MRS. CLINTON JOINS HUD IN LAUNCHING
WASHINGTON -- The Clinton Administration today announced the
investment of $20 million in a national pilot project that will
create a new type of community lending institution to revitalize
NEW COMMUNITY EMPOWERMENT
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.
Content Archived: January 20, 2009