As a college student in the 1980s, Calvin Holmes didn't need his minor track in urban studies at Northwestern University to comprehend community blight. He saw it first-hand growing up in East St. Louis, Ill., a five-hour drive south from Chicago. Each trip home, he saw that the unraveling of the city's economic and social tapestry seemed to worsen, as more businesses shuttered, crime escalated and people continued to flee to the suburbs.
The experience helped inspire Holmes to find his calling in community development. Since 1998, he has been president of one of Illinois' most prominent nonprofits, the Chicago Community Loan Fund. A designated community development financial institution, or CDFI, it has placed more than $1 billion in public- and private-sector capital into 60 low-income neighborhoodsincluding 6,700 affordable housing units and small-business support that has helped add more than 2,000 jobs to hard-hit portions of the Chicago area.
In August, Holmes was appointed by President Barack Obama to the Community Development Advisory Board, which helps guide the Treasury Department's CDFI Fund. (Other members of the advisory board include the secretaries of the Departments of Agriculture, Commerce, Housing and Urban Development, Interior and Treasury, or their designees.) Mark Pinsky, another longtime leader in the CDFI sector, says Holmes' appointment is a recognition not only of his friend's expertise in housing and nonprofits' access to capital, but of his passion for service. "He served on my board for nine years, and never ever missed a responsibility to speak up on behalf of the people in the community we're supposed to serve," says Pinsky, president and CEO of the Philadelphia-based Opportunity Finance Network.
Holmes, whose organization won a 2009 MacArthur Award for Creative & Effective Institutions, recently spoke with American Banker Magazine's Glen Fest about his goals for the advisory board, as well as his views on Community Reinvestment Act changes and the banking industry's role in supporting and utilizing CDFIs. (Transcript has been condensed.)
Q:In this new advisory board post, how do you hope to influence federal policy on community development?
I want to work with my fellow directors and the management team of the CDFI Fund to optimize the funds' efficacy in low-wealth communities across the country. I'm hoping that the fund in particular can focus more so than it ever has on how we create jobs and employment opportunities for this strata of Americans severely impacted [by the recession].
Q: At $225 million, does the Obama administration's proposed fiscal 2014 budget for the CDFI Fund address the specific goal of job creation?
I know that through the CDFI Fund guarantee program in particular, the New Markets Tax Credit programs, and the guidance for the types of things the fund is excited about in its financial assistance program, they are encouraging their applicants to be focused on job creation, so I think that will carry forward in 2014.
Q:Given the current political climate, are you optimistic that Treasury can get Congress' approval for the funding?
Historically, the CDFI Fund in particular has had a high level of bipartisan support, and clearly under the Obama administration, a particularly helpful level of administrative support. At minimum, I think that CDFI Fund should maintain level funding. And based on the way the fund is trying to improve its impact measurement and tracking, hopefully it's able to make a stronger case that it is a very efficient and cost effective program, and be able to convince lawmakers that additional funding is appropriate.
Q:Do you have allies you'll be able to call on in the banking industry?
We do know that a number of the large national institutions, as well as some larger regional ones, increasingly view CDFIs as important partners in providing financial and technical assistance to communities that are in their footprints.
Q:Speaking of large banks, how has their support for CDFIs changed since the crisis?
Just focusing on my organization, [through] the Great Recession we've been close to a doubling of our capitalization, and much of that has come from banks. The banks increasinglygiven how their credit box has tightenedsee CDFIs as instrumental in supporting [low- and moderate-income] areas. So we've become a very strategic and important partner to the banks in making sure capital is flowing into our LMI areas. That's our experience and I think it's the case for many CDFIs nationally.
We are also increasingly working with banks in loan participations and co-lending, just trying to put together deal structures up front with banks so that we have distinct roles in a transaction.
Q:Have community banks also stepped up their involvement?
My sense is that a number of the community banks have had capital constraints or portfolio issues that have forestalled their ability to increase their level of involvement with CDFIs. We have some community banks that are investors and partners, but there hasn't been a major increase in the amount of dollars that they've been willing to invest or an uptick in the number of partners that we've been able to recruit. Now at the same time, we haven't really focused on them as potential partners.
Q:Is there a case to be made for community banks to participate in loans as a new area of profit?
Yeah! I think as an industry we've proven to be very solid, stable and steady investments. Our collective loss rate is still well below 2 percent cumulatively. Most of us are able to pay anywhere from a 2 percent to 4 percent return on investments, and some of us go higher, so from a deal perspective we're a good investment.
As importantly, besides any kind of CRA requirement, we often operate at a grassroots level, and can help community banks even with business development. They are in some ways natural partners for us to do loan participations and co-lending opportunities for community-based organizations, whether they are for-profit or nonprofit, in their immediate footprint. Oftentimes we have some capacity in areas they may not have and we can help them underwrite affordable housing, community facility and commercial retail deals in their geographies that they would want to have as customers.
Q:Some large institutions, like Bank of America, say they participate in community development not just out of altruism but as a way of creating new markets for themselves. Do many banks take that view?
I think so. They see the opportunities to work with us to achieve measurable change in local markets and they seem to be taking it very seriously. We are in constant contact now with our bank investors.
Q:Are there any revisions to the Community Reinvestment Act you think could be helpful to CDFIs, or any that would complicate CDFIs' objectives?
Most folks are talking about changing the assessment definition, so that it's not about exactly where the bank has their branches or their deposits, but also where they make loans or provide credit. That's probably the top recommendation that most of us agree with, including the banks. One of the current areas that many advocates agree upon is the need to expand CRA to apply to mortgage and insurance companies, securities firms, large credit union and nondepository affiliates of banks. Doing so would greatly benefit CDFIs' access to the broader capital markets.
One area that many of us appreciate is in the service tests segment of the CRA requirement, about bank executives providing leadership and participating on the boards and committees of nonprofits and community organizations. That issue isn't discussed as much, but I personally would love to see us have the banks share their talent with us in a much broader capacity.
For example, risk management is an area where you don't get too many folks from the bank side as volunteers. Corporate branding and marketing, those people we don't see as volunteers as much. Talent management, human resources, IT systemsI think [all of that expertise] could be very helpful in allowing us as their partners to work with them even more successfully.
Q:What would you say your signature successes have been at the Chicago Community Loan Fund?
I've been on board with CCLF since 1995, when I started out as a loan officer. We've done some analysis and we think by aggregating a number of our loans in neighborhoods such as Woodlawn and North Lawndale, and the Quad Communities area, which is near the South Side of Chicago, we have played a meaningful role.
As an intermediary, all the program evaluators have said it's very difficult for us to establish causality, so we have to be really careful in what we can take credit for, and this is one of the issues that the CDFI Fund is working on. At least at CCLF we're being very careful about what we can lay claim to. We do think we've had a meaningful role in effecting stabilization and redevelopment particularly in Woodlawn and North Lawndale, [and the data] corroborate that but we've got a long way to go.
Q:What spawned your interest in urban development in the first place?
I think maybe I got it through osmosis. My mother and grandmother in the '60s, when I was very young, worked in my hometown of East St. Louis for the Model Cities program, which was a HUD urban renewal program. My mom would bring home blueprints and master plans, and as a kid I'd look at them and try to figure out what they were. My dad at one point ran a breakfast program for a social service agency in our neighborhood, and maybe just from conversations at the dinner table, this need to give back and to be involved in community was inculcated into me.
I found myself really drawn to cities, urban planning, maps and things of that nature, so I developed my own penchant for building model cities with [my mother's] Mary Kay leftover boxes and bottles. That grew into me deciding to have a minor concentration in urban studies as an undergrad, aside from my major in African-American studies.
When you major in African-American studies, you get a lot of exposure to social and economic and political injustice in the curriculum in general, so that got me thinking about social and economic and political injustice and how I could commit my life to try to correct those kinds of injustices. So economic development as a career became one of the ways I could contribute to the solutions.