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ARLINGTON, Va. – Three weeks out from its release, Credit Unions: True To Their Mission, the most recent report from the National Community Reinvestment Coalition which tried to make the case that credit unions of over $100 million in assets should be covered by the Community Reinvestment Act, appears to have fallen on deaf ears. Only one daily of any note, the Buffalo News, in Buffalo, New York, wrote about the report and drew a short letter to the editor from Fred Becker, CEO of NAFCU, who tried to set the record straight. Becker wrote the paper that the mandate to serve their members is “a heartfelt mission that credit unions have never abandoned,” adding: “In fact, since the year 2000, the total number of underserved areas added to federal credit union membership was 1,263, representing 94.5 million potential member-owners.” “Credit unions are constantly developing new products and services to reach out to those populations that most need their help, such as young people, low-income families and recent immigrants. These are not populations that banks want to serve,” he added. Other things about the report have emerged as well in the last three weeks. According to John Taylor, president of the NCRC, the organization decided to conduct the research that it included in True To Their Mission only after affiliate members complained that credit unions were not helping them in various community reinvestment projects. At the time Taylor could name no affiliates and no credit unions where this had occurred, but specific names were promised. But, three weeks later, the organization still has not put forward any affiliates or credit unions where the alleged non-cooperation occurred. This does not particularly surprise some long-time NCRC critics who have made the point that, to some extent, the organization and its affiliates could be said to live off of CRA money. Under CRA, banks with more than $250 million in assets face a three-pronged CRA exam which looks at their lending in low-income areas, their investment in low-income areas and their service to low-income areas. Of the three prongs, lending is the most important, accounting for 50% of the bank’s CRA score. Banks with fewer than $250 million in assets face a more streamlined test, which only looks at lending. This approach means that banks have been able to increase their CRA scores by investing in organizations such as affiliates of the NCRC sometimes, the critics have suggested, under an implied threat from an organization that it will make life hard for a bank which does not invest. This approach to CRA became such a concern that a provision of the Graham-Leach-Bliley Act of 1999 was known as CRA Sunshine and it mandated disclosures of CRA investments made by banks. But bank regulatory agencies admitted that little have come of the regulations since. Thus, critics allege, NCRC and other groups benefit from having the number of financial institutions subject to CRA become as large as possible. “I think it would be fair to say that NCRC and other like groups have a vested interest in expanding the pool of institutions which are subject to CRA,” said David John, an analyst of banking and pension issues for the conservative Heritage Foundation, a think tank in Washington, D.C. “I am not arguing that this is necessarily a bad thing, but I think it’s fair to consider whenever there is a bid to add anyone else to the CRA umbrella,” he said. The flow of cash from banks into such investments has reached such a proportion that it has sparked the creation of a the CRA Fund, a mutual fund into which over 265 banks and thrifts invest in order to meet some of their CRA obligations. The $500 million-plus asset fund is open to investments from the general public as well as banks, subject to a $2,500 investment minimum, and has Taylor as one of its trustees. This raises the specter of a direct conflict of interest in his promotion of CRA for credit unions since Taylor benefits from increases in the Fund’s size and prestige and credit unions under CRA would presumably be potential Fund investors. When contacted about Taylor’s trusteeship, the NCRC at first denied that Taylor was a trustee but then confirmed that he was, saying that Taylor donated any money he made from being a Fund trustee to charity. Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions said that CRA had created an incentive for banks to make investments, including into CDCUs, which they might not have made before. While he didn’t have a figure off the top of his head, Rosenthal estimated that tens of millions of dollars in investment has flowed into CDCUs from banks seeking to improve their CRA scores. But Rosenthal reiterated the Federation’s opposition to applying CRA to credit unions and pointed out the NCRC itself has bigger targets for CRA inclusion, namely insurance companies and mortgage brokers, each of whom market financial services into low-income areas and are among the largest overall sources of investment capital. “You used to hear more from NCRC about the insurance company issue, but I haven’t heard anything in a while,” Rosenthal said. -

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