12/93 CRA Reform

FOIA Number: 2006-0466-F FOIA MARKER This is not a textual record. This is used as an administrative marker by the William J. Clinton Presidential Library Staff. Collection/Record Group: Clinton Presidential Records Subgroup/Office of Origin: Speechwriting Series/Staff Member: Jonathan Prince Subseries: OA/ID Number: 10440 FolderID: Folder Title: 12/93 CRA Reform Stack: Row: Section: Shelf: Position: S 91 7 1 2 Withdrawal/Redaction Sheet Clinton Library DOCUMENT NO. SUBJECT/TITLE DATE RESTRICTION AND TYPE 001: memo Janice Booker to Lee Cross; re: Projects in South Central L.A. 11/24/1993 P6/b(6) (partial) (1 page) 002. memo Janice Booker to Lee Cross; re: Projects in South Central L.A. 11/24/1993 P6/b(6) (partial) (1 page) COLLECTION: Clinton Presidential Records Speechwriting Jonathan Prince OA/Box Number: 10440 FOLDER TITLE: 12/93 CRA Reform 2006-0466-F jp1378 RESTRICTION CODES Presidential Records Act - [44 U.S.C. 2204(a)] Freedom of Information Act - 15 U.S.C. 552(b)] P1 National Security Classified Information [(a)(1) of the PRA] b(1) National security classified information |(b)(1) of the FOIA] P2 Relating to the appointment to Federal office [(a)(2) of the PRA] b(2) Release would disclose internal personnel rules and practices of P3 Release would violate a Federal statute |(a)(3) of the PRA] an agency [(b)(2) of the FOIA] P4 Release would disclose trade secrets or confidential commercial or b(3) Release would violate a Federal statute [(b)(3) of the FOIA] financial information |(a)(4) of the PRA] b(4) Release would disclose trade secrets or confidential or financial P5 Release would disclose confidential advice between the President information [(b)(4) of the FOIA] and his advisors, or between such advisors [a)(5) of the PRA] b(6) Release would constitute a clearly unwarranted invasion of P6 Release would constitute a clearly unwarranted Invasion of personal privacy [(b)(6) of the FOIA] personal privacy |(a)(6) of the PRA] b(7) Release would disclose information compiled for law enforcement purposes I(b)(7) of the FOIA] C. Closed in accordance with restrictions contained in donor's deed b(8) Release would disclose information concerning the regulation of of gift. financial institutions [(b)(8) of the FOIA) PRM. Personal record misfile defined in accordance with 44 U.S.C. b(9) Release would disclose geological or geophysical information 2201(3). concerning wells |(b)(9) of the FOIA] RR. Document will be reviewed upon request. THE WHITE HOUSE WASHINGTON December 4, 1993 MEMORANDUM FOR BOB RUBIN CAROL RASCO FROM: Paul Dimond Paul Weinstein SUBJECT: White House Press Briefing On Community Reinvestment Act Reform Gene Ludwig has asked if he could hold a briefing in the White House press room on December 9 announcing the completion of the President's reform of the Community Reinvestment Act (CRA). While the main purpose of the briefing is to signal the closure of the CRA reform process, the briefing would also provide an opportunity to place political pressure on the Federal Reserve Board to vote in favor of the reform package. While we believe the Fed will vote in support of the package (Governor Lindsey was integrally involved in the development of the final document), we feel a White House briefing would go along way towards insuring victory for the President. Gene has asked that you attend the briefing with him, and provide some introductory remarks. The Fed Board of Governors plan to vote on the CRA reform proposal December 10. Jonathan Prince in Communications is coordinating the event. CC: Carol Rasco Gene Sperling Bruce Reed Sylvia Mathews Jonathan Prince Questions and Answers on CRA Reform Proposal NOT FOR PUBLIC DISTRIBUTION 1. Why aren't you requiring banks to report data on race, ethnic origin and gender for small business loans? HMDA requires this data for home mortgage loans. Without it, it's impossible to identify racial redlining. The proposal would greatly expand data collection and disclosure. We stopped short of requiring that race data be collected. This was the subject of considerable discussions amongst the regulators, and we anticipate, and welcome significant public comment on this issue. 2. The proposed rule gives banks CRA credit for loans made by subsidiaries or other entities that they've invested in. Doesn't this essentially let banks "buy out" of their obligations under CRA? Won't this result in a second class banking system for low- income and minority customers? Ideally, banks will attempt to serve the needs of low- and moderate-income areas through their mainstream business and through innovative approaches and products that meet the unique needs of low and moderate income borrowers. In some cases, it may be more efficient and effective for banks to use specialized lenders that have stronger relationships with the community, have expertise in community development lending, and can tailor products more readily to the community. What is most important is that these loans are being made -- not how they are made. As a practical matter, however, it would be highly unlikely that a bank could satisfy its CRA obligations exclusively through a third-party specialized lender. NOTE: A bank would get credit, under the investment test, for investments it has made in community development corporations, lending consortia or other entities serving the community. A bank could also get credit, under the lending test, for its proportionate share of lending done by such an entity if the lender were willing to geocode its loans. A bank could get credit, under the services test, only for service it provided directly. 3. The lending test focuses on the number and volume of loans made by an institution. Won't this result in banks making the easiest loans while avoiding those that are more difficult and require more time and effort to make? We recognized that this could be a potential drawback of a numerical approach. That's why we've built flexibility into the rule. A bank's rating under the lending test could be adjusted upward if the bank has made a substantial number of "difficult" loans -- such as loans requiring flexible underwriting, credit enhancement and subsidies, low- to moderate-income multifamily housing construction and rehabilitation loans, or loans to very small or start up businesses in low- and moderate-income areas. 4. The rule would require data collection for small business loans on the basis of the size of the business. Why don't you collect small business data according to the size of the loan? Small loans, say $100,000 working capital loans, are often the most crucial for small businesses but can be among the most difficult to get. We already collect data on business loan size under the call report. But loan size isn't always an accurate proxy for business size. Small businesses are the most important source of jobs in our economy. Small businesses are often more closely tied to communities in which they operate. But, unfortunately, small businesses are often unable to get the credit they need to operate and expand. We believe that collecting information on lending to small businesses is necessary to provide an accurate and complete picture of the bank's lending in its community. The bank's efforts to make small loans would be recognized under the lending test. The bank's rating under the lending test could be adjusted upward if it has made a substantial number of "difficult" loans, including very small loans, or loans to very small or start up businesses. 5. You have said that the term the "other side of the tracks" still resonates in some small towns. Why, then, have you chosen to reduce the CRA obligation of small town banks and to exempt them from loan disclosure? Doesn't this ignore the problems of access to credit in rural America? This proposal does not let small, rural banks off the hook. Small banks will not be given an exemption. Small banks will be subject to a real CRA examination. Examiners will look at whether the bank has a good loan-to-deposit ratio and a good loan mix -- including different types of loans and loans to borrowers at different income levels. Examiners will take into consideration the geographic distribution of HMDA loans (if the bank currently reports such data), evidence of discriminatory lending practices, complaints from community members. By eliminating the process-oriented paperwork currently associated with CRA, examiners will have more time to spend analyzing the bank's actual performance. 6. You have said that data on the geographic distribution of lending will be required for all banks with more than $250 million in assets. Will smaller banks that currently report under HMDA now be exempt? No. The proposed rule will not affect current HMDA reporting requirements for any institutions. It will require big banks, operating outside of metropolitan areas, to report some data on home mortgage lending for the first time, in addition to the new small business and some consumer lending data. 7. In the past, CRA has been enforced only when a bank has some corporate application pending. The President wants strengthened enforcement of the CRA, including enforcement against institutions without any corporate applications. What are you doing to achieve that goal? Will you ever assess civil money penalties on the basis of poor CRA performance? Yes. The proposed rule states that financial institutions have a continuing and affirmative obligation to help meet the credit needs of their communities, including low- and moderate-income areas. Banks in substantial noncompliance will be subject to the full range of enforcement actions permitted under our general enforcement authority for violation of any other law or regulation. Civil money penalties are one of the enforcement options that regulators can consider. 8. What happens if there are no low- or moderate-income areas near where a bank is located? Would the bank have to go outside its normal service area to make the right kind of loans in order to get a satisfactory CRA rating? The proposed rule defines a bank's "service area" as the bank's effective lending territory -- that is, the area around the bank's office or groups of offices where the bank makes reportable loans. The rule would not require a bank to include low- or moderate-income areas in its service area if there were none within a reasonable distance given the size and financial condition of the institution. The rule is intended to prevent a bank from defining its service area to unreasonably exclude low-income or minority neighborhoods. For example, a bank could not define the metropolitan Washington area as its service area but exclude Anacostia. NOTE: The definition of service area does not have to include the entire metropolitan area in which the bank is located. 9. The regulation rewards banks that do more lending in low-income areas than they do in other parts of their community. Isn't this reverse discrimination? What impact will this policy have on other credit needs in the community? This is certainly not reverse discrimination. There is no penalty in this proposal if an institution is lending in all parts of its service area(s) equally. It is true that one way for a bank to get an outstanding CRA rating based on its lending activities is to demonstrate that it is more effective than its competitors in meeting the needs of low- and moderate-income areas. But, the purpose of the CRA statute is to resolve credit availability problems, including in low- and moderate-income areas. Moreover, banks can achieve an overall outstanding CRA rating under the lending test in other ways as well as through the other two tests of service and investment. 10. How soon will the new CRA proposal go into effect? When will the data collection requirements for small business lending go into effect? This is only a proposed rule -- we still have a long way to go before the final rule is in place. The proposed rule should be published in the Federal Register within a few days. The public will have 60 days to comment on it. The regulators will then need time to review the public comments and modify the rule accordingly. We hope to accomplish this as expeditiously as possible. We hope to publish a final rule in the spring. The data collection requirement would go into effect on July 1. Large institutions would first have to report this data by January 31, 1995 (only for the last sixth months of 1994). Evaluation under the new standards would become mandatory after July 1, 1995. Before that date, a bank may choose to be evaluated under either the new or old CRA standards. 11. The proposed rule provides for community groups to have more input into the CRA process. Doesn't this set banks up for blackmail by community groups? How will examiners decide which community groups are the right ones to consult with? The proposed rule provides two basic ways for community groups to get involved in a bank's CRA activities. First, each quarter, the OCC will publish a list of banks that will be examined for CRA compliance in the following three months. Community groups can then write the bank or the OCC to comment on the bank's CRA performance. Second, banks will have the option of complying with CRA by developing a CRA plan, with the involvement of community groups, and then complying with the plan's requirements. Even if community groups are not involved in developing the plan, they will certainly make their views known when the plan is published for public comment. In fact, the proposal reduces the threat of blackmail by community groups during the corporate application process, because a bank's CRA examination would include community group input. 12. What exactly is a "bona fide complaint" that would trigger a more expansive CRA examination for small banks? A bona fide complaint is a complaint that is neither trivial nor frivolous and concerns the bank's performance in serving the credit needs of its community. 13. Do you think CRA should apply to non-bank financial intermediaries, insurance companies, etc? The proposed regulation does not attempt to apply CRA to non-bank financial intermediaries because the law itself clearly does not extend that far. During the hearings, both banks and community groups commented that some form of CRA obligation should be made to apply to other financial institutions besides banks and thrifts. 14. Doesn't the proposed rule really set up a de facto system of credit allocation? No. The proposed rule does not require any set level of lending, service, or investments to any particular community or constituency.. It does provide for more objective measures of a bank's lending, service, and investment activities. The performance measures in the rule compare a bank's lending performance in low- and moderate-income areas to its own performance in other areas. And they compare a bank's performance to the performance of its competitors. Even these measures are not set in stone. Examiners can take into consideration unique circumstances or additional information, as appropriate. 15. You've said that the proposed regulation will focus less on paperwork and more on performance. How will this rule reduce the regulatory burden on banks? Won't the collection of small business lending data increase regulatory burden? The proposed rule replaces the 12 assessment factors in the old rule with three primary assessment factors: lending, investments, and services. This will allow regulators to focus on actual performance. The only way to effectively evaluate performance, however, is to have good information. For example, large banks will have to report data on their small business lending, and some consumer lending, similar to the data reported under HMDA. 15a. What regulatory burdens does the proposed rule eliminate? Under the proposal, bankers will no longer have to maintain non-performance related documentation. Banks will no longer have to: -- prepare a CRA statement; -- review the CRA statement annually and note that review in the minutes of the board of directors; -- justify the basis for their community delineation; -- ascertain the community credit needs and explain the method for doing so; -- maintain documentation supporting marketing efforts; or -- maintain documentation demonstrating directors' participation in formulating CRA policies and reviewing bank CRA policies. 16. Under the proposal, what will happen to a bank where examiners have found isolated instances of discrimination? Will that bank automatically be out of compliance with CRA? What if the bank corrects the problem? Except in very rare circumstances, banks found to have engaged in a pattern or practice of discrimination that they had not corrected fully could not receive a satisfactory or outstanding rating. Such exceptions could include violations that were technical or de minimis. For example, if a bank gave preferential credit treatment to individual over 55 years of age, rather than 62 years of age, that would constitute a violation of the Equal Credit Opportunity Act. However, it would not be sufficient justification, by itself, for denying a bank a satisfactory CRA rating. Except in very rare circumstances, banks that were aware of isolated instances of discrimination and that hadn't taken actions to correct or begin to correct them could not receive a satisfactory or outstanding rating. Other enforcement actions under the Fair Housing Act or Equal Credit Opportunity Act might also be levied in both cases. 17. What's the difference between CRA and anti-discrimination laws? CRA and anti-discrimination laws are different but related. CRA was originally enacted in part to combat the practice of "redlining" certain communities -- often, but not always, on the basis of race. CRA requires banks to serve the credit needs of all segments of their communities. A bank is not serving its entire community if it is illegally discriminating against some members of that community. Therefore, under the proposed rule, a bank could not get a satisfactory or outstanding rating if it has been found to have engaged in a pattern or practice of illegal discrimination that it has not fully corrected or if it has committed isolated acts of discrimination that it is aware of and has not begun to correct. If a bank is found to be illegally discriminating, the OCC and the other regulators also have procedures in place to take enforcement actions and refer the case to the Department of Justice, or HUD. 18. How will the proposed regulation meet the President's goal of increasing lending and access to other financial services in underserved areas? In the past, CRA exams have often focused on paperwork and process, rather than actual lending and service. Nearly 90 percent of all institutions have been able to get satisfactory or outstanding ratings under this process. The proposed rule would, for the first time, focus on performance. The rule would provide the examiners, the banks and the public with the tools to measure that lending performance -- the new small business lending data, to augment HMDA data already collected. By changing the focus of CRA and setting clear, objective standards for performance, banks will know what they have to do to carry out the law. This should, indeed, lead to greater lending and services in underserved areas. 19. Why have you proposed letting small banks off the hook and not requiring them to geocode loans or collect data on small business and consumer lending? Developing and maintaining a new data collection system, would have a disproportionate cost impact on smaller banks. Moreover, the volumes of loan applications and originations are relatively low at small banks, and it would therefore be difficult to conduct statistically significant analyses of data at small banks. Many of these small banks are in small towns serving rural areas. The entire service area may be within a single census tract. In these cases, geocoding would not help examiners to analyze which parts of the community were or were not being served. Instead, it would only result in unnecessary regulatory burden. In smaller institutions, examiners can get a relatively good sense of what kind of loans a bank is making by looking through individual loan files. Under the new rule, examiners would be looking specifically to see if loans at smaller institutions were made throughout the community and to borrowers at different income levels. 19-a. Doesn't this proposal amount to an exemption for small banks from compliance with CRA? Absolutely not. Examiners will still examine small banks for compliance with CRA by assessing their performance in lending, providing services, and making investments in low- and moderate-income communities. The only difference is that they will not be required to maintain geocoded data on small business loans. Given the size of their markets and the volume of their loans, such a requirement would be a regulatory burden that would yield little useful data. Instead, on-site examinations will specifically assess whether loans at smaller institutions were made throughout the community and to borrowers at different income levels. 19-b. Is it true that the Administration went soft on the small banks in this regulation in order to get the IBAA to soft-pedal its opposition to the Administration's interstate branching proposal? There is absolutely no truth to that charge. The proposed rule does not "go soft" on small banks. They are still subject to examination to assess their lending, service and investment activities in low- and moderate-income segments of their market areas. They are not required to geocode small business or consumer loans because such a requirement would impose a disproportionate cost burden on small institutions with very little benefit. However, when examiners conduct the CRA examination, they will specifically determine whether loans at small banks were made throughout the community and to borrowers at different income levels. 20. Under the proposal, how would the regulators rate banks that have numerous service areas? For example, how will you deal with a bank's application if it gets a bad CRA rating in one of its service areas but gets good ratings for others? The proposed rule would require CRA examinations and ratings for different service areas. The institution would receive one overall rating based on the ratings of each different service area. These component ratings would also be reported in the publicly available evaluations. For purposes of approving or denying applications, the regulators would rely on the overall rating of the institution. 21. What would happen if there is a CRA protest in a service area that examiners didn't look at? The issues relating to the protest would be reviewed carefully and if found to be significant, they will be taken into account in the next examination of that service area. In general, however, the institution's composite rating would be based upon the overall CRA record of the institution. 22. What does the proposal mean for a bank that wants to expand across state lines? If interstate banking legislation is enacted, what effect would this have on CRA? Interstate banking or branching should not affect how regulators assess CRA performance under the new proposal. Banks with widely separated branches would be responsible for helping to meet the credit needs of each of their service areas. This is no different from banks operating in states that permit statewide branching now. The new regulation will require CRA evaluations of a bank's performance in its different service areas. Each separately chartered institution would receive an overall CRA rating based on the ratings applied to its different service areas. An institution's CRA rating will remain an important factor in the regulators' decisions to approve acquisitions or expansions that result from the enactment of interstate banking legislation. 23. Aren't you exceeding your legal authority? For example, where in the CRA does it authorize administrative enforcement actions? What authority do you have to impose all these new data requirements? If these things are good public policy, don't we really need to make changes to the CRA law itself, instead of stretching the existing law so far? No. All the new regulatory provisions, including administrative enforcement actions and the data requirements, are authorized under the existing law. There is no question that CRA reforms are necessary. But I believe we can accomplish these reforms through this proposed regulation. Everyone may not be completely satisfied with the regulation and may turn to Congress to revisit some issues. Small banks may seek outright exemptions from CRA. Community groups may seek further data requirements or stronger enforcement sanctions. Overall, however, I think this proposed rule strikes a good balance among the various competing interests and concerns. 24. Doesn't this CRA proposal really tell banks they can throw away their credit standards and make bad loans -- as long as they go to poor people? Isn't there a conflict between safety and soundness objectives and CRA objectives? Absolutely not. CRA encourages banks to help meet the credit needs of their communities, consistent with safety and soundness objectives. Nothing in the proposed regulation would undermine that. Lending to low- and moderate-income borrowers is not inherently risky. There are good loans to be made in low- and moderate-income areas just as there are good loans to be made in other communities. Lending is not exactly rocket science. If bankers can learn to understand the complexities of derivatives and other new financial markets, they can certainly learn how to make good, sound mortgage or business loans to low- and moderate-income borrowers. The proposed regulation will encourage bankers to think creatively and employ innovative products to meet community needs. And we intend to ensure that our examiners are well-versed in understanding these innovative products so that they assess them correctly. 25. Will minority-owned banks get special credit under CRA? The proposed regulation reflects the statutory guidance on CRA treatment of minority-owned institutions: Banks that donate or sell branches on favorable terms to minority- or women-owned institutions would receive credit for that activity under the investment test. Other investments in, loans to, or joint ventures with, minority-owned institutions would receive CRA credit to the extent that they benefitted low- or moderate-income areas. Minority-owned institutions, themselves, would be fully subject to all CRA requirements. 26. How can you say the proposed CRA system is objective when it relies so heavily on examiner judgment in developing the ratings? The proposed rule includes objective measures of CRA performance, particularly in lending to both urban and rural low- and moderate-income areas. This represents a vast improvement over the current process. But, lending to low- and moderate-income borrowers is not a "cookie cutter" business. Communities vary in their credit needs. Banks vary in the products they offer and the markets they serve. Because small businesses vary widely, each small business loan is unique. We could not, and should not, set performance standards that don't allow for individual circumstances. The proposed rule strikes a balance between establishing clear guidance and providing sufficient flexibility to accommodate differences in communities and in banks. Examiners will be expected to make some judgments about each situation. To help them, we are beginning a new program to further educate and train our examiners so that they will enforce the law in a consistent manner. 27. Why did you pick $250 million as the threshold for the small bank streamlined examination? HMDA (and other statutes?) use a much lower threshold. We chose a threshold that would reasonably separate big banks from small banks. At this threshold, the proposed regulation would require data reporting from banks that account for more than 85 percent of the assets in the banking system and about 23 percent of the banks. Moreover, we had to select a threshold where the public benefit to be gained from the additional data collection and examination outweighed the burden on banks. We believe this threshold meets that requirement. 28. Doesn't the emphasis on full-service branches ignore the evolution of banking away from brick and mortar? Aren't you loading banks up with additional overhead costs just at a time when they need to cut costs to stay competitive? Bank branches are still significantly tied to credit availability. In many low- and moderate-income communities, they provide the only access to bank services. Branches are a strong symbol of a bank's presence in a community. They enable a bank to have a better understanding of the community it serves. The proposed regulation does emphasize full-service branches, but it also allows for flexibility in defining a full service branch. "Mini" branches and shared branches that have people and provide services to the community are included. The proposal also takes into consideration other forms of service outlets, such as extensive provision of ATMs, and other forms of service, such as credit counseling, low-cost check cashing, "lifeline" checking accounts, financial planning, home ownership counseling, loan packaging assisting small and minority businesses, and partnerships with community groups to promote credit- related services. 29. This proposal seems unbelievably complicated. How can you say with a straight face that this will reduce regulatory burden? In some ways, this proposal is more complicated than the old rule, yet it provides greater clarity than the old rule. The old rule was only four and a half pages long. In fact, so much was left unsaid that the regulators had to fill in the details with very complicated and time-consuming explanations. The result was a situation in which banks carried a heavy regulatory burden that had little to do with the bank's actual performance in meeting the goals of CRA. This proposal is considerably longer, but it is much more logical and much clearer. It says that a bank's CRA assessment will be based on whether it is making loans, providing services, and/or investing in low- and moderate- income parts of its service area. It provides objective measures for assessing bank performance, and it eliminates needless regulatory burden. It provides for data collection from large banks on small business and some consumer lending - - a previously neglected aspect of CRA performance. And it provides for streamlined examinations of small banks which, while significantly reducing the CRA burden for small banks, will allow regulators to assess their actual CRA performance. 30. Why does the proposal exclude car loans and credit cards from the lending assessment? Collecting and analyzing data on car loans and credit cards to determine whether they were provided throughout a bank's service area and to all income levels would be extremely difficult. It is not clear that the burden of collecting this data would be justified by the additional information it would provide. NEWS RELEASE Comptroller of the Currency Administrator of National Banks NR 93-128 Washington, DC 20219 For: Release After White House News Conference Contact: (202) 874-4700 Date: December 8, 1993 CRA REFORM PROPOSAL WOULD INCREASE LOW-INCOME LENDING AND REDUCE REGULATORY BURDEN ON BANKS A new regulatory proposal would encourage banks to provide credit, services, and investments to America's low- and moderate-income communities, while reducing the regulatory burden on financial institutions. The proposal carries out President Clinton's initiative to reemphasize the original goal of the Community Reinvestment Act (CRA) by making credit and financial opportunities available to all people in all communities throughout urban and rural America. Comptroller of the Currency Eugene A. Ludwig today released a copy of the new proposed regulation for public comment. The other federal financial institution supervisory agencies (the Federal Deposit Insurance Corporation, the Federal Reserve Board, and the Office of Thrift Supervision) are expected to announce similar proposals later this week. "The proposed reform package we are unveiling today follows the President's directive and fulfills the promise of the law," said Comptroller Ludwig at a White House news conference. "It would channel billions of dollars in new credit into America's distressed communities, while at the same time reducing unnecessary burdens on the banks. It would make the law work." The proposed CRA rule emphasizes performance over documentation. The following three evaluation standards, or tests, would replace the current 12 assessment factors for CRA review and rating: The lending test would evaluate direct lending, and if the institution chose, indirect lending through loan pools, lending consortia, subsidiaries, funded non-chartered affiliates, or other lenders in which the institution had invested. The service test would evaluate the provision of branches accessible to low- and moderate-income areas, and the provision of services that promote credit availability. - more NEWS RELEASE Comptroller of the Currency NR 93-129 Administrator of National Banks Washington, DC 20219 For: Release After White House News Conference Contact: (202) 874-4700 Date: DECEMBER 8, 1993 Statement by Eugene A. Ludwig Comptroller of the Currency December 8, 1993 Thank you. Fifteen years ago, Congress passed the Community Reinvestment Act to ensure that banks and thrifts served the financial needs of their entire communities, and, in particular, to help economically empower persons of low and moderate income. But the CRA has never achieved the full promise Congress had intended. During the Presidential campaign last year, Governor Clinton, responding to the complaints of bankers and community leaders, vowed to reform the CRA to make the law work by emphasizing performance over paperwork. Following up on his campaign pledge, the President last July challenged the federal banking regulators to breathe new life and new purpose into the law. He told us to rethink the entire system of regulation through which we put the CRA into effect to make the law work. The proposed reform package we are unveiling today follows the President's directive and fulfills the promise of the law. It would channel billions of dollars in new credit into America's distressed communities, while at the same time reducing unnecessary burdens on the banks. It would make the law work. This reform package is the product of five months of consultation and deliberation. Before we made a single decision on proposing reform, we turned to the people to ask what the people thought, what the people needed. We walked through South Central Los Angeles and a predominantly minority neighborhood in New York City to see with our own eyes and to listen with our own ears to what should be done. We talked with representatives of the Navajo nation, to bankers large and small, to poor people in rural North Carolina. For Release After White House Press Conference December 8, 1993 COMMUNITY REINVESTMENT ACT REFORM PROPOSAL FACT SHEET Proposed changes to the Community Reinvestment Act (CRA) provide clearer and more objective evaluation standards, eliminate unnecessary documentation requirements, and improve the consistency of CRA examinations and enforcement efforts. The new rule emphasizes performance over documentation. The 12 current CRA assessment factors would be replaced with three tests: a lending test, a service test, and an investment test. Banks and thrifts would be evaluated based on the products and services offered in their normal course of business. They would not have to meet all three tests to get a satisfactory rating. Banks and thrifts would no longer be assessed on their method of community delineation. Service areas would be defined by the geographic area (or areas) around branch and main offices where the institution makes the bulk of its loans. New CRA rules would distinguish between large and small institutions. Independent banks and thrifts with assets under $250 million, or members of a holding company with total banking and thrift assets of under $250 million, would be eligible for streamlined examinations. They would, however, be fully responsible for meeting the requirements of CRA. Large banks and thrifts would be required to report data to regulators on the geographic distribution of their small business loans and consumer loans. Wholesale and limited-purpose banks would be evaluated based on their investment in or other support of organizations that promote credit availability to low- and moderate-income individuals or geographic areas, and organizations and initiatives that foster community development, small and minority-owned business development and funding for affordable housing. A bank or thrift would have the option of developing a CRA strategic plan, to be approved by the regulators, under which it would be evaluated. Banks and thrifts would continue to make their CRA ratings public, and the public would have an opportunity to comment on CRA performance. Under the proposed rule, large banks and thrifts would begin reporting loan data January 31, 1995. The new evaluation standards would become mandatory July 1, 1995. ### For Release After White House News Conference December 8, 1993 COMMUNITY REINVESTMENT ACT REFORM PROPOSAL SUMMARY Overview In July 1993, the Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), Federal Deposit Insurance Corporation (FDIC) and Federal Reserve Board, acting at the request of President Clinton, began a comprehensive review and overhaul of the interagency regulation for the Community Reinvestment Act (CRA). The President's charge was explicit: reform the CRA regulation to emphasize performance over documentation, and refocus the regulation on making credit and financial services available to all communities, including underserved areas throughout urban and rural America. The four federal financial supervisory agencies, working with community organizations, representatives of local government, and the banking and thrift industries, were committed to developing clearer and more objective standards for CRA compliance, eliminating unnecessary documentation requirements, and improving consistency in CRA examinations and enforcement. The proposed changes to the CRA regulations address and implement these goals. Currently, CRA assessments of financial institutions are based on 12 separate factors. Regulatory agencies and examiners within the agencies have interpreted and judged these factors differently, resulting in inconsistent CRA ratings. The President's reform initiative called for distinct assessment standards based on measurable performance in three specific areas: lending, service, and investment. Under the proposed rule, not every institution would be subject assessment in each of these three areas. In general, a bank or thrift would be evaluated based on its record of serving its entire community, including low- and moderate-income neighborhoods, with the products and services offered in its normal course of business. Retail banks would be evaluated primarily on their lending performance. Wholesale and limited purpose banks that do not engage in significant retail lending would be evaluated primarily on their investments. Three Evaluation Tests The first test, a lending test, would evaluate direct lending by the institution itself, and if the institution elects, indirect lending through loan pools, lending consortia, subsidiaries and funded non-chartered affiliates, and community development or affordable housing lenders in which the bank has made investments. The bank or thrift would be evaluated primarily on whether it was making loans in low- and moderate-income geographies. The lending test would compare the institution's market share of loans in low- and moderate-income geographies to its market share of loans in its entire service area. - more - 2 - The lending test would also evaluate the percentage of a bank or thrift's outstanding loans to low- and moderate-income geographies or individuals, or the percentage of low- and moderate-income geographies in which the institution has made a significant number of loans. Lenders would receive extra credit for making complex or innovative loans that serve pressing community development needs loans without undermining safety and soundness. Based on these measures, an institution would receive a preliminary lending rating which it may rebut. The second test, the service test, would evaluate the provision of branches accessible to low- and moderate-income areas and the provision of services that promote the availability of credit. Special accomplishments or programs that provide greater access to credit, capital or services would also receive consideration. Services such as low-cost check cashing, "lifeline accounts" and credit counseling could improve a retail institution's rating under the service test and would form the basis for evaluating a wholesale or limited purpose institution. Third, the investment test would evaluate an institution's record of qualified investment in organizations and initiatives that foster community development, small and minority-owned business development, or affordable housing lending, including state and local government agency housing or revenue bonds. Service Area Designation Under existing CRA rules, covered financial institutions delineate their local communities geographically on a map, using methods that do not unreasonably exclude low- or moderate- income areas. Bank examiners review the reasonableness of the basis for these delineations. Under the reform proposal, banks and thrifts would not be evaluated on the method they use to delineate their service areas. The geographic area around each office or group of offices in which the institution makes the bulk of its loans would be used to define its service area. Institutions that provide services substantially across state lines or metropolitan areas would have separate service area delineations for those markets. Streamlined Examination Procedures The proposed CRA rule provides streamlined CRA examination procedures for small institutions. These institutions would still be responsible for helping to meet the credit needs of their entire communities. The streamlined examinations would take into account an institution's loan-to-deposit ratio, whether it makes most of its loans locally, its loan mix -- including the distribution of loans across income levels - and its record of community complaints and lending discrimination. Small institutions are defined as independent banks and thrifts with total assets of under $250 million, or members of a holding company with total banking and thrift assets of less than $250 million. - more - - 3 - Strategic Plan Assessment A bank or thrift would have the option of submitting to its regulator a CRA plan for approval and then being evaluated under that plan. The plan would have to be publicly available and have measurable goals. Regulators would consult with community groups to determine whether the plan was responsive to community credit needs. If an institution failed to meet or exceed the preponderance of goals set forth in the plan, its performance would be evaluated under the lending and service tests. Regulatory Burden and Data Collection Requirements The proposed rule would make significant reductions in regulatory burden. Banks and thrifts would no longer have to prepare CRA statements, review these statements annually and note those reviews in the minutes of the board of directors, justify the basis for their community delineations, ascertain community credit needs and explain their methods of doing so, and maintain documentation supporting marketing efforts. Large banks and thrifts would be required to report additional data on the geographic distribution of their small business and some consumer loans, and summary data collected by the regulators will be made available to the public. Data collected for all institutions under the Home Mortgage Disclosure Act (HMDA) would still be made available to the public by the Federal Reserve Board. CRA performance evaluations for all covered institutions would be redesigned consistent with the new evaluation standards but would continue to be made public by the institutions and their regulators. CRA Enforcement The OCC, the OTS, the FDIC and the Federal Reserve would continue to consider CRA performance and any complaints in evaluating corporate applications. The regulators would encourage public comment on CRA performance. In addition, banks and thrifts that receive a rating of Substantial Noncompliance would be subject to formal enforcement actions. Transition Period Although the proposal calls for revised data collection and reporting procedures to go into effect after a short adjustment period, evaluation under the new CRA standards would not become mandatory until July 1995. During the interim period, banks and thrifts could elect to be evaluated under either the current CRA regulation or the new CRA provisions. ### For Release After White House Press Conference December 8, 1993 COMMUNITY REINVESTMENT ACT REFORM PROPOSAL Major Issues 1. What will be the underlying basis for CRA performance evaluations under the reform proposal? In assessing an institution's CRA performance, regulators recognize that the institution is expected to help meet the credit needs of its entire community. In examinations, however, particular attention will be paid to the institution's record of helping to meet the credit needs in low- and moderate-income census tracts or rural areas (collectively referred to as low- and moderate-income geographies in the regulation) and of low- and moderate-income individuals. That record will be evaluated primarily using three measures -- a lending test, a service test, and an investment test. An institution's fair lending record will also be considered. 2. Do banks and thrifts need to engage in all three CRA activities - lending, investment, and service -- in order to earn a satisfactory or better CRA rating? No. As a general rule, banks and thrifts will be evaluated on the basis of the product lines offered to their customers in the normal course of business. The lending test will apply to all retail banks and thrifts and will evaluate direct lending by the institution itself and, if the institution elects, indirect lending through loan pools; lending consortia; bank subsidiaries and funded non-charter affiliates; and other entities, in whom the bank or thrift has made investments, that lend in low- and moderate-income individuals or geographies. The service test evaluates the accessibility of a retail bank's branches and the extent to which the bank provides other facilities and services that enhance credit availability. The service test does not require any bank to expand its branch network or to operate its facilities at a loss. It considers non-traditional branches, including mini-branches in grocery stores or branches operated in conjunction with other banks, other local businesses, churches, or other non-profit organizations. Wholesale and limited purpose institutions will be evaluated on the extent to which they provide other services that enhance credit availability. The investment test evaluates banks on the amount of their investments that benefit low- and moderate-income geographies or persons. The investment test will constitute the principal test in evaluating the CRA performance of wholesale and limited-purpose institutions (instead of the lending test). The investment test will apply to provide extra 5. Will the loans have to be made directly by the bank or thrift to be considered in the institution's performance evaluation? No. An institution may elect to count under the lending test loans made through a loan pool, a lending consortium, by subsidiaries or funded non-charter affiliates, or through community development and affordable housing lenders, women-owned or minority- owned financial institutions, low-income credit unions, and others that lend directly to the low- and moderate-income community. Regulators will attribute to the institution its percentage (based on the level of the bank or thrift's investment or participation) of each loan in a loan pool, a loan consortium, subsidiary, funded non-charter affiliate or community lending organization in which the bank has invested or participated. Lending by the consortia or the community development lender need not be restricted to the institution's service area for it to be considered as helping to meet the institution's CRA responsibilities. 6. What criteria will be used to evaluate an institution's performance under the lending test? Outstanding Subject to rebuttal, the regulator will rate a bank or thrift's lending performance outstanding if: The institution's market share of reported loans in low- and moderate- income geographies in its service area significantly exceeds its market share of reported loans in other geographies in its service area; and Either it has made a significant amount of loans in the vast majority of the low- and moderate-income geographies in its service area Or its loans to low- and moderate-income geographies in its service area represent a substantial percentage of its loans in its service area. High Satisfactory Subject to rebuttal, the regulator will rate a bank or thrift's lending performance high satisfactory fashion if: The institution's market share of reportable loans in low- and moderate- income geographies in its service area is at least roughly comparable to its market share of reported loans in other geographies in its service area; and 3 The institution's market share of reportable loans in low- and moderate- income geographies in its service area is significantly less than its market share of reported loans in its entire service area; and It made very few, if any, loans in the low-and moderate-income geographies in its service area. 7. Will regulators take other information into account in assessing a bank or thrift's performance under the lending test? Yes. The regulator may increase a presumptive rating if the bank or thrift participates in a program for giving second reviews to loan applications, particularly if done in conjunction with community organizations who participate in the review or offer applications from low- and moderate-income individuals that the bank will consider for credit. Regulators may also increase a presumptive rating if the institution makes a substantial amount of loans that require creative or innovative underwriting (while maintaining a safe and sound quality) or loans for which there is a particular need. Regulators will also consider favorably loans to third parties, such a community development organizations and intermediaries that make or facilitate lending in low- and moderate-income geographies. In exceptional cases, the regulator may reduce a presumptive rating if it concludes that the quantitative measures fail to reflect the institution's actual record of lending to low- and moderate-income individuals or geographies. 8. What factors will be considered under the service test? In order to keep the test relatively straightforward and to reflect the law's expectation that banks and thrifts be encouraged to help meet the credit needs of their communities, the service test for retail institutions will emphasize branch location in or readily accessible to low- and moderate-income geographies in the institution's service area. Provision of services such as accessible ATMs, credit counseling, low-cost check cashing, "lifeline" checking accounts, and other programs will be considered favorably, but generally will not be required. If a bank or thrift offers or provides support for these or other services designed to facilitate access to the institution in low- and moderate- income communities, those programs will enhance the institution's service record. Whclesale and limited purpose institutions will be evaluated on the extent to which they provide other services that enhance credit availability. 9. What criteria will be used to evaluate an institution's record under the service test? For retail banks, the service test addresses the availability of branches throughout an 5 geographies or individuals, and similar programs. A regulator may adjust a bank's record upward or downward to reflect more accurately its branch service to low- or moderate-income geographies or individuals. In determining the appropriateness and degree of any adjustment the regulator may consider the institution's record of opening and closing branches. The regulator might also consider whether branches in or readily-accessible to low- or moderate-income geographies serve low- and moderate-income individuals. Regulators may also take into account significant differences in the quantity, quality, or types of services offered to low- and moderate- income individuals or geographies and similar considerations. A bank or thrift could rebut a presumption raised by the quantitative measures by demonstrating that they present an inaccurate picture of its service of low- and moderate- income geographies and individuals because of peculiarities in the demographics of its service area, limitations imposed by its financial condition, economic limitations on branch operation, or similar considerations. 11. Can wholesale banks and limited-purpose banks be evaluated under the service test? Yes. Wholesale and limited-purpose banks would be evaluated based on the extent to which they offer services to promote credit availability, or provide support to organizations that offer such services, in low- and moderate-income geographies or to low- and moderate-income individuals. 12. What factors will be considered under the investment test? Wholesale and limited-purpose institutions will normally be evaluated under the investment test instead of the lending test. Retail institutions will be evaluated under the investment test (in addition to the lending and service tests), but investment performance cannot reduce their composite rating. Institutions will be evaluated based on the amount of capital they have devoted to qualified investments not already considered under the lending test. Qualified investments include investments: in support of local affordable housing and community, economic, or small business development; in community development banks, community development corporations, community development projects, small business investment corporations (including minority small business investment corporations), and minority- and women-owned financial institutions and other community development financial intermediaries; in consortia or other structures serving low- and moderate-income individuals and areas; and in state and local government agency housing bonds or state and local government revenue bonds specifically aimed at helping low- and moderate- income geographies and individuals. The focus of the investment test is the ultimate impact of the bank or thrift's investment 7 For retail institutions, the base rating may be increased by up to two levels (on the five rating scale) in the case of outstanding investment performance or by one level in the case of high satisfactory investment performance. This base rating may be increased by one level in the case of outstanding service and decreased by one level in the case of substantial non-compliance in service. The rating will then be converted to the statutorily-required four level rating system, with high satisfactory and low satisfactory both scored as satisfactory. An institution that would otherwise receive a needs to improve rating will be rated in substantial noncompliance if the institution received no better than a needs to improve rating on both of its last two examinations. Finally, the rating will be adjusted, if necessary, to take into account illegal lending discrimination by the institution to arrive at a final composite rating. 15. How will a reason to believe that an institution has engaged in illegal lending discrimination affect its CRA rating? There will be a rebuttable presumption that to receive a composite rating of satisfactory or better a bank or thrift has not: Engaged in a pattern or practice of discrimination that it has not fully corrected; and Committed an isolated act of illegal discrimination of which it has knowledge that it has not corrected fully or is not in the process of correcting fully. 16. Will extenuating circumstances (little or no loan demand, an innovative product that did not or is taking time to catch on, etc.) be taken into account in assessing CRA ratings? Yes, in at least two ways. First, the tests are set up as rebuttable presumptions. Therefore a bank or thrift will have the opportunity to rebut the presumptive case by citing extraordinary circumstances. Second, the tests generally take into account any special circumstances related to the financial condition of the institution, its product lines, and the environment within which it is operating. 17. Will banks and thrifts still be required to assess the credit needs of their communities? To perform under the quantitative measures, banks and thrifts will have to offer products for which there is a market. Therefore, they have an incentive to perform needs assessments in their communities. Under the proposal, however, the regulators will not 9 Has no legitimate, bona-fide complaints from community members; Has not engaged in a pattern or practice of illegal lending discrimination that it has not fully corrected; or committed isolated acts of discrimination, of which it has knowledge, that it has not corrected fully or is not in the process of correcting fully; and For a bank or thrift already subject to reporting home mortgage lending data under HMDA, has a reasonable geographic distribution of HMDA loans; A small bank or thrift that meets each of the standards for a satisfactory rating and exceeds some or all of those standards may warrant consideration for an overall rating of outstanding. In assessing whether a small bank's CRA record is outstanding, its regulator will consider the extent to which the bank's loan to deposit ratio, its lending to its service area, and its loan mix exceed the standards for a satisfactory rating. In addition, at the option of the bank, the OCC will evaluate: Its record of making qualified investments, especially those in its local service area; and Its record of providing branches, ATMs, and other services that enhance credit availability or in other ways serve the convenience and needs of low- and moderate-income persons in its service area. 21. Can a small bank or thrift receive a less than satisfactory rating using the streamlined procedures? Yes. A small bank or thrift that fails to meet or exceed all of the standards for a satisfactory rating under the small bank examination is not presumed to be performing in a less than satisfactory manner, however. Rather, for those institutions, the regulator conducts a more extensive examination of the bank or thrift's loan to deposit record, its record of lending to its local community, and its loan mix. The regulator will also contact members of the community, particularly in response to complaints about the bank, and review the findings of its most recent fair lending examination. In addition, at the option of the bank or thrift, its regulator will assess: Its record of making qualified affordable housing and community development investments, especially those in its local service area; and Its record of providing branches, ATMs, and other services that enhance credit availability or in other ways meet the convenience and needs of low- and moderate-income persons in its service area. 22. How will enforcement of the CRA be strengthened? 11 Home purchase (1-4 family); Home improvement (1-4 family); Refinancings (1-4 family); Multifamily (home purchase, home improvement, refinancings) Where possible, data collected on home mortgages will be consistent with data collected under the Home Mortgage Disclosure Act. 26. Will all consumer loans be included in the consumer loan category? No. Credit card loans and auto and other vehicular loans will not be included in the consumer loan category. 27. When will the data be collected? The information will be collected beginning July 1, 1994, for the remaining six months of 1994. The data for the six months will be submitted to a lending institution's primary regulator by January 31, 1995. Beginning January 1, 1995, on an annual basis, a summary of a bank or thrift's data collected-under this regulation will be submitted to its primary regulator by January 31, of the following year. The summary data will be submitted in a format that will be prescribed in an appendix to the regulation. 28. Will banks and thrifts be required to report data on indirect loans? A bank or a thrift will not be required to report indirect loans unless the institution elects to have the indirect loans attributed for purposes of the lending test. If a bank or thrift elects to report its indirect loans, it will report all attributable indirect loans outside low- or moderate-income geographies as well as loans inside such geographies. 29. Will CRA performance evaluations continue to be made public? Yes. The format will be revised to ensure that the evaluations include all data relevant in reaching a conclusion about an institution's CRA performance. 30. How will the regulators conduct examinations involving affiliated banks or thrifts? Multiple Branches operating under a Single Charter The primary regulator will conduct complete lending and service tests in a sample of the service areas in which a bank operates. 13 For Release After White House Press Conference December 8, 1993 Benefits of Proposed CRA Regulation 1. Provides clearer guidance to financial institutions. It eliminates the 12 qualitative assessment factors. It stresses quantitative measures of performance -- lending, service, and investment performance - not effort, public relations, or documentation. It eliminates subjective evaluations of minutes, meetings, and marketing efforts. It permits assessment relative to an approved CRA plan. It clarifies the effect of CRA performance on corporate applications. 2. Encourages public participation. It requires regulators to publish examination schedules in advance. It solicits public comment prior to examinations, not just during the corporate application process. It solicits public comment on CRA plans prior to regulatory approval. 3. Reduces unnecessary compliance burdens and rewards improved performance. It provides for streamlined, but rigorous, small institution examinations. It shifts examination burdens from the institution to the examiner. It relieves wholesale and limited-purpose institutions from requirements to define a local service area. 4. Provides necessary flexibility for examinations of diverse institutions. It distinguishes between large and small retail institutions and among retail, wholesale, and limited-purpose institutions. It bases an institution's rating on the product lines it offers. It sets up five performance levels under each test. It permits lenders to be evaluated on lending subsidiaries, funded affiliates, and other entities in which the institution has invested. It recognizes innovative/complex products or those meeting pressing credit needs. CRA ASSESSMENTS ARE NOW BASED ON THESE TWELVE FACTORS: 1. Activities conducted by a bank or thrift to ascertain the credit needs of its community, including the extent of efforts to communicate with members of its community regarding the credit services it provides; 2. The extent of the bank or thrift's marketing and special credit related programs to make members of the community aware of the credit services offered; 3. The extent of participation by the bank or thrift's board of directors in formulating policies to implement CRA, and reviewing CRA performance; 4. Existence of any practices intended to discourage credit applications from any segment of the community, particularly low- and moderate-income neighborhoods; 5. The geographic distribution of the bank or thrift's credit extensions, credit applications and credit denials; 6. Evidence of prohibited discriminatory or other illegal credit practices; 7. The bank or thrift's record of opening and closing offices in low- and moderate-income areas, and of providing equivalent services in all areas; 8. Participation or investment in local community development and redevelopment projects or programs; 9. The bank or thrift's origination or purchase of loans, including residential mortgage loans, housing rehabilitation loans, home improvement loans and small business or small farm loans within its community; 10. The bank or thrift's participation in governmentally insured, guaranteed or subsidized loan programs for housing, small businesses or small farms; 11. The bank or thrift's ability to meet community credit needs based on its financial condition, size, legal impediments, local economic conditions, and other factors; and, 12. Other factors that reasonably have bearing on the bank or thrift's efforts to meet the credit needs of its entire community. THE WHITE HOUSE WASHINGTON July 15, 1993 MEMORANDUM FOR: THE HONORABLE EUGENE ALLAN LUDWIG COMPTROLLER OF THE CURRENCY THE HONORABLE ANDREW C. HOVE ACTING CHAIRPERSON FEDERAL DEPOSIT INSURANCE CORPORATION THE HONORABLE ALAN GREENSPAN CHAIR, BOARD OF GOVERNORS FEDERAL RESERVE SYSTEM THE HONORABLE JONATHAN FIECHTER ACTING DIRECTOR OFFICE OF THRIFT SUPERVISION The Community Reinvestment Act ("CRA"), enacted in 1977, requires banks and thrifts to help meet the credit needs of the communities in which they do business. In recent years, the statute has come to play an increasingly important role in making credit opportunities available to underserved communities both urban and rural, across America. Despite its successes, I believe the CRA's full potential remains unrealized. Its implementation has focused too much on documentation and process, and not enough on actual performance. Banks complain about excessive paperwork and inconsistent implementation of the law. Community groups complain that their communities remain unserved, and the CRA evaluations often fail to reflect actual community reinvestment activities. We can do better. By giving our banks and thrifts clearer guidance as to how the regulatory agencies will evaluate CRA performance, we can eliminate much meaningless documentation and improve consistency in CRA enforcement. By focusing that guidance on the provision of real investment and services, we can increase support to communities that need it. Comptroller of the Currency Administrator of National Banks Washington, DC 20219 Office of the Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) was established in 1863 as a bureau of the Department of Treasury. The OCC is headed by the Comptroller who is appointed by the President, with the advice and consent of the Senate, for a 5-year term. The OCC is the regulator and supervisor of the national banking system. There are currently approximately 3600 national banks, with about $2 trillion in assets, representing about 60 percent of the total assets of U.S. commercial banks. The OCC: examines national banks in order to promote safety and soundness by requiring that national banks adhere to sound management principles and comply with the law, including the Community Reinvestment Act; takes actions against national banks that do not conform to laws and regulations or which engage in unsound banking practices; issues rules and regulations that implement federal law governing national banks; and approves or denies applications for new national bank charters, branches, capital or other changes in corporate or banking structure. The Comptroller serves on the boards of the Federal Deposit Insurance Corporation and the Resolution Trust Corporation and is a director of the Neighborhood Reinvestment Corporation. #### Comptroller of the Currency Administrator of National Banks Washington, DC 20219 BIOGRAPHICAL INFORMATION Eugene A. Ludwig Comptroller of the Currency Eugene A. Ludwig took the oath of office on April 5, 1993 as the 27th Comptroller of the Currency. The Office of the Comptroller of the Currency (OCC)- supervises nearly 3600 federally chartered commercial banks. The banks supervised by the OCC account for approximately 60 percent of the assets of the commercial banking system. By statute, the Comptroller serves a concurrent term as a Director of the Federal Deposit Insurance Corporation and the Neighborhood Reinvestment Corporation. The Comptroller also serves as a member of the Federal Financial Institutions Examination Council. Mr. Ludwig joined the OCC from the law firm of Covington and Burling in Washington, where he was a partner beginning in 1981. He specialized in intellectual property law, banking and international trade. He has written numerous articles on banking and finance for scholarly journals and trade publications, and served as a guest lecturer at Yale and Harvard Law Schools and Georgetown University's International Law Institute. Mr. Ludwig grew up in York, Pennsylvania, where he attended York Suburban High School. He earned a B.A. magna cum laude from Haverford College in Pennsylvania. He received a Keasbey scholarship to attend Oxford University, where he studied politics, philosophy and economics and earned a B.A. and M.A. He holds an LL.B. from Yale University, where he served as editor of the Yale Law Journal and chairman of Yale Legislative Services. April 1993 DEC 01 '93 06:04PM CONG & BANK RELATION P.1 MEMORANDUM Comptroller of the Currency Administrator of National Banks Washington, DC 20219 FACSMILE TRANSMISSION REQUEST NO. OF PAGES: COVER + 2 DATE 12/1/93 TO: NAME Jonathon Prince COMPANY Wt. Hse Press Office DEPT/MAIL STOP CITY OFFICE PHONE 456-7151 FAX PHONE 456-6527 FROM: NAME Eileen Gallagher PHONE 874-4883 OCC FAX: (202) 874-5305 Additional addresses or other information: DEC 01 '93 06:04PM CONG & BANK RELATION P.2 MEMORANDUM Comptroller of the Currency Administrator of National Banks Washington, D.C. 20219 To: Jonathon Prince, White House press office From: Eileen Gallagher, Special Assistant to Konrad Alt Date: December 1, 1993 Subject: Roll out of CRA regulation and Presidential events in Los Angeles this weekend I have been trying unsuccessfully to reach you by phone to follow up on conversations you had last week with Comptroller Ludwig, Konrad Alt and Lee Cross. Presidential events in Los Angeles Last week, you asked for sample "CRA" projects currently under construction in Los Angeles that could be used as a backdrop for a Presidential event this weekend. We sent over information on several suggested housing and community development projects. Were any of these sites selected? We also promised to send you some suggested text on CRA for possible inclusion in the President's speech. Some draft language is attached for your use. CRA Regulation The Notice of Proposed Rulemaking on the Community Reinvestment Act (CRA) is nearly complete. The FDIC board is scheduled to vote on the rule next Thursday, December 9th at 10 am. The Fed board is scheduled to vote on the rule next Friday, December 10th. We are working to get Treasury clearance of the OCC and OTS versions of the rule by next Wednesday, at the latest. Last week, you discussed the possibility of a White House briefing for the press immediately following the FDIC board vote. Such a briefing would get the information out to the press quickly and would help to ensure that this is perceived as an Administration initiative. Can the White House press rooom (or the OEOB press room) be used for a press briefing on CRA next Thursday, December 9th at 11 am? If it can, what information or materials do you need from us? Please let me know as soon as possible whether or not to go forward with a White House press room briefing. DEC 01 '93 06:05PM CONG & BANK RELATION P.3 DRAFT 11/29/93 COMMUNITY REINVESTMENT ACT REFORM PROPOSAL PARAGRAPH FOR PRESIDENT CLINTON'S SPEECH Credit is the lifeblood of a healthy economy and economically healthy communities. Without access to credit, small businesses die and neighborhoods decay. That's why Congress enacted the Community Reinvestment Act -- to ensure that credit and bank services were equally available to all Americans -- regardless of where they live and work. CRA has produced some real success stories, but it can and should do much, much more. This past July, I asked the federal bank and thrift regulators to rewrite the CRA regulation -- to make it a more effective tool for ensuring that credit and banking opportunities are available to all people and communities throughout urban and rural America. I asked them to focus more on results and less on process -- more on loans, service, and investments in low- and moderate- income communities, and less on paperwork and procedures. For the past four months, the regulators have been working with community groups, representatives of local government, and financial institutions to find a way to meet these goals. In the next few weeks, the regulators will issue their proposal for reforming CRA. By itself, reinventing the way federal regulators administer CRA will not revitalize our inner cities and rural communities. But, as an important part of my Administration's urban redevelopment effort, it will play an important role. Withdrawal/Redaction Marker Clinton Library DOCUMENT NO. SUBJECT/TITLE DATE RESTRICTION AND TYPE 001. memo Janice Booker to Lee Cross; re: Projects in South Central L.A. 11/24/1993 P6/b(6) (partial) (1 page) COLLECTION: Clinton Presidential Records Speechwriting Jonathan Prince OA/Box Number: 10440 FOLDER TITLE: 12/93 CRA Reform 2006-0466-F jp1378 RESTRICTION CODES Presidential Records Act - |44 U.S.C. 2204(a)] Freedom of Information Act - 15 U.S.C. 552(b)| P1 National Security Classified Information |(a)(1) of the PRAJ b(1) National security classified information [(b)(1) of the FOIA) P2 Relating to the appointment to Federal office [(a)(2) of the PRA] b(2) Release would disclose internal personnel rules and practices of P3 Release would violate a Federal statute [(a)(3) of the PRA| an agency [(b)(2) of the FOIA] P4 Release would disclose trade secrets or confidential commercial or b(3) Release would violate a Federal statute [(b)(3) of the FOIA] financial information |(a)(4) of the PRA] b(4) Release would disclose trade secrets or confidential or financial P5 Release would disclose confidential advice between the President information [(b)(4) of the FOIA) and his advisors, or between such advisors [a)(5) of the PRAJ b(6) Release would constitute a clearly unwarranted invasion of P6 Release would constitute a clearly unwarranted invasion of personal privacy [(b)(6) of the FOIA] personal privacy |(a)(6) of the PRAJ b(7) Release would disclose Information compiled for law enforcement purposes [(b)(7) of the FOIA] C. Closed in accordance with restrictions contained in donor's deed b(8) Release would disclose information concerning the regulation of of gift. financial institutions [(b)(8) of the FOIA| PRM. Personal record misfile defined in accordance with 44 U.S.C. b(9) Release would disclose geological or geophysical Information 2201(3). concerning wells [(b)(9) of the FOIA] RR. Document will be reviewed upon request. NOV 24 '93 10:27 OCC/COMMUNICATIONS P.2 MEMORANDUM Comptroller of the Currency Administrator of National Banks Washington, DC 20219 To: Lee Cross, Deputy Comptroller, Communications From: Janice A. Booker, Director of Community Development Division Date: November 24, 1993 Subject: Projects in South Central L.A. Listed below are 3 construction projects underway in South Central Los Angeles. We recommend that they be considered for the White House event. They are listed in priority order. 1. SINGLE FAMILY HOUSING SUBDIVISION DEVELOPMENT The Drew Economic Development Corporation (DEDC), a non-profit neighborhood development entity, is currently developing two single family housing subdivisions in South Central Los Angeles (Watts and Willowbrook the original South Central L.A. area. Some rioting occurred in the commercial strip area during the disturbances). Many of the houses have been completed and others are under construction. Citibank is providing the permanent financing for the project and Bank of America provided the construction financing. DEDC also will be breaking ground in a couple of months for a child care center with financing being provided by the public sector and Bank of America. They also have a second housing project under discussion that will likely be funded by Wells Fargo Bank, N.A. (this bank was out-bidded by Bank of America on the current project). DEDC has experience in working with many lenders, the public sector and other community partners. This entity was recommended highly by the Fair Housing Congress of Southern California and the Center for Community Change (California branch). DEDC is also an active member of Communities for Accountable Reinvestment. Contact person: Carla Dartis, President (312) 632-3290 Office [oa]] (b)(6) 2. HOUSING AND SMALL BUSINESS DEVELOPMENT The Los Angeles Neighborhood Housing Services, Inc. is actively developing housing in South Central Los Angeles and providing some financing for small businesses. NOV 24 '93 10:27 OCC/COMMUNICATIONS P.3 They started the "Rebuild a Block" program soon after the riots that takes one block at a time in the riot area and focuses resources to rehabititate the properties. Work on the initial blocks have started and includes a local grocery store owned by a Korean family. The store is being enlarged and work on residential properties is in progress. Financing is being provided by local banks, the NHS (through a NRC grant), the City of Los Angeles, and HUD totaling $97 million. The commitment for the initial block was $1.2 million provided substantially by the financial institutions. Contact person: Lori R. Gay, Director (213) 749-7797 3. HOUSING AND CHILD CARE FACILITY FAME Gardens, a project of the First African Methodist Episcopal Church, is being developed with financing from the First Interstate Bank of California. The project includes 81 units of housing and a mansion that is being converted into a Child Care Facility. We are still checking this one out with community contacts and won't have feedback until later today. Contact person: Peggy Graham Hill, Director of Housing (213) 737-0897 We did not advise these groups that they were under consideration for a White House event. If one is used, we should be notified. cc: KAlt EGallagher Withdrawal/Redaction Marker Clinton Library DOCUMENT NO. SUBJECT/TITLE DATE RESTRICTION AND TYPE 002. memo Janice Booker to Lee Cross; re: Projects in South Central L.A. 11/24/1993 P6/b(6) (partial) (1 page) COLLECTION: Clinton Presidential Records Speechwriting Jonathan Prince OA/Box Number: 10440 FOLDER TITLE: 12/93 CRA Reform 2006-0466-F jp1378 RESTRICTION CODES Presidential Records Act - |44 U.S.C. 2204(a)] Freedom of Information Act - [5 U.S.C. 552(b)] P1 National Security Classified Information [(a)(1) of the PRAJ b(1) National security classified Information [(b)(1) of the FOIA] P2 Relating to the appointment to Federal office [(a)(2) of the PRA] b(2) Release would disclose Internal personnel rules and practices of P3 Release would violate a Federal statute [(a)(3) of the PRAJ an agency [(b)(2) of the FOIA] P4 Release would disclose trade secrets or confidential commercial or b(3) Release would violate a Federal statute [(b)(3) of the FOIA] financial Information |(a)(4) of the PRA] b(4) Release would disclose trade secrets or confidential or financial P5 Release would disclose confidential advice between the President information |(b)(4) of the FOIA] and his advisors, or between such advisors [a)(5) of the PRAJ b(6) Release would constitute a clearly unwarranted invasion of P6 Release would constitute a clearly unwarranted Invasion of personal privacy [(b)(6) of the FOIA] personal privacy [(a)(6) of the PRA] b(7) Release would disclose information compiled for law enforcement purposes |(b)(7) of the FOIA] C. Closed in accordance with restrictions contained in donor's deed b(8) Release would disclose Information concerning the regulation of of gift. financial institutions [(b)(8) of the FOIA] PRM. Personal record misfile defined in accordance with 44 U.S.C. b(9) Release would disclose geological or geophysical information 2201(3). concerning wells [(b)(9) of the FOIA] RR. Document will be reviewed upon request. NOV 24 '93 10:27 OCC/COMMUNICATIONS P.2 MEMORANDUM Comptroller of the Currency Administrator of National Banks Washington, DC 20219 To: Lee Cross, Deputy Comptroller, Communications From: Janice A. Booker, Director of Community Development Division Date: November 24, 1993 Subject: Projects in South Central L.A. Listed below are 3 construction projects underway in South Central Los Angeles. We recommend that they be considered for the White House event. They are listed in priority order. 1. SINGLE FAMILY HOUSING SUBDIVISION DEVELOPMENT The Drew Economic Development Corporation (DEDC), a non-profit neighborhood development entity, is currently developing two single family housing subdivisions in South Central Los Angeles (Watts and Willowbrook -- the original South Central L.A. area. Some rioting occurred in the commercial strip area during the disturbances). Many of the houses have been completed and others are under construction. Citibank is providing the permanent financing for the project and Bank of America provided the construction financing. DEDC also will be breaking ground in a couple of months for a child care center with financing being provided by the public sector and Bank of America. They also have a second housing project under discussion that will likely be funded by Wells Fargo Bank, N.A. (this bank was out-bidded by Bank of America on the current project). DEDC has experience in working with many lenders, the public sector and other community partners. This entity was recommended highly by the Fair Housing Congress of Southern California and the Center for Community Change (California branch). DEDC is also an active member of Communities for Accountable Reinvestment. Contact person: Carla Dartis, President (312) 632-3290 Office [002] (b)(6) 2. HOUSING AND SMALL BUSINESS DEVELOPMENT The Los Angeles Neighborhood Housing Services, Inc. is actively developing housing in South Central Los Angeles and providing some financing for small businesses. NOV 24 '93 10:27 OCC/COMMUNICATIONS P.3 They started the "Rebuild a Block" program soon after the riots one block at a time in the riot area and focuses resources to rehabititate th es. Work on the initial blocks have started and includes a local grocery store ;y a Korean family. The store is being enlarged and work on residential pro S in progress. Financing is being provided by local banks, the NHS (through grant), the City of Los Angeles, and HUD totaling $97 million. The commi he initial block was $1.2 million provided substantially by the financial instit. Contact person: Lori R. Gay, Director (213) 749-7797 3. HOUSING AND CHILD CARE FACILITY FAME Gardens, a project of the First African Methodist Episcopal ( nurch, is being developed with financing from the First Interstate Bank of California. The project includes 81 units of housing and a mansion that is being convirted into a Child Care Facility. We are still checking this one out with community ontacts and won't have feedback until later today. Contact person: Peggy Graham Hill, Director of Housing (213) 737-0897 ) We did not advise these groups that they were under consider: tion for a White House event. If one is used, we should be notified. cc: KAlt EGallagher DEC 02 '93 18:27 OCC/COMMUNICATIONS P.1 MEMORANDUM Comptroller of the Currency Administrator of National Banks Washington, DC 20219 To: Jonathan Prince, The White House From: Lee Cross, Deputy Comptroller for Public Affairs Ce Date: December 2, 1993 Subject: CRA Projects in Boston When Gene Ludwig, Konrad Alt and I talked with you about the CRA news briefing last week, you mentioned that you needed an example of a good CRA project in Boston for a trip that was scheduled for the Vice President. I wasn't sure exactly what you had in mind, so I hope this information will help. First National Bank of Boston -- The Lithgow Building This $8 million mixed-use project includes commercial and residential development of deteriorated and previously abandoned properties in Dorchester, a low-income neighborhood in Boston. The project was anchored by the renovation of the Lithgow Building, with 24,000 square feet of space, which had stood vacant for several years on the corner of an entirely abandoned block. Bank of Boston opened a branch office in this abandoned building. It also provided financing to help renovate the building. Next door. The nonprofit developer for the project says that, if the bank had not taken these actions, the project would never have been completed. There are now 31 units of affordable housing next door to the Lithgow building, built with the assistance of the Massachusetts Housing Finance Agency. Additional redevelopment in the neighborhood surrounding the building is continuing. In addition to Bank of Boston and the Massachusetts Housing Finance Agency, participants in this public/private project included a strong community-based, nonprofit developer, the Codman Square Housing Development Corporation (CSHCD); Boston's Public Facilities Department; the Massachusetts Government Land Bank; and the Massachusetts Community Development Finance Agency. FONFIGN AID GROSSMAN KENNOM mon AIRAC Green viorsoma LP SENATOR cour WOFFORD WOFFOND BREAUX COM CONNAP FOND sporoon MARKAN sasson FEINSTEIN HC CONCORD COAUTION #' BY STATE CHAFFEE TALY straws JEFFORDS PASCHL6 RUSH DECONCINI A capital budget soft entitlement bodget NOV 17 '93 18:14 OCC/COMMUNICATIONS P.1 FAX Comptroller of the Currency Administrator of National Banks Washington, DC 20219 FACSIMILE TRANSMISSION REQUEST NO. OF PAGES: COVER + HERE /6 DATE 11/17/93 TO NAME Jonathan Prince COMPANY DEPT/MAIL STOP CITY OFFICE PHONE 456-7151 FAX PHONE 456-6527 FROM NAME Lee Cross PHONE 874-4970 OCC FAX: (202) 874-5263 Additional addresses or other information: CONTACT PERSON: PHONE NUMBER: