The Housing and Economic Recovery Act of 20081 (the “HERA”), which was signed into law by President Bush July 30, 2008, has a provision that will give national banks, and state member banks, greater latitude to invest in public welfare projects without regard to a community’s income levels. This change will restore an avenue for banks to apply for Community Reinvestment Act credit that was taken away in the Financial Services Regulatory Relief Act of 20062 (the “FSRRA”).

Prior to 2006, national banks were authorized by 12 U.S.C. 24 (Eleventh) “[t]o make investments designed primarily to promote the public welfare, including the welfare of low- and moderate-income communities or families (such as by providing housing, services, or jobs) (the “Public Welfare Test”).” The FSRRA modified the Public Welfare Test and limited national bank investments to direct or indirect investments that promote “the public welfare by benefiting primarily low- and moderate-income communities or families (such as by providing housing services or jobs).” The HERA restores the pre-FSRRA Public Welfare Test standard.

To implement the HERA, the Office of the Comptroller of the Currency issued an interim final rule that makes a number of revisions to 12 C.F.R. 24 (the “Rule). The Rule was printed in the Federal Register Aug. 11, 20083. Although the Rule is open to comment until Sept. 10, 2008, it became effective immediately upon publication. The interim final rule allows national banks and their subsidiaries additional flexibility to make public welfare investments beyond just low- and moderate-income areas. Under the Rule, such investments can include targeted redevelopment areas, and other investments that would receive consideration under the Community Reinvestment Act as “qualified investments”4.