MRS. CLINTON JOINS HUD IN LAUNCHING
NEW COMMUNITY EMPOWERMENT BANKING INITIATIVE
TO REVITALIZE IMPOVERISHED AREAS

First Lady Hillary Rodham Clinton joined Housing Secretary Henry G. Cisneros and Assistant Secretary Andrew Cuomo in announcing that the new Community Empowerment Banking Initiative will begin in parts of Washington, Baltimore, and six rural counties in Mississippi in early 1997.

The Department of Housing and Urban Development developed the program and made it possible by awarding $8.5 million in grants and $11.5 million in loan guarantees to newly created community empowerment banks in the three areas today.

Community empowerment banks will make loans to help entrepreneurs create jobs by starting and expanding small businesses. The banks will provide mortgages for home purchases and loans for home improvements in poor neighborhoods.

Area residents and businesses will be the owners of the community empowerment banks, controlling the banks through shares of stock they purchase for $10 to $30 each.

"This is the first time the federal government has helped launch a community-owned lending institution that will focus on serving people in economically distressed areas," Cisneros said. Similar community banks exist in some developing countries.

"In other countries, community empowerment banks are successful, they have low rates of loan defaults, and they change lives for the better," Cisneros said. "Small loans can bring remarkable results -- more people working and fewer on welfare, homeowners moving into areas instead of moving out, homes being repaired instead of falling into decay."

A shortage of credit in poverty-stricken areas has choked off attempts at revitalization over the years, making it hard for the areas to attract new jobs and homeowners.

HUD funds will serve as seed money for the community empowerment banks, leveraging much larger investments by conventional banks, foundations, non-profit groups, other investors and residents and business owners living in areas served by the community empowerment banks.

"The community empowerment banks will fill a critical need in low-income areas, making loans to residents and businesses that have trouble qualifying for loans from conventional banks," Cisneros said. "Established banks will work with community empowerment banks and will loan them money."

If the pilot projects prove successful, HUD could provide seed money to launch more community empowerment banks around the country in future years, Cisneros said.

Cuomo, who developed the idea of community empowerment banks based on the success of similar ventures abroad, said: "By purchasing shares in the bank, residents become owners of the assets. By becoming part of the decision-making within the bank, residents have more control over what happens in their neighborhoods. They are empowered."

"The community empowerment bank is a true manifestation of what President Clinton said he wanted to do four years ago -- empower communities, empower residents," Cuomo said.

The community empowerment bank in Washington will receive a $3.5 million grant and $5 million in loan guarantees from HUD. The bank in Baltimore will receive a $1.5 million grant and $1.5 million in loan guarantees. The bank in Mississippi (serving portions of Bolivar, Holmes, Humphreys, Leflore, Sunflower and Washington Counties) will receive a $3.5 million grant and $5 million in loan guarantees.

Low-income areas designated by HUD as an Enterprise Community in Washington and as Empowerment Zones in Baltimore and Mississippi will be served by the community empowerment banks.

As shareholders in their local community empowerment bank, people in the community will have a financial stake in the success of businesses borrowing from the bank. To ensure that business borrowers can repay their loans, area residents are expected to become loyal customers of the businesses.

Only area residents and small businesses investing in a community empowerment bank will be allowed to borrow from it.

The community empowerment banks will complement other community-oriented lenders that serve low-income areas, including Community Development Credit Unions and Community Development Financial Institutions supported by the Treasury Department.

Some cities have launched similar lending institutions, but none in the United States are controlled by shareholders living and working in the community.

Today's announcement took place at the Whitelaw Hotel in Washington, in the area served by the new community empowerment bank. The Whitelaw, built in 1919, was the only luxury hotel in Washington catering to blacks until 1949. It closed in 1977 and was restored and reopened in 1992 as affordable apartments by Manna, Inc., a non-profit housing developer.

HUD made the investments in the community empowerment banks through its Economic Development Initiative program.

Cisneros also announced another $7.5 million in grants and $28.7 million in loan guarantees under the Economic Development Initiative program today to help leverage private investment, create jobs and revitalize these communities:

Riverside, CA will receive a $975,000 grant and $4.8 million in loan guarantees; Atlanta, GA will receive a $1.25 million grant and $4.4 million in loan guarantees; Quincy, MA will receive a $1 million grant and $5 million in loan guarantees; Somerville, MA will receive a $1 million grant and $1.5 million in loan guarantees; Portland, OR will receive a $2.25 million grant and $8 million in loan guarantees; and Fort Worth, TX will receive a $1 million grant and $5 million in loan guarantees.