WASHINGTON -- The community development bank bill that President Clinton signed with great fanfare Friday provides few incentives for privatesector institutions to lend in lowincome communities, bankers say.

That's because the law was set up to bypass traditional banks and thrifts to the maximum extent possible. And the funding that could reach them is too limited to spur industrywide shifts in lending and service patterns, banking trade groups said.

The law doesn't quite match up to the vision offered by candidate Bill Clinton in the 1992 campaign. Then, Mr. Clinton promised to spend up to $1 billion to create a network of 100 community development banks to serve downtrodden communities.

The bill that passed Congress provides $382 million over four years, a sum that many community activists regard as woefully small.

"The whole bill is a watereddown version of every15ody's hopes and dreams," said Susannah B. Goodman, a legislative advocate for Public Citizen.

Under the new law, banks like Chicago's South Shore Bank, which President Clinton pointed to as a model of community development lending, could apply for up to $8.75 million in support. But more traditional banks will be unlikely to qualify for such funding.

Two-thirds of the $382 million in the law is set aside for banks like South Shore. Even bank subsidiaries that would alone meet the standard are ineligible unless their parent quailries. However, some joint ventures between banks and community development organizations could meet the test.

The remainder of the money a third of the $382 million will go to traditional banks and thrifts as cash awards for community development activities.

Some big banks clearly plan to take advantage of that provision of the new law. BankAmerica Corp. said Friday it would take advantage of the new law to make $50 million in loans, investments, and other grants over four years. NationsBank. plans $25 million in new lending.

But bank trade groups said most of the money will go to small, community loan funds.

"It was done specifically in a way to keep banks from getting that money," said Peter M. Kravitz, the Independent Bankers Association of America's legislative counsel.

"They wanted to use it as seed money for community development banks - not commercial banks."

The law will create a small Washington entity called the Community Development Financial Institutions Fund, which will write many of the details governing eligibility and how institutions go about applying for the support.

The fund, which will be led by a presidentially appointed administrator, also will be responsible for judging which applicants deserve funding as part of a competitive process.

Edward L. Yingling, executive director of government relations at the American Bankers Association, said, "There are going to be so many people applying for such limited funding that there won't be much money out there."

Banks are unlikely to rush to increase their community development activities as a result of the new law. "In individual instances, it might change behavior, but it is not enough to make the banking industry as a whole change its behavior," Mr. Yingling said.

The thrift trade group is pleased the government has offered a carrot instead of a stick. Savings and Community Bankers of America lobbyist Jay Harris said, "This incentive-based approach is very positive."

Community groups and bankers persuaded the Clinton administration to use the existing, cheap infrastructure of local development loan funds nationwide to quickly funnel credit to low-income communities, instead of creating 100 new banks.

"There already are 300 institutions out there which are doing this type of work," said Mark A. Pinsky, coordinator of the Community Development Financial Institutions coalition, which represents 310 CDFIs in 45 states that together, manage about $1 billion.

Most of the coalitions' members are loan funds, which are unregulated nonprofits that raise capital from investors at belowmarket rates and relend it at low rates.

The lending pools range in size from $200,000 to $35 million.

"It is a win-win for the banks all the way around," said Richard F. Hohlt, a Washington-based financial consultant.

With the void in low-income credit, banks are glad not to be forced to make the loans themselves.

"If somebody else can do it through federal dollars, more power to them, because it helps take the pressure off" banks, Mr. Hohlt said.

Community groups though are less impressed.

"Three hundred million dollars million spread over the entire country is no more than planting the seeds of hope," said John Bryant, the chairman and chief executive officer of Los Angelesbased Operation Hope, a public/private partnership in urban economic empowerment.

Mr. Bryant called the law "a step in the right direction," but the limited funding means, "you are talking about a pilot program."

The funding in the CDFI law, "may be all the money that is available fight now, but it is just a drop in the bucket when it comes to addressing the need for credit and investment to pay for affordable housing and business development in this country," said Mr. Pinsky, one of the law's strongest proponents.

"It is a 1% down payment on what it is going to take," he said.

Still, some community development lenders said the law would have a strong impact on needy communities.

Instead of money flowing out, "there is actually more capital that could potentially flow in to neighborhoods that are fighting forces of urban decline," said Joan E. Shapiro, a senior vice president at $275 million-asset South Shore, "This is capital that is critically needed."

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