FROM THE OFFICE OF PUBLIC AFFAIRS

Yesterday Senator Gramm released for comment draft legislative provisions and proposals. In our view, the draft package, if enacted, would weaken the Community Reinvestment Act, which encourages banks and thrifts to serve creditworthy borrowers throughout their communities. CRA is working well. We believe strongly that it is important to maintain CRA, and we continue to oppose efforts to weaken CRA.

The draft bill released yesterday would diminish banking regulators' current ability to review a financial institution's CRA performance when assessing mergers or acquisitions. In addition, financial institutions would not be required to achieve or maintain an adequate CRA rating in order to conduct new financial activities. Further, we have concerns about a proposal to make certain activities criminal.

Although the draft bill recognizes that giving financial institutions a choice of structure between affiliates and subsidiaries is appropriate and consistent with safety and soundness, it limits that choice to community banks. Financial modernization must provide all banks access to the advantages that the subsidiary structure offers for safety and soundness as well as efficiency.

The draft package also includes a proposal that would dramatically expand the mixture of banking and commerce. At a time when recent events in financial markets give reason for caution about mixing banking and commerce, these provisions would head in the wrong direction.

Finally, the draft package includes a proposal that would expand the Federal Home Loan Bank System without addressing the need for comprehensive reform of the system.

These and other draft provisions and proposals raise serious concerns and are unacceptable in their current form. We look forward to continuing our work with Congress on a financial modernization bill that serves the interests of consumers, businesses and communities, while protecting the safety and soundness of our financial system.