WASHINGTON - Banks and thrifts scored a budget victory last week, as the House approved a new spending-cuts package that provides financial incentives for community development lending.
The package makes $50 million available for President Clinton's community development bank program. However, the spending measure stipulates that a third of that money must be used for the Bank Enterprise Act - a 1991 law that encourages banks to lend in low-income communities.
The community development bank program provides seed capital to lenders to help small businesses located in poor communities.
"This $50 million at least keeps the programs alive," said Rep. Floyd Flake, D-N.Y., the principal sponsor of the Bank Enterprise Act and a supporter of community development banks.
"With a return on investment ratio of about 27 to 1, people will begin to realize that these are the kinds of programs that we ought to be investing in as we cut down social programs," he added.
The Senate was working on a similar package last Friday. However, it ran into a procedural snag and Majority Leader Robert Dole, R-Kan., pulled it from floor consideration. It was not clear when deliberations might resume.
However, the House action was a step forward for proponents of the Bank Enterprise Act. President Clinton vetoed an earlier version of the spending cuts package but issued a statement last week calling the House measure "a bill that I am prepared to sign."
The community development bank program is a priority for President Clinton, who talked it up throughout the 1992 campaign.
"We're very happy about this," added deputy assistant Treasury secretary Fe Morales Marks. "With few federal dollars we can leverage private dollars to bring much-needed economic development to distressed communities."
Community development funding has become even more critical since Congress has started scaling back the Community Reinvestment Act, said Mark Pinsky, coordinator of the CDFI Coalition.
"With CRA being marginalized, CDFIs are especially important to ensure that credit is still being provided and that investment is still going into low-income communities," said Mr. Pinsky.
The package of spending cuts also mandates that the CDFI Fund is folded into the Treasury Department. Originally, the program was to be run as an independent agency.
