The OCC, the Board, and the FDIC (collectively, the ``agencies'') are amending their Community Reinvestment Act (CRA) regulations to adjust the asset-size thresholds used to define ``small bank'' or ``small savings association'' and ``intermediate small bank'' or ``intermediate small savings association.'' As required by the CRA regulations, the adjustment to the threshold amount is based on the annual percentage change in the Consumer Price Index.
The Community Reinvestment Act should focus on enhancing equality of opportunity rather than on the idea of a duty owed by banks to the community. Individual equality best justifies intervention, compared to arguments based on community or on localism. The analysis suggests some problems with the shift toward measuring results rather than efforts. Some safe harbors should be allowed, while the act should be extended to cover finance companies and mortgage companies. Community development corporations, community development financial institutions, and minority-owned financial institutions should be encouraged.
[...] a public policy that regarded homeownership for all as the key to prosperity- combined with stagnant incomes, exploding costs for necessities such as health care and education, and lack of support for affordable rental alternatives- made it highly likely that when house prices stopped going up, millions of Americans would find themselves unable to afford their mortgage payments. [...] the lack of coverage of independent mortgage companies and mortgage companies that are part of bank holding companies but not banks is a major failing that should be corrected. [...] the concept of CRA assessment area is outdated, especially for large, national institutions; it is essential that a greater proportion of the lending done by CRA-covered institutions be actually evaluated under CRA.
The OCC, FRB and FDIC have issued a joint final rule, effective September 1, 2005, that revises certain provisions of the rules implementing the Community Reinvestment Act. The joint final rule: 1. adresses regulatory burden imposed on small banks with an asset size between $250 million and $1 billion, 2. making holding company affiliation no longer a factor in determining which CRA evaluation standards apply to a bank, 2. revising the term community development to include activities to revitalize and stabilize distressed or underserved rural areas and designated disaster areas, and 3. adopting without change the amendments to the regulations to address the impact on a bank's CRA rating of evidence of discrimination or other credit practices that violate an applicable law, rule, or reg...
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