William Michael Cunningham and Creative Investment Research, Inc.

Thursday, December 05, 2002

Jonathan G. Katz, Secretary
450 Fifth Street, NW
Washington, D.C. 20549-0609

RE: File No. S7-36-02

Dear Mr. Katz:

We understand the "Securities and Exchange Commission is proposing amendments to its forms under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940 to require registered management investment companies to provide disclosure about how they vote proxies relating to portfolio securities they hold." We favor the proposed rule, and below, provide specific comments on this matter.


William Michael Cunningham registered with the U.S. Securities and Exchange Commission as an Investment Advisor on 2/2/1990. He registered with the D.C. Public Service Commission as an Investment Advisor on 1/28/1994.

Mr. Cunningham manages an investment advisory and research firm, Creative Investment Research, Inc. The firm researches and creates socially responsible investments and provides socially responsible investment advisory services. The company was founded in 1989. On November 16, 1995, the firm launched one of the first investment advisor websites.

The firm and Mr. Cunningham have long been concerned with the Commission's ability to protect the public interest. We base this concern on the following incidents:

  • On July 9, 1993, Mr. Cunningham wrote SEC Commissioner Mary Schapiro to suggest the SEC warn the investing public about a certain investing "scam." A timely warning was not, to our knowledge, ever issued.

  • In an April 1995 article titled "Profit From Debt: The Black Enterprise Fixed Income Roundtable" Mr. Cunningham recommended investors not purchase municipal securities issued by the District of Columbia, given social and financial difficulties the city was experiencing. In retaliation, shortly thereafter, Mr. Cunningham was subject to certain unfair regulatory practices by the Public Service Commission of the District of Columbia (DC Public Service Commission Case 943-G.) He requested the SEC review this action, but no review of this matter was ever conducted.

  • In October 1998, in a petition to the United States Court of Appeals1, Mr. Cunningham cited evidence that growing financial market malfeasance greatly exacerbated risks in financial markets, reducing the safety and soundness of large financial institutions. He went on to note that:

    "The nature of financial market activities is such that significant dislocations can and do occur quickly, with great force. These dislocations strike across institutional lines. That is, they affect both banks and securities firms. The financial institution regulatory structure is not in place to effectively evaluate these risks, however. Given this, public safety is at risk."

  • From October 1999 to March 2002, Mr. Cunningham served as Manager, Social Purpose Investing for a pension fund. In that role, he was responsible for proxy voting activity. In 2001, he voted on 1395 issues impacting 401 companies. In 2000, he voted on 1903 issues impacting 422 companies. On Thursday, February 14, 2002, Mr. Cunningham wrote to the SEC Office of the General Council to inquire about his responsibility under the duty of care standard to monitor corporate events and to vote proxies, as an SEC and State-registered investment adviser who also worked for a pension fund. Mr. Cunningham noted several incidents that interfered with his ability to carry out his duty to exercise proper care. As a result, he was concerned about his liability for negligence caused by his employer. The Commission responded in a timely manner. We have attached background memorandum concerning this matter.

There have been several other similar incidents.

In most cases, upon commenting to the SEC, Commission personnel reviewed Mr. Cunningham's activities, instead of reviewing the facts surrounding the matters cited. We note this behavior may explain why the SEC does not receive more timely information from industry insiders concerning inappropriate activities.

Summary of the Proposed Rule

Under the proposed rule, "registered management investment companies would be required to disclose the policies and procedures that they use to determine how to vote proxies relating to portfolio securities. The proposals also would require registered management investment companies to file with the Commission and to make available to their shareholders the specific proxy votes that they cast in shareholder meetings of issuers of portfolio securities."

While we appreciate this effort, we note the following:

Repeatedly, over the past twenty-five years, signal market participants abandoned ethical principles in the pursuit of material well being.2 This has occurred in both bull and bear markets, in the most materially advantaged country ever. A culture of avarice, arrogance, and malice may have taken root in certain capital market institutions, propelling ethical standards of behavior downward. Regulation has failed to protect the public interest.

"Section 10(b) of the Securities Exchange Act makes it 'unlawful for any person ... [t]o use or employ, in connection with the purchase or sale of any security ..., any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.'"

Certain market practices and procedures have been corrupted. Specifically, investment analyst "buy and sell" recommendations became "manipulative or deceptive device(s)," part of "a (successful) scheme to defraud" the investing public.

These are the simple facts.

Clearly, investment bankers and analysts engaged in criminal activities. They have, however, evaded criminal prosecution by paying tax-deductible fines (amounting to, for the firms involved, less than 10% of annual earnings). This prosecution strategy may not be effective, since it appears to be contrary to basic principles of justice and fairness. Renumeration for crimes committed is divorced from any realistic measure of damage caused. The lack of rational prosecution means the proposed rule may not discourage future illegal behavior, since we believe firms and individuals balance the cost of compliance with benefits received from breaking the law.3

Of course, under any proposed rule, crimes will continue to be committed. The proposed rule is a step forward. All of the empirical evidence available to date suggests that, under current rules, the public interest is not being served.

Our specific comments follow, in plain text, below.

Disclosure of Policies and Procedures with Respect to Voting Proxies Relating to Portfolio Securities

The Commission requested "comment generally on the disclosure of policies and procedures that funds use to determine how to vote proxies relating to securities held in their portfolios and specifically on the following issues:"

"Should we require funds to disclose their policies and procedures with respect to voting proxies of portfolio securities?"

Yes. The proposed rule should not prescribe the nature and format of the proxy voting policy information that must be disclosed; rather, we suggest the rule describe the scope of the information that must be disclosed.

Certainly, the extent to which a fund company relies on the advice of third parties or delegates to committees' proxy voting responsibilities should be described.

"Should we provide greater specificity with regard to the disclosure that funds are required to make? For example, should our forms expressly require disclosure of any or all of the specific matters enumerated above or of any other specific matters?"

We suggest that funds be responsible only for preparing a summarized (by holding {corporate entity in the portfolio} and by corporate governance issue) global list of all proxy votes for a given mutual fund over a one year period. Clients who are interested in reviewing the voting record of the mutual fund company would use this list, in conjunction with another list showing portfolio holdings (investments), to determine how the investment company voted with respect to their mutual fund holdings.

"Is the SAI (and, for closed-end funds, Form N-CSR) the appropriate location for funds to disclose their policies and procedures with respect to voting proxies relating to portfolio securities?"


"Will our proposals provide adequate access to fund proxy voting policies and procedures by fund shareholders and prospective investors?"


"Should the disclosure be included in a document that is delivered to every shareholder?"

No. Proxy voting record documents will be quite large. Requiring fund families to deliver these documents to every investor will not bring greater clarity to the corporate governance issue. The investing public is already overburdened with reports they have no hope of deciphering. We believe it more important to restore standards of trust and integrity in the capital markets generally.

To help do this, we suggest a fund's proxy voting record and policy be made available, preferably via the Internet, upon request by any member of the public. We further suggest the Commission describe proxy voting policies and procedures it believes are "best practices" for mutual funds in a separate set of documents, perhaps posted on the Internet.

We suggest the Commission examine practices used by the Federal Reserve System during the adoption of Home Mortgage Disclosure Act and Community Reinvestment Act data reporting requirements for banks. To facilitate the efficient provision of information about the new rule, we suggest the Commission hold public meetings around the country to describe and explain the new rule, if adopted. Public meetings should be targeted to three groups:

  • Individual investors

  • Institutional Investors

  • Investment Advisors, Investment Companies and other financial institutions

"We request comment generally on the proposed disclosure of a fund's proxy voting record and specifically on the following issues. What would be the costs of requiring funds to file with the Commission their proxy voting records on Form N-CSR, and to make these records available to their shareholders?"

See answer below.

"Are there less costly alternative means of requiring funds to disclose their proxy voting records?"

Yes. We suggest the Commission carefully review the experience of the Federal Financial Institution Examination Council (FFIEC) with respect to the implementation of the Home Mortgage Disclosure Act. HMDA requires banks and other financial institutions report statistics on every home mortgage loan application received. The law has required FFIEC to collect millions of records4, and has resulted in no appreciable damage to banking operations. In fact, the law, by encouraging financial institutions to make loans to previously underserved but credit worthy borrowers, opened a new market, resulted in increased profitability.5 We believe the adoption of this rule will, likewise, open a new market for mutual funds. Investors will select funds based, in part, on their proxy voting record.

"What would be the benefits to fund shareholders and others of having funds' proxy voting records disclosed?"

Faulty corporate governance practices mask a company's true value. This misallocates capital by moving investment dollars from deserving companies to unworthy companies. It is hoped that these reporting requirements will make it harder for corporate management to, using faulty corporate governance practices, transfer value from shareholders to management.

Further, it is our belief that proxy-voting skill has economic value. Skill shown by an investment company in voting proxies may indicate the level of diligence and care a fund uses in managing the affairs of clients, in general. We believe that, over time, investors will use proxy voting compliance and performance data as one mutual fund selection factor.

Just as a client has a right to information on investment performance, so a client or potential client has a right to information on the compliance record of an investment company. Under the proposed rule, investment company performance with respect to proxy voting would become part of the fund's overall compliance record. Clearly, clients should have access to this record.

"Is Form N-CSR the appropriate location for the disclosure of a fund's proxy voting record?"

Yes, but see answer below. We prefer the SEC create a new database of proxy voting information using the method outlined below.

"We have proposed, but not yet adopted, Form N-CSR. If we ultimately do not adopt Form N-CSR to implement the certification requirement of Section 302 of the Sarbanes-Oxley Act of 2002, should we nevertheless adopt Form N-CSR as a medium for a fund to disclose its proxy voting record?"

Yes, but see answer below.

"If not, how should a fund file its proxy voting record with the Commission? Should the information simply be filed together with the reports to shareholders currently required to be filed with the Commission pursuant to rule 30b2-1 under the Investment Company Act?"

Many investment advisors vote proxies on-line, using sites like www.proxyvote.com. We suggest the Commission capture proxy-voting information when submitted on-line. For example, a proxy voting web site might ask the following questions:

  1. Is the voter an investment advisor/company?

  2. If so, would the voter like to have an electronic copy of the proxy vote submitted via this website sent to the SEC?

We suggest the SEC maintain a database of raw proxy voting information that it would then process and make available to the public. The Commission would do this by matching proxy voting shareholder identifiers and control numbers to specific investment advisors and mutual funds, summarizing the data, and posting it on a website. Note that, to ensure privacy, the owner of the mutual fund shares would not have to be identified. Only the fund (or advisor voting), the identity of company issuing the proxy, and the specific votes would have to be revealed.

Having the SEC maintain a database of raw proxy voting information would clearly serve the public interest. A broad, multi-fund, multi-company proxy voting information database would lower proxy voting information search costs by providing one centralized database members of the public can access when comparing fund proxy voting behavior. For example, to review the proxy-voting behavior of Vanguard, American Century and Fidelity, accessing one, public database will be cheaper and more efficient than having to submit three information requests to three funds.

"Is it sufficient to require that a fund's proxy voting record be made available to investors or should we require a fund to deliver its proxy voting record to each investor? For example, should a fund's complete proxy voting record be included in its reports to shareholders?"

See comments above. While we believe a fund's full proxy voting record should be made available to the public, a fund should only be required to deliver its proxy voting record upon request. Funds should be free to spend money describing, documenting and delivering proxy voting policies and results depending upon the level of client interest. Certain funds will develop specific proxy voting expertise, in the same way that some funds develop specific expertise in market sectors. For example, socially responsible and faith-based funds have clients who are specifically interested in proxy voting policies; therefore, they spend more time describing their proxy voting policies, procedures and performance to clients.

"Should a fund be permitted to meet its obligation to disclose its proxy voting record exclusively through posting the required information on its website?"


"The proposal would require funds to disclose their proxy voting records semi-annually. Will this provide sufficiently frequent disclosure to investors? Should we require funds to disclose their proxy voting records more frequently? If so, through what means? Would less frequent disclosure, e.g., annually, be sufficient?"

Corporate governance issues tend to be long term in nature. In other words, except under aggravated circumstances, changes in shareholder value attributable to corporate governance factors take, relatively, a long time to be reflected in market value. Mutual fund investors will need to track proxy voting records over a multi-year period. Disclosing, in a standardized format, proxy-voting records makes tracking voting records and corporate governance factors less costly. We suggest funds disclose their proxy voting records on an annual basis and that they be required to retain proxy-voting information for five years in hard copy form and for ten years in electronic form.

"Are we proposing to require too much or too little information to be disclosed in proposed Form N-CSR?"

No. We believe the Commission has selected the most important factors.

"For example, should we limit the disclosure to contested matters, not require disclosure with respect to any categories of `routine' matters, or otherwise limit the types of matters with respect to which disclosure is required?"

No. It is important that the full proxy voting record be revealed. Matters that are uncontested in one year often show up as contested matters in subsequent years.

"Could funds generically disclose their votes on any categories of matters, e.g., votes with management (or votes as recommended by an independent third-party proxy voting service) on certain categories of issues?"

Yes. For a few categories, say, Board member elections, this may suffice.

"Would this type of summary disclosure provide investors with adequate information?"

For certain categories (and only for certain categories of matters) this type of summary disclosure will suffice.

"Should we require additional information, e.g., information about how other funds in the fund complex have voted?"

Yes. It will be important to determine the consistency with which a fund complex votes on certain matters. It is our belief that care taken with respect to proxy voting indicates the level of diligence a fund uses in managing the affairs of clients, in general. Again, to the extent that the Commission creates a main database of advisor or fund proxy voting information, search costs may be lowered. In the alternative, a database showing the results of proxy voting at the company level maintained by the Commission and providing information on fund and advisor proxy voting behavior may suffice.

"Our proposed requirements to disclose proxy voting policies and procedures and proxy voting records would only apply to registered management investment companies. Should the proposed disclosure requirements also extend to unit investment trusts (`UITs')?"

We believe the proposed disclosure requirements should not extend to unit investment trusts at this time, but would suggest they be included at some later point, after the Commission has a chance to review registered management investment company compliance with the proposed disclosure requirements.

"We request comment generally on the disclosure of proxy votes that are inconsistent with a fund's policies and procedures and specifically on the following issues. Should we require disclosure in reports to shareholders of proxy votes that are inconsistent with a fund's proxy voting policies and procedures? Is it necessary or appropriate to require delivery (as opposed to availability) of this information to all shareholders?"

We suggest that proxy votes that are inconsistent with a fund's proxy voting policies and procedures be highlighted. We do not believe it necessary or appropriate to require delivery (as opposed to availability) of this information to all shareholders.

"Should information about any other aspects of a fund's actual proxy voting record be required to be included in reports to shareholders? For example, should a fund be required to include in its reports to shareholders its votes on contested matters, management compensation issues, director elections, or any other matters?"


"Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comments to: (i) evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;"

We believe the collection of this information is necessary for the proper performance of the functions of the agency. Providing a record of proxy votes by company and by proxy line item will help investors determine an investment company's position on important matters related to corporate governance. These issues directly affect shareholder value. Thus, this data will have utility.

"(ii) evaluate the accuracy of the Commission's estimate of burden of the proposed collection of information;"

We have no comment concerning this matter.

"(iii) determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected;"

As noted, we believe the experience of the FFIEC in enhancing the quality, utility and clarity of data collected from financial institutions under CRA and HMDA provides an experience base6 the Commission can use to enhance the quality, utility, and clarity of the information to be collected under the proposed rule.

"(iv) evaluate whether there are ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology"

An SEC maintained proxy voting information facility would minimize the burden of the collection of information on those who will be required to respond under the proposed rule. Under the proposed rule, to be fully responsive to client interest, an investment company might have to respond to millions of proxy voting information requests. This might be costly. We would rather have the fund company refer inquiries to a centralized proxy voting information database, as is the case with home mortgage lending data. As noted by the FFIEC7, information technology can be used to significantly reduce the reporting requirement burden.

In addition, an SEC maintained proxy voting information facility would have the added benefit of making it easier for the public to review proxy-voting activity at a specific company. Under the proposed rule, to obtain the full set of information on investment company and investment advisor voting behavior with respect to one company, say, IBM, a member of the public would have to request information from each investment company separately. Given 7,000 such companies, this would be a very time consuming process.

Given these timesavings, we believe having the SEC create a proxy voting record data base and data retrieval facility will be in the public interest. In the alternative, and to minimize costs, we suggest the Commission require proxy voting information be posted on a given fund company's website.

"We request comments on all aspects of this cost-benefit analysis, including identification of any additional costs or benefits of, or suggested alternatives to, the proposed amendments. Commenters are requested to provide empirical data and other factual support for their views to the extent possible."


We believe the public interest will be served by the proposed amendments. While we recognize the potential benefits are difficult to quantify we again refer the Commission to work done using CRA and HMDA data to quantify the benefit of community development lending.8


We note Commission staff has estimated that "the total external and internal costs of the additional disclosure that would be required by the proposed amendments would be $14,868,874." This estimate seems reasonable.

We further note that the 2003 budget for data collection and management efforts relating to the collection of HMDA data is $2,500,000. This fact supports the creation of an SEC maintained proxy voting database and data collection/distribution system.

"Consideration of Impact on the Economy

The Commission requests comment on the potential impact of the proposed amendments on the U.S. economy on an annual basis. Commenters are requested to provide empirical data to support their views."

We believe the proposed rule and rule amendments, by strengthening the property rights of shareholders, will increase transparency and fairness in capital markets. Thus, we believe the proposed amendments economically significant and positive. We cite the following:

"Well-functioning markets require accurate information to allocate capital and other resources, and market participants must have confidence that our predominately voluntary system of exchange is transparent and fair. Although business transactions are governed by laws and contracts, if even a modest fraction of those transactions had to be adjudicated, our courts would be swamped into immobility. Thus, our market system depends critically on trust--trust in the word of our colleagues and trust in the word of those with whom we do business. Falsification and fraud are highly destructive to free-market capitalism and, more broadly, to the underpinnings of our society...

Above all, we must bear in mind that the critical issue should be how to strengthen the legal base of free market capitalism: the property rights of shareholders and other owners of capital. Fraud and deception are thefts of property. In my judgment, more generally, unless the laws governing how markets and corporations function are perceived as fair, our economic system cannot achieve its full potential. "9

We agree.

Thank you.


William Michael Cunningham
William Michael Cunningham and Creative Investment Research, Inc.

ELCA Board of Pensions MEMORANDUM

DATE: Thursday, February 14, 2002
TO: Mike Troutman, Dave Lecander, Janet Sergot, Beverly Riegel
RE: 2001 Proxy Voting Activity

This memorandum summarizes 2001 proxy voting activity for the ELCA Board of Pensions.

In 2001, the Board voted on 1395 issues impacting 401 companies. These votes conformed to proxy voting guidelines. In 1041 matters, we voted in favor of shareholder resolutions. We voted against 349 items. We abstained from voting on 5 matters. We voted against management 261 times. A complete report on proxy voting activities in 2001 is available.

Proxies from 86 companies were not voted in 2001. In 2000, proxies from 30 companies were not voted. In 1999, The Board did not vote 43 proxies.

For 2001, in some cases, vendor systems failure prevented staff from determining the economic impact of the subject proxy proposal. In other cases, changes in corporate annual meetings following events related to September 11, 2001 prohibited staff from filing timely votes.

More importantly, certain factors related to administrative staff, including staff turnover, have negatively impacted our proxy voting activities. After attempting to solve the problem with currently assigned administrative staff, I notified Dave Lecander (my supervisor) and Beverly Riegel (administrative staff supervisor) of the problem. Attached are several email messages sent in 2001 concerning this issue. The first email is dated May 11, 2001. The final email is dated July 29, 2001. In addition, to protect the Board and to help insure that administrative tasks relating to proxy voting be carried out professionally, I suggested another administrative staff person (Jeanne Hammerly) be assigned to assist or replace the person currently handling this task (Julie Kaplan).

-----Original Message-----
From: Bill Cunningham
Sent: Friday, May 11, 2001 10:29 AM
To: Julie Kaplin
Cc: Bev Riegel; Dave Lecander
Subject: Missed proxy votes

We missed the following international proxy votes:

Taiwan Semiconductor Mfc.
Koninklijke Nederlandsche Petroleum Maatschappij

Julie, you've been posting the domestic proxy voting date on the international proxy materials. This is incorrect. International proxies have specific cut off dates that are listed on the bottom of each ballot. Please post this cut off date on international proxy forms forwarded to me. Thanks.

William Michael Cunningham
Manager, Social Purpose Investing & Customer Education
Board of Pensions
800 Marquette Ave.
Suite 1050
Minneapolis, MN 55402
612-752-4268 phone

-----Original Message-----
From: Bill Cunningham
Sent: Tuesday, June 05, 2001 6:53 PM
To: Julie Kaplin
Cc: Bev Riegel
Subject: Missed Proxy Vote

I discovered the proxy for Nabors Industries today stuck inside the proxy documentation for Converse Technology. The Nabors meeting took place today, so we missed voting. Julie, you'll want to make sure to separate the proxies documents in the future.


William Michael Cunningham
Manager, Social Purpose Investing & Customer Education
Board of Pensions
800 Marquette Ave.
Suite 1050
Minneapolis, MN 55402
612-752-4268 phone

-----Original Message-----
From: Bill Cunningham
Sent: Thursday, June 07, 2001 11:11 AM
To: Bev Riegel
Subject: RE: Missed Proxy Vote
Sensitivity: Private

As I have indicated, the administrative support for proxy voting has gone thru a number of iterations. We have had at least four admins involved in the process over the past year: Julie, Tina, Myhang, and LJ. This one of the key issues here. In addition, as I have mentioned several times, Julie seems to have an issue working in a diverse environment. This does not help matters and may now be impacting her (and my) work. Placing a proxy ballot box in my office is fine, if you think this will help.

The short term solution is to carefully monitor the situation, as I have, noting every problem as it occurs. Perhaps we want to do a trial run of the proxy voting report out of IRRC to determine how many proxies have been voted to date and the number of missed votes.

A further issue concerns Julies' creation of ballots in the IRRC program. In certain cases, ballots are missing from the IRRC database. Julie then creates a ballot, selecting the issues to place on the ballot. This is fine, as long as the created ballot matches the real ballot. We need to check. I will check with IRRC to determine why these ballots are missing in the first place.


William Michael Cunningham
Manager, Social Purpose Investing & Customer Education
Board of Pensions
800 Marquette Ave.
Suite 1050
Minneapolis, MN 55402
612-752-4268 phone

-----Original Message-----
From: Bill Cunningham
Sent: Sunday, July 29, 2001 8:02 PM
To: Bev Riegel
Cc: Dave Lecander
Subject: Missed proxy votes

FYI...There are several (5 or 6) proxies that I am, I believe, just getting that we missed voting on. I will provide more detail later.

William Michael Cunningham

1 Case Number 98-1459.
2 We refer the Commission to the following, abbreviated listing of market related ethical lapses since 1991:

According to published reports, "the integrity of the entire U.S. Treasury securities auction market was called into question when Salomon Inc., admitted in August 1991 to serious violations of the auction rules during 1990 and 1991." In essence, the firm attempted to "monopolize" or "corner the market" in a particular U.S. Treasury security.

The National Association of Security Dealers was found by the U.S. Securities and Exchange Commission to be "failing to police wrongdoing the NASDAQ Stock market, the second largest stock market in the world." The Washington Post (August 8, 1996. Page A1.)

According to the Washington Post (August 28, 1996. Page D1), several securities brokers were suspended because they hired others to impersonate them and take the main securities licensing examination, the Series 7 test.

According to some news reports, the failure of Long-Term Capital, an investment partnership started in 1994, was "laid on the kind of capitalism .. where a closed, secretive and incestuous elite held absolute sway over politics, the economy and finance, where banks lent to cronies and crooks, and the state miraculously came to the rescue when the time came to balance (or cook) the books." From "LTCM, a Hedge Fund Above Suspicion," by Ibrahim Warde, Le Monde Diplomatique, November 1998.

3 We assume that "employees are `rational cheaters,' who anticipate the consequences of their actions and (engage in illegal behavior) when the marginal benefits exceed costs." See Nagin, Daniel, James Rebitzer, Seth Sanders and Lowell Taylor, "Monitoring, Motivation, and Management: The Determinants of Opportunistic Behavior in a Field Experiment," The American Economic Review, vol. 92 (September, 2002), pp 850-873.
4 According to the FFIEC, "In 2002, there were approximately 28 million loan records for calendar year (CY) 2001 reported by 7,631 financial institutions. In 2001, 7,713 financial institutions reported approximately 19 million loan records for CY 2000. In 2000, 7,829 financial institutions reported approximately 23 million loan records for CY 1999. In 1999, 7,836 financial institutions reported approximately 24.7 million loan records for CY 1998. In 1998, 7,925 financial institutions reported approximately 16.4 million loan records for CY 1997." See: http://www.ffiec.gov/hmda/history.htm.
5 This is our view. For a detailed review of the law's impact, see: "Assessing the Impact of the CRA on Banking Institutions." March, 2001. Robert Avery, Raphael Bostic, Glenn Canner, presented at Changing Financial Markets and Community Development: The Federal Reserve System's Second Community Affairs Research Conference, The Capital Hilton, Washington, D.C., April 5-6, 2001. Available on-line at: http://www.chicagofed.org/cedric/2001/Aprilconference.cfm.
6 When CRA and HMDA data was initially collected, it was flawed. The data collection process was viewed as problematic. There were questions about the quality and clarity of the information. Subsequent collection efforts resulted in clearer, more useful data.
7 According to the FFIEC, "On behalf of the FFIEC, the Federal Reserve System designed the HMDA Data Entry Software to assist respondents in automating the filing of their HMDA data. The software includes editing features to help you verify and analyze the accuracy of the data. The data file created, using this software, can be exported onto a diskette for mailing, or encrypted in order to submit via Internet email." See: http://www.ffiec.gov/hmda/softinfo.htm.
8 See: "The Impact of the Community Reinvestment Act on Bank and Thrift Home Mortgage Lending." March, 2001. Eric Belsky, Gary Fauth, Michael Schill, Anthony Yezer, presented at Changing Financial Markets and Community Development: The Federal Reserve System's Second Community Affairs Research Conference, The Capital Hilton, Washington, D.C., April 5-6, 2001. Available on-line at: http://www.chicagofed.org/cedric/2001/Aprilconference.cfm.
9 Testimony of Chairman Alan Greenspan, Federal Reserve Board's semiannual monetary policy report to the Congress. Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate. July 16, 2002