Treasury Secretary Robert E. Rubin lauded the banking industry Thursday for dramatically boosting investment in economically distressed neighborhoods.
Speaking in New York at a Rainbow/Push Coalition conference on expanding economic opportunities for minorities and women, Mr. Rubin said large commercial banks have "increased enormously" their community development lending.
"In the last four years, national banks have invested four times as much in community development as they did in the previous 30 years," he said.
According to the Office of the Comptroller of the Currency, banks and thrifts committed $314 billion to loans and other projects under the Community Reinvestment Act last year, a sevenfold increase since 1993.
The Treasury chief attributed the jump in loans for affordable housing and commercial revitalization to the federal government's strengthening of CRA rules.
Nevertheless, he cautioned that much work remains before minority and low-income Americans are brought into the economic mainstream.
"We still have a severe shortage of financial institutions and a shortage of credit to create housing and jobs in the inner city," he said.
As another solution, he touted a Clinton administration proposal to expand the low-income housing tax credit by 40%.
The administration's plan, to be included in its fiscal year 1999 budget, would provide an extra $134 million annually for low-income housing, according to an Enterprise Foundation estimate. Under the proposal, states would be allocated $1.75 per resident in tax credits, up from $1.25.
Developers and investors in low-income housing projects apply to states for the credit. Banks can use investments in these projects to meet their CRA obligations. The program provides financing for the development of about 100,000 units of low-cost housing annually.
Expanding the tax credit has been controversial on Capitol Hill, but reaction from the financial community was enthusiastic.
"It is great," said Frank R. Narron, acquisitions manager for NationsBank Corp.'s community investment group. "Since the low-income tax credit has been in existence, it has increased in value significantly."
"This tax-driven incentive is unique in benefiting poor people as well as corporate investors," Enterprise Foundation chairman Bart Harvey said in a prepared statement. The foundation provides financing for housing development using the tax credit.