WASHINGTON -- President Clinton plans to ask Congress to establish a federally chartered, tax-exempt corporation to channel credit to distressed communities.
The administration wants $382 million over the next four years for a "Community Banking and Credit Fund," according to a document spelling out plans for financing community development programs. It gives no indication of the loan volume and related assistance that the appropriation is expected to generate.
The corporation would provide matching funds to existing lenders and to new community development lenders working in specially designated areas.
An 11-member board composed of cabinet-level officials, bankers, and members of community groups would oversee the program.
Bill Expected Shortly
President Clinton is expected to unveil the Community Development Financial Institutions Act of 1993 within two weeks, in conjunction with regulatory changes intended to increase the effectiveness of the Community Reinvestment Act.
The proposal represents an effort to fulfill a campaign promise that, as originally made, could have involved a network of 100 new community development banks.
"They're no longer talking about creating a whole new type of institution, they're talking about building on the current system," said Ed Yingling, chief lobbyist of the American Bankers Association.
The plan should appease many bankers and consumer advocates who criticized the idea of setting up an entire new class of specialized lenders.
Praise from IBAA
"Existing institutions seem to be the focal point [of the administration document], and I think that's all to the good," said Stephen Verdier, senior legislative counsel of the Independent Bankers Association of America.
"It's the existing banks that have large amounts of money available for lending."
The President's four-year plan would provide any insured "community development financial institution" up to $5 million annually. Uninsured organizations could get up to $1 million each year.
Under the plan, private-sector, for-profit lenders would have access to funds through separate, specialized lending arms. This feature is expected to engender opposition from some in Congress as well as from community groups.
Lenders would be required to match every dollar from the new government-chartered fund with at least $2 in private money. Loans or aid for development would be partially exempted from this requirement.
Three types of lenders would qualify for assistance:
* Established or newly chartered insured depository institutions with a primary mission of community development.
* Depository institutions or holding companies that have community development financial institutions, like community development corporations.
* Other credit providers, like community-based loan funds, that get special approval from the board.
Various Forms of Assistance
Aid could be in the form of capital, grants, contracts, deposits, development services, or cooperative agreements with public and private sector organizations.
The corporation's 11-member board would include the secretaries of agriculture, commerce, housing and urban development, and the Treasury, as well as the head of the Small Business Administration.
Six nongovernment members -- representing community groups, commercial banks, and community development lenders -- would be appointed by the President.
To qualify for funds, lenders must be able to become self-sustaining, have a comprehensive strategic plan, and have private sources of funds.
In evaluating applications, the bill would require the board to consider factors like comprehensiveness of the services, evidence of community support, job-creation potential, and the experience and background of managers.
While the plan is expected to have considerable support in Congress, passage is by no means certain. Some Democrats oppose giving for-profit lenders access to the government funds, and many Republicans oppose spending any government money at all.
"It will not be an easy battle," said Deepak Bhargava of the community group known as Acorn. "The administration is going to have to do a lot of work to hold the Democrats and it will meet substantial Republican opposition."