information clearinghouse for credit unions that serve predominantly low-income communities. NFCDCU helps start new credit unions and assists its 100 members in building their management capacity and in obtaining capital for community development loans. The Self-Help Credit Union is an excellent example of a conununity development credit union. It provides loans and technical assistance to worker-owned businesses and loans for low- and moderate-income housing. Accounts are federally insured and offer competitive rates. In the last few years, revolving loan funds have sprung up around the country to address the problem of unmet credit needs. These are nonprofit organizations that take loans from investors, who often set their own terms, and provide below market rate loans to community development projects. (See "Investing in Community," page 14.) Some traditional banks are now funding community development projects, but seldom take the initiative. A coalition of organizations in Chicago, led by the Woodstock Institute and the National Training and Information Center (NTIC), collected data on the lending practices of three of Chicago's largest banks. They found that the banks were not adequately meeting the credit needs of their cormnunity. In 1984, they negotiated with the banks to provide over $170 million in community development loans. In the first two years of operation the banks have had no defaults and are very pleased with the results. Richard Hartnack of First National Bank, which made a large commitment, said, "We're not going to end it when we reach $120 million." People who really care about the way hanks use their money should go to their hanker and say: "I want to see the way you lend your money and where you lend it." Since the Chicago success, NTIC and the Woodstock Institute have provided technical assistance to citizen groups in other cities around the country including St. Louis, Philadelphia, and San Antonio. Over $200 million has been allocated by some of the major banks for community development loans. The tool being used by community organizations is the Community Reinvestment Act (CRA) of 1977. CRA requires federal regulatory agencies to encourage financial institutions to help meet the credit needs of their local communities and assess how well they meet those needs. If a bank or savings and loan association wants to open a branch office, relocate, or acquire or merge with another company, CRA requires regulators to consider the views of any interested party. Community groups that feel a bank is not meeting local credit need can directly participate in the review process. Banks are required to make public a CRA statement outlining its local community and the types of loans available. Hopefully, the banks that are now committing money to community lending due to CRA challenges will continue their programs. Becoming a permanent source of urban redevelopment is difficult. According to Joan Shapiro, vice president of "Development Deposits" at South Shore Bank, "It's not easy. You need a long-term commitment. Bankers see much quicker and easier short-term profit opportunities. You need to have committed management in there for the long term and shareholders that buy into it. If your shareholders demand profit maximization and no deviation from standard commercial lending practices, this isn't going to happen. A major barrier is the lack of experience and lack of availability of loan officers sensitive to these issues." Dozens of bankers have toured South Shore Bank and a few say they are planning to initiate similar programs. Although South Shore bank staff have been generous with their time, Shapiro says that it is not a bank priority to convince other banks to meet the credit needs of their community. She suggests, "People who really care about the way banks use their money should go to their banker and say: 'I want to see your CRA statement. I want to see the way you lend your money and where you lend it. What is the percentage of your assets in loans, rather than your securities portfolio? Of those loans, what percent are actually in our community? What kinds of loans? What percentage of your board or officer core are women or minorities?' In nine out of ten cases the answers to those questions won't be satisfactory." If a bank is not meeting its community's credit needs, depositors can move their funds to a more responsive institution, possibly a smaller bank or savings and loan, a credit union, or a socially-screened money market account. In the long run, a commitment to community development lending by traditional institutions is needed, whether it comes as a result of a CRA challenge or by the example of successes such as South Shore Bank. Shapiro asks, "Can you imagine what would happen if the big money center banks put half of their resources back into their communities?" # Page 21
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