Four California banks have agreed to participate in what is being billed as the biggest community development group in the country.
First Interstate Bancorp, BankAmerica Corp., Wells Fargo & Co., and Union Bank have committed to make a total of $210 million in loans through the new organization, which is called the Los Angeles Community Development Bank.
The venture is designed to use a combination of government and bank money to fund loans to small businesses and start-ups in economically disadvantaged areas.
But the Los Angeles bank has much more money committed to it than other efforts, namely, an initial commitment of $660 million, which includes the bank loans, and another $450 million of grants and bond guarantees from the Department of Housing and Urban Development.
"We believe community development banks can be an invaluable economic catalyst in disadvantaged communities, which is why we've made the largest single pledge of private-sector money," said Bruce G. Willison, chairman and chief executive of First Interstate's lead California bank.
First Interstate has committed $75 million of loans. Wells Fargo and BankAmerica each committed $50 million, while Union bank committed $35 million.
The community development bank was conceived as a sort of consolation prize for Los Angeles, which was stung when it was not included in a Clinton administration "empowerment zone" program. The program entitles participating cities to hefty tax credits and grants for social services.
The Los Angeles Community Development Bank won't have tax credits but it will make loans that create jobs in designated areas of south-central Los Angeles and the San Fernando Valley, and it will also provide venture capital.
The loans can be initiated by the participating banks for people who don't qualify for standard loans, or by a handful of non-profit community development groups that are being asked to work with the new Community Development Bank.
Gordon P. Lejeune, the First Interstate vice president who is leading the bank's day-to-day involvement in the group, said the participating banks will be able to make riskier loans than they normally would. The Los Angeles Community Development Bank will either guarantee the loans or contribute some of the loan-loss reserves.