130

Minutes

of

The Meeting of the FDIC Advisory Committee on Economic Inclusion

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington / D. C .

Open to Public Observation

November 16/2010 - 8:52 A.M.

The meeting of the FDIC Advisory Committee on Economic

Inclusion ("ComE-IN" or "Committee") was called to order by

Diana L. Taylor / Committee Chairman.

The members of ComE- IN present at the meeting were Diana L.

Taylor / Committee Chairman and Managing Director / Wolfensohn &

Company / L. L. C. / New York, New York; Michael S. Barr / Assistant

Secretary for Financial Institutions / U. S. Department of the

Treasury ("Treasury"); Ted Beck, President and Chief Executive

Officer ("CEO") / National Endowment for Financial Education;

Kelvin Boston, Execut i ve Producer and Host of PBS / Moneywi se wi th

Kel vin Boston; Martin Eakes / CEO / Self -Help/Center for

Responsible Lending / Durham, North Carolina; Alden J. McDonald,

Jr. / President and CEO / Liberty Bank and Trust / New Orleans /

Louisiana; Manuel Orozco / Senior Associate at the Inter-American

Dialogue / and Senior Researcher / Institute for the Study of

International Migration, Georgetown Uni versi ty; J. Michael

Shepherd, President and CEO, Bank of the West and BancWest

Corporation; and Peter Tufano / Sylvan C. Coleman Professor of

Financial Management / Harvard Business School/and Senior

Associate Dean for Planning and Uni versi ty Affairs. Lawrence K.

Fish, Former Chairman and CEO, Citizens Financial Group, Inc.;

Ester R. Fuchs / Professor / School of International and Public

Affairs, Columbia University; Bruce D. Murphy, Executive Vice

President and President / Community Development Banking / KeyBank

National Association; and Deborah C. Wright / Chairman and CEO,

Carver Bancorp Inc. / New York, New York, participated in the

meeting by phone. Committee members Wade Henderson, President
131

and CEO / Leadership Conference on Civil Rights / and Counselor to

the Leadership Conference on Civil Rights Education Fund; Rev.

Dr. Floyd H. Flake / Senior Pastor / Greater Allen AME Cathedral of

New York; Rebecca W. Rimel/President and CEO / The PEW Chari table

Trusts; John W. Ryan, Executive Vice President / Conference of

State Bank Supervisors; and Robert K. Steel/Deputy Mayor for

Economic Development / The City of New York, New York, were absent

from the meeting.

Members of the Federal Deposit Insurance Corporation' s

("Corporation" or "FDIC") Board of Directors present at the

meeting were Sheila C. Bair / Chairman, Martin J. Gruenberg / Vice

Chairman, and Thomas J. Curry, Director (Appointive). Roberta K.

McInerney / Designated Federal Officer for the Committee and

Deputy General Counsel/Corporate / Consumer / Insurance / and

Legislation Branch, FDIC Legal Division, also was present at the

meeting. Corporation staff who attended the meeting included

George C. Alexander / Michael J. Barry / Heather L. Basnett /

Michael W. Briggs / Luke H. Brown, Richard A. Brown, Karyen Chu,

Glenn E. Cobb / Patricia B. Devoti / Robert E. Feldman, Janet R.

Gordon, Leneta G. Gregorie, Tray Halverson, Greg Hernandez, Sally

J. Kearney / Kenyon T. Kilber / Michael H. Krimminger / Alan W.

Levy / Ellen W. Lazar / Rae-Ann Miller / Janet V. Norcom, Luke W.

Reynolds, Sherrie Rhine, Barbara A. Ryan, Kimberly Stock, James

C. Watkins / and Cathie A. Wright.

Committee Chairman Taylor opened and presided at the

meeting. She began by welcoming ComE- IN members and providing an

overview of the meeting agenda. Next / Chairman Bair announced

that Elizabeth Warren had resigned her Committee membership to

concentrate on her new responsibilities as Assistant to the

President and Special Advisor to the Secretary of the Treasury on

the new Consumer Financial Protection Bureau ("CFPB") / and

expressed thanks to Ms. Warren for her outstanding service during

her tenure on the Committee. She then provided a brief update on

past initiatives of the Committee.

Chairman Bair recalled that the Committee had previously

discussed whether the FDIC would consider conducting a pilot to

help identify best practices of banks offering safe and low-cost

transaction and savings accounts / particularly those responsive

to the needs of underserved and unbanked consumers / and reported

that the FDIC Board of Directors had approved the pilot and

Commi ttee-reviewed transaction and savings account templates.

She then advised that / as the result of the ensuing application

process, nine applicants had been selected to participate in the

pilot and announced that the nine pilot banks were Bath Savings

Insti tution, Bath, Maine; Cross County Federal Savings Bank,

Middle Village, New York; First State Bank, Union City,

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Tennessee; Liberty Bank and Trust / New Orleans / Louisiana;

Pinnacle Bank / Lincoln / Nebraska; South Central Bank, Glasgow /

Kentucky; Webster Five Cent Savings Bank, Webster / Massachusetts;

Citibank, National Association, Las Vegas, Nevada; and ING Bank,

FSB, Wilmington, Delaware. She further advised that each of the

nine pilot banks had agreed to offer accounts consistent with the

recommended templates and provide quarterly data about

enrollment / usage / and account costs / which would allow

aggregation of the data and sharing of results wi th other banks

that have an interest in offering similar accounts.

Chairman Bair next announced that the FDIC, consistent with

past advice of the Committee / had just entered into an historic

partnership agreement with the U. S. Department of Education

("DOE") and the National Credit Union Administration ("NCUA") to

promote financial education and financial access among youth in

the United States, with the agreement calling for the FDIC and

the NCUA to support DOE in training more than one million lowincome students in the basics of personal finance and sound

financial practices. She expressed excitement about the program,

optimism that the agreement would lead to more financial

institutions partnering with schools, and, noting the FDIC' s

history of support for financial education through its Money

Smart curriculum, a belief that the partnership would provide the

FDIC with additional data on the impact of the curriculum on

financial behavior. Concluding her remarks / Chairman Bair

indicated an interest in hearing the Committee / s views about

other concrete steps the FDIC can take to advance children' s

savings accounts and related literacy issues. She then turned

the discussion over to Professor Tufano.

Professor Tufano, noting the current sense of urgency around

the rethinking of consumer financial rules and regulations and

the establishment of the CFPB, introduced the concept of using

market research to inform the regulatory agenda. To illustrate

the concept / he briefed the Committee on the results of a

national/internet -based study of Americans he conducted in

October 2010 in conjunction with TNS, a global market research

firm, to measure overall satisfaction with financial regulation

and identify what he referred to as regulatory "pain points."

Regarding overall satisfaction with financial regulation, he

advised that the study asked the degree to which respondents

think their household financial interests are currently protected

by laws and regulations and that 46 percent of respondents

indicated they were appropriately protected / 28 percent indicated

they were not appropriately protected, and 27 percent indicated

they were neither appropriately nor not appropriately protected.

He further advised that among the 28 percent of respondents who

reported feeling less well protected, one could add 6 to 11

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points for those who say they carry some debt; 16 to 25 points

for those who say they are over-indebted; 11 to 12 points for

those who indicate they would be unable to raise $2/ 000 wi thin 30

days; 7 to 8 points for those who use mortgage products; 5 to 9

points for those who carry credit card balances; and 7 to 8

points for those who use alternative financial services ("AFS")

products. Regarding regulatory pain points / he reported that

respondents were most dissatisfied, in order of priority / with

fees on credi t cards / interest rates charged on credit cards /

terms on credit cards / the level of fees on overdraft protection,

activity to identify and stop fraudulent investments and their

promoters / and deal ing with fraudulent lenders.

Chairman Bair asked whether mortgages were one of the

financial product categories included in the study / in response

to which Professor Tufano stated that they were included; that

mortgages fell somewhere in the middle of products wi th which

respondents were most and least dissatisfied; and that / among

mortgage-related issues, respondents were most dissatisfied with

negotiating mortgage modifications, followed by terms of home

mortgages and shopping for and comparing mortgage offers.

Next / Professor Tufano provided context for the panel

presentations on children / s savings accounts / noting that

approximately 4.3 million children are born each year in the

United States; that about 20 percent of children are members of

poor families, with about one-third of Black and Hispanic

children living in poverty; that / when discussing the possibility

of establishing universal savings accounts, it is important to be

cognizant of reaching the 20 to 25 percent of children born into

less than ideal circumstances and to take into account the

mobility of the U. S. population; and that a variety of theories

underlie the logic of children' s savings accounts, including

starting the savings habit early to employ the power of compound

interest / supporting asset building / addressing the issue of

intergenerational transmission of poverty and opportunity / and

getting children into what he referred to as the "plumbing

system" of the financial world as a j umpstart to encouraging

financial 1 i teracy and other savings. He then introduced hi s

fellow panelists / José Cisneros / Treasurer for the City and

County of San Francisco; Robert A. Annibale / Global Director /

Ci tibank Microf inance and Community Development; Katryn

Gabrielson, Deputy General Counsel/Finance Authority of Maine;

and Robert Friedman, General Counsel/Founder / and Chairman of

the Board / CFED.

Mr. Cisneros / after underscoring San Francisco / s commitment

to financial empowerment programs, including the city' s Bank On

San Francisco program and its Payday Plus SF program, provided

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134

background on a more recent ini tiati ve / the soon-to-be launched

Kindergarten to College ("K2C") program. He explained that it

would be the first universal child savings account program, that

it would be administered by reaching out to children enrolled in

the public school system, and that San Francisco is well-suited

for such a program because it has the lowest number of children

per capita of any major city in the nation; it has a significant

percentage of children living in poverty; it has a school system

that is incredibly diverse / with a large immigrant population;

and nearly 70 percent of its public school graduates enroll in

post-secondary education. Pointing to studies that show that

children wi th any amount of money saved for college are many

times more likely to attend college than those who have saved no

money, he identified as the goals of the program creating a

college-going culture / reducing exclusion from the financial

mainstream, increasing financial literacy/and leveraging private

investments in San Francisco families.

Next addressing program design, Mr. Cisneros advised that it

included automatic enrollment, universality, and a publicly

funded seed deposit / with each child entering kindergarten in a

public school receiving an account with an initial deposit of $50

and an additional $50 for children eligible for the free and

reduced lunch program; opportunities for matched savings and

incent i ves through private funding sources; a range of deposit

options; and financial education for the children and their

families. He then identified as some of the program challenges

obtaining the information necessary for auto-enrollment / which

was mitigated by working with the school system; finding

financial providers willing to administer large numbers of small

dollar accounts / which was solved through a partnership with

Citibank; and the local budget climate, which served as an

impediment to getting the program approved. As for account

structure / Mr. Cisneros indicated that the Ci ty would establish

an escrow account with its own tax identification number, with

subaccounts for each child; that signed consent forms would be

obtained from parents to gain access to the information necessary

to manage incentives; and that the City would assume

responsibility for tracking incentives and matches. He further

indicated that the K2C program has a phased rollout. Concluding

his remarks / he identified some of the key program partners /

including the Mayor' sand Treasurer' s offices / the Department of

Children, Youth and Families, and the San Francisco Unified

School District; non-profit organizations such as EARN, CFED, and

the New America Foundation; and research and evaluation partners

from Stanford Uni versi ty. Al though acknowledging the challenges

ahead, Mr. Cisneros said that he looked forward to working with

regulators and financial institutions and to successful evolution

of the program.

November 16/ 2010
135

Mr. Annibale began by emphasizing Citibank' s extensive

history of philanthropic work in the area of matched savings

programs and noting that / while many of these efforts have

produced positive outcomes, these efforts have not been

financially sustainable and have not reached the hoped for scale.

He stated that / as a resul t / Ci tibank set out to develop a

banking platform that would support large-scale / lower-size / lowcost / but very accessible transactions for student ini tiati ves /

with the development effort leading to a new Custodial Account

Structure that allows for universal or wide-scale enrollment /

with the program sponsor determining eligibility for enrollment

and the program administrator handling enrollment; provide simple

account management and incentive tracking, with on-line access by

participants to their individual accounts; of fer easy- to-build

savings, with the option to make deposits at Citibank branches or

via direct deposit / wire transfers / or mail; and engage students

interactively through technology to keep them active over a

period of time. Observing that there are a number of players in

the program model, Mr. Annibale identified those players as the

bank, which provides the product / the platform and the technology

that houses the accounts and provides easy access through a

customized website; the schools / which have primary

responsibili ty for engaging students and parents; the

administrator / which opens and manages the accounts and program

guidelines; and the custodian, which owns the accounts / with the

administrator and custodian sometimes being the same entity. He

then advised that the next steps in the student account process

are enrollment of students and starting to savei with the best

way of reaching large numbers of children being through school

systems; learning to save through incentives, competitions,

games / and awards built into the school curriculum; and /

ul timately / enrollment of participants into college / at which

time participants gain access to their funds.

In conclusion / Mr. Annibal e expressed conf idence that the

Custodial Account Structure is one that offers easy opening /

scale / and a low enough operating cost to be attractive to other

organizations. He said that / in fact / since the City of San

Francisco had announced its program, Citibank has already

received interest from other cities and school systems. Advising

that the webs i t e ,""1¡_1¡_:_i:y§:=_y~:rg§è3C:~~()"Lr:!::g_"1~9 / would soon go 1 i ve /

he expressed hope that it will be the basis for building tens of

thousands of accounts in a relatively short period and

establishing a good partnership between Citibank and program

sponsors.

Ms. Gabrielson then briefed the Committee on the Harold

Alfond College Challenge ("Challenge") administered by the

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Finance Authority of Maine ("FAME") for the Alfond Scholarship

Foundation ("Foundation") through NexGen. She explained that

Challenge is a legacy gift of $500 toward higher education

expenses for every Maine resident baby / regardless of family

income, and that it is also a challenge to the State of Maine to

get all Maine families thinking about the need for and the

possibili ty of higher education. She noted that / if each of

14/ 000 Maine babies took advantage of the grant each year / the

foundation would be funding $7 million annually. Further

explaining the program, she stated that the funds are invested in

Maine' s Section 529 Plan, that the account must be opened by the

baby' s first birthday / that the funds are available for qualified

education expenses up to age 28/ and that additional

contributions are encouraged, but not required.

Next discussing some of the program challenges / Ms.

Gabrielson advised that getting timely and complete applications

is often difficult because some residents think the offer is too

good to be true and ignore it / there is often a wait encountered

for Social Security numbers after the birth of a baby / the

application can be daunting for those with literacy issues, and

the one-on-one approach that has proved to be the best for

opening accounts is also the most costly. As for how the

challenges have been met / she said that FAME has established

partnerships with hospitals / physicians / groups / financial

advisors / employers / banks / and other institutions that are on

the front lines with families to raise awareness about the

availabili ty of the grant / especially during the pre-natal stage;

that it conducts "casting calls /" generally held at malls /

offering free professional baby photographs / which is then used

as an opportunity to market the program and to assist with

completion of applications; that FAME employs the Bureau of Vital

Statistics to conduct direct marketing through mailings to

families; and that the Foundation works to raise awareness about

the advantages of higher education through quarterly brochures on

a variety of topics and provides quarterly account summaries to

accountholders. Regarding the role of banks / Ms. Gabrielson

indicated that they act as a bridge to the investment product /

distributing enrollment and Alfond materials, and that they often

offer matching contributions to employees as an employee benefit

or to customers as a customer bonus. She stated that / thus far /

the program has seen the enrollment of 7/000 within two years, a

take rate of about 40 percent / with 25 percent of those accounts

making additional contributions; that there also has been what

she described as a sibling side-effect, with families opening

accounts for older siblings who were unable to participate in the

Challenge but are able to take advantage of other grants; and

that FAME hopes to see upwards of 75 percent participation by

2014.

November 16/ 2010
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Then, Mr. Friedman stated that he wanted to offer comments

on seven topics / which he identified as savings / accounts /

lifelong process, incentives, budget, politics, and growth. With

respect to savings / he suggested that / given the opportunity /

low- income and even very poor people would save for college / to

start businesses / to buy homes / and for retirement / not because

it was easy/but because they saw it as a way to get ahead; and

that / while an average savings of $10 per month may not sound

like a loti with one-to-one matching, it could equal the cost of

two years at a community college. With respect to accounts,

emphasizing the importance of auto-enrollment / he indicated there

is a need to find a way to defaul t every child into an account /

combined with a process to engage them, because the data on

financial education show there is little evidence that it works

unless it is offered wi thin the context of an account with real

money. He suggested that / while the work of the FDIC to ensure

that financial institutions and their partners to better

understand customer identification requirements for opening

accounts has already been helpful/anything it could do to reduce

those requirements to make auto-enrollment a possibility and to

encourage financial institutions to offer children' s savings

accounts would have a tremendous impact. With respect to

lifelong / he noted that the thinking in Washington is that

matched savings accounts are affordable for retirement or for

children, but not both. However / he offered his opinion that the

two are not in opposition because savings should be a lifelong

process / with the way to a secure retirement starting as early as

birth.

Regarding incentives / Mr. Friedman advised that there is

evidence that opening an account / regardless of the size of the

account / has a significant impact; and that some kind of match

makes a huge difference in giving people a level playing field

and creating real opportunity. Regarding budget / he advised that

the Aspire Act, which would create a $500 account for every

child, with an additional $500 for the poorest half of children,

would cost about $40 billion over 10 years and the expanded

savers / credit for adults would cost another $40 billion, but

suggested that those amounts pale in comparison to the size of

existing expenditures to provide individual asset-building

incenti ves / such as the home mortgage interest deduction and

favorable capital gains treatment / with little evidence that the

programs have an actual effect. Regarding politics, Mr. Friedman

reported that SEED polls show that / after being educated on the

aforementioned proposals / 70 to 80 percent of those polled were

supportive. Finally, regarding growth, he shared his belief

that / historically / the policies that have generated the most

signif icant / sustainable / and widely- shared increases in economic

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well -being have been investments in the common genius / such as

universal education, the Homestead Act, creation of the 30-year

mortgage / and the GI Bill/and that children' s savings accounts

and matched savings accounts for adults are such programs.

In the discussion that followed, Committee members asked

panelists a number of questions / including questions about the

sustainability of programs dependent upon budget approval when a

current administration leaves office, plans for program research

and evaluation, recommendations for what regulators can do to

facilitate children' s savings accounts, specific program goals,

and mechanisms contemplated for getting parents involved in the

savings programs. In response to Mr. Boston' s question about

what would happen to the K2C program once San Francisco' s current

mayor leaves office, Mr. Cisneros responded that, while it cannot

be said for certain that any program is permanent / the K2C

program has generated a tremendous amount of community support /

which influences the budget process / and that / al though the

Ci ty/ s share of current program financing is about 50 percent /

the goal is to reduce the City' s share in future years by raising

more private funding. In response to Committee Chairman Taylor / s

questions regarding what kinds of mechanisms are in place to

evaluate program outcomes / Mr. Friedman responded that a number

of ongoing SEED studies on the results of savings ini tiati ves and

that the SEED for Oklahoma Kids experiment / which is just

beginning / includes random assignment control groups to allow

follow-up from birth over the next 30 years, funding permitted.

Mr. McDonald suggested that / in addition to examining the high

costs associated with maintaining low balance savings accounts /

some consideration be given to evaluating cost benefits to

provide a fuller picture for financial institutions thinking

about offering children' s savings accounts.

Answering Mr. Shepherd / s questions regarding what regulators

can do to facilitate children / s savings accounts / Mr. Annibale

suggested that / because asset building is an appropriate

precursor to accessing credit / regulators should consider

allowing credit under the Community Reinvestment Act ("CRA") for

such accounts. In response to Vice Chairman Gruenberg' s question

about the specific goals of children' s savings accounts / Mr.

Cisneros advised that San Francisco has several goals / including

generally creating a supportive environment for families as it

pertains to successfully handling their money and knowledge of

and access to mainstream financial products / building hopes / and

building a college nest egg for each child; and Mr. Annibale

advised that most people see the main purpose of such accounts as

encouraging and enabling higher education, but that / ul timately /

his goal is to empower more people to participate in the economy

as producers / not as consumers. In answer to Mr. Beck / s question

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about mechanisms for parental involvement, Mr. Cisneros indicated

that, in addition to contacting parents to provide informat ion on

the accounts, San Francisco would be reaching out through its

partners to provide financial education classes and through

parent-teacher organizations to find out which parents can use

assistance and support and, perhaps, would be offering some

incentives targeted at parents; and Ms. Gabrielson indicated that

simply by requiring an application process rather than setting up

auto-enrollment, the Challenge provides an opportunity for active

parental involvement.

Committee Chairman Taylor then announced that the meeting

would briefly recess. Accordingly, at 10:36 a.m., the meeting

stood in recess.

* * * * * * *

The meeting reconvened at 10: 51 a. m. that same day, at which

time Committee Chairman Taylor introduced Barbara A. Ryan, Deputy

to the FDIC Vice Chairman, as moderator of the panel discussion

on "Underserved Studies."

Ms. Ryan recalled that at the Committee meeting held on

December 2, 2009, she had shared the results of the FDIC's first

National Survey of Unbanked and Underbanked Households

("Household Survey") and that the FDIC had also conducted a

companion Survey of Banks' Efforts to Serve the Unbanked and

Underbanked. She reminded Committee members that both surveys

are designed to be repeated approximately every two years and

advised that staff currently is in the process of developing a

second set of instruments for each survey, incorporating lessons

learned from the initial surveys and from the survey results;

that the second Household Survey, like the first, would be

conducted as a supplement to the Census Bureau's Current

Population Survey in June 2011; that the draft revised Household

Survey instrument had been published for public comment; and that

revisions were being made on the basis of those comments. After

noting that panelists would share research that provides a deeper

understanding of the behavior of unbanked households, she

introduced as her fellow panelists Eleni Constantine, Director,

Financial Securi ty Portfolio, Pew Chari table Trusts; Tammy

Edwards, Community Affairs Officer, Federal Reserve Bank of

Kansas City ("Kansas City FRB"); and Betsy Costle, Director of

Consumer and State Affairs, AARP Public Policy Insti tute.

Ms. Constantine then briefed the Committee on a recent Pew

study, titled Unbanked By Choice, which she stated was conceived

as a complement to Pew's work on banking the unbanked in the Bank

On Program and designed to compare the financial behaviors of the

banked population to those of the unbanked population. After

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summarizing the survey methodology, which she explained involved

a randomized approach and two waves of door-to-door interviews in

targeted Los Angeles neighborhoods, she launched into some of the

high level findings. She advised that, generally, those who

operate in a cash only economy and those who are purely banked

have more in common with each other than those who use

alternative financial services ("AFS"), whether or not they have

a bank account, citing as examples findings that those who use

only bank services and those who use only cash were more able to

save and to remit at a higher level than were those who use AFS,

whether banked or unbanked. With respect to comparisons between

the banked and unbanked, she advised that more than one-third of

the banked and more than two-thirds of the unbanked use AFS; more

than twice as many banked than unbanked are able to save for the

future; the unbanked say they do not make enough to pay their

bills at a higher rate than the banked; both the banked and

unbanked express high levels of satisfaction with their financial

service providers, with the banked having a high level of trust

for banks and credit unions and the unbanked having a high level

of trust for check cashers; the banked receive their income

mostly by check versus the unbanked who receive their income

mostly in cash; and the banked and the unbanked aspire to similar

financial goals such as purchasing a home or an automobile and

educating themselves or their children. She further advised that

use of check cashers is higher among the banked than the

unbanked, probably because more of them are paid by check; use of

independent money transfer chains for remittances is high for

both the banked and the unbanked; and, although budgets were

modest in both cases, monthly household expenditures were

sl ightly higher for the banked than the unbanked.

Ms. Constantine cited as other high level findings that

about two-thirds of the unbanked have never had a bank account;

that the unbanked do not particularly want a bank account because

they do not perceive it as useful; that the maj ori ty of those who

are banked use at least five products or services; that the

unbanked report the highest use of their money to pay bills,

purchase pre-paid calling cards, and purchase money orders,

suggesting that banks are not doing very well in meeting their

need for these products and services; that significant numbers of

the banked and previously banked reported adverse experiences

with banks related to fees for insufficient funds or overdrafts

or being charged a fee that they did not understand; and that the

primary reasons the previously banked left a bank were because of

being charged fees without explanation or because they were

treated in a discourteous manner. Noting that the average length

of time in the country for the unbanked was about 14 years,

versus about 21 years for the banked, she stated that immigrants

typically live in the cash economy for the first 15 years, then

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141

move toward use of AFS providers, which places more stress on

their budgets, before fully entering the mainstream financial

system. She suggested that, to facilitate savings and creditbuilding among this population, it is important to develop bridge

products that allow a transition from a full cash economy to

participation in the financial mainstream without going through

the AFS phase.

Ms. Edwards then presented the findings of a recently

completed focus group research initiative, The Unbanked and

Underbanked Consumer in the ioth District, which she advised was

conducted partially as the result of the FDIC's Household Survey

data, showing the growing ranks of the unbanked and underbanked

in the states served by the Kansas City FRB. Providing

background on the research effort, she said that it included 24

focus groups, 18 conducted in English and six in Spanish, in four

cities-Kansas City, Oklahoma City, Omaha, and Denver-with each

focus group composed of three to four people. She advised that,

demographically, the percentage of unbanked households range from

20 percent in Nebraska to 33 percent in New Mexico, with 26

percent of the district overall falling into the unbanked

category and minorities disproportionately represented among the

unbanked or underbanked. Defining the characteristics of the

unbanked and underbanked focus group participants, she indicated,

that they have limited and unstable income, have had bad

experiences with bank fees, encountered unexpected fees that

reduced their balances, admitted to having inadequate

recordkeeping, and have received limited or no financial

education, yet still see value in having a relationship with a

bank.

Citing key findings of the focus groups, Ms. Edwards advised

that the unbanked and underbanked have financial desires similar

to the mainstream, including the desire to own a home, have a

reliable form of transportation, and save money for their

children's education; that their financial behaviors are

primarily influenced by their families; that the transparency and

final i ty of financial transact ions is extremely important to

them; that they express a strong desire to have physical control

of their money; that they feel that AFS providers are easier to

use; that they share a misunderstanding about fees and how they

are assessed as well as about the functional aspects of products

and services; and that a savings account is the desired entry

point for a banking relationship because they see it as a way to

build credit and reach some of their goals. Next, addressing the

implications of the research, she suggested that there are

several ways regulated financial institutions and financial

educators can transition the unbanked and underbanked into

relationships with insured depository insti tutions, namely by

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offering low- or no-cost products and services; introducing

clarity around the issues of how products and services work, fee

structures, and identification requirements; providing greater

convenience in the form of longer hours and more ATMs that

operate 24 hours a day, seven days a week; and addressing the

issue of comfort with more front-line associates who look like

the population to be served and speak their language. She also

suggested that products and services should be expanded to

provide al ternati ves to payday lenders, check cashers, and pawn

shops; that clearly def ined second chance programs and problem

resolution processes should be implemented; and that financial

education should be linked to specific life events such as the

purchase of a new home, a new job, or the purchase of an

automobile. Ms. Edwards then concluded her presentation by

explaining that, as a result of the research, the Kansas City FRB

was working with state and city leaders, nonprofit organizations,

and lenders throughout the ioth District to launch Bank On

programs to offer a suite of products targeted to the unbanked

and underbanked; developing culturally relevant workforce

initiatives to help lenders increase their front-line workforce

of culturally sensi ti ve, bil ingual employees; developing targeted

financial education; and expanding products and services, from

more participation at VITA sites to having more lenders offer

remi ttance services, payroll cards, and small dollar loan

programs. She advised that, to determine whether the ini tiati ves

are making a difference, the Kansas City FRB plans to repeat its

research, likely in 2012.

Next, Ms. Costle briefed the Committee on the AARP's study,

entitled A Portrai t of Older, Underbanked and Unbanked Consumers,

explaining that i t involved a customi zed analysis of data from a

2008 survey conducted by the Center For Financial Services

Innovation to determine whether patterns of the unbanked and

underbanked differed by age. She reported that the analysis

showed that older people tended to be more likely to be banked,

wi th either a checking or savings account, with the percentage

who are banked increasing with each age cohort; that, as

expected, the size of savings accounts varied by income; that

older Latinos and Blacks were less likely to have accounts than

their White counterparts; that the main reasons given for not

having a checking account were costs, substantial concerns about

misuse of personal information, and concerns about documentation

requirements. With respect to cost, she indicated the concerns,

in order of priority, were not having enough money, hidden fees

or expenses, accounts are too expensive, and too high a minimum

balance requirement. She advised that the reasons for not having

an account varied by race, with Blacks and Hispanics most often

citing concern about misuse of personal information and Whites

most often citing not having enough money for an account to be

November 16, 2010
143

useful. Nevertheless, she advised that, overall, older consumers

indicate a preference for conducting their financial transactions

in a bank or credit union, with supermarkets cited as their

second most preferred venue, but noted that older Black and

Hispanics showed far less preference for bank and credit unions

than their White counterparts.

Continuing, Ms. Costle advised that the research also shows

that most people, whether they were banked or unbanked or used

AFS, were either very or somewhat satisfied with their financial

transactions; that the most often cited reasons for satisfaction

were that the transactions do not take much time, helpfulness of

staff, fees that were perceived as affordable, or respectful

treatment by staff, with the helpfulness of staff most often

ci ted by Hispanics and affordable fees most often cited by

Blacks. With respect to borrowing, she explained that as the age

groups progressed, people were less likely to borrow, with 27

percent of those aged 45 to 64 and 20 percent of those aged 65

and over reporting borrowing; that Hispanics were the most likely

to borrow; that most borrowed one time, but 47 percent of those

aged 65 and over with incomes under $10,000 reported borrowing

more than nine times; and that most borrowed under $1,000,

although there were significant variations in amount based on

age, income, and employment status. She further explained that

personal loans represented the highest percentage of loans in all

age groups, with home equity loans representing the second

highest percentage for those aged 65 and older and the third

highest percentage for those aged 45 to 64; that the number of

auto title loans was significant for all age groups; and that the

majority of those aged 45 and up preferred to borrow from banks

and credit unions, with payday lenders cited as the least

preferred source of loans.

In closing, Ms. Costle noted that, al though unbanked and

underbanked consumers express satisfaction with their financial

transactions, AFS providers do not offer a pathway to savings for

emergencies, education, or retirement and they do not facilitate

borrowing on reasonable terms, opening channels to payday and

auto title lenders and precluding relationships with mainstream

financial institutions and the building of a credit history. She

stated that, for these reasons, it is incumbent upon banks and

credit unions to offer products with no hidden fees that keep

costs low and to provide valued services, offering as an example

the FDIC's pilot for safe and affordable transaction and savings

accounts, and indicated that a failure to do so would result in

ceding a very large and eventually lucrative market to

unregulated providers of financial services.

November 16, 2010
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Mr. Barr asked, given the research findings presented by

panelists, what they felt the banking system should look like in

terms of meeting the needs of unbanked and underbanked consumers.

In response, Ms. Edwards stated that it was important to have

front-line associates who are more culturally sensitive and

responsive to their diverse populations; Ms. Constantine stated

that, while she believes institutions are doing a fairly good job

with respect to the savings needs of those populations, she feels

that they could do a better job in the areas of lending and

transactions, by offering more safe and affordable small dollar

loans and introducing more properly structured and regulated

card-based systems; and Ms. Costle stated that banks should begin

to move towards a card-based transaction system that channels

customers into savings and loan products, rather than continuing

to operate separate transaction, credit, and savings systems.

During the ensuing discussion, Committee members sought and

recei ved clarification on the use of loans taken out by older

citizens, the possibility of AARP developing its own transaction

card or small dollar loan program, the reasons behind a high

degree of concern about misuse of personal information, and the

ability of consumers to distinguish among prepaid cards, debit

cards, and credit cards. On the latter issue, there was a

general consensus that many consumers do not understand the

distinctions and that different rules and regulations and fees

apply to each product. Mr. McDonald suggested that it would be

important to keep this confusion in mind with respect to the

FDIC's card-based, safe and affordable transaction and savings

accounts pilot. Mr. Boston suggested that the Committee extend

an invitation to Ms. Edwards to return at a future date to

discuss the recently issued Kansas State mandate for financial

education at the high school level, expressing concern over the

lack of standards by which states can evaluate various financial

education curricula.

Commi ttee Chairman Taylor then announced that the meeting

would recess for lunch. Accordingly, at 12 :10 p.m., the meeting

stood in recess.

* * * * * * *

The meeting reconvened at 1: 33 p. m. that same day, whereupon

Committee Chairman Taylor introduced Ellen W. Lazar, Senior

Advisor to the FDIC Chairman for Consumer Policy, as moderator of

the "Issues Update" panel.

Ms. Lazar introduced as her fellow panelists Michael H.

Krimminger, Deputy to the FDIC Chairman for Policy; George C.

Alexander, Assistant Director, Structured Transactions, FDIC

November 16, 2010
145

Division of Resolutions and Receiverships ("DRR"); James C.

Watkins, Deputy Director, Supervisory Examinations, FDIC Division

of Supervision and Consumer Protection ("DSC"); and Roberta K.

McInerney, Designated Federal Officer for the Committee and

Deputy General Counsel, Corporate, Consumer, Insurance, and

Legislation Branch, FDIC Legal Division.

Mr. Krimminger, noting that a number of issues had been

raised recently regarding documentation, legal title and related

issues for ongoing foreclosures, the mortgage process, and the

overall structure of mortgage finance, advised that Chairman Bair

and the FDIC have been heavily involved in examining the factual

and legal aspects of such issues, with all of them connected in

some way to consumer protect ion, securi t i za t ion, and the servicing process. More specifically, he identified the issue of

robo-signing and whether affidavits were being completed in

compl iance with legal standards, with the evidence clearly

pointing to significant defects in complying with those standards

in foreclosures; the securitization process and questions as to

whether there was compliance with legal standards for title

transfers necessary to proceed with foreclosures; and various

other issues associated with title transfers and legal authority

to foreclose, including issues related to the mortgage electronic

registration system (also known as "MERS"). He advised that,

currently, staff is reviewing the facts to gain an understanding

of what is actually happening in FDIC-supervised institutions as

well as institutions for which the FDIC has joint examination

authority. He identified as fundamental issues needing

resolution a determination of the extent to which unnecessary

foreclosures have occurred due to robo- signing and other defects;

the extent of real title defects and a determination of the

impact of such defects on the abil i ty to service loans and to

proceed with foreclosures; and the extent of faulty foreclosure

errors and a determination of whether the errors have been the

result of intentional wrongdoing or broad negligence in the

marketplace.

Next, Mr. Watkins advised that the FDIC takes very seriously

the issue of bank foreclosure practices and robo-signing

incidents; that the FDIC expects proper review of loan documents

prior to initiating or conducting foreclosure proceedings and

maintenance of appropriate policies, procedures, and

documentation; and that, the FDIC and other Federal and state

regulators fully intend to hold banks responsible for

noncompliance with laws and regulations. He further advised

that, to determine what specific corrective actions are needed

and to identify lessons learned, the FDIC is reviewing mortgage

servicing and foreclosure practices through the following

processes: participation in joint examinations of foreclosure

November 16, 2010
1.46

and securitization practices of the 14 largest mortgage

servicers; participation in interagency examinations to evaluate

foreclosure and securitization practices in electronic

registration systems; examiner verification that FDIC-supervised

servicers do not exhibit problems that have been identified in

the largest servicers; DRR review of processes used by servicers

of loans subj ect to loss share agreements and loans from

receiverships of failed banks; Legal Division review of a variety

of legal issues related to the handling of mortgages and

foreclosure actions; and formation of an internal working group,

comprised of high-level personnel from a number of divisions, to

facilitate information sharing and coordination of assessments of

industry risks and exposures. He then distributed to Committee

members a fact sheet issued by the White House on October 20,

2010, summarizing the activities of various Federal agencies to

support accountability, stability, and clarity in the housing

market.

Mr. Alexander then explained that, in addition to having a

supervisory interest, the FDIC also has a potential economic

interest in many of the issues, especially with respect to loss

share agreements, into which it has entered with acquirers of

failing banks, noting that the FDIC has executed agreements with

123 banks and has coverage on about $57 billion in single family

residential loans, 50 percent of which are concentrated in five

banks. He indicated that, as part of FDIC oversight, each

acquiring institution is required to certify whether there are

any problems associated with any affidavit defects in the

institution's foreclosure process and that larger acquirers must

submit to a visit by an on-site team which makes its own

determination as to whether there are problems related to the

foreclosure processes. He stated that the FDIC has made it clear

that to the extent that losses are incurred as the result of

flaws or failures in the affidavit or foreclosure process, it

will not cover those losses under the loss share agreements.

Briefly touching on securi ti zation news, Mr. Alexander reported

that the Fitch ratings agency had recently issued a negative

watch on all single family residential servicers because of the

possible implications of affidavit and foreclosure problems; that

Deutsche Bank, the world's second largest trustee, has demanded

that all servicers provide it with indemnification for any

servicer error in transactions; and that securitization servicers

have begun to curtail the amount of delinquent payment advances

that they have traditionally made in such transactions.

Supplementing the information shared by Mr. Alexander on

securitizations, Mr. Krimminger updated Committee members on

regulatory developments in the area of securitization by briefing

them on a final rule, effective September 30, 2010, continuing

November 16, 2010
147

the safe harbor for financial assets transferred in connection

with securitizations and participations in which financial assets

were transferred in compliance wi th existing regulation, but also

imposing further conditions for a safe harbor for securitizations

or participations issued after a transition period, ending on

December 31, 2010.

Ms. McInerney then updated the Committee on matters related

to the establishment of the Consumer Financial Protection Bureau

("CFPB"), Dodd-Frank Wall Street Reform and Consumer Protection

Act ("Dodd- Frank") topics, the FDIC's new Office of Minority and

Women Inclusion ("OMWI"), and recent internal reorganization

efforts undertaken by the FDIC. Regarding establishment of the

CFPB, she advised that it would assume responsibil i ty for most

Federal consumer protection law rulemaking on the transfer date,

as designated by the Secretary of the Treasury as July 21, 2011;

that it will examine and enforce most Federal consumer financial

laws for covered non-bank entities; that it has responsibility

for examination and enforcement of banks and thrifts (and their

affiliates) with assets of more than $10 billion, with

examination and enforcement authority for approximately 46 FDICsupervised institutions to be transferred to the CFPB; that each

of the Federal bank regulatory agencies will transfer some staff

to the new agency; that, currently, there are 50 to 60 employees

at the Treasury working on gathering information, developing

examination and other policies and procedures, securing office

space, and creating IT systems for the new agency; and that the

CFPB Director will replace the Director, Office of Thrift

Supervision, on the FDIC's Board of Directors. She explained,

however, that the FDIC and other banking agencies retain under

Dodd-Frank authority for CRA, flood insurance, and a handful of

other consumer-related laws. Regarding OMWI, she advised that

section 342 of Dodd-Frank requires that the FDIC and a number of

other agencies establish such an office by January 21, 2011; that

the duties of the office are to increase opportunity, diversity,

and outreach wi thin each of the agencies, increase participation

of minority- and women-owned businesses and programs and

contracts with the agency, and develop standards to address

di versi ty policies of entities regulated by the agencies; and

that the FDIC is in the early stages of ramping up the office,

but fully intends to have it operational by the statutory

deadline. Finally, with respect to the FDIC's reorganization

efforts, she announced that, in order to ensure that the

Corporation is in the best position to carry out its

responsibilities under Dodd-Frank, a new Office of Complex

Financial Institutions was being established to focus on

oversight of bank holding companies with more than $100 billion

in assets and their corresponding insured depository institutions

as well as non-bank financial companies designated as

November 16, 2010
148

systemically important by the new Financial Stability Oversight

Council; and that a new Division of Depositor and Consumer

Protection, to be headed by Mark Pearce, was being established to

provide increased focus to the FDIC's compliance examination,

enforcement, and outreach program.

A question and answer session followed, during which

Committee members asked and staff members responded to questions

about what specifically is to be included in resolution plans,

the potential consequences of not being able to submit a credible

resolution plan, the definition of "servicing quality," and best

practices in the area of home modifications. Chairman Bair asked

Mr. Alexander to elaborate on some of the incentives the FDIC has

built into its securitization servicing agreements. Mr.

Alexander, in response, advised that the FDIC agreements include

pricing that basically pays a dollar price for servicing

performing loans; that, if the loans become delinquent, servicers

are paid a multiple of that price, giving them the ability to

earn additional money for working with defaulted borrowers; that

servicers also have the ability to earn a multiple of the basic

price on loans for which impending events might trigger a

defaul t , giving servicers an incentive to contact borrowers in

advance of the triggering event in an effort to resolve any

problems before they occur; and that the FDIC has incorporated

flexibility into its agreements to allow the sponsor, the FDIC,

the master servicer, and the servicer to negotiate changes in the

servicing protocols and standards for the transaction in response

to changed circumstances.

Ms. Ryan then began the Status Report on Mortgage Work Stream

and Other Strategic Plan Proj ects session. She introduced

Michael W. Briggs, Supervisory Counsel, Consumer/Compliance

Section, Corporate, Consumer, Insurance, and Legislation Branch,

FDIC Legal Division, who, she indicated would provide legislative

and regulatory updates regarding mortgages; and Karyen Chu,

Chief, Consumer Finance Research Section, FDIC Division of

Insurance and Research ("DIR"), who she indicated would share

statistics that highlight a significant decline in mortgage

originations in properties located in low- to moderate-income

("LMI") census tracts since 2 0 0 6 . Providing background on the

Mortgage Subcommittee, Ms. Ryan recalled that it was established

at the request of Chairman Bair in Spring 2010; that it is

chaired by Mr. Eakes; and that the group's primary goals are to

prepare a landscape assessment to determine where we are in terms

of the impact of recent legislative and regulatory developments

that may affect mortgage terms generally and LMI mortgage terms

specif ically, and to identify best practices for LMI mortgage

lending.

November 16, 2010
149

Mr. Briggs then provided an overview of legislative and

regulatory developments affecting mortgages, including

explanations of new consumer protections; new mortgage loan

originator compensation rules, and new standards for the ability

to pay and what constitutes a qualified mortgage under DoddFrank; the Board of Governors of the Federal Reserve System's

("FRB' s") proposed mortgage rules under the Truth in Lending Act,

which would require additional disclosures for reverse mortgages,

simplification of the right to rescind disclosures, and add a new

category of disclosures for loan modifications; the FRB's final

rules, effective April 1, 2011, which separately from Dodd-Frank

prohibit yield spread premiums, "double -dipping" or receipt of

compensation from the consumer and the creditor or another

person, and certain steering practices; and final rules issued by

the Department of Housing and Urban Development , effective

October 4, 2010, which introduce a new credit score threshold for

Federal Housing Administration ("FHA") - insured loans and reducing

loan- to-val ue maximums for FHA- insured loan borrowers with credit

scores under 580.

Next, Ms. Chu advised that staff had conducted analyses of

mortgage features and performance using mortgage servicing data;

mortgage originations using Home Mortgage Disclosure Act data,

specifically originations of first main home purchase and

refinance loans for owner-occupied properties; and home ownership

levels using the Census Bureau's Quarterly Vacancy Survey. She

reported that those analyses showed, generally, that some of the

mortgage features addressed in Dodd-Frank, such as hybrid

adjustable rate mortgages ("ARMs") with short reset periods and

mortgages with prepayment penal ties , negative amortization, and

interest -only payments, are not currently being offered and that

the share of originations in LMI tracts dropped dramatically

between 2005 and 2009. Specifically, she advised that the share

of hybrid ARMs with short reset periods peaked in the first

quarter 2006, declined to almost zero between the first quarter

2006 and the fourth quarter 2007, and remains at almost zero

today; that mortgages in LMI tracts were about 50 percent more

likely during the boom years to have prepayment penalties than

those in middle- and upper-income tracts, but by the fourth

quarter 2007 the share of such mortgages had fallen to almost

zero and remains at almost zero today; and that mortgages in LMI

tracts were slightly more likely during the boom period to have

negative amortization or interest only payments than those in

middle- and upper- income tracts, but had fallen to almost zero by

the first quarter 2008 and the first quarter 2009, respectively,

where they remain today.

wi th respect to mortgage originations, Ms. Chu reported that

the number of originations has decreased dramatically between the

November 16, 2010
150

boom years and 2009, with a disproportionate decrease in LMI

tracts, with a 57 percent decrease in LMI tracts versus a 22

percent decrease in middle- and upper-income tracts between 2005

and 2009; that the share of originations in LMI tracts declined

dramatically from a peak of 17 percent in 2006 to only 9 percent

in 2009; and that the share of FHA mortgages in LMI tracts

increased from less than 5 percent in 2005 to about 35 percent in

2009. Moving to foreclosure, del inquency, and home ownership

rates, she advised that, as of August 2010, the foreclosure rate

in LMI tracts is about 50 percent higher than those in middleand upper- income tracts; that the rate of serious delinquency is

significantly higher in LMI tracts than middle- and upper- income

tracts; and that, although home ownership rates are not available

by census tract, data by race and ethnicity show that Blacks and

Hispanics have a greater percentage decrease in home ownership

rates from the peak relative to non-Hispanic Whites, widening the

disparity in homeownership rates between those groups.

Ms. Ryan observed that it's fairly apparent that Dodd-Frank

reform will significantly change the landscape of mortgage

lending by helping to ensure that some of the more problematic

lending practices are eliminated, which obviously is a posi ti ve

development from the perspective of LMI households. She advised

that, nonetheless, there are still rulemakings on the horizon

that could affect the availability of credit or the terms of

loans available to LMI households. She further advised that,

taken together, the legislative and regulatory developments and

research data suggest that the issue is not only with respect to

what constitutes a safe mortgage product, but more fundamentally

it's an issue of access and meeting the primary challenge of

ensuring that sustainable homeownership still exists for LMI

households where appropriate. She then identified as next steps

beginning to focus efforts on ways to address access issues in

the current environment by exploring innovative responses of

local developers, community organi zat ions, and other stakeholders

to take an inventory of best practices; and beginning to think

about the features of a safe mortgage product, building upon

Dodd-Frank in the process.

After Ms. Lazar supplemented Ms. Ryan's earlier update on the

safe transactions and savings pilot, Rae-Ann Miller, Special

Advisor to the Director, DIR; Luke W. Reynolds, Chief, Outreach &

Program Development Section, Community Affairs Branch, Consumer

Protection and Community Affairs, DSC; and Luke H. Brown,

Associate Director, Compliance Policy Branch, Policy, DSC,

provided status reports on the activities of the Savings and

Affordable Credit Work Groups, the Financial Education Work

Group, and the Incentives Work Group, respectively.

November 16, 2010
151

Regarding the Savings Work Group, Ms. Miller indicated that

it played a significant role in the development of the safe and

affordable transaction and savings account pilot and also would

be involved in data review and lessons learned from the pilot;

that it is reviewing existing research on emergency savings with

the goal of determining an appropriate level of such savings for

LMI households; that it had researched and catalogued existing

children's savings account programs and was interested in

receiving Committee feedback on the issues of auto-enrollment,

family involvement, multiple program participants, long-term

evaluation, and the possibility of CRA credit. Regarding the

Affordable Credit Work Group, she advised that it was actively

involved in the development of the small dollar loan pilot,

including follow-up activities to promote the findings of the

pilot; that it had conducted a follow-up conference call with the

small dollar loan pilot participants to discuss Title XII of

Dodd-Frank as it related to small -dollar loan and loan loss

reserve guarantees; that it had opened a dialogue with a number

of groups, including the National Governors Association, trade

associations, and others about possible mechanisms for

disseminating information about best practices; and that it has

had discussions with financial institutions and non-profits

interested in exploring employer-based small-dollar loan

programs.

Wi th respect to the acti vi ties of the Financial Education

Work Group, Mr. Reynolds elaborated on some of the key elements

of the FDIC's partnership agreement with DOE and NCUA and

reported on the FDIC's October 2010 release of an updated version

of the adult Money Smart instructor-led curriculum that includes

new information on topics ranging from transactional accounts to

financial recovery; that the group had provided valuable feedback

to staff on its draft framework for the FDIC's Adopt a School

Program; and that staff provided input to the General Accounting

Office on its study on the feasibility of certification for

financial education programs and has continued to work with

Treasury as a member of the Financial Literacy in Education

Commission on the core competencies process.

Mr. Brown began his update on the Incentives Work Group by

noting that Mr. McDonald is now chair of the group and thanking

him for joining the group's efforts. He then advised that the

group was in the process of developing an FDIC Chairman's Award,

planned to be announced and opened for nominations in December

2010, for excellence in serving the needs of LMI consumers; that

it is focused on bringing support to Community Development

Financial Institutions ("CDFIs") by encouraging banks to be

involved in CDFI investments and participations, and involved in

planning for a CDFI conference, to be jointly sponsored by the

November 16, 2010
152

banking agencies in Spring 2011; and that staff, jointly with

staffs of the other banking regulators, is currently reviewing

the many comments received in response to the CRA hearings held

throughout the country.

During the ensuing discussion, Committee members and staff

covered a number of topics, including automatic enrollment in

children's savings accounts and the direction of the mortgage

market, particularly as it relates to LMI consumers. Chairman

Bair asked Committee members for their views. In response, Mr.

Beck suggested that there is an argument for conducting an

experiment with two groups-one with automatic enrollment and, as

a control group, one without automatic enrollment-to determine

which approach is most effective in promoting continuing

participation after the initial deposit. In response to Vice

Chairman Gruenberg's request for the group's assessment on the

outlook for the mortgage market, Ms. Ryan expressed her opinion

that with the current diminution of some of the more problematic

mortgage practices, the tightening of standards makes the real

issue one of access, suggesting a need to focus attention on

innovative ways of helping people to save for a down payment and

to meet more restrict i ve requirements; Mr. Eakes agreed that

there is likely to be a groundswell around the issue of access to

credi t, but questioned whether there continues to be a societal

belief that sustainable homeownership in LMI communities is an

appropriate goal; and Mr. Boston pointed out that these issues

also affect the Black middle class, which is seriously at risk of

losing much of its wealth due to the foreclosure crisis as well

as high unemployment and the lack of access to small business

loans.

Chairman Bair indicated that it had been a successful

meeting and thanked everyone for their input.

There being no further business, the meeting was adj ourned.

Robert E. Feldman

~~

Executive Secretary

Federal Deposit Insurance

Corporation

And Committee Management Officer

FDIC Advisory Committee on Economic

Inclusion

November 16, 2010
Minutes

of

The Meeting of the FDIC Advisory Committee on Economic Inclusion

of the

Federal Deposit Insurance Corporation

Held in the Board Room

Federal Deposit Insurance Corporation Building

Washington, D.C.

Open to Public Observation

November 16, 2010 - 8: 52 A.M.

I hereby certify that, to the best of my knowledge, the attached

minutes are accurate and complete.

SJrtc- L ~ L

Diana. L. Ta lor

Chairman

FDIC Advisory Committee on Economic Inclusion

Dated: February 11, 2011