A leading House Republican is charging the Clinton administration's program to award banks seed money for low-income projects is rife with conflicts of interest.
After a monthlong investigation of the Community Development Financial Institutions Fund, Rep. Spencer Bachus, R-Ala., said Thursday that objective standards were not used to award lenders $37 million in 1996.
"The Treasury has opened the system up to political favoritism and abuse," said Rep. Bachus, who chairs House Banking's general oversight subcommittee.
The CDFI Fund hired officials from companies requesting funds to review some of the 264 applications filed in January 1996, he charged.
For example, the Low Income Housing Fund in San Francisco received a $1.2 million award last July. The housing fund's vice president, Daniel P. Lopez, was employed by the CDFI Fund to review applications, according to subcommittee staff. While he did not evaluate his own company's offer, Mr. Lopez reviewed-and rejected-the bid of another San Francisco low-income lender, the Northern California Community Loan Fund, according to subcommittee aides.
This "raises many troubling issues, including whether adequate safeguards were utilized to protect against conflicts of interest," Rep. Bachus wrote in a May 9 letter to Treasury Secretary Robert Rubin. A Treasury spokesman declined to comment Friday.
The CDFI program was a centerpiece of President Clinton's first presidential campaign. He pledged to inject $1 billion into 100 new community development banks to reinvigorate urban centers, but Congress appropriated only $50 million for the program in 1996, its first year.
The CDFI Fund will award $40 million in grants in 1997. President Clinton is asking Congress to expand the program to the $1 billion mark over the next five years.
Rep. Bachus also accused the CDFI Fund of misleading investigators. When subcommittee staff first reviewed the file of Shorebank Corp., which received $4.5 million in grants, there was no memo detailing how the application was reviewed, according to Rep. Bachus. Eleven days later, an undated memo was in the file, the lawmaker said.
"It would be a truly serious matter if documents are being prepared and inserted in the files for the purpose of misleading congressional investigators," Rep. Bachus said.
Rep. Bachus asked Treasury to provide information regarding the undated memos by Wednesday.
