For Rep. Maxine Waters, the solution to inner-city problems is crystal clear: Banks must finance multimillion-dollar redevelopment projects.

"Your scattered $27,000 small-business loans are something we could have talked about 15 years ago," the California Democrat said at a forum here this week. "But not today. To develop Vermont Avenue (in the city's South Central neighborhood), my land costs alone would exceed all your small- business lending."

But is bank lending-even large loans-the only answer? Bankers, regulators, and civic leaders are divided on the question.

The disagreements were on display this week at a Community Reinvestment Act forum here featuring Federal Reserve Board Chairman Alan Greenspan, top California bankers, and leaders from the South Central neighborhood in Los Angeles.

Mr. Greenspan said inner-city businesses need venture capitalists willing to invest without expecting an immediate return. "You need people to put in their seed capital," he said.

Bank loans alone are insufficient because businesses must use their cash flow to make monthly payments, he said. "You cannot put more credit on top of credit," he said.

Bankers, however, stressed the importance of making mortgages to low- income borrowers and lending to small businesses.

Kerry Killinger, chairman and chief executive officer at Washington Mutual Inc., said his thrift pledged $50 billion in affordable-housing loans to minorities and borrowers in low-income census tracks.

"This is not just about helping the community," Mr. Killinger said. "This is good business."

The industry also is ensuring the community has ready access to small- business loans, often for amounts of less than $100,000. This provides credit to mom-and-pop stores so they can expand and create new jobs and wealth.

BankAmerica Corp. extended $14 million in small-business credit in 1996 in the South Central neighborhood and has pledged to make $80 billion of small-business loans over the next decade.

"We ought to be a catalyst for economic development and neighborhood revitalization," said Donald Mullane, an executive vice president at BankAmerica. "That is why we put an emphasis on small-business lending."

But local leaders want more.

Banks, they charged, are ignoring the community's need for multimillion- dollar development projects.

"To say $14 million sounds nice," said Danny Bakewell Sr., president and chief executive officer of Brotherhood Crusade. "But when you go back over it, it results in almost nothing for the community."

So what do struggling communities need? Community development experts said in interviews that venture capital, small-business, and large-scale development loans are all central to reviving depressed urban cores.

"You absolutely need a combination of all three," said Sarah Ludwig, executive director of the Neighborhood Economic Development Advocacy Project in New York. "That is the best way to develop neighborhoods."

"There isn't a contradiction among those perspectives," agreed Benson F. Roberts, vice president for public policy at Local Initiative Support Corp. "You need a whole variety of things to revitalize a community. You need housing, shopping centers, small businesses, and large businesses."

Most successful revitalization projects begin with investments in multifamily rental housing, Mr. Roberts said. That helps stabilize the population and encourages families to buy homes in the area. The resulting increase in disposable income prompts entrepreneurs to open businesses and often results in an increase in city services, such as police patrols. This then encourages larger businesses to open in the neighborhood, resulting in more jobs and greater stability.

"Before you can attract a large project you need smaller revitalizations like strip malls and retail stores," said Judith E. Knight, director of housing and community development for the American Bankers Association. "They help signal to potential investors that this is a community to look at."

But Richard J. Devine, a community development specialist in the San Francisco office of the Center for Community Change, said regulators, bankers, and local leaders may be getting ahead of themselves. Development is impossible without a reduction in crime and an improvement in the education system.

"These are prerequisites," he said. "Then the rest will fall into place."

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