[Congressional Record Volume 154, Number 177 (Thursday, November 20, 2008)]
[Extensions of Remarks]
[Pages E2326-E2327]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   COMPTROLLLER OF THE CURRENCY DUGAN REFUTES UNFAIR ATTACKS ON THE 
                       COMMUNITY REINVESTMENT ACT

                                 ______
                                 

                           HON. BARNEY FRANK

                            of massachusetts

                    in the house of representatives

                      Thursday, November 20, 2008

  Mr. FRANK of Massachusetts. Madam Speaker, during the recent 
campaign, motivated I believe by an effort to stave off much-needed 
legislation establishing appropriate regulation for currently 
unregulated aspects of the financial industry, a number of people 
launched a concerted effort to blame the Community Reinvestment Act for 
our current financial crisis. Their argument--wholly inaccurate--was 
that the Community Reinvestment Act was the reason that a large number 
of irresponsible subprime loans were made.
  I was very pleased--although not surprised--that Comptroller of the 
Currency John C. Dugan, an appointee of President Bush, took the time 
on November 19th to refute these accusations. Comptroller Dugan is as 
well qualified to discuss this as anyone in the country, because he has 
a prime responsibility for the regulation of the safety and soundness 
of banks and the banking system. Given that, I believe it is essential 
that all Members have the benefit of his analysis.
  Comptroller Dugan is characteristically forthright in addressing the 
question of the role that CRA has played:
  ``There are even some that suggest that CRA is responsible for the 
binge of irresponsible subprime lending that ignited the crisis we now 
face. Let me squarely respond to this suggestion: I categorically 
disagree. While not perfect, CRA has made a positive contribution to 
community revitalization across the country and has generally 
encouraged sound community development lending, investment and service 
initiatives by regulated banking organizations.
  ``CRA is not the culprit behind the subprime mortgage lending abuses, 
or the broader credit quality issues in the marketplace. Indeed, the 
lenders most prominently associated with subprime mortgage lending 
abuses and high rates of foreclosure are lenders not subject to CRA . . 
. (B)anks subject to CRA and their affiliates originated or purchased 
only six percent of the reported high cost loans made to lower-income 
borrowers within their CRA assessment areas.''
  Madam Speaker, to make it clear that the forceful defense of CRA that 
I have just quoted is taken fully in context, I ask that those portions 
of Comptroller Dugan's speech that discuss the CRA be printed here in 
their entirety. This firm statement by President Bush's appointee with 
prime responsibility for the safety and soundness of the banking system 
should help us end the inaccurate, politically-motivated 
misrepresentation of the role that CRA has played.

   Remarks by John C. Dugan--Comptroller of the Currency Before the 
        Enterprise Annual Network Conference--November 19, 2008

       ``. . . Indeed, all of these efforts are fully in keeping 
     with the OCC's mission and the way that we approach our 
     regulatory and supervisory responsibilities, including those 
     under the Community Reinvestment Act. CRA supports banks 
     doing what they do best and what they should want to do 
     well--making viable lending and investment decisions, with 
     acceptable rates of return, consistent with their business 
     plans, I their own communities.
       Given recent public discussion, it is appropriate to ask 
     about the role that CRA plays in the credit challenges we 
     face on so many fronts. In my view, it plays a very positive 
     role. Unfortunately, however, current market disruptions have 
     clouded the accomplishments that CRA has generated, many of 
     which we recognized last year during its 30th anniversary. 
     There are even some who suggest that CRA is responsible for 
     the binge of irresponsible subprime lending that ignited the 
     credit crisis we now face.
       Let me squarely respond to this suggestion: I categorically 
     disagree. While not perfect, CRA has made a positive 
     contribution to community revitalization across the country 
     and has generally encouraged sound community development 
     lending, investment, and service initiatives by regulated 
     banking organizations.
       CRA is not the culprit behind the subprime mortgage lending 
     abuses, or the broader credit quality issues in the 
     marketplace. Indeed, the lenders most prominently associated 
     with subprime mortgage lending abuses

[[Page E2327]]

     and high rates of foreclosure are lenders not subject to CRA. 
     A recent study of 2006 Home Mortgage Disclosure Act data 
     showed that banks subject to CRA and their affiliates 
     originated or purchased only six percent of the reported high 
     cost loans made to lower-income borrowers within their CRA 
     assessment areas.
       Over the last ten years, CRA has helped spur the doubling 
     of lending by banking institutions to small businesses and 
     farms, to more than $2.6 trillion. During this period, those 
     lenders more than tripled community development lending to 
     $371 billion. Overwhelmingly, this lending has been safe and 
     sound. For example, single family CRA-related mortgages 
     offered in conjunction with NeighborWorks organizations have 
     performed on a par with standard conventional mortgages. 
     Foreclosure rates within the NeighborWorks network were just 
     0.21 percent in the second quarter of this year, compared to 
     4.26 percent of subprime loans and 0.61 percent for 
     conventional conforming mortgages. Similar conclusions were 
     reached in a study by the University of North Carolina's 
     Center for Community Capital, which indicates that high-cost 
     subprime mortgage borrowers default at much higher rates than 
     those who take out loans made for CRA purposes.
       Of course, not all single-family CRA mortgages performed 
     this well, because these loans have experienced the same 
     stresses as most other types of consumer credit. 
     Nevertheless, a number of studies have shown that when these 
     loans are made in conjunction with a structured homebuyer 
     counseling program, mortgage performance is substantially 
     improved. Affordable CRA multi-family projects utilizing low-
     income housing tax credits have also performed well, with an 
     average foreclosure rate through 2006 of 0.08 percent on the 
     underlying mortgages.
       During the community tours I have taken over the past three 
     years, I personally witnessed the positive impact that CRA 
     partnerships have had in transforming communities, expanding 
     homeownership, and promoting job creation and economic 
     development. These partner ships between communities and 
     financial institutions have also helped house senior citizens 
     and people with special needs, built community facilities, 
     and assisted small businesses serving low-income areas.
       In the Anacostia community of D.C., an area of economic 
     resurgence that I have toured on several occasions, 
     Enterprise's Wheeler Creek project was a critical link in 
     stabilizing a neighborhood that had been plagued by a 
     troubled public housing project. Wheeler Creek involved 
     development of for-sale homes in conjunction with a bank 
     community development corporation, as well as a bank's 
     purchase of low-income housing tax credits for rental 
     housing.
       CRA projects also act as catalysts for other investments, 
     job creation, and housing development. Such infusion of 
     capital into these markets leverages public subsidies, 
     perhaps as much as 10 to 25 times, by attracting additional 
     private capital. Many of these CRA equity investments can be 
     made under national banks' public welfare investment 
     authority. These bank investments have grown significantly 
     over the years--totaling more than $25 billion over the past 
     decade. Indeed, the OCC recently held its Managers Conference 
     at the Grand Masonic Lodge on North Charles Street here in 
     Baltimore, a public welfare investment funded by a national 
     bank. To meet the demand to invest in similar types of 
     projects, OCC successfully sought legislation last year to 
     raise the cap on public welfare investments from 10 to 15 
     percent of a bank's capital and assets. This rise will enable 
     the amount of such investments to increase by as much as $30 
     billion.
       Interpreting national bank public welfare investment 
     authority, OCC recently issued an approval related to energy 
     conservation that may be of interest to Enterprise. This 
     approval clarifies that such authority extends to bank 
     investments in renewable energy tax credits primarily 
     benefiting low-and moderate-income individuals and areas, 
     government revitalization areas, rural underserved and 
     distressed middle-income areas, and designated disaster 
     areas. The investing bank can claim the credits and, in some 
     instances, receive positive CRA consideration under the 
     investment or community development testes.
       Your Green Communities initiative, and others like it, may 
     be able to take advantage of these tools to obtain additional 
     resources under the public welfare investment authority, CRA, 
     and other available incentives to build many more sustainable 
     homes and communities across the country. The research and 
     examples described on your Web site demonstrate that moving 
     to a green economy can generate a significant number of jobs, 
     stimulate economic growth, and create a healthy environment 
     in communities that Enterprise serves.
       As the credit market stabilizes, CRA-driven initiatives can 
     also help us tackle challenges such as the preservation of 
     homeownership opportunities and rental housing development. 
     Opportunities also lie ahead for bank partnerships with 
     Enterprise affiliates and other nonprofits to help mitigate 
     the impact of foreclosures in communities across the country. 
     . .
       Our nation has accomplished much since CRA's passage. 
     Perhaps even Jim Rouse could not imagine how much the flow of 
     CRA-related capital and credit has contributed to affordable 
     homeownership, jobs and business development, and healthy 
     neighborhoods. In today's challenging economy, the need for 
     the positive results that CRA has generated are even greater, 
     and the same is true for organizations like Enterprise.
       Thank you very much.''

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