WASHINGTON - A House Appropriations subcommittee has taken a first step toward turning President Clinton's cherished community development bank program into an empty shell.

The subcommittee on Veterans Affairs, Housing and Urban Development, and Independent Agencies voted last week to ax the $125 million budgeted for community development financial institutions for the fiscal year that begins Oct. 1.

If the full House and Senate agree, the Community Development Financial Institutions program signed into law last year would effectively be gutted.

The program is a major priority for President Clinton, who made it a standard part of his campaign speech in 1992. The program was expected to provide seed money to lenders that would help small businesses located in low-income communities.

"That money is a slingshot to help us lift this industry up by an order of magnitude," said Mark Pinsky, executive director of the National Association of Community Development Loan Funds. "Now we're faced with major uncertainties in planning the program."

However, one administration official said she didn't feel the rescission was a direct attack on the CDFI program.

"I don't see Thursday's vote as an effort focused on the elimination of CDFI," said Fe Morales Marks, deputy assistant secretary for financial institutions policy at the Treasury Department. "This is the beginning of a long process."

If appropriated, the $125 million would be distributed through an independent agency, called the CDFI Fund.

Despite Thursday's vote, the transition team in charge of starting up the agency is busy drafting regulations in preparation for the program's launch in about four months, said Katharine McKee, CDFI Fund transition director.

"We feel that this has been caught up in the budget-cutting fervor," said Ms. McKee. "This bill passed with strong bipartisan support in both the House and the Senate last year, and we feel we have strong support in the Senate."

The CDFI bill authorizes $382 million for community development institutions over the next four years. In his proposed budget for fiscal 1996, the President requested an additional $144 million for the program.

Although the CDFI cut was only a small part of the appropriations panel's massive $9.4 billion in spending cuts, it could turn into a big disappointment to some bankers who were anticipating using the funds.

"None of us have been real successful in doing what we do, and we were really hoping to tap into that source," said Ronald F. Miller, president of the Northern Shenandoah Valley Community Development Corp. The group of six banks helps provide financing for affordable housing.

Mr. Miller is also the president of First Bank, a $125 million-asset institution headquartered in Strasburg, Va.

The full House Appropriations Committee is expected to vote this week on the rescissions made Thursday, along with cuts already made by other appropriations panels.

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