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86–938 PDF 2003

S. HRG. 108–75

NATIVE AMERICAN CAPITAL FORMATION AND

ECONOMIC DEVELOPMENT ACT

HEARING

BEFORE THE

COMMITTEE ON INDIAN AFFAIRS

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON

S. 519

TO ESTABLISH A NATIVE AMERICAN-OWNED FINANCIAL ENTITY TO

PROVIDE FINANCIAL SERVICES TO INDIAN TRIBES, NATIVE AMERICAN ORGANIZATIONS, AND NATIVE AMERICANS

APRIL 30, 2003

WASHINGTON, DC

(
COMMITTEE ON INDIAN AFFAIRS

BEN NIGHTHORSE CAMPBELL, Colorado, Chairman

DANIEL K. INOUYE, Hawaii, Vice Chairman

JOHN McCAIN, Arizona,

PETE V. DOMENICI, New Mexico

CRAIG THOMAS, Wyoming

ORRIN G. HATCH, Utah

JAMES M. INHOFE, Oklahoma

GORDON SMITH, Oregon

LISA MURKOWSKI, Alaska

KENT CONRAD, North Dakota

HARRY REID, Nevada

DANIEL K. AKAKA, Hawaii

BYRON L. DORGAN, North Dakota

TIM JOHNSON, South Dakota

MARIA CANTWELL, Washington

PAUL MOOREHEAD, Majority Staff Director/Chief Counsel

PATRICIA M. ZELL, Minority Staff Director/Chief Counsel

(II)
(III)

C O N T E N T S

Page

S. 519, text of ........................................................................................................... 3

Statements:

Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado, chairman,

Committee on Indian Affairs ....................................................................... 1

Hall, Tex G., president, National Congress of American Indians, Washington, DC ..................................................................................................... 47

Henson, Eric, Harvard Project on American Indian Economic Development, Cambridge, MA .................................................................................. 66

Irwin, Mike, senior vice president, Alaska Federation of Natives, Anchorage, AK .......................................................................................................... 60

Murkowski, Lisa, U.S. Senator from Alaska .................................................. 56

Paisano, Chris, acting executive director, Navajo Nation, Washington,

DC .................................................................................................................. 51

Russell, William, O., deputy assistant secretary, Public and Indian Housing, Department of Housing and Urban Development, Washington, DC 45

Stainbrook, Cris, executive director, Indian Land Tenure Foundation,

Little Canada, MN ........................................................................................ 64

Watchman, Derrick, board member, Native Anerican Bank Corporation,

Denver, CO .................................................................................................... 57

APPENDIX

Prepared statements:

Dayish, Jr., Frank J., vice president, Navajo Nation .................................... 83

Hall, Tex G. ....................................................................................................... 77

Henson, Eric ...................................................................................................... 135

Kitka, Julie, president, Alaska Federation of Natives (with attachments) . 106

Liu, Michael, assistant secretary, Public and Indian Housing, Department

of Housing and Urban Development, Washington, DC ............................. 75

Murkowski, Lisa, U.S. Senator from Alaska .................................................. 73

Russell, William, O. .......................................................................................... 74

Stainbrook, Cris ................................................................................................ 131

Watchman, Derrick .......................................................................................... 97

(1)

NATIVE AMERICAN CAPITAL FORMATION AND

ECONOMIC DEVELOPMENT ACT

WEDNESDAY, APRIL 30, 2003

U.S. SENATE, COMMITTEE ON INDIAN AFFAIRS, Washington, DC.

The committee met, pursuant to notice, at 2:05 p.m. in room 485,

Senate Russell Building, Hon. Ben Nighthorse Campbell (chairman

of the committee) presiding.

Present: Senators Campbell and Murkowski.

STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM COLORADO, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

The CHAIRMAN. The Committee on Indian Affairs will come to

order.

Indians have an average jobless rate of 50 percent, and lack the

kind of job opportunities that most Americans take for granted.

Every year Congress appropriates billions of dollars for the benefit

of Indian people. In fiscal year 2002 alone, $12 billion was appropriated for the benefit of Indian people, and of this, hundreds of

millions for economic development purposes. It seems to me that

more Federal funds simply will not solve the core problems that we

face in Indian country.

Little, if any, attention is paid to the systemic problems with Indian economics, like investment inhibitors, lack of infrastructure,

poor governance, identifying development opportunities, and other

factors.

I believe that the best way to bring jobs and hope to Indian people is to act collectively. Therefore, the bill before us is based on

certain fundamental principles.

First, there ought to be a full-time Indian-owned development organization that focuses only on Indian economic development. The

organization should have sufficient resources. The organization

should include all Indian tribes as shareholders, not just those who

happen to be wealthy tribes. The organization needs to be much

more than just a bank that hands out money. It needs to focus on

things like political risk, building stronger tribal governments, and

looking at Indian development comprehensively.

I read some of the testimony that has been turned in already and

I think there is a fundamental misunderstanding on the part of

some of the people who are going to testify. I hope we do not get

hung up on all the dotting of ‘‘i’s’’ and crossing of ‘‘t’s’’ and the lan-
2

guage today. Any bill, in fact, when it is first turned in, becomes

a vehicle for change. It just seems to me that change is long overdue in trying to help Indian economies, and S. 519 is going to be

that vehicle. Hopefully we will be able to get some testimony today

that will make the bill better.

[Text of S. 519 follows:]
3

1

II

108TH CONGRESS

1ST SESSION S. 519

To establish a Native American-owned financial entity to provide financial

services to Indian tribes, Native American organizations, and Native

Americans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 5, 2003

Mr. CAMPBELL introduced the following bill; which was read twice and

referred to the Committee on Indian Affairs

A BILL

To establish a Native American-owned financial entity to

provide financial services to Indian tribes, Native American organizations, and Native Americans, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Native American Capital Formation and Economic De6 velopment Act of 2003’’.

7 (b) TABLE OF CONTENTS.—The table of contents of

8 this Act is as follows:
4

2

•S 519 IS

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Purposes.

Sec. 4. Definitions.

TITLE I—NATIVE AMERICAN CAPITAL DEVELOPMENT

CORPORATION

Sec. 101. Establishment of the Corporation.

Sec. 102. Authorized assistance and service functions.

Sec. 103. Native American lending services grant.

Sec. 104. Audits.

Sec. 105. Annual housing and economic development reports.

Sec. 106. Advisory Council.

TITLE II—CAPITALIZATION OF CORPORATION

Sec. 201. Capitalization of the Corporation.

TITLE III—REGULATION, EXAMINATION, AND REPORTS

Sec. 301. Regulation, examination, and reports.

Sec. 302. Authority of the Secretary of Housing and Urban Development.

TITLE IV—FORMATION OF NEW CORPORATION

Sec. 401. Formation of new corporation.

Sec. 402. Adoption and approval of merger plan.

Sec. 403. Consummation of merger.

Sec. 404. Transition.

Sec. 405. Effect of merger.

TITLE V—OTHER NATIVE AMERICAN FUNDS

Sec. 501. Native American Economies Diagnostic Studies Fund.

Sec. 502. Native American Economic Incubation Center Fund.

TITLE VI—AUTHORIZATIONS OF APPROPRIATIONS

Sec. 601. Native American financial institutions.

Sec. 602. Corporation.

Sec. 603. Other Native American funds.

1 SEC. 2. FINDINGS.

2 Congress finds that—

3 (1) there is a special legal and political relation4 ship between the United States and the Indian

5 tribes, as grounded in treaties, the Constitution,

6 Federal statutes and court decisions, executive or7 ders, and course of dealing;
5

3

•S 519 IS

1 (2) despite the availability of abundant natural

2 resources on Indian land and a rich cultural legacy

3 that accords great value to self-determination, self4 reliance, and independence, Native Americans suffer

5 rates of unemployment, poverty, poor health, sub6 standard housing, and associated social ills to a

7 greater degree than any other group in the United

8 States;

9 (3) the economic success and material well10 being of Native Americans depends on the combined

11 efforts and resources of the United States, Indian

12 tribal governments, the private sector, and individ13 uals;

14 (4) the poor performance of moribund Indian

15 economies is due in part to the near-complete ab16 sence of private capital and private capital institu17 tions; and

18 (5) the goals of economic self-sufficiency and

19 political self-determination for Native Americans can

20 best be achieved by making available the resources

21 and discipline of the private market, adequate cap22 ital, and technical expertise.

23 SEC. 3. PURPOSES.

24 The purposes of this Act are—
6

4

•S 519 IS

1 (1) to establish an entity dedicated to capital

2 development and economic growth policies in Native

3 American communities;

4 (2) to provide the necessary resources of the

5 United States, Native Americans, and the private

6 sector on endemic problems such as fractionated and

7 unproductive Indian land;

8 (3) to provide a center for economic develop9 ment policy and analysis with particular emphasis

10 on diagnosing the systemic weaknesses with, and in11 hibitors to greater levels of investment in, Native

12 American economies;

13 (4) to establish a Native-owned financial entity

14 to provide financial services to Indian tribes, Native

15 American organizations, and Native Americans; and

16 (5) to improve the material standard of living

17 of Native Americans.

18 SEC. 4. DEFINITIONS.

19 In this Act:

20 (1) ALASKA NATIVE.—The term ‘‘Alaska Na21 tive’’ has the meaning given the term ‘‘Native’’ in

22 section 3 of the Alaska Native Claims Settlement

23 Act (43 U.S.C. 1602).

24 (2) BOARD.—The term ‘‘Board’’ means the

25 Board of Directors of the Corporation.
7

5

•S 519 IS

1 (3) CAPITAL DISTRIBUTION.—The term ‘‘cap2 ital distribution’’ has the meaning given the term in

3 section 1303 of the Federal Housing Enterprise Fi4 nancial Safety and Soundness Act of 1992 (12

5 U.S.C. 4502).

6 (4) CHAIRPERSON.—The term ‘‘Chairperson’’

7 means the chairperson of the Board.

8 (5) CORPORATION.—The term ‘‘Corporation’’

9 means the Native American Capital Development

10 Corporation established by section 101(a)(1)(A).

11 (6) COUNCIL.—The term ‘‘Council’’ means the

12 Advisory Council established under section 106(a).

13 (7) DESIGNATED MERGER DATE.—The term

14 ‘‘designated merger date’’ means the specific cal15 endar date and time of day designated by the Board

16 under this Act.

17 (8) DEPARTMENT OF HAWAIIAN HOME

18 LANDS.—The term ‘‘Department of Hawaiian Home

19 Lands’’ means the agency that is responsible for the

20 administration of the Hawaiian Homes Commission

21 Act, 1920 (42 Stat. 108 et seq.).

22 (9) FUND.—The term ‘‘Fund’’ means the Com23 munity Development Financial Institutions Fund es24 tablished under section 104 of the Riegle Commu-
8

6

•S 519 IS

1 nity Development and Regulatory Improvement Act

2 of 1994 (12 U.S.C. 4703).

3 (10) INDIAN TRIBE.—The term ‘‘Indian tribe’’

4 has the meaning given the term in section 4 of the

5 Indian Self-Determination and Education Assistance

6 Act (25 U.S.C. 450b).

7 (11) MERGER PLAN.—The term ‘‘merger plan’’

8 means the plan of merger adopted by the Board

9 under this Act.

10 (12) NATIVE AMERICAN.—The term ‘‘Native

11 American’’ means—

12 (A) a member of an Indian tribe; or

13 (B) a Native Hawaiian.

14 (13) NATIVE AMERICAN FINANCIAL INSTITU15 TION.—The term ‘‘Native American financial insti16 tution’’ means a person (other than an individual)

17 that—

18 (A) qualifies as a community development

19 financial institution under section 103 of the

20 Riegle Community Development and Regulatory

21 Improvement Act of 1994 (12 U.S.C. 4702);

22 (B) satisfies—

23 (i) requirements established by sub24 title A of title I of the Riegle Community
9

7

•S 519 IS

1 Development and Regulatory Improvement

2 Act of 1994 (12 U.S.C. 4701 et seq.); and

3 (ii) requirements applicable to persons

4 seeking assistance from the Fund;

5 (C) demonstrates a special interest and ex6 pertise in serving the primary economic develop7 ment and mortgage lending needs of the Native

8 American community; and

9 (D) demonstrates that the person has the

10 endorsement of the Native American commu11 nity that the person intends to serve.

12 (14) NATIVE AMERICAN LENDER.—The term

13 ‘‘Native American lender’’ means a Native American

14 governing body, Native American housing authority,

15 or other Native American financial institution that

16 acts as a primary mortgage or economic develop17 ment lender in a Native American community.

18 (15) NATIVE HAWAIIAN.—The term ‘‘Native

19 Hawaiian’’ has the meaning given the term in sec20 tion 201 of the Hawaiian Homes Commission Act,

21 1920 (42 Stat. 108).

22 (16) NEW CORPORATION.—The term ‘‘new cor23 poration’’ means the corporation formed in accord24 ance with title IV.
10

8

•S 519 IS

1 (17) SECRETARY.—The term ‘‘Secretary’’

2 means the Secretary of Housing and Urban Develop3 ment.

4 (18) TOTAL CAPITAL.—The term ‘‘total cap5 ital’’ has the meaning given the term in section 1303

6 of the Federal Housing Enterprise Financial Safety

7 and Soundness Act of 1992 (12 U.S.C. 4502).

8 (19) TRANSITION PERIOD.—The term ‘‘transi9 tion period’’ means the period beginning on the date

10 on which the merger plan is approved by the Sec11 retary and ending on the designated merger date.

12 TITLE I—NATIVE AMERICAN

13 CAPITAL DEVELOPMENT COR14 PORATION

15 SEC. 101. ESTABLISHMENT OF THE CORPORATION.

16 (a) ESTABLISHMENT; BOARD OF DIRECTORS; POLI17 CIES; PRINCIPAL OFFICE; MEMBERSHIP; VACANCIES.—

18 (1) ESTABLISHMENT.—

19 (A) IN GENERAL.—There is established

20 and chartered a corporation, to be known as the

21 ‘‘Native American Capital Development Cor22 poration’’.

23 (B) PERIOD OF TIME.—The Corporation

24 shall be a congressionally chartered body cor25 porate until the earlier of—
11

9

•S 519 IS

1 (i) the designated merger date; or

2 (ii) the date on which the charter is

3 surrendered by the Corporation.

4 (C) CHANGES TO CHARTER.—The right to

5 revise, amend, or modify the Corporation char6 ter is specifically and exclusively reserved to

7 Congress.

8 (2) BOARD OF DIRECTORS; PRINCIPAL OF9 FICE.—

10 (A) BOARD.—The powers of the Corpora11 tion shall be vested in a Board of Directors,

12 which Board shall determine the policies that

13 govern the operations and management of the

14 Corporation.

15 (B) PRINCIPAL OFFICE; RESIDENCY.—

16 (i) PRINCIPAL OFFICE.—The principal

17 office of the Corporation shall be in the

18 District of Columbia.

19 (ii) VENUE.—For purposes of venue,

20 the Corporation shall be considered to be a

21 resident of the District of Columbia.

22 (3) MEMBERSHIP.—

23 (A) IN GENERAL.—
12

10

•S 519 IS

1 (i) NINE MEMBERS.—Except as pro2 vided in clause (ii), the Board shall consist

3 of 9 members, of which—

4 (I) 3 members shall be appointed

5 by the President; and

6 (II) 6 members shall be elected

7 by the class A stockholders, in accord8 ance with the bylaws of the Corpora9 tion.

10 (ii) THIRTEEN MEMBERS.—If class B

11 stock is issued under section 201(b), the

12 Board shall consist of 13 members, of

13 which—

14 (I) 9 members shall be appointed

15 and elected in accordance with clause

16 (i); and

17 (II) 4 members shall be elected

18 by the class B stockholders, in accord19 ance with the bylaws of the Corpora20 tion.

21 (B) TERMS.—Each member of the Board

22 shall be elected or appointed for a 4-year term,

23 except that the members of the initial Board

24 shall be elected or appointed for the following

25 terms:
13

11

•S 519 IS

1 (i) Of the 3 members appointed by

2 the President—

3 (I) 1 member shall be appointed

4 for a 2-year term;

5 (II) 1 member shall be appointed

6 for a 3-year term; and

7 (III) 1 member shall be ap8 pointed for a 4-year term;

9 as designated by the President at the time

10 of the appointments.

11 (ii) Of the 6 members elected by the

12 class A stockholders—

13 (I) 2 members shall each be

14 elected for a 2-year term;

15 (II) 2 members shall each be

16 elected for a 3-year term; and

17 (III) 2 members shall each be

18 elected for a 4-year term.

19 (iii) If class B stock is issued and 4

20 additional members are elected by the class

21 B stockholders—

22 (I) 1 member shall be elected for

23 a 2-year term;

24 (II) 1 member shall be elected

25 for a 3-year term; and
14

12

•S 519 IS

1 (III) 2 members shall each be

2 elected for a 4-year term.

3 (C) QUALIFICATIONS.—Each member ap4 pointed by the President shall have expertise in

5 1 or more of the following areas:

6 (i) Native American housing and eco7 nomic development matters.

8 (ii) Financing in Native American

9 communities.

10 (iii) Native American governing bod11 ies, legal infrastructure, and judicial sys12 tems.

13 (iv) Restricted and trust land issues,

14 economic development, and small consumer

15 loans.

16 (D) MEMBERS OF INDIAN TRIBES.—Not

17 less than 2 of the members appointed by the

18 President shall be members of different, feder19 ally-recognized Indian tribes enrolled in accord20 ance with the applicable requirements of the In21 dian tribes.

22 (E) CHAIRPERSON.—The Board shall se23 lect a Chairperson from among the members of

24 the Board, except that the initial Chairperson

25 shall be selected from among the members of
15

13

•S 519 IS

1 the initial Board who have been appointed or

2 elected to serve for a 4-year term.

3 (F) VACANCIES.—

4 (i) APPOINTED MEMBERS.—Any va5 cancy in the appointed membership of the

6 Board shall be filled by appointment by the

7 President, but only for the unexpired por8 tion of the term.

9 (ii) ELECTED MEMBERS.—Any va10 cancy in the elected membership of the

11 Board shall be filled by appointment by the

12 Board, but only for the unexpired portion

13 of the term.

14 (G) TRANSITIONS.—Any member of the

15 Board may continue to serve after the expira16 tion of the term for which the member was ap17 pointed or elected until a qualified successor

18 has been appointed or elected.

19 (b) POWERS OF THE CORPORATION.—The

20 Corporation—

21 (1) shall adopt bylaws, consistent with this Act,

22 regulating, among other things, the manner in

23 which—

24 (A) the business of the Corporation shall

25 be conducted;
16

14

•S 519 IS

1 (B) the elected members of the Board shall

2 be elected;

3 (C) the stock of the Corporation shall be

4 issued, held, and disposed of;

5 (D) the property of the Corporation shall

6 be disposed of; and

7 (E) the powers and privileges granted to

8 the Corporation by this Act and other law shall

9 be exercised;

10 (2) may make and execute contracts, agree11 ments, and commitments, including entering into a

12 cooperative agreement with the Secretary;

13 (3) may prescribe and impose fees and charges

14 for services provided by the Corporation;

15 (4) may, if a settlement, adjustment, com16 promise, release, or waiver of a claim, demand, or

17 right of, by, or against the Corporation, is not ad18 verse to the interests of the United States—

19 (A) settle, adjust, and compromise on the

20 claim, demand, or right; and

21 (B) with or without consideration or bene22 fit to the Corporation, release or waive, in

23 whole or in part, in advance or otherwise, the

24 claim, demand, or right;
17

15

•S 519 IS

1 (5) may sue and be sued, complain and defend,

2 in any Federal, State, tribal, or other court;

3 (6) may acquire, take, hold, and own, manage,

4 and dispose of any property;

5 (7) may—

6 (A) determine the necessary expenditures

7 of the Corporation and the manner in which

8 those expenditures shall be incurred, allowed,

9 and paid; and

10 (B) appoint, employ, and fix and provide

11 for the compensation and benefits of such offi12 cers, employees, attorneys, and agents as the

13 Board determines reasonable and not inconsist14 ent with this section;

15 (8) may incorporate a new corporation under

16 State, District of Columbia, or tribal law, as pro17 vided in this Act;

18 (9) may adopt a plan of merger, as provided in

19 this Act;

20 (10) may consummate the merger of the Cor21 poration into the new corporation, as provided in

22 this Act; and

23 (11) may have succession until the designated

24 merger date or any earlier date on which the Cor-
18

16

•S 519 IS

1 poration surrenders the Federal charter of the Cor2 poration.

3 (c) INVESTMENT OF FUNDS; DESIGNATION AS DE4 POSITARY, CUSTODIAN, OR AGENT.—

5 (1) INVESTMENT OF FUNDS.—Funds of the

6 Corporation that are not required to meet current

7 operating expenses shall be invested in—

8 (A) obligations of, or obligations guaran9 teed by, the United States (or any agency of

10 the United States); or

11 (B) in obligations, participations, or other

12 instruments that are lawful investments for fi13 duciary, trust, or public funds.

14 (2) DESIGNATION AS DEPOSITARY, CUSTODIAN,

15 OR AGENT.—Any Federal Reserve bank or Federal

16 home loan bank, or any bank as to which at the time

17 of its designation by the Corporation there is out18 standing a designation by the Secretary of the

19 Treasury as a general or other depositary of public

20 money, may—

21 (A) be designated by the Corporation as a

22 depositary or custodian or as a fiscal or other

23 agent of the Corporation; and

24 (B) act as such a depositary, custodian, or

25 agent.
19

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•S 519 IS

1 (d) ACTIONS BY AND AGAINST THE CORPORATION.—

2 Notwithstanding section 1349 of title 28, United States

3 Code, or any other provision of law—

4 (1) the Corporation shall be deemed to be an

5 agency covered under sections 1345 and 1442 of

6 title 28, United States Code;

7 (2) any civil action to which the Corporation is

8 a party shall be deemed to arise under the laws of

9 the United States, and the appropriate district court

10 of the United States shall have original jurisdiction

11 over any such action, without regard to amount or

12 value; and

13 (3) in any case in which all remedies have been

14 exhausted in accordance with the applicable ordi15 nances of an Indian tribe, in any civil or other ac16 tion, case, or controversy in a tribal court, State

17 court, or in any court other than a district court of

18 the United States, to which the Corporation is a

19 party, may at any time before the commencement of

20 the civil action be removed by the Corporation, with21 out the giving of any bond or security and by follow22 ing any procedure for removal of causes in effect at

23 the time of the removal—
20

18

•S 519 IS

1 (A) to the district court of the United

2 States for the district and division in which the

3 action is pending; or

4 (B) if there is no such district court, to the

5 United States District Court for the District of

6 Columbia.

7 SEC. 102. AUTHORIZED ASSISTANCE AND SERVICE FUNC8 TIONS.

9 The Corporation may—

10 (1) assist in the planning, establishment, and

11 organization of Native American financial institu12 tions;

13 (2) develop and provide financial expertise and

14 technical assistance to Native American financial in15 stitutions, including methods of underwriting, secur16 ing, servicing, packaging, and selling mortgage and

17 small commercial and consumer loans;

18 (3) develop and provide specialized technical as19 sistance on overcoming barriers to primary mortgage

20 lending on Native American land, including issues

21 relating to—

22 (A) trust land;

23 (B) discrimination;

24 (C) high operating costs; and
21

19

•S 519 IS

1 (D) inapplicability of standard underwrit2 ing criteria;

3 (4) provide mortgage underwriting assistance

4 (but not in originating loans) under contract to Na5 tive American financial institutions;

6 (5) work with the Federal National Mortgage

7 Association, the Federal Home Loan Mortgage Cor8 poration, and other participants in the secondary

9 market for home mortgage instruments in identify10 ing and eliminating barriers to the purchase of Na11 tive American mortgage loans originated by Native

12 American financial institutions and other lenders in

13 Native American communities;

14 (6) obtain capital investments in the Corpora15 tion from Indian tribes, Native American organiza16 tions, and other entities;

17 (7) act as an information clearinghouse by pro18 viding information on financial practices to Native

19 American financial institutions;

20 (8) monitor and report to Congress on the per21 formance of Native American financial institutions

22 in meeting the economic development and housing

23 credit needs of Native Americans; and

24 (9) provide any of the services described in this

25 section—
22

20

•S 519 IS

1 (A) directly; or

2 (B) under a contract authorizing another

3 national or regional Native American financial

4 services provider to assist the Corporation in

5 carrying out the purposes of this Act.

6 SEC. 103. NATIVE AMERICAN LENDING SERVICES GRANT.

7 (a) INITIAL GRANT PAYMENT.—If the Secretary and

8 the Corporation enter into a cooperative agreement for the

9 Corporation to provide technical assistance and other serv10 ices to Native American financial institutions, the agree11 ment shall, to the extent that funds are available as pro12 vided in this Act, provide that the initial grant payment,

13 anticipated to be $5,000,000, shall be made at the time

14 at which all members of the initial Board have been ap15 pointed under this Act.

16 (b) PAYMENT OF GRANT BALANCE.—The payment

17 of the remainder of the grant shall be made to the Cor18 poration not later than 1 year after the date on which

19 the initial grant payment is made under subsection (a).

20 SEC. 104. AUDITS.

21 (a) INDEPENDENT AUDITS.—

22 (1) IN GENERAL.—The Corporation shall have

23 an annual independent audit made of the financial

24 statements of the Corporation by an independent
23

21

•S 519 IS

1 public accountant in accordance with generally ac2 cepted auditing standards.

3 (2) DETERMINATIONS.—In conducting an audit

4 under this subsection, the independent public ac5 countant shall determine and submit to the Sec6 retary a report on whether the financial statements

7 of the Corporation—

8 (A) are presented fairly in accordance with

9 generally accepted accounting principles; and

10 (B) to the extent determined necessary by

11 the Secretary, comply with any disclosure re12 quirements imposed under section 301.

13 (b) GAO AUDITS.—

14 (1) IN GENERAL.—Beginning on the date that

15 is 2 years after the date of commencement of oper16 ation of the Corporation, unless an earlier date is re17 quired by any other law, grant, or agreement, the

18 programs, activities, receipts, expenditures, and fi19 nancial transactions of the Corporation shall be sub20 ject to audit by the Comptroller General of the

21 United States under such rules and regulations as

22 may be prescribed by the Comptroller General.

23 (2) ACCESS.—To carry out this subsection, the

24 representatives of the General Accounting Office

25 shall—
24

22

•S 519 IS

1 (A) have access to all books, accounts, fi2 nancial records, reports, files, and all other pa3 pers, things, or property belonging to or in use

4 by the Corporation that are necessary to facili5 tate the audit;

6 (B) be afforded full facilities for verifying

7 transactions with the balances or securities held

8 by depositaries, fiscal agents, and custodians;

9 and

10 (C) have access, on request to the Corpora11 tion or any auditor for an audit of the Corpora12 tion under subsection (a), to any books, ac13 counts, financial records, reports, files, or other

14 papers, or property belonging to or in use by

15 the Corporation and used in any such audit and

16 to any papers, records, files, and reports of the

17 auditor used in such an audit.

18 (3) REPORTS.—The Comptroller General of the

19 United States shall submit to Congress a report on

20 each audit conducted under this subsection.

21 (4) REIMBURSEMENT.—The Corporation shall

22 reimburse the General Accounting Office for the full

23 cost of any audit conducted under this subsection.
25

23

•S 519 IS

1 SEC. 105. ANNUAL HOUSING AND ECONOMIC DEVELOP2 MENT REPORTS.

3 Not later than 1 year after the date of enactment

4 of this Act, and annually thereafter, the Corporation shall

5 collect, maintain, and provide to the Secretary, in a form

6 determined by the Secretary, such data as the Secretary

7 determines to be appropriate with respect to the activities

8 of the Corporation relating to economic development.

9 SEC. 106. ADVISORY COUNCIL.

10 (a) ESTABLISHMENT.—The Board shall establish an

11 Advisory Council in accordance with this section.

12 (b) MEMBERSHIP.—

13 (1) IN GENERAL.—The Council shall consist of

14 13 members, who shall be appointed by the Board,

15 including—

16 (A) 1 representative from each of the 12

17 districts established by the Bureau of Indian

18 Affairs; and

19 (B) 1 representative from the State of Ha20 waii.

21 (2) QUALIFICATIONS.—Of the members of the

22 Council—

23 (A) not less than 6 members shall have ex24 pertise in financial matters; and

25 (B) not less than 9 members shall be Na26 tive Americans.
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•S 519 IS

1 (3) TERMS.—Each member of the Council shall

2 be appointed for a 4-year term, except that the ini3 tial Council shall be appointed, as designated by the

4 Board at the time of appointment, as follows:

5 (A) Each of 4 members shall be appointed

6 for a 2-year term.

7 (B) Each of 4 members shall be appointed

8 for a 3-year term.

9 (C) Each of 5 members shall be appointed

10 for a 4-year term.

11 (c) DUTIES.—The Council shall—

12 (1) advise the Board on all policy matters of

13 the Corporation; and

14 (2) through the regional representation of mem15 bers of the Council, provide information to the

16 Board from all sectors of the Native American com17 munity.

18 TITLE II—CAPITALIZATION OF

19 CORPORATION

20 SEC. 201. CAPITALIZATION OF THE CORPORATION.

21 (a) CLASS A STOCK.—The class A stock of the Cor22 poration shall—

23 (1) be issued only to Indian tribes and the De24 partment of Hawaiian Home Lands;

25 (2) be allocated—
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•S 519 IS

1 (A) with respect to Indian tribes, on the

2 basis of Indian tribe population, as determined

3 by the Secretary in consultation with the Sec4 retary of the Interior, in such manner as to

5 issue 1 share for each member of an Indian

6 tribe; and

7 (B) with respect to the Department of Ha8 waiian Home Lands, on the basis of the num9 ber of current leases at the time of allocation;

10 (3) have such par value and other characteris11 tics as the Corporation shall provide;

12 (4) be issued in such a manner as to ensure

13 that voting rights may be vested only on purchase

14 of those rights from the Corporation by an Indian

15 tribe or the Department of Hawaiian Home Lands,

16 with each share being entitled to 1 vote; and

17 (5) be nontransferable.

18 (b) CLASS B STOCK.—

19 (1) IN GENERAL.—The Corporation may issue

20 class B stock evidencing capital contributions in the

21 manner and amount, and subject to any limitations

22 on concentration of ownership, as may be established

23 by the Corporation.

24 (2) CHARACTERISTICS.—Any class B stock

25 issued under paragraph (1) shall—
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26

•S 519 IS

1 (A) be available for purchase by investors;

2 (B) be entitled to such dividends as may

3 be declared by the Board in accordance with

4 subsection (c);

5 (C) have such par value and other charac6 teristics as the Corporation shall provide;

7 (D) be vested with voting rights, with each

8 share being entitled to 1 vote; and

9 (E) be transferable only on the books of

10 the Corporation.

11 (c) CHARGES AND FEES; EARNINGS.—

12 (1) CHARGES AND FEES.—The Corporation

13 may impose charges or fees, which may be regarded

14 as elements of pricing, with the objectives that—

15 (A) all costs and expenses of the oper16 ations of the Corporation should be within the

17 income of the Corporation derived from such

18 operations; and

19 (B) those operations would be fully self20 supporting.

21 (2) EARNINGS.—

22 (A) IN GENERAL.—All earnings from the

23 operations of the Corporation shall be annually

24 transferred to the general surplus account of

25 the Corporation.
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27

•S 519 IS

1 (B) TRANSFER OF GENERAL SURPLUS

2 FUNDS.—At any time, funds in the general sur3 plus account may, in the discretion of the

4 Board, be transferred to the reserves of the

5 Corporation.

6 (d) CAPITAL DISTRIBUTIONS.—

7 (1) DISTRIBUTIONS.—

8 (A) IN GENERAL.—Except as provided in

9 paragraph (2), the Corporation may make such

10 capital distributions as may be declared by the

11 Board.

12 (B) CHARGING OF DISTRIBUTIONS.—All

13 capital distributions under subparagraph (A)

14 shall be charged against the general surplus ac15 count of the Corporation.

16 (2) RESTRICTION.—The Corporation may not

17 make any capital distribution that would decrease

18 the total capital of the Corporation to an amount

19 less than the capital level for the Corporation estab20 lished under section 301, without prior written ap21 proval of the distribution by the Secretary.
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•S 519 IS

1 TITLE III—REGULATION,

2 EXAMINATION, AND REPORTS

3 SEC. 301. REGULATION, EXAMINATION, AND REPORTS.

4 (a) IN GENERAL.—The Corporation shall be subject

5 to the regulatory authority of the Department of Housing

6 and Urban Development with respect to all matters relat7 ing to the financial safety and soundness of the Corpora8 tion.

9 (b) DUTY OF SECRETARY.—The Secretary shall en10 sure that the Corporation is adequately capitalized and op11 erating safely as a congressionally chartered body cor12 porate.

13 (c) REPORTS TO SECRETARY.—

14 (1) ANNUAL REPORTS.—On such date as the

15 Secretary shall require, but not later than 1 year

16 after the date of enactment of this Act, and annually

17 thereafter, the Corporation shall submit to the Sec18 retary a report in such form and containing such in19 formation with respect to the financial condition and

20 operations of the Corporation as the Secretary shall

21 require.

22 (2) CONTENTS OF REPORTS.—Each report sub23 mitted under this subsection shall contain a declara24 tion by the president, vice president, treasurer, or

25 any other officer of the Corporation designated by
31

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•S 519 IS

1 the Board to make the declaration, that the report

2 is true and correct to the best of the knowledge and

3 belief of that officer.

4 SEC. 302. AUTHORITY OF THE SECRETARY OF HOUSING

5 AND URBAN DEVELOPMENT.

6 The Secretary shall—

7 (1) have general regulatory power over the Cor8 poration; and

9 (2) promulgate such rules and regulations ap10 plicable to the Corporation as the Secretary deter11 mines to be appropriate to ensure that the purposes

12 specified in section 3 are accomplished.

13 TITLE IV—FORMATION OF NEW

14 CORPORATION

15 SEC. 401. FORMATION OF NEW CORPORATION.

16 (a) IN GENERAL.—In order to continue the accom17 plishment of the purposes specified in section 3 beyond

18 the terms of the charter of the Corporation, the Board

19 shall, not later than 10 years after the date of enactment

20 of this Act, cause the formation of a new corporation

21 under the laws of any tribe, any State, or the District of

22 Columbia.

23 (b) POWERS OF NEW CORPORATION NOT PRE24 SCRIBED.—Except as provided in this section, the new

25 corporation may have such corporate powers and at-
32

30

•S 519 IS

1 tributes permitted under the laws of the jurisdiction of in

2 which the new corporation is incorporated as the Board

3 determines to be appropriate.

4 (c) USE OF NAME PROHIBITED.—The new corpora5 tion may not use in any manner the names ‘‘Native Amer6 ican Capital Development Corporation’’ or ‘‘NACDCO’’,

7 or any variation of those names.

8 SEC. 402. ADOPTION AND APPROVAL OF MERGER PLAN.

9 (a) IN GENERAL.—Not later than 10 years after the

10 date of enactment of this Act, after consultation with the

11 Indian tribes that are stockholders of class A stock re12 ferred to in section 201(a), the Board shall prepare, adopt,

13 and submit to the Secretary for approval, a plan for merg14 ing the Corporation into the new corporation.

15 (b) DESIGNATED MERGER DATE.—

16 (1) IN GENERAL.—The Board shall establish

17 the designated merger date in the merger plan as a

18 specific calendar date on which, and time of day at

19 which, the merger of the Corporation into the new

20 corporation shall take effect.

21 (2) CHANGES.—The Board may change the

22 designated merger date in the merger plan by adopt23 ing an amended plan of merger.

24 (3) RESTRICTION.—Except as provided in para25 graph (4), the designated merger date in the merger
33

31

•S 519 IS

1 plan or any amended merger plan shall not be later

2 than 11 years after the date of enactment of this

3 Act.

4 (4) EXCEPTION.—Subject to the restriction

5 contained in paragraph (5), the Board may adopt an

6 amended plan of merger that designates a date

7 under paragraph (3) that is later than 11 years

8 after the date of enactment of this Act if the Board

9 submits to the Secretary a report—

10 (A) stating that an orderly merger of the

11 Corporation into the new corporation is not fea12 sible before the latest date designated by the

13 Board;

14 (B) explaining why an orderly merger of

15 the Corporation into the new corporation is not

16 feasible before the latest date designated by the

17 Board;

18 (C) describing the steps that have been

19 taken to consummate an orderly merger of the

20 Corporation into the new corporation not later

21 than 11 years after the date of enactment of

22 this Act; and

23 (D) describing the steps that will be taken

24 to consummate an orderly and timely merger of

25 the Corporation into the new corporation.
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32

•S 519 IS

1 (5) LIMITATION.—The date designated by the

2 Board in an amended merger plan shall not be later

3 than 12 years after the date of enactment of this

4 Act.

5 (6) CONSUMMATION OF MERGER.—The con6 summation of an orderly and timely merger of the

7 Corporation into the new corporation shall not occur

8 later than 13 years after the date of enactment of

9 this Act.

10 (c) GOVERNMENTAL APPROVALS OF MERGER PLAN

11 REQUIRED.—The merger plan or any amended merger

12 plan shall take effect on the date on which the plan is

13 approved by the Secretary.

14 (d) REVISION OF DISAPPROVED MERGER PLAN RE15 QUIRED.—If the Secretary disapproves the merger plan or

16 any amended merger plan—

17 (1) the Secretary shall—

18 (A) notify the Corporation of the dis19 approval; and

20 (B) indicate the reasons for the dis21 approval; and

22 (2) not later than 30 days after the date of no23 tification of disapproval under paragraph (1), the

24 Corporation shall submit to the Secretary for ap25 proval, an amended merger plan that responds to
35

33

•S 519 IS

1 the reasons for the disapproval indicated in that no2 tification.

3 (e) NO STOCKHOLDER APPROVAL OF MERGER PLAN

4 REQUIRED.—The approval or consent of the stockholders

5 of the Corporation shall not be required to accomplish the

6 merger of the Corporation into the new corporation.

7 SEC. 403. CONSUMMATION OF MERGER.

8 The Board shall ensure that the merger of the Cor9 poration into the new corporation is accomplished in ac10 cordance with—

11 (1) a merger plan approved by the Secretary

12 under section 402; and

13 (2) all applicable laws of the jurisdiction in

14 which the new corporation is incorporated.

15 SEC. 404. TRANSITION.

16 Except as provided in this section, the Corporation

17 shall, during the transition period, continue to have all of

18 the rights, privileges, duties, and obligations, and shall be

19 subject to all of the limitations and restrictions, set forth

20 in this Act.

21 SEC. 405. EFFECT OF MERGER.

22 (a) TRANSFER OF ASSETS AND LIABILITIES.—On

23 the designated merger date—

24 (1) all real, personal, and mixed property, all

25 debts due on any account, and any other interest, of
36

34

•S 519 IS

1 or belonging to or due to the Corporation, shall be

2 transferred to and vested in the new corporation

3 without further act or deed; and

4 (2) no title to any real, personal, or mixed prop5 erty shall be impaired in any way by reason of the

6 merger.

7 (b) TERMINATION OF THE CORPORATION AND FED8 ERAL CHARTER.—On the designated merger date—

9 (1) the surviving corporation of the merger

10 shall be the new corporation;

11 (2) the Federal charter of the Corporation shall

12 terminate; and

13 (3) the separate existence of the Corporation

14 shall terminate.

15 (c) REFERENCES TO THE CORPORATION IN LAW.—

16 After the designated merger date, any reference to the

17 Corporation in any law or regulation shall be deemed to

18 refer to the new corporation.

19 (d) SAVINGS CLAUSE.—

20 (1) PROCEEDINGS.—The merger of the Cor21 poration into the new corporation shall not abate

22 any proceeding commenced by or against the Cor23 poration before the designated merger date, except

24 that the new corporation shall be substituted for the
37

35

•S 519 IS

1 Corporation as a party to any such proceeding as of

2 the designated merger date.

3 (2) CONTRACTS AND AGREEMENTS.—All con4 tracts and agreements to which the Corporation is a

5 party and which are in effect on the day before the

6 designated merger date shall continue in effect ac7 cording to their terms, except that the new corpora8 tion shall be substituted for the Corporation as a

9 party to those contracts and agreements as of the

10 designated merger date.

11 TITLE V—OTHER NATIVE

12 AMERICAN FUNDS

13 SEC. 501. NATIVE AMERICAN ECONOMIES DIAGNOSTIC

14 STUDIES FUND.

15 (a) ESTABLISHMENT.—There is established within

16 the Corporation a fund to be known as the ‘‘Native Amer17 ican Economies Diagnostic Studies Fund’’ (referred to in

18 this section as the ‘‘Diagnostic Fund’’), to be used to

19 strengthen Indian tribal economies by supporting invest20 ment policy reforms and technical assistance to eligible In21 dian tribes, consisting of—

22 (1) any interest earned on investment of

23 amounts in the Fund under subsection (d); and

24 (2) such amounts as are appropriated to the

25 Diagnostic Fund under subsection (f).
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36

•S 519 IS

1 (b) USE OF AMOUNTS FROM DIAGNOSTIC FUND.—

2 (1) IN GENERAL.—The Corporation shall use

3 amounts in the Diagnostic Fund to establish an

4 interdisciplinary mechanism by which the Corpora5 tion and interested Indian tribes may jointly—

6 (A) conduct diagnostic studies of Native

7 economic conditions; and

8 (B) provide recommendations for reforms

9 in the policy, legal, regulatory, and investment

10 areas and general economic environment of the

11 interested Indian tribes.

12 (2) CONDITIONS FOR STUDIES.—A diagnostic

13 study conducted jointly by the Corporation and an

14 Indian tribe under paragraph (1)—

15 (A) shall be conducted in accordance with

16 an agreement between the Corporation and the

17 Indian tribe; and

18 (B) at a minimum, shall identify inhibitors

19 to greater levels of private sector investment

20 and job creation with respect to the Indian

21 tribe.

22 (c) EXPENDITURES FROM DIAGNOSTIC FUND.—

23 (1) IN GENERAL.—Subject to paragraph (2), on

24 request by the Corporation, the Secretary of the

25 Treasury shall transfer from the Diagnostic Fund to
39

37

•S 519 IS

1 the Corporation such amounts as the Corporation

2 determines are necessary to carry out this section.

3 (2) ADMINISTRATIVE EXPENSES.—An amount

4 not exceeding 12 percent of the amounts in the Di5 agnostic Fund shall be available in each fiscal year

6 to pay the administrative expenses necessary to

7 carry out this section.

8 (d) INVESTMENT OF AMOUNTS.—

9 (1) IN GENERAL.—The Secretary of the Treas10 ury shall invest such portion of the Diagnostic Fund

11 as is not, in the judgment of the Secretary of the

12 Treasury, required to meet current withdrawals. In13 vestments may be made only in interest-bearing obli14 gations of the United States.

15 (2) ACQUISITION OF OBLIGATIONS.—For the

16 purpose of investments under paragraph (1), obliga17 tions may be acquired—

18 (A) on original issue at the issue price; or

19 (B) by purchase of outstanding obligations

20 at the market price.

21 (3) SALE OF OBLIGATIONS.—Any obligation ac22 quired by the Diagnostic Fund may be sold by the

23 Secretary of the Treasury at the market price.

24 (4) CREDITS TO FUND.—The interest on, and

25 the proceeds from the sale or redemption of, any ob-
40

38

•S 519 IS

1 ligations held in the Diagnostic Fund shall be cred2 ited to and form a part of the Diagnostic Fund.

3 (e) TRANSFERS OF AMOUNTS.—

4 (1) IN GENERAL.—The amounts required to be

5 transferred to the Diagnostic Fund under this sec6 tion shall be transferred at least monthly from the

7 general fund of the Treasury to the Diagnostic Fund

8 on the basis of estimates made by the Secretary of

9 the Treasury.

10 (2) ADJUSTMENTS.—Proper adjustment shall

11 be made in amounts subsequently transferred to the

12 extent prior estimates were in excess of or less than

13 the amounts required to be transferred.

14 (f) TRANSFERS TO DIAGNOSTIC FUND.—There are

15 appropriated to the Diagnostic Fund, out of funds made

16 available under section 603, such sums as are necessary

17 to carry out this section.

18 SEC. 502. NATIVE AMERICAN ECONOMIC INCUBATION CEN19 TER FUND.

20 (a) ESTABLISHMENT.—There is established within

21 the Corporation a fund to be known as the ‘‘Native Amer22 ican Economic Incubation Center Fund’’ (referred to in

23 this section as the ‘‘Economic Fund’’), consisting of—
41

39

•S 519 IS

1 (1) any interest earned on investment of

2 amounts in the Economic Fund under subsection

3 (d); and

4 (2) such amounts as are appropriated to the

5 Economic Fund under subsection (f).

6 (b) USE OF AMOUNTS FROM ECONOMIC FUND.—

7 (1) IN GENERAL.—The Corporation shall use

8 amounts in the Economic Fund to ensure that Fed9 eral development assistance and other resources

10 dedicated to Native American economic development

11 are provided only to Native American communities

12 with demonstrated commitments to—

13 (A) sound economic and political policies;

14 (B) good governance; and

15 (C) practices that promote increased levels

16 of economic growth and job creation.

17 (c) EXPENDITURES FROM ECONOMIC FUND.—

18 (1) IN GENERAL.—Subject to paragraph (2), on

19 request by the Corporation, the Secretary of the

20 Treasury shall transfer from the Economic Fund to

21 the Corporation such amounts as the Corporation

22 determines are necessary to carry out this section.

23 (2) ADMINISTRATIVE EXPENSES.—An amount

24 not exceeding 12 percent of the amounts in the Eco25 nomic Fund shall be available in each fiscal year to
42

40

•S 519 IS

1 pay the administrative expenses necessary to carry

2 out this section.

3 (d) INVESTMENT OF AMOUNTS.—

4 (1) IN GENERAL.—The Secretary of the Treas5 ury shall invest such portion of the Economic Fund

6 as is not, in the judgment of the Secretary of the

7 Treasury, required to meet current withdrawals. In8 vestments may be made only in interest-bearing obli9 gations of the United States.

10 (2) ACQUISITION OF OBLIGATIONS.—For the

11 purpose of investments under paragraph (1), obliga12 tions may be acquired—

13 (A) on original issue at the issue price; or

14 (B) by purchase of outstanding obligations

15 at the market price.

16 (3) SALE OF OBLIGATIONS.—Any obligation ac17 quired by the Economic Fund may be sold by the

18 Secretary of the Treasury at the market price.

19 (4) CREDITS TO FUND.—The interest on, and

20 the proceeds from the sale or redemption of, any ob21 ligations held in the Economic Fund shall be cred22 ited to and form a part of the Economic Fund.

23 (e) TRANSFERS OF AMOUNTS.—

24 (1) IN GENERAL.—The amounts required to be

25 transferred to the Economic Fund under this section
43

41

•S 519 IS

1 shall be transferred at least monthly from the gen2 eral fund of the Treasury to the Economic Fund on

3 the basis of estimates made by the Secretary of the

4 Treasury.

5 (2) ADJUSTMENTS.—Proper adjustment shall

6 be made in amounts subsequently transferred to the

7 extent prior estimates were in excess of or less than

8 the amounts required to be transferred.

9 (f) TRANSFERS TO ECONOMIC FUND.—There are ap10 propriated to the Economic Fund, out of funds made

11 available under section 603, such sums as are necessary

12 to carry out this section.

13 TITLE VI—AUTHORIZATIONS OF

14 APPROPRIATIONS

15 SEC. 601. NATIVE AMERICAN FINANCIAL INSTITUTIONS.

16 (a) IN GENERAL.—There are authorized to be appro17 priated to the Fund, without fiscal year limitation, such

18 sums as are necessary to provide financial assistance to

19 Native American financial institutions.

20 (b) NO CONSIDERATION AS MATCHING FUNDS.—To

21 the extent that a Native American financial institution re22 ceives funds under subsection (a), the funds shall not be

23 considered to be matching funds required under section

24 108(e) of the Riegle Community Development and Regu25 latory Improvement Act of 1994 (12 U.S.C. 4707(e)).
44

42

•S 519 IS

1 SEC. 602. CORPORATION.

2 There are authorized to be appropriated to the Sec3 retary, for transfer to the Corporation, such sums as are

4 necessary to carry out activities of the Corporation.

5 SEC. 603. OTHER NATIVE AMERICAN FUNDS.

6 There are authorized to be appropriated such sums

7 as are necessary to carry out sections 501 and 502.

Æ
45

The CHAIRMAN. Our first witness today will be William Russell,

deputy assistant secretary, Public and Indian Housing, Department

of Housing and Urban Development.

Your complete testimony will be included in the record. If you

would like to abbreviate and keep it down to 5 or 6 minutes, that

would be just fine with me. Thank you.

STATEMENT OF WILLIAM O. RUSSELL, DEPUTY ASSISTANT

SECRETARY, PUBLIC AND INDIAN HOUSING, DEPARTMENT

OF HOUSING AND URBAN DEVELOPMENT, WASHINGTON, DC

Mr. RUSSELL. Thank you, Mr. Chairman. My name is William

Russell and I am deputy assistant secretary for Public and Indian

Housing. Thank you for inviting me to testify today before the

Committee on Indian Affairs. I am glad to be with you today and

welcome the opportunity to share with you the Department of

Housing and Urban Development’s perspective on many of the concepts included in your bill, S. 519, the Native American Capital

Formation and Economic Development Act of 2003, which has been

introduced by you.

Let me just state that Assistant Secretary Liu could not be here

for this hearing. He is in your home State of Colorado participating

in an important negotiated rule making with the tribes on the

NAHASDA formula.

The PIH is responsible for the management, operations, and

oversight of HUD’s Native American programs. These programs are

available to over 550 federally-recognized and a limited number of

State-recognized tribes. We serve these tribes directly, or through

tribally-designated housing entitled by providing grants and loan

guarantees designed to support afford housing, and community and

economic development activities.

I would like to express my appreciation for your continued efforts

to improve the housing conditions of those who need it most. As

you have heard from previous testimony, much progress is being

made and tribes are taking advantage of new opportunities to improve the housing conditions of the Native American families residing on Indian reservations, on trust or restricted Indian land, and

in Alaska Native villages. This momentum needs to be sustained

as we continue to work together toward creating a better living environment throughout Indian country.

At the outset, let me reaffirm the Department of Housing and

Urban Development’s support for the principle of government-togovernment relations with Indian tribes. HUD is committed to honoring this fundamental precept in our work with American Indians

and Alaska Natives.

The Administration is currently actively reviewing your bill and

hopes to soon be able to provide you with specific comments. In

general, we agree that the goals of economic self-sufficiency and political self-determination can best be achieved through access to

private capital and equity investments.

HUD is committed to exploring new opportunities to surmount

barriers to lending on tribal lands and to facilitating access to alternative sources of capital, financial services, and technical expertise. HUD’s Office of Native American Programs is currently working with tribal governments and lenders to increase private hous-
46

ing investments through the Section 184 Indian Housing Loan

Guarantee Fund Program, and the Title VI Tribal Housing Activities Loan Guarantee Fund.

We know that there are numerous barriers to accessing capital.

Many of these were recently identified in the ‘‘Native American

Lending Study’’ completed by the Department of the Treasury’s

Community Development Financial Institute Fund, as well as

through other research.

Capital in Native America tends to come from four primary

sources: Tribal financial resources, Federal guaranteed loans,

grants and tax credits, debt capital, and equity investors. The latter is woefully inadequate for many reasons. Issues raised by investors and private lenders include the legal status of tribal lands; inadequate or nonexistent legal and business codes; insufficient understanding of issues related to tribal sovereignty and sovereign

immunity; a lack of technical assistance resources; uncertainty related to leadership changes in tribal governments; and a lack of financial institutions and services or in close proximity to Native

American communities.

Many tribes and TDHEs, as well as other tribally affiliated community and economic development organizations, use a project-byproject approach to housing and economic development. There is a

great need to create a more comprehensive approach to the creation of sustainable economies. There are clear roles that tribal

governments, Federal agencies, and lending institutions can play in

creating these economies.

The Administration would like to give careful consideration to

whether the creation of this corporation can resolve impediments

to lending on tribal lands and contribute to the establishment of

sound policies that promote increased levels of economic growth

and job creation.

Finally, let me state for the record that we concur with many of

the findings in your bill. We agree that much of the poor performance of Native American economies correlate to the absence of private capital and private financial institutions. We will continue to

work in partnership with tribal governments, Native American organizations, the private sector, and other government agencies to

support private investment and leveraging in Indian country.

Mr. Chairman, HUD is prepared to work with you to help overcome these barriers to accessing capital in Indian country.

This concludes my prepared remarks. I would ask that my prepared statement be inserted in the record in its entirety.

The CHAIRMAN. Without objection.

[Prepared statement of William Russell appears in appendix.]

The CHAIRMAN Thank you. As I understand your testimony, you

are in support of the concept of what we are doing, but the Administration has not totally reviewed it. Do you have any idea when

the committee could expect that to be finished so you could give us

an idea about what parts they support, or if they support it at all?

Mr. RUSSELL. I believe within the next several weeks you should

have that; yes, sir.

The CHAIRMAN. Okay. I would appreciate that. Thank you for

your testimony.
47

You spoke a little bit about the dollars that go out in the Federal

Government through different groups. It would seem to me that

somewhere along the line it would make sense to administer a lot

of these Federal funds such as the Economic Development Administration funding, DOT funding, HUD funding, BIA’s loan guarantee,

and so on under some kind of a systematic development program

that the tribes could understand and could focus on.

I do not know if you are qualified and are an authority to say

or not whether or not that makes sense. But let me ask you if it

does, in your view.

Mr. RUSSELL. I am probably not qualified to comment on that.

But I think one of the things that we are looking at is some of the

expertise or programs that Departments like Treasury and even

Agriculture obviously may have even more expertise than HUD in

managing some of these economic development funds and programs. That is one of the things we are looking into.

The CHAIRMAN. Okay. One way to create capital is to recycle

home loans through a secondary market. Are you in favor of creating such a market for Indian home loan programs?

Mr. RUSSELL. We definitely think there is a need for a more vibrant secondary market. We would definitely support efforts to improve access to such a secondary market.

The CHAIRMAN. How about a U.S. guarantee? One way to facilitate the corporation’s ability to raise funds in the capital markets

is to provide a U.S. guarantee on a corporation’s commercial paper.

Are you in favor of that?

Mr. RUSSELL. I probably cannot comment on that position at this

point.

The CHAIRMAN. Okay. All right. If you could get back to the committee as soon as the review is done and let you know what you

think about it, I would certainly appreciate it.

Mr. RUSSELL. Certainly.

The CHAIRMAN. Thank you for appearing, Mr. Russell.

Mr. RUSSELL. Thank you.

We will now go to the second panel. Tex Hall is president of the

National Congress of American Indians and Chris Paisano, acting

executive director of the Navajo Nation, Washington Office.

Welcome, Tex. I have not see you for a while. We will go ahead

and start with you, Tex. As with the first panel, if you would like

to submit most of your testimony, you can abbreviate your remarks.

STATEMENT OF TEX G. HALL, PRESIDENT, NATIONAL

CONGRESS OF AMERICAN INDIANS, WASHINGTON, DC

Mr. HALL. [Remarks in Native tongue.]

Chairman Campbell and members of the committee, I would like

to thank you for inviting me to testify on behalf of the National

Congress of American Indians regarding the Native American Capital Formation and Economic Development Act. On behalf of the

member tribes and individual staff and leadership of NCAI, I

would like to express appreciation for the dedication of this committee. It shows Indian people your honorable fulfillment of Federal trust and treaty responsibilities.
48

We also want to express our appreciation for the effort this committee is making to assist with economic development in Indian

country. We all know that one of the greatest problems facing

much of Indian country, despite the relative success of gaming for

some tribes, is getting capital to make economic development efforts happen. The need for economic development in Indian country

remains acute and impacts nearly every aspect of life in reservation communities.

This bill represents one approach and a starting point for discussion, we believe, that has been ongoing for many years about how

the Federal Government and the private sector can be brought together to assist in capital formation in Indian country. As you

know, I am already very familiar with the efforts in Indian ountry

to develop a means for private capital formation. I am not only the

president of NCAI but I am also the chairman of the board of the

holding company that owns the Native American Bank that was recently developed. It is an enterprise that in general owes its creation to the efforts of some members of the Indian Affairs Committee.

The Native American Bank represents one inter-tribal approach

to capital formation in Indian country, one of which I am very

proud to be a part of. The Native American Bank also has a Community Development Corporation component that is undertaking

some of the same tasks we believe would be assigned to the corporate entity established in S. 519.

But we all know that one financial institution cannot provide for

all the needs of Indian country with regard to the kind of intensive

capital development that is necessary to sustain economic development for the long term. This makes the discussion started by S.

519 very important.

This bill represents an effort by the Federal Government to assist in development of Native American financial institutions. This

is a different approach to capital formation than something like the

Native American Bank. But nevertheless, we believe the approach

stated in S. 519 is very worthy of discussion and further development.

With this background in mind, it is my hope that S. 519 will be

developed, amended, and commented on by tribal leaders, tribal

members, financial experts, and the Congress consistent with the

following goals:

No. 1, any entity created federally should provide assistance in

capital formation for institutions like the Native American Bank

and other similar tribally-owned banking institutions so that they

can continue to grow and assist economic development in Indian

country as private institutions;

No. 2, the institution created should be able to provide technical

expertise to tribes and individual tribal members and other financial institutions such as banks and other investment companies

that are working to make capital available for economic development in Indian country; and,

No. 3, any institution created federally should be complementary

to, not competitive with, existing tribal financial institutions when

it comes to providing service such as lending, venture capital, and

advice on business formation.
49

How does S. 519 measure up in relation to these goals? At

present I am not yet convinced that the structure of the Native

American Capital Development Corporation outlined in S. 519 will

do everything we want it to do. But I do know that NCAI and I

are willing to continue to work to find a structure that will. We

want to continue to work with you on that effort, Chairman Campbell.

We believe that the Native American Capital Formation and Economic Development Act can be a starting point for a discussion of

how Congress and Federal Government can best assist tribes to

solve the economic development puzzle.

I would like to talk about the functions of the Native American

Capital Development Corporation. It is important to look at what

S. 519 does and does not include with regard to the functions of

the Native American Capital Development Corporation created by

the act.

The act calls for the creation of an Indian Development Corporation to be capitalized by Indian tribes and with instructions, as

stated in section 102, to provide technical assistance to help establish tribal financial institutions. It would provide technical assistance to existing tribal financial institutions as they develop a loan

portfolio, and to help provide technical assistance to overcome barriers on mortgage lending on Indian land. It would assist tribes

and individuals to work with Federal home mortgage institutions,

and to act as an information clearinghouse on financial practices

in Indian country. Finally, it would obtain capital investments from

tribes.

Because of this last function of the Corporation, to obtain capital

investment from tribes as mentioned in the act, it is not clear to

us whether the Corporation is intended to be a source of capital for

tribal economic enterprises by itself, or if it is simply to become a

technical advisor to tribal financial institutions who themselves are

already doing a lot of the lending.

As structured, we believe the Corporation could be most useful

as a technical advisory institution and one that can contract with

existing or newly formed tribal financial institutions to provide

technical assistance. However, we would also note that some of the

suggested functions of the Corporation may already be provided in

the private sector. It is our hope that the Corporation will not be

duplicative of existing private institutions.

As you know, Chairman Campbell, there is already a lot of good

work going on in Indian country from a variety of directions. Some

Government programs have proven to be very successful. Other

partnerships with educational institutions and non-Indian committee organizations have been doing very useful and important work

on reservations.

Most meaningful, however, has been the hard work and dedication shown by Indian people themselves. Indian institutions like

the Native American Bank, the Lakota Fund, the First Nations Development Institution, the Northwest Area Foundation, and dozens

of other smaller but no less vital organizations have done far and

away the most work in the development of tribal economies.

It is our hope that this committee strongly considers the suggestions that these organizations may have to improve the bill. We be-
50

lieve that the institutions created by S. 519 should be structured

so as not to take away anything from these efforts thus far. We ultimately want the Corporation to be complementary of and supplemental to what is already going on in many of our communities.

The structure of the Corporation is of great importance to NCAI.

The Corporation should be tribally owned. It should also be a corporate entity operated by Indian tribes and their members. This

will give the Corporation some additional credibility. That will be

important if it is to be successful.

We have some suggested improvements in this regard. The Board

of Directors of the Corporation is only required to have two members from Indian tribes. We believe that de facto control of the organization must reside with Indian people as they know the needs

of their people best.

We propose that the majority of corporate board members be required to be tribal members. Thus, in addition to the two of three

Presidential appointed members being tribal members, we would

like to see three of six of those elected by class A shareholders and

two of four of those elected by class B shareholders be members of

Indian tribes.

On policy analysis and Incubation Centers, S. 519 sets up some

two corollary funds proposed in this bill. These are helpful additions to the work of the proposed organization. The Native American Economies Diagnostic Studies Fund is well positioned to analyze the stake of Indian economies, the viability of policies both applied and removed from tribal business, legal, and regulatory schema and their effects, as well as the general economic trends on our

reservations.

Hopefully the Diagnostic Fund will be able to deal directly both

with the state of Indian country economies and as an arm of the

Corporation, the implementation of policies that will eliminate the

identified barriers and problems.

The other fund, the Native American Incubation Center Fund

could also be helpful. However, as mentioned above regarding the

question of the purpose of the Corporation, it is unclear exactly

what the purpose of the Incubation Center Fund would be. Is this

Fund intended to provide financial assistance to tribal communities

directly? Or is it simply to be a clearinghouse for other Federal

funds that are available for economic development efforts on behalf

of tribes?

In summary, we believe that S. 519 acts to start the discussion

of how the Federal Government can help the tribal nations and

help tribal financial institutions grow and prosper. With a few

amendments, it contains some of the most important elements of

that assistance: control and ownership by tribal members and a

commitment to technical assistance among others.

Conceptually, the Corporation has the potential to be a force for

financial reform for Indian country economies. But the success of

this effort will depend largely on the acceptance of the concepts in

S. 519 throughout Indian country. Indian tribes will have to be convinced that investment in a federally charted institution will be a

good and wise investment. That could be a hard sell.

Further, whether the Corporation can create and maintain the

availability of broad-based financial services and technical assist-
51

ance for businesses in Indian country will be critical to its success.

It will need to show that its particular expertise in the area of tribal housing funding is useful and needed in Indian country.

It would also need to complement existing private efforts that

have been initiated by tribes, both individually and intra-tribally

as has already been mentioned before in my testimony. Perhaps in

time the Corporation can also work to reduce the confusion and

misconception surrounding political differences that arise from tribal sovereignty. Like the Overseas Political Insurance Corporation,

perhaps the Corporation will be able to provide some sort of insurance for international risk.

NCAI has identified this as one of the keys to comprehensive development in Indian country, and we feel that the Corporation may

have the potential to assist in fulfilling this role further down the

road. Again, we would hope that the Corporation would do this in

cooperation with existing and to be created tribally-owned institutions.

Again, Senator Campbell, we thank you for the opportunity to

testify on this important bill. We believe this bill can provide a

good starting point for discussion on these issues. We encourage

further dialog and work on this concept so that it can truly help

existing tribally-owned economic development institutions, and can

help start new ones.

We also thank you for introducing legislation to try to help develop financial institutions that will enhance the lives of our citizens and serve and strengthen our tribal governments. We look forward to working with you and the committee to make this bill as

effective and helpful to Indian country as possible.

I would ask that my prepared statement be inserted in the

record in its entirety.

The CHAIRMAN. Without objection.

[Prepared statement of Mr. Hall appears in appendix.]

Mr. HALL. [Remarks in Native tongue.] Thank you, Senator.

The CHAIRMAN. Thank you, Tex.

Mr. PAISANO.

STATEMENT OF CHRIS PAISANO, ACTING EXECUTIVE DIRECTOR OF THE NAVAJO NATION WASHINGTON OFFICE, WASHINGTON, DC

Mr. PAISANO. [Remarks in Native tongue.]

My name is Christopher James Paisano, acting executive director

for the Navajo Nation Washington Office. I serve as President Joe

Shirley’s official Representative in Washington, DC. Vice President

Frank J. Dayish, Jr. is not able to present his testimony before the

committee. He sends his regrets. He requested that I deliver his remarks and testimony which are laid before you.

I would ask that his prepared statement be inserted in the record

in its entirety.

The CHAIRMAN. Without objection.

[Prepared statement of Mr. Dayish appears in appendix.]

Mr. PAISANO. In his absence and discussion, we will bring new

ideas to the challenges of economic development that will initiate

additional choices for Indian country. The Navajo people must have

the opportunity to be more than what fate and circumstance allows
52

us to be. The president and vice president seek to empower our

people to have additional opportunities to allow them to imagine a

life different than one that is imposed upon them by the current

and outdated economic policies.

S. 519 initiates the discussion of attracting Indian and non-Indian investors to Indian country. The president and vice president

understand very well that finding solutions to economic challenges,

or rather, nation building is a responsibility that is enjoined by all

of us.

We hope the committee will work with the Navajo Nation on S.

519 which we understand is a concept that is in the process of

being finalized. Together we will finalize the bill that might assist

tribes in taking the initial steps toward financial independence.

With that in mind, we submit our legislative concerns and recommendations for S. 519.

The Navajo Nation is familiar with capital drought and its effects

on the rest of Indian country. You have seen it with your own eyes.

As I understand it, a delegation from your committee recently traveled to the Navajo Nation to investigate Indian housing issues. We

hope that the conditions of capital drought was well illustrated.

Economic development will not be simply solved by writing a

check. The larger issues are why are not more private businesses

investing on the Navajo Nation? Private investors, Navajo or nonNavajo, primarily lack confidence in the current system of business

or leasing approval. The Shirley-Dayish Administration seeks to

change this.

Tribal governments in the past have not been very supportive of

businesses. This will change as we strengthen tribal courts, review

off-reservation investment opportunities, and explore a new view of

Indian trust lands. The Shirley-Dayish Administration supports existing private businesses that have ventured and pledged to remain

in business on the Navajo Nation.

One such example of such private business is MechTronics of Arizona. MechTronics continues to employ 90 Navajos on the Navajo

Nation by building complex wiring for computer defense hardware

that is fitted into F-16s, satellites, and automatic ship firing defenses on U.S. battleships. Unfortunately, they have difficulty obtaining additional defense contracts since they do not qualify being

listed on the Small Business Administration’s Pro-Net system because they do not qualify as a small business although they are entitled to give off-reservation contractors tax credits for doing business on Indian reservations.

President Shirley is looking for options that will allow

MechTronics to be listed on Pro-Net, thereby enjoying the same

level playing field as other Pro–Net businesses. President Shirley

also supports New Mexico representative Tom Udall’s bill, H.R.

1166, the Small Business Development Center Assistance to Indian

tribe members, Native Alaskans, and Native Hawaiians, and hopes

that a version of this bill will pass in the Senate.

Mr. Udall’s bill has passed in the House and has been referred

to the Senate Committee on Small Business and Entrepreneurship

which seeks to establish the SBA’s Small Business Development

Centers on or near Indian reservations. These centers would provide the much-needed information and training to support local po-
53

tential and existing Indian small businesses to increase their

chances of success.

President Shirley will work with the Small Business and Entrepreneurship Committee on this bill which would proactively provide training and support to develop Indian small businesses.

The Navajo Nation understands that honesty and comfort is a

must when negotiating with investors. Everyone must feel that

they can be honestly and fairly heard in tribal court when disputes

arise. Our tribal courts must be unbiased and able to fairly litigate

these disputes.

One successful tribal nation that has many non-Indian investors

on their land made a suggestion to the Navajo Nation to have a

clause in business contracts for an investor or a tribe that gives the

option to have their dispute heard in Federal court at any time.

The tribe claimed that to date, not one non-Indian investor has

ever used this option. The simple fact that this clause exists gives

the investors a very strong sense of comfort. It also shows that the

tribe is confident about its own tribal courts. This is one way tribes

can proactively help bring investors to their lands. The Navajo Nation will continue to explore this unique option.

Another incentive is for the tribe to buy real estate off the reservation that would not be put into trust status, but used as collateral to secure additional loans. These examples are part of tribal

responsibility that makes the market economy work, as well as

putting private investors at ease regarding their investments.

As part of this responsibility, the Shirley-Dayish Administration

proposes a different way of viewing trust lands, not as an impediment to economic development, but a valuable resource that ensures our commitment to protect these lands that the Navajo people will have the land in perpetuity.

We now wish to explore a not so new concept about the relationship to trust lands and trust responsibilities from the very government that the United States based its laws upon: England. Tribes

do not fully appreciate how trust lands gives Indian people a

unique status to establish a healthy Indian country now and for

the future. As you know, property law in the United States is

based upon concepts from English common law. While it may seem

contra-intuitive, we must travel across the big pond to the United

Kingdom to refine our views about Indian trust land status.

The United Kingdom has trust land. Queen Elizabeth II’s crown

estates are essentially trust lands for the Queen. The Crown Estate

Commissioners never let her trust land become an obstacle to economic development. If they can work on this mechanism, why cannot we? The Queen has, by right, ownership of a vast array of

lands throughout the United Kingdom. Yet she cannot sell these

lands for they are not her own personal property, but are tied to

her title and position as Queen. They are part of the heritage and

history of the United Kingdom and, therefore, held in trust. It is

her responsibility, managed by the Crown Estate Commissioners,

to ensure that these lands are controlled and administered responsibly.

Yet the Crown Estates do not experience the same difficulties

finding investors to invest in properties that they will never own.

In fact, the Crown Estates own a major portion of Regent Street
54

in London where that location alone conveys quality and high

priced shops. Where did we go wrong?

Trust land status should not set us to be impoverished, but

should set the guidelines on how we manage our lands and our resources in a responsible manner for the benefit of all people. The

Navajo Nation stance for not selling its land, and should not be

seen as old fashioned, but seen as proactive and as thoughtful

lands management policy that embodies true Navajo Nation sovereignty for a future that will benefit the Navajo people.

Utilizing this concept, the Navajo Nation was successful in getting the Bureau of Indian Affairs out of the business of leasing approvals through the passage of the Navajo Nation Trust Leasing

Act of 2000. The Navajo Nation Council must approve them before

sending them to the Secretary of the Interior for her approval.

President Shirley directed the Navajo Nation Division of Economic Development to step up this process and to have them before

the Navajo Nation Council for approval by this summer.

These examples of non-monetary support are what the Navajo

Nation can do on behalf of private businesses that continue to invest on the Navajo Nation. We also encourage Navajos and nonNavajos to take that important and brave step toward economic

self-sufficiency that will build a nation.

On a final note, we urge the committee to begin writing legislation that is not broad or generalized. The Navajo Nation learned

from the U.S. Supreme Court’s decision on United States v. Navajo

that Congress must be very clear on the U.S. Government’s role

and responsibility regarding Indian trust.

What specifically is the trust responsibility in S. 519? What happens if either the tribe or the Federal Government does not live up

to its agreements? What are the penalties? We hope that the recommendations we give will clarify what we expect from future Congressional bills.

S. 519 represents a start not only in how to bring much needed

capital to Indian tribes, but to begin crafting and writing responsible legislation for the full participation of tribal sovereign governments that have direct implications on your trust responsibilities

towards tribes.

Thank you.

The CHAIRMAN. Thank you. I thank both of you.

I think I will start with Tex. You mentioned that one bank cannot do it all. I think you are probably absolutely right. Maybe one

bill cannot do it all, either. Certainly we have tinkered around the

edge with economic development for a lot of years and have not

taken any action. I think S. 519 is bold enough to really get some

serious capital to tribes.

We have known each other for a long time. For the last 10 years

since I have been either chairman or vice chairman, you know that

my view has always been that we do not move forward with a bill

until the tribes have had a chance to digest it, participate in it, and

are okay with it. So when you mentioned that it might be a hard

sell, I just want to give you my word that we are just trying to

plant a seed here. We are not going to move forward with anything

until the tribes are very comfortable with it.
55

Let me just ask you a couple of questions. Do you think that it

is time for an organization that includes all Indian tribes to be envisioned, as S. 519 does?

Mr. HALL. I think it could be, Chairman Campbell. I think the

big thing is to make sure that obviously, as you mentioned, that

it is working with tribes on the finer points of the bill, especially

those existing institutions that tribes are all working through. It

should be in cooperative and enhancing those, not viewed as competition.

The CHAIRMAN. Do you think that it would be viewed as competition by some of those institutions that tribes are working with now,

that somehow they would get an unfair advantage?

Mr. HALL. Yes; I think it does. There is a section of the bill that

does not include banks. That obviously excludes those tribal banks

that are already in existence. Obviously those institutions would be

very concerned about that. Second, when you are looking at capital

raising through tribal banks, that could be viewed as competition

as well.

I think everybody wants to raise capital. Everybody wants to develop the finer points of the bill. I think it can get there. Some

tribes are looking at it as competition because of the certain section

that does not include banks.

The CHAIRMAN. Maybe I am wrong, but as I understand it, most

tribal banks are not capitalized high enough to give the kinds of

loans that sometimes tribes need for major industry development.

Would that be a fair assessment or not?

Mr. HALL. For the individually tribally-owned banks, I would

say, yes, definitely. But for inter-tribally owned banks or financial

institutions, they are looking at a broader scale. There are numerous tribes involved which are looking at getting larger than that,

and are moving quite rapidly. So those would feel that they are in

competition.

The CHAIRMAN. I understand that competition is the American

way, but sometimes when it threatens your bottom line, it becomes

a different concept. I understand that.

Mr. Paisano, I am going to ask you to go over one thing again.

You talked about MechTronics, and you have 90 employees of

MechTronics. Where is the on-reservation location they are working?

Mr. PAISANO. Fort Defiance, AZ.

The CHAIRMAN. You said they did qualify for one thing and did

not qualify for another. Please go over that again for me.

Mr. PAISANO. They are qualified to give Indian tax credits because they are located on a reservation. They are able to give other

subcontractors tax credits. But they are not able to be listed on

SBA’s Pro-Net system. That is a computer system listing major defense contractors.

The CHAIRMAN. So the SBA does not have a way of defining what

is on the reservation and what is not?

Mr. PAISANO. I think it for them it is more a large business versus a small business.

The CHAIRMAN. When you have the time, sit down and spend

some time with staff and see if we cannot frame up some kind of

an amendment, or maybe a separate bill. You have me interested.
56

It seems to me that even if they are very large firms, if they are

on reservations or helping tribal economies, there ought to be some

benefits at least for that part of it that are working with tribal

economies.

Mr. PAISANO. Exactly.

The CHAIRMAN. Maybe you could give us some ideas on something we could frame up as a separate amendment or as an amendment. I would appreciate that.

Mr. PAISANO. I look forward to doing so.

The CHAIRMAN. I do not live too far from Navajo country. I used

to go down to Gallup quite a bit. The tribe, as I remember, bought

a trailer manufacturing company. Is that before your tenure,

maybe 15 or 20 years ago?

Mr. PAISANO. I do not recall. It has been a while.

The CHAIRMAN. Well, for whatever reason, it went out of business. Everybody I know out in that Western country has a trailer

or two. I thought it was a terrific opportunity for the Navajos. I forget what they actually called it. It seems to me it was called ‘‘Navajo Trailer Manufacturers.’’ It was right outside Gallup toward Red

Rocks. A couple of years later I went by and it was all but abandoned.

Thank you for your testimony.

We are joined by Senator Murkowski of Alaska. I know you have

missed a lot of the testimony. Do you have an opening statement

or comments before Tex and Mr. Paisano leave?

STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM

ALASKA

Senator MURKOWSKI. Thank you, Mr. Chairman. I do have some

opening comments. It probably would be best if they were just inserted in the record.

The CHAIRMAN. Your complete comments and opening statement

will be included in the record.

[Prepared statement of Senator Murkowski appears in appendix.]

Senator MURKOWSKI. I will state that I am pleased that you have

introduced and are taking up S. 519, the Native American Capital

Formation and Economic Development Act.

In my State of Alaska, as we look to economic activities, not only

within the State, but for our Native Alaskans, we recognize that

there is a need for assistance with capital formation. So I am

pleased to listen to the testimony here this afternoon.

The CHAIRMAN. We will now go to the third panel. We have Derrick Watchman, board member, Native American Bank Corporation, Denver, CO; Cris Stainbrook, executive director, Indian Land

Tenure Foundation, Little Canada, MN; Eric Henson, Harvard

Project on American Indian Economic Development, Cambridge,

MA; and Mike Irwin, senior vice president, Alaska Federation of

Natives, Anchorage, AK.

We will go ahead and start in that order. All of your written testimony will be included in the record. You can abbreviate your testimony.

We will start with Mr. Watchman.
57

STATEMENT OF DERRICK WATCHMAN, BOARD MEMBER,

NATIVE AMERICAN BANK CORPORATION, DENVER, CO

Mr. WATCHMAN. Thank you, Chairman Campbell and Senator

Murkowski.

On behalf of the Native American Bancorporation, I am pleased

to provide testimony on S. 519, and to generally cover issues involving capital formation in Indian country.

My name is Derrick Watchman. I am a member of the Navajo

Reservation, the Navajo Tribe. I am from Wonder Rock, AZ. I am

a member of the Native American Bancorporation.

In our testimony today, I want to provide an overview of the Native American Bancorporation, to give some general observations

on S. 519, and to give some observations on Indian economic development.

In general, obviously we are a for-profit entity. Our bias is toward private sector initiatives which would let the markets do the

work but also provide for minimal government support.

The Native American Bancorporation is a holding company, certified and chartered by the Federal Reserve. It is owned by 21

tribes and Alaska Native corporations. The board of directors of the

Native American Bank is composed of representatives from these

investors.

We have 10 founding tribes. They include the Arctic Slope Regional Corporation; the Blackfeet Indian Nation; the Eastern Shoshone Tribe; the Grand Traverse Band Economic Development Corporation; the Mandan, Hidatsa, and Arikara Nation, the

Mashantucket Pequot Tribe; the Mille Lacs Reservation Business

Committee; the Navajo Nation; the Oneida Tribe of Indians of Wisconsin; and the Ute Mountain Ute Tribes.

The Native American Bank has two subsidiaries. The first is the

Native American Bank National Association which is chartered by

the Office of the Comptroller. It is also considered a community development focus bank.

NABNA offers a full range of banking services primarily to the

Blackfeet Indian Tribe in Browning, MT. We are also pursuing opportunities around the reservation. Our executive office is located

in Denver, CO, and through our offices in Denver, CO, we offer a

full range of banking services to all customers. But our primary

focus is those customers that are tribal governments, Alaska Native corporations, Indian-owned businesses, and Indian non-profit

organizations.

On September 29, 2001 the bank was approved and chartered by

the OCC. Since operation, we have been primarily focusing on Indian customers; 80 percent of our business right now are with new

loans in Indian country.

We also recently opened a trust department. Our long-term plan

calls for the opening of branches on reservations throughout Indian

country. We are hoping to promote a teaming relationship with

other Indian-owned and tribally-owned financial institutions.

As I said earlier, our bank is chartered and certified as community development focus institution by the Treasury Department. In

addition to NABNA, we also have the Native American Community

Development Corporation. That is a 501(c)(3) organization. That is

sponsored by NAB.
58

NACDC has three missions. First, is to serve as a national

source of loan funds for loans that will promote reservation development, but will make NABNA and other banks assist those institutions that will provide capital to tribes and areas that do not

have bankable credit.

The second mission is to break down barriers to credit faced by

Indians, particularly those living on Indian communities where

there is not a whole lot of expertise. We need to focus on that area.

The third mission is to provide financial literacy and other banking

programs to reservations.

NACDC’s first priority at this point is to focus on mortgage financing for reservation housing. We have a long-term approach

where we are trying to provide a low-cost, low- interest fund source

to provide housing programs on reservations.

We are working with several tribes. NACDC is helping to break

down the barriers of mortgage financing. This is a very critical and

complicated area that the institution is working on. We are working with Fannie Mae, the Federal Home Loan Bank, and also other

institutions in the area.

NACDC’s second priority is to focus on providing capital to deal

with issues of fractionated heirship interests and to look at the reacquisition of reservation lands. We are working with the Indian

Land Tenure Foundation, whose representatives are here today.

We are hoping to make a more positive relationship so we can look

at the re-acquisition of lands and to look at the fractionated interests.

Finally, NACDC is looking at a national re-lending program

where we work with small businesses and reservation communities

to focus on small businesses. We have a project called the MiniBanks in the Schools program which is working with the Blackfeet

Indian Reservation.

I would like to spend just 1 moment on our views on S. 519. First

of all, it is very important that we look at resources available to

provide tribes with more options of creating sustainable economic

development in our tribal communities. Tribal members need good

jobs. We need to look at the prospect of a brighter future so that

we can break the cycle of poverty and we can break the cycle of

unemployment.

We believe that the best way to facilitate is to work with triballyowned and Indian-owned financial institutions such as the Native

American Bank, and the Native American Community Development Corporation.

With respect to S. 519, I want to point out a few items. First of

all, we need to look at non-appropriation measures. We believe that

we do not need new appropriations for a couple of reasons. One, we

should look at certain grant programs that could be administered

by Indian-owned financial institutions.

We ask that Congress review various Federal funding programs

to determine if it would be more productive to give those funds to

Indian-owned financial institutions. The BIA recently awarded $7

million for Indian land acquisitions. We believe that we can partner with this and actually leverage the use of these dollars from

$7 million to almost $70 million.
59

We also think that we need to look at reducing the BIA redtape.

One of the biggest problems that we have and one of the biggest

problems for the affected flow of capital to Indian reservations is

the redtape imposed by BIA. For example, with the Native American Bank, it takes us almost 6 to 9 months to do a loan for a mortgage. That is because of the title processing and the time involved

to get the BIA to prove that it is a legitimate deal and that we can

actually have a piece of paper that we can lend on.

We also would like to look at trust funds. One of the biggest

issues that is out there is there is no capital. For example, if we

were to use a part of the $3 billion that is invested right now by

BIA and the trust fund, if that were directed to Indian-owned institutions, such as the Native American Bank, that would provide

more than sufficient capital to banks, including the Native American Bank, to have the assets to loan out to small businesses and

big businesses.

Meeting the Federal Government’s trust responsibilities and allowing for those funds to contribute to economic development is

what we think we really need to look at.

The fourth area that we are looking at is requiring Federal capital formation programs to recognize the unique status in Indian

country. Congress has established several programs including the

CDFI and the New Markets Tax Credit Program.

However, recently the New Markets Tax Credit Program only

provided a grant to one financial Indian-owned institution. The reason for that is that they said that most of the other Indian-owned

financial institutions just do not have the experience or the track

record to be able to handle such a program as this. We ask Congress to look at this New Markets Program and to consider a setaside in Indian country.

They would like to look at Point Five as promoting business opportunities. One, the big areas out there is 8(a) contracting and

using the Indian set-aside program. We would like to look at forming relationships with those companies that are 8(a) certified or

that have Indian set-aside preferences so that we can provide a full

comprehensive banking program to them.

I want to address a couple of areas very briefly. One is new appropriations. We need to look at increasing the size of the BIA

Loan Guarantee Program. Right now it is very clear that banks

take a risk for a BIA loan of 10 percent. Right now at this point

for fiscal year 2008, I believe that $68 million is being program to

be funded to the BIA Loan Guarantee Program. This program

works.

We believe that we need to increase this program by two to three

times—$200 to $300 million. That will provide an excellent source

for institutions such as the Native American Bank to really get out

there and provide the needed capital for loans and small business

in Indian country.

Another area which was brought up earlier is an equity fund.

One of the most glaring deficiencies in Indian country is the lack

of access to equity and venture capital. Financial institutions such

as the Native American Bank are not venture capitalists. We are

basic commercial lenders.
60

We are asking that the SBA look at the program called the Small

Business Investment Company and provide for additional investments, and provide for non-recourse loans into Indian country.

The third area that I want to talk about briefly is a feasibility

fund. Another form of capital that is critically needed is non-recourse loans to provide for feasibility and development funds. NAB

has firsthand knowledge of this. Ten years ago as a part of a CRA

agreement with the banking regulators, a large bank agreed to create a $15 million non- recourse loan feasibility fund. NAB was fortunate to get a loan for this. That is how we were able to put our

operations together and become fully operational.

There is a need to continue this kind of program. There is a need

to look at these kinds of funds for Indian-owned financial institutions in this country.

Mr. Chairman, and Senator Murkowski, in conclusion, Indian

country has or is planning to create many of the entities and programs needed to address capital formation and the gaps on reservations and in Alaska Native villages.

While they can facilitate the kind of local decision making that

is most effective in steering capital to the highest and best use,

what is needed, we believe, is access to significant amounts of capital at appropriate terms, long terms, and low cost interest rates.

It would also be helpful if we were to be involved in decision

making at the SBA level and how the SBIC works. We would also

like to look at expanding more on the non-appropriation activities.

On behalf of the Native American Bank, I appreciate your comments. I hope to answer your questions. I would ask that my prepared statement be inserted in the record in its entirety. Thank

you.

The CHAIRMAN. Without objection.

[Prepared statement of Mr. Watchman appears in appendix.]

The CHAIRMAN. I will have some questions.

I have to tell you right off the bat when you talk about increasing the loan guarantee program, I agree. Unfortunately when you

are facing over a $300-billion deficit for fiscal years 2003 and 2004

combined, finding $200 to $300 million more for anybody in any

project is not so easy.

We will ask some questions, but I would like to move through the

whole panel first. I would like to go to Mike Irwin now since Senator Murkowski is here and may have to leave. I would at least

have her hear your testimony.

STATEMENT OF MIKE IRWIN, SENIOR VICE PRESIDENT,

ALASKA FEDERATION OF NATIVES, ANCHORAGE, AK

Mr. IRWIN. Thank you, Mr. Chairman.

Mr. Chairman and Senator Murkowski, I appreciate the opportunity to testify before the committee today regarding S. 519. As

noted and for the record, my name is Mike Irwin and I am senior

vice president of the Alaska Federation of Natives, headquartered

in Anchorage, AK. I am pleased to appear here today to support

this important legislation.

The Alaska Federation of Natives commends Senator Campbell

for his wisdom and foresight in developing and introducing S. 519.

As noted in the findings of the bill, there is a special legal and po-
61

litical relationship between the United States and Indian and Alaska Native tribes. Although the legal status of Alaska Native corporations is different than that of tribes, it has long been recognized that a special legal and political relationship exists between

the United States and Alaska Natives generally.

Also, as noted in the findings, Alaska Natives, like all other Native Americans, suffer high rates of unemployment, poverty, poor

health, substandard housing, and social ills to a greater degree

than any other group in the United States. We have many successes in Alaska, all of which we are quite proud.

However, in many areas of the State our people suffer as they

do elsewhere around the country from serious unemployment and

underemployment, and economic development efforts that have not

proven successful in the past. We believe that the purposes behind

this important piece of legislation are sound and the bill would fulfill a need in Native American and Alaska Native communities.

Despite owning and operating a number of successful corporations as Native-owned entities, promoting economic growth and reduction of poverty remains huge challenge which requires, in our

opinion, a paradigm shift movement to the next level of the historically successful Federal self-determination policies.

I would like to note that I am trying to abbreviate my remarks

here today. But we have submitted much more lengthy testimony

with all kinds of information backing up some of the things I will

cover here today.

The CHAIRMAN. Without objection.

[Prepared Statement of Mr. Irwin, for Ms. Kitka, appears in appendix.]

Mr. IRWIN. I would like to comment specifically on title V of the

bill entitled, ‘‘Other Native American Funds’’ which establishes two

different financial funds—the Native American Economies

Diagnostics Studies Fund and the Native American Incubation

Center Fund.

The first one is designed to provide comprehensive economic

analysis of Indian economies and, in turn, offer recommendations

to remove or ameliorate inhibitors to greater investment and job

creation.

The second development fund is designed to encourage the design

and implementation of pro-growth economic policies to help stimulate Indian economies.

AFN strongly supports the underlying rationale behind the establishment of funds designated to these purposes and believe they

would assist economic development throughout Alaska if they were

enacted into law. However, AFN would like to request inclusion of

a new Alaska specific provision that would authorize a 10-year

demonstration project for Alaska.

We believe there is an urgent need in our communities for a native tribal development bank. I know that a lot of times we, as

Alaska Natives, come forward and say, ‘‘We think our circumstances are perhaps unique and different for many, many reasons.’’ I will cite those here. But I think that we also would like

to propose that there be a generally different tack taken with this

legislation that perhaps might also be able to extend throughout

Indian country and to Native Hawaiian communities.
62

We, of course, have geographic differences in Alaska that make

us much more isolated as native communities. In Alaska the

downturns in the fishing and timber economies, two of the only

economies that we have that touch rural Alaska where most of our

native people live, are further stressing already distressed economies.

The slow down in the Alaska economy generally, our State’s fiscal crisis, which has been ongoing now for about 6 or 7 years, and

the continued retrenchment of the State of Alaska from rural and

predominately native community areas, lead us to believe that it

is imperative that Federal development assistance be shifted to

high impact assistance.

What would a native tribal development bank do? This is the

special demonstration project that we are asking for you to consider as inclusion in S. 519. The focus of the effort is a coordinated

and targeted approach to social, educational, economic, and political development acting as catalysts for systemic reform. The model

is similar to, but not exactly the same, as development banks overseas, such as the Inter-American Development Bank, Asian Development Bank, the African Development Bank, or even the Islamic

Development Bank.

The purpose would be to promote growth, improve well being,

and fight poverty and inequality with the objective to help native

communities accelerate social progress for its own sake, and for

poverty reduction and for growth promotion. Central to the idea is

a focus on a people-centered development, strengthening and expanding existing capacities, and getting to the root causes of our

vulnerabilities as people and as communities.

Within the United States there is no valid public policy reason,

in our opinion, that we should have areas which remain well below

the poverty level for decades with no hope for the communities to

see improved life opportunities, nor for remote rural communities

to experience all the major decisions which affect their lives to be

made from Washington, DC, Juneau, or Anchorage.

There are proven ways that systemic change can happen, and we

want to build on successes from around the world. Often people reference our small remote areas as intractable or just economically

infeasible seeing all the standard obstacles to development in the

conventional sense.

But, for example, if you look at the experience of Korea and their

efforts to transition to a knowledge-driven economy, you can see

that there are other ways to address development. If you look at

the best of the best examples of the World Bank’s development efforts, you can see areas we are missing in our efforts. We hope to

learn from these successes.

The first steps that the Native Tribal Development Bank would

be to implement the Congressional authorization by setting up an

Alaska Native Development Assistance Committee.

Mr. Chairman, there is a real need in many parts of remote and

rural Alaska for something such as a Native Tribal Development

Bank dedicated to the social, educational, economic, and political

development. We have seen through our own lives and any number

of studies that social well being is intertwined with political stability and economic prosperity.
63

We simply cannot separate the health and well being of native

people from strong economies and strong political institutions. We

believe that a properly constructed institution dedicated to social,

education, economic, and political development could and would leverage State, local, and private funds and be of greater assistance

to communities throughout Alaska and which Alaska Natives live,

work, and raise their families.

With this in mind, we support S. 519 and believe the enactment

of this legislation with provisions that apply specifically to Alaska

would be highly beneficial to our people. Thus, our recommendation

is that we are urging the Congress to authorize and fund an Alaska

Native Tribal Development Assistance Committee that would function as the principal strategy setting, policy and performance review entity for educational, social, economic, and political development within Alaska’s native communities.

The committee would focus on the development objectives, promote coordination, and review effectiveness of Federal development

assistance. The committee would work with Alaska Native tribes

and institutions to select appropriate social and economic development indicators, and set measurable goals for increasing the economic growth and reduction of poverty.

The broad categories of indicators would include size, growth,

and structure of population, demographics, determination of population growth, including fertility, infant mortality, and life expectancy, labor and employment, poverty, and income distribution, education, and health.

In addition, a set of indicators would be developed to measure

the relationship between economic growth and poverty reduction.

Thank you for allowing AFN the opportunity to put this idea on

the table before you as a demonstration project proposal. We would

be pleased to prepare a full demonstration project abstract for this

10-year demonstration project and legislative language for further

review by members of the committee.

At this point we do not know what amendments may be considered for this bill. We would be pleased to work with you and the

members of the committee on amendments, particularly as they

apply to Alaska and Alaska Natives.

Once again, we commend you for developing such important legislation. We stand ready to work with you on its throughout the

legislative process.

The CHAIRMAN. Thank you, Mr. Irwin. We will look forward to

any suggestions you have to make it a better bill.

As we move along, I know Alaska is facing some of the same economic problems all the States are. Every State is in some trouble,

as you know, from the downturn of the economy, after 9/11, and

from so many other things happening. But I would venture to say

that the big States like California, New York, Florida, or Texas,

would be delighted if they had your delegation here representing

them. You cannot get any tougher voices than Senator Stevens and

Senator Murkowski. I just wanted to pass that on to you. If you

think you have it bad, somebody else has it tough, too, because

they do not have the strength of voices that your delegation does.

Mr. IRWIN. We live in that appreciation every day, Mr. Chairman.
64

The CHAIRMAN. I am sure of it.

We will now go to Mr. Stainbrook.

STATEMENT OF CRIS STAINBROOK, EXECUTIVE DIRECTOR,

INDIAN LAND TENURE FOUNDATION, LITTLE CANADA, MN

Mr. STAINBROOK. Thank you, Chairman Campbell, for the opportunity to come and provide some thoughts on S. 519 Let me take

you up on your offer to be brief. I will annotate my comments that

you have already received in writing. I would ask that my prepared

statement be inserted in the record in its entirety.

The CHAIRMAN. Without objection.

[Prepared statement of Mr. Stainbrook appears in appendix.]

Mr. STAINBROOK. The Indian Land Tenure Foundation, of which

I am president, is a new foundation. It was created approximately

1 year ago, but it comes out of a history of community development. That community development started nearly 4 years ago

with a planning process throughout Indian country which involved

hundreds of Indian people developing a series of strategic plans of

how to address Indian land issues throughout the country.

Those plans came together and ultimately resulted in a single

plan that is somewhat daunting, but is simply breathtaking. That

mission is to have all Indian land within the exterior boundaries

of the reservations back in Indian ownership and management, as

well as those lands outside the reservation boundaries where indigenous interests are still strong and culturally appropriate.

The strategic plan includes four primary strategies including one

of educating every land owner, individual Indian and tribal. Knowledge becomes power in making decisions about their land assets.

There is the need to increase the economic value and leverage of

Indian lands; using Indian lands to discover culture of the various

tribes; reforming legal and regulatory mechanisms related to Indian lands; and also the strengthening of sovereignty throughout

the country for all of the tribes.

At the conclusion of the planning process, the Indian Land Tenure Foundation was formed and was the recipient of a $20 million

grant from the Northwest Area Foundation. It covers our operating

costs for approximately 10 years. It allows us to recruit and distribute other resources throughout Indian country to deal with Indian

land, and to carry on program development, where that is appropriate and where those programs do not currently exist in Indian

country.

I believe that the findings of the committee are appropriate and,

in fact, identified some of the most significant issues concerning

economic development in Indian country: The lack of investment

capital, the need for understanding and overcoming some impediments, and also the fundamental connection between resolving

land issues and the ability to develop reservation economies.

I think those three pieces are very fundamental to successful economic development on reservations. In essence, it is those three

pieces that brought the Indian Land Tenure Foundation to begin

working on what we call the Indian Land Capital Fund some

months ago to address both the lack of private capital being applied to Indian land, purchases, and reacquisition, and the resolu-
65

tion of the fractionated ownership in Indian country and Indian

lands.

We are within just a few months of implementing that fund. In

essence, the design of that fund is not dissimilar from the Bureau

of Indian Affairs Consolidation Pilot Projects which have been ongoing for some time. We do have different twists to that.

The largest and most significant piece of it is that we would

bring private capital, philanthropic capital, and tribal capital to

bear leveraging Federal dollars in that fund. What it would essentially do is begin taking the Pilot Project concept to a scale that

would actually have an impact. At this point, that scale is not

there. The ability of the Bureau of Indian Affairs to buy small undivided interests of Indian land and make a dent in the

fractionated ownership pattern is negligible.

As part of our work on the Fund, as Derrick mentioned earlier,

we have begun working with the Native American Bank Community Development Corporation. In that view, we have attempted to

bring value to Indian land that is recovered and also Indian lands

that are consolidated.

This is not to say that along the way we would not need an injection of Federal dollars. Obviously when we begin talking about consolidating these fractionated ownerships, this situation was

brought about by the various allotment acts that were passed.

Clearly, the Federal Government should have a role in helping resolve some of those.

But we do believe that those dollars could be leveraged substantially. Those dollars may come in the form of resources and may

come in the form of initial seed capital to capitalize the fund. It

may be tax credits. I was encouraged to hear the gentleman from

HUD relate a number of options that could be available. That could

be from borrowing from other sectors such as the energy savings

performance contracts. That would provide a similar mechanism

for us to work on land consolidation in that fashion.

Indian Land Tenure Foundation believes in self- determination.

It was our very basic beginning. True self-determination comes

through the identification of the problems that tribes and individual Indian people have before them, and the ability to come to resolution around that.

I offered the suggestion of the Indian Land Capital Fund not so

much as putting that program before you for funding or even consideration, but more as an example of the types of activities that

are going on in Indian country and being created by Indian people.

One of the pieces that I would suggest in that vein is that as the

committee goes through their decisions and their manipulation of

S. 519, that they look to Chairman Hall’s suggestion that there are

a number of entities out there doing substantial work around private capital. Those entities should somehow be folded into the process.

On a final note, I would also suggest that the diagnostic and analytic component perhaps be elevated or accelerated to lead the financial capital piece, as well as the incubation fund piece of the

bill. It is through the diagnostic piece that I believe that could inform how the other two pieces are structured.
66

Finally, I would also recommend that under the diagnostic and

analytic piece that it rather quickly move from the general to the

very specific. In our work and in years of experience in working in

Indian country, the situations that the 500-plus tribes are in, are

very different. To generalize about what the impediments may be

will not get to a point where many tribes will be able to take that

first action step and implement something.

If we can do diagnostic pieces at the tribal level, I believe you

would see economic development begin to take effect with each

tribe having a very clear picture of what steps they need to undertake.

I thank you again, Chairman Campbell, for inviting us. I would

be happy to answer any questions.

The CHAIRMAN. Thank you. I will have a couple of questions for

you in a few minutes.

We will finish up with Mr. Henson. By the way, you work with

Professor Kalt; is that right?

Mr. HENSON. Yes, sir.

He submitted some testimony. He has been down here in person

a number of times to testify. He is always insightful and always

well thought out. I would appreciate it if you would thank him personally from me and from the committee for his testimony, I would

certainly appreciate it.

Mr. HENSON. I will do that.

The CHAIRMAN. Please go ahead. You may also abbreviate your

testimony, if you would like.

Mr. HENSON. I will be brief.

STATEMENT OF ERIC HENSON, HARVARD PROJECT ON AMERICAN INDIAN ECONOMIC DEVELOPMENT, CAMBRIDGE, MA

Mr. HENSON. Good afternoon, Mr. Chairman. My name is Eric

Henson. I would like to thank you for the opportunity to appear

today. I am employed as a senior consultant by Lexecon, Incorporated. I serve as a Research Fellow at the Harvard Project on

American Indian Economic Development, both in Cambridge, MA.

I am a member of the Chickasaw Nation.

I want to very briefly talk about two things today. First, I will

touch on the research findings of the Harvard Project, and second,

I will talk about the conceptual component of this bill that Mr.

Stainbrook ended with, the diagnostic analyses contemplated.

In the course of my comments I would like to convey that although there are some unanswered questions you have heard from

the other witnesses testifying, this bill is a commendable attempt

to overcome one of the most vexing problems facing Indian country—the perpetual lack of capital formation.

As some of you may know, the Harvard Project has found that

no single event, such as increasing capital flows into Indian country or securing one big grant, will be sufficient. The fundamental

challenge is to create political and institutional environments that

will attract capital and, thus, ensure sustained economic development.

The first of the core components for the sustained development

is capable institutions. This includes governmental bodies as well

as informal social and cultural institutions. As in any society, In-
67

dian or non-Indian, capable institutions are the mechanisms that

get things done.

Second is a cultural match. The underlying norms of a society

must match the governing system for these institutions to function

effectively. In other words, tribes need to make sure the institutions have legitimacy among the people they serve.

Third is sovereignty and self-determination. Vigorous exercises of

sovereignty are critical to this long-term development, including

such actions as contracting and compacting which have both proven successful in promoting economic development and enhancing

self-governance. This is important because it places tribes in the

driver’s seat for decisionmaking.

Some of the activities contemplated under the funds as spelled

out in the bill echo the lessons of the Harvard Project Research and

present an opportunity to target efforts of the Native American

Capital Development Corporation, or the NACDC, toward capacity

building for Indian nations.

Through the diagnostic research envisioned, the capabilities of

participating nations may increase and the NACDC will be attempting to help establish, tribe-by-tribe, settings into which capital will more freely flow. This tribe-by-tribe approach does two

closely related and important things.

One, it avoids the mistake of attempting to approach every Indian problem with a one size fits all remedy. It recognizes that

each tribal circumstance is different, that each nation faces different obstacles hindering capital formation, and that the solutions

needed will vary from situation-to-situation.

Two, it avoids the mistake of attempting to impose Federal solutions onto tribal challenges by involving tribes on a participatory

basis. The past attempts to impose Federal solutions have consistently failed by presenting supposed solutions that nations are not

prepared to implement and not prepared to enact because they

were not involved in the formulation of the legislation in question.

This legislation was mandated in Washington, DC and imposed

upon the tribes.

What does this capacity building approach entail for a given diagnosis carried out under the funds? It is impossible to provide a

completely generalized answer. The need to tailor each analysis

precludes formulation of an adequate check list for every such

study.

However, our research at the Harvard Project directly coincides

with the diagnostic projects envisioned here and can inform

NACDC’s initial efforts to understand a given tribe’s developmental

infrastructure. This includes assessing the presence and effective

implementation of at least five things and fostering their development where they are missing. These five things are:

No. 1, financial and budgetary controls, such as third-party audits. Every commercial venture needs to know where it stands financially.

No. 2, principles of corporate governance, including the separation of tribal politics from tribal businesses. We found that triballyowned businesses have greatly increased success rates when separated from tribal politics.
68

No. 3, regulatory codes, including land-use ordinances, commercial codes, and taxing provisions. These are rules under which businesses and commercial ventures will operate when under tribal jurisdiction.

No. 4, planning and development policies, such as strategic visions or planning documents. These chart the future as developmental opportunities arise.

No. 5, a separation of powers between the branches of tribal government. This includes independent tribal courts to ensure fair and

non-arbitrary adjudication of commercial disputes which are bound

to arise in any commercial setting.

These components of developmental infrastructure represent the

nexus of our research and the diagnostic activities contemplated in

this bill.

Mr. Chairman, I believe this is important because these components of developmental infrastructure help an economy develop by

instilling confidence on the part of outside commercial interests;

depoliticizing dispute resolution proceedings; standardizing and

streamlining commercial practices; and enhancing tribal sovereignty by allowing tribes to exert regulatory authority over business activities.

In short, they help create the environment for increased commercial and business enterprises and, thus, create increased capital

flows and long-term capital formation.

I would like to close by noting that this bill, if thoughtfully implemented, and as you discussed with Mr. Hall with the backing

of the Indian nations, can help overcome the obstacles of capital

formation, and can help establish the settings in which economic

development will take hold.

To the extent that this legislation can do these things, it should

fully receive the support of this committee. Thank you. I would ask

that my prepared statement be inserted in the record in its entirety.

The CHAIRMAN. Without objection.

[Prepared statement of Mr. Henson appears in appendix.]

The CHAIRMAN. Thank you.

Since you are last up, let me just tell you that I think your testimony is really right on when you talk about the key to economic

help is to combine structural reforms and stable government, with

other assistance. I know for a fact that in some cases tribes have

signed contracts with outside interests to build factories and because of some turmoil within the tribes, the outside investors after

a few years pull up their roots and leave.

In a case of the Navajos, the electronics factory down by Shroud

was a good example 20 years ago, Mr. Watchman. I have also seen

that happen with the Crows with a carpet factory. I am also convinced that there has been increased stable government as well as

structural changes and reforms with an independent court system,

coupled with economic help.

Let me ask you one question, Mr. Henson. Do you see any impediments in this bill of having all Indian tribes as shareholders

in the Corporation? There are 562 tribes.

Mr. HENSON. I discussed this briefly with Mr. Moorehead on your

staff. He believes that the split class A and class B stock could be
69

appropriately situated so that tribal voting is sorted out sothat perhaps smaller tribes with fewer shares would be in the class A category with perhaps more money to contribute to the capitalization

of the Corporation would not be outvoted by a tribe that simply has

a higher population, and I think that with the thoughtful implementation of that kind of system you can overcome the problems

of potentially misaligning the capital injection from the tribe and

their relative voice in the administration of the corporation..

The CHAIRMAN. Thank you.

Thank you also for making a very strong statement on self-determination and the feeling that we should not move any faster than

the tribes are able to move with us. As Tex Hall knows, this is

something I believe in.

Let me go to Mr. Irwin. You mentioned a demonstration project.

Since almost half of the Federally recognized tribes are in Alaska,

I assume that you might suggest that if we did a demonstration

project, it ought to be in Alaska; is that correct?

Mr. IRWIN. Yes, sir; what we are proposing, it is very specific to

what we in Alaska have identified as being the underpinnings for

true economic sustainable economies in rural Alaska which have to

do with the social, educational, and political development that is

needed in order for that to take place.

We have many obstacles to development such as transportation,

infrastructure, and the cost of doing business. But even if those are

solved, the educational attainment levels, the social ills that we experience in our communities, and the need for stable political development, really even in the best of worlds from an economic development point of view, would still not allow us to have all that

we could have in the way of our strong economies.

The CHAIRMAN. You spoke about the size of Alaska and it being

rural and largely undeveloped. Just now some of the things that I

assume you might call the American Federation of Natives’ vision

of what they would like to do. Is most of that consistent with what

we are trying to do in S. 519?

Mr. IRWIN. I think it is. I think it is a much broader approach

to the problem than is being proposed here, and a much more long

term developmentally oriented as far as the people development

side of it goes.

It is a somewhat radial departure from S. 519. But as far back

as 1994, the Alaska Natives submitted the Alaska Natives Commission report, which really contained many of these same recommendations for what would really work for getting sustainable

economies in rural Alaska.

We are using this as an opportunity to remind Congress that

they have had that for nine years and things really have not

changed in Alaska.

The CHAIRMAN. You use the word ‘‘radical’’ and I use the word

‘‘bold.’’ I am just convinced that what we have been doing is not

inclusive enough and not moving fast enough to help native communities. That was the interest in introducing it.

Let me now ask Mr. Stainbrook a question or two. Do you think

S. 519’s Corporation would be a good financing mechanism for the

purpose of Indian land resocialization financing?
70

Mr. STAINBROOK. Yes; I believe it could be. I think there are certain advantages to having this overarching piece of principle there.

The CHAIRMAN. Your testimony indicates that it would take more

than $1 billion to buy out all the fractional interests of Indian

country, and that the fiscal year 2004 request proposes only $21

million. You are probably right on both assumptions.

Does that not make the point that we are probably never going

to be ahead of the curve if we just keep waiting for the Federal

Government to put up the money?

Mr. STAINBROOK. That is exactly our position. In fact, if this is

not taken to scale soon, some form of the pilot project, or, in fact,

the capital fund that we are suggesting be put together to buy

those fractionated interests, that exponential growth of fractionated

interests will not allow for any reduction in the near future, no

matter how much money is spent on it.

The CHAIRMAN. Is your tribe a member of the Native Bank?

Mr. STAINBROOK. No, sir; I am not here representing a tribe.

The CHAIRMAN. Okay.

Let me go to Mr. Watchman. How many tribes are shareholders

of your bank? Did I hear you say 21?

Mr. WATCHMAN. We have 21 tribes participating. We have 10

founding tribes that I outlined.

The CHAIRMAN. So, 10 are shareholders.

Mr. WATCHMAN. They contributed $1 million apiece.

The CHAIRMAN. Can any tribe be a member of your bank?

Mr. WATCHMAN. Yes; any tribe can be a member of the bank, but

initially when we were looking at becoming a founding tribe, we

were looking at $1 million apiece. That is for the class A shareholders. Class B shareholders is any amount less than $1 million. But

any tribe can be a member.

The CHAIRMAN. What advantage does a class A shareholder have

that a class B shareholder would not have?

Mr. WATCHMAN. The advantages between A and B shareholders

is that the class A shareholders can actually vote and participate

in bank activities and bank affairs.

The CHAIRMAN. But they can both borrow money?

Mr. WATCHMAN. Yes.

The CHAIRMAN. What is the paid-in capital for your bank?

Mr. WATCHMAN. The paid-in capital initially was $12 million.

After 11⁄2 years of operations, we have an asset base of about $35

million.

The CHAIRMAN. You talked a little bit in your testimony about

the long-range plans of expanding branch offices; is that correct?

Mr. WATCHMAN. That is correct.

The CHAIRMAN. Do you see any benefit of having all Indian tribes

some day being a part of your bank?

Mr. WATCHMAN. I do. There is a certain amount of economic

scale and expertise that is acquired by operating on separate reservations. Each tribe is different with rules and regulations and

land acquisition. In my area, the tribes in the Southwest because

of working with the BIA, they do business differently than the

tribes in the other districts.
71

With the economies of scale, you can learn the process. The biggest issue is how do you work with BIA to have the title and approvals. It can be used as a financing mechanism to do loans.

The CHAIRMAN. I am a supporter of the BIA, but believe me,

there are a few people around here that are not sure how they operate, either. [Laughter.]

Let me ask you a couple of more questions about your bank and

if it is proprietary or something, you do not need to answer. But

I am interested in how many loans has the bank made since it was

chartered? It is now in the second year of charter?

Mr. WATCHMAN. We are in our second year of charter; that is correct.

We have a loan portfolio of about $20 million.

The CHAIRMAN. Have you had any of those to go into default yet?

These are loans to tribes?

Mr. WATCHMAN. These are loans to tribes, tribal entities, tribal

organizations.

The CHAIRMAN. Tribal member-owned businesses and things of

that nature?

Mr. WATCHMAN. Yes; we have some loans with tribally owned enterprises and Indian owned companies.

The CHAIRMAN. What was that total dollar amount that you have

loaned so far?

Mr. WATCHMAN. We are in the range of $20 million.

The CHAIRMAN. What about your default rate? Have you had

many defaults?

Mr. WATCHMAN. One of the big things is that we are actually

governed by the Office of Comptroller Currencies so we do have to

meet the criteria. We do have to watch our loan loss reserves.

So far we have been operating within the guidelines that the

OCC wants us to operate. We are actually in norm with other

banks in the country.

The CHAIRMAN. You are capitalized at about $20 million. You

heard Mr. Stainbrook’s testimony that it might take $1 billion or

more to buy up fractionated interests in Indian country. Could you

even begin to handle something like that if it came through a bank

that is capitalized for $20 million?

Mr. WATCHMAN. Well, the other issue I should point out, Mr.

Chairman, is that in addition to the paid-in capital, if we could get

business from Federal agencies, or tap into the trust funds, that

would give us additional assets. For every dollar of deposit that we

get in, we can actually leverage that out almost 10-to-1.

That is really what we are trying to do. That is the whole purpose of a bank is that we turn that money around and we do invest

in Indian country or in loans. That is the big issue that we are trying to look at.

If you look at most minority-owned banks in this country, the average is about $5 million in capital. But they have been able to secure business. They have been able to secure loans. They, in turn,

leverage it. That is the big concept behind banks.

That is what we are looking at all. If we get more business, we

certainly can get into the business of land consolidation and land

re-acquisition. It is just a matter of trying to get people interested
72

in the Native American Bank which, as we said earlier, is Indian

owned.

We are trying to provide some expertise behind it. There is a lot

of subtleties and nuances in Indian credit. You have to understand

the BIA process. You have to learn how you would like with the

tribal councils and so forth.

The CHAIRMAN. I understand. Sometimes that is not too easy.

I have no further questions. Other Senators may have questions

that they might submit in writing.

I want to thank all the witnesses for being here today. Very

frankly, I feel better about the bill now than when we started out.

I think there are some real seeds that we can germinate and with

your help and with your suggestions, we can do something that is

long overdue in helping to provide some economic help for Indian

communities.

We will keep the record open for 2 weeks if you have any additional statements you would like to submit, or if anyone in the audience have any statements they would like to submit, I would appreciate your doing that before 2 weeks are over.

The CHAIRMAN. Thank you for appearing today.

The committee is adjourned.

[Whereupon, at 3:35 p.m., the committee was adjourned, to reconvene at the call of the chair.]
(73)

APPENDIX

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA

Good afternoon, Mr. Chairman. I would like to extend a special welcome my constituent, Mike Irwin, Senior Vice President of the Alaska Federation of Natives. Mr.

Irwin wears many hats, one of which is Chairman of the Board of Doyon, Limited,

which is based in Fairbanks, Alaska. Doyon is one of the most successful of the

Alaska Native Corporations when it comes to generating employment opportunities

for Native shareholders. It is also one of the most consistently profitable Native corporations. I will come back to this in a moment.

We have come together today to explore an exciting new idea to promote economic

development in our Native communities. The Native American Capital Development

Corporation, created under this legislation, will be charged with identifying obstacles to economic development and proposing strategies to overcome them. Sometimes

it is the lack of capital that inhibits economic development, but often it is also the

lack of viable, sustainable business opportunities that stymies development. The

lack of infrastructure, be it the lack of roads or the lack of power capacity, is a particular obstacle in Alaska. The corporation could help address all of these obstacles.

Since the enactment of the Alaska Native Claims Settlement Act some 30 years

ago, our villages have been grappling with these very issues. Today, our Alaska Native Corporations are recognized as engines of economic development in the State.

However, much of their investment and job creation has taken place in the cities,

in communities on the road system that are accessible to tourists, and on the North

Slope.

This is not for lack of desire. Our Native corporations must invest in profitable

ventures in order to return dividends to their shareholders. They are constantly

seeking viable business concepts in the villages where their people live.

The villages too yearn for year-round, good wage employment. Until then, Native

people in Alaska must leave their families behind and travel long distances, to other

parts of our vast state, often working 2 weeks on—2 weeks off, if they are to enjoy

year round employment.

Mike Irwin’s company, Doyon, Limited, generates jobs for its shareholders

through two businesses which are wholly dependent on the health of Alaska’s oil

and gas industry. Doyon Drilling, which is one of only two major oilfield drillers in

the State, trains rural shareholders for entry level positions on the drilling rigs,

transports them to work on the North Slope and promotes from within.

And Doyon Universal Services provides catering, security and other remote site

services in support for the North Slope oil producers and the Trans Alaska pipeline.

It uses a similar shareholder hiring and promotion model.

Mr. Chairman, if you will indulge me briefly, I need to point out that the continued opposition to oil and gas development in the Arctic National Wildlife Refuge has

a direct, adverse effect on economic opportunities for Alaska Natives. The continued

success of Doyon’s business ventures, and similar ventures owned by other Alaska

Native Corporations, depends on a robust Alaska oil and gas industry. When there
74

are no wells to drill, rigs go down. . . camps go down. . . and Native shareholders

are laid off. We don’t want to see that.

Just as there is much work to be done in creating opportunities in Indian country

in the Lower 48, we have much work to do to grow enterprises in our rural villages.

Our Native people tell us that the jobs they value most are the jobs in their. villages. I think S. 519 could provide the spark to expand employment opportunities

in the villages as well as in Lower 48 Indian country.

Mr. Chairman, I am very pleased that you have introduced S. 519 and organized

this hearing today. By inviting investment from Alaska Native Corporations to a

fund which could potentially loan money to ventures on Lower 48 reservations, your

bill helps strengthen the ties between Alaska Natives and the broader community

of Native Americans. That is a very welcome idea and one that I hope can be enacted into law.

I thank the witnesses and look forward to their testimony.

PREPARED STATEMENT OF WILLIAM O. RUSSELL, DEPUTY ASSISTANT SECRETARY,

PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Chairman Campbell, Vice Chairman Inouye, and Members of the Committee,

thank you for inviting me to testify before the Committee on Indian Affairs. I am

glad to be with you today and welcome the opportunity to share with you the Department of Housing and Urban Development’s perspective on many of the concepts

included in S. 519, the Native American Capital Formation and Economic Development Act of 2003, which has been introduced by Chairman Campbell.

My name is Bill Russell, and I am the Deputy Assistant Secretary for Public and

Indian Housing. PIH is responsible for the management, operation and oversight of

HUD’s Native American programs. These programs are available to over 550 federally recognized and a limited number of State-recognized Indian tribes. We serve

these tribes directly, or through tribally designated housing entities (TDHEs), by

providing grants and loan guarantees designed to support affordable housing, and

community and economic development activities.

In addition to those duties, our jurisdiction encompasses the public housing program, which aids the nation’s 3,000-plus public housing agencies in providing housing and housing-related assistance to low-income families.

It is a pleasure to again appear before you, and I would like to express my appreciation for your continuing efforts to improve the housing conditions of those who

need it most. As you have heard from previous testimony, much progress is being

made and tribes are taking advantage of new opportunities to improve the housing

conditions of the Native American families residing on Indian reservations, on trust

or restricted Indian land, and in Alaska Native Villages. This momentum needs to

be sustained as we continue to work together toward creating a better living environment throughout Indian country.

At the outset, let me reaffirm the Department of Housing and Urban Development’s support for the principle of government-to-government relations with Indian

tribes. HUD is committed to honoring this fundamental precept in our work with

American Indians and Alaska Natives.

As you know, the Administration is actively reviewing S. 519 and hopes to soon

be able to provide you with specific comments. In general, however, it is a little hard

to understand exactly what the Native American Capital Development Corporation

created by S. 519 is and whether it duplicates capabilities that already exist within

HUD and the Department of Treasury.

HUD is committed to exploring new opportunities to surmount barriers to lending

on tribal lands and facilitate access to alternative sources of capital, financial services and technical expertise. HUD’s Office of Native American Programs (ONAP) is

currently working with tribal governments, TDHEs, and lenders to increase private

housing investments through the Section 184 Indian Housing Loan Guarantee Fund

Program, and the Title VI Tribal Housing Activities Loan Guarantee Fund.

We know that there are numerous barriers to accessing capital. Many of these

were recently identified in the ‘‘Native American Lending Study,’’ completed by the

Department of the Treasury’s Community Development Financial Institute Fund, as

well as through other recent research.

Capital in Native America tends to come from four primary sources: Tribal financial resources, Federal guaranteed loans, grants and tax credits, debt capital, and

equity investors. The latter is woefully inadequate for many reasons. Issues raised

by investors and private lenders include: The legal status of tribal lands, inadequate

or nonexistent legal and business codes; insufficient understanding of issues related

to tribal sovereignty and sovereign immunity; a lack of technical assistance re-
75

sources; uncertainty related to leadership changes in tribal governments, and a lack

of financial institutions and services on or in close proximity to Native American

communities.

Many tribes and TDHEs, as well as other tribally affiliated community and economic development organizations, use a project-by-project approach to housing and

economic development. There is a great need to create a more comprehensive approach to the creation of sustainable economies. There are clear roles that tribal

governments, Federal agencies and lending institutions can play in creating these

economies. The Administration would like to give careful consideration to whether

the creation of a Corporation could resolve impediments to lending on tribal lands

and contribute to the establishment of sound economic and political policies that

promote increased levels of economic growth and job creation on tribal lands.

Finally, let me state for the record that we concur with many of the findings as

outlined in S. 519. We agree that much of the poor performance of Native American

economies correlates to the absence of private capital and private financial institutions. We will continue to work in partnership with tribal governments, Native

American organizations, the private sector, and other government agencies to support private investment and leveraging in Indian Country. And, Mr. Chairman,

HUD is prepared to work with you to help overcome these barriers to accessing capital in Indian County.

This concludes my prepared remarks. Thank you again for this opportunity to testify, and I would be happy to answer any questions you may have.

PREPARED STATEMENT OF MICHAEL LIU, ASSISTANT SECRETARY, PUBLIC AND INDIAN

HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Chairman Campbell, Vice Chairman Inouye, and Members of the Committee,

thank you for inviting me to testify before the Committee on Indian Affairs. I am

glad to be with you today and welcome the opportunity to share with you the Department of Housing and Urban Development’s perspective on many of the concepts

included in S. 519, the Native American Capital Formation and Economic Development Act of 2003, which has been introduced by Chairman Campbell.

My name is Michael Liu, and I am the Assistant Secretary for Public and Indian

Housing. I am responsible for the management, operation and oversight of HUD’s

Native American programs. These programs are available to over 550 federally recognized and a limited number of state-recognized Indian tribes. We serve these

tribes directly, or through tribally designated housing entities (TDHEs), by providing grants and loan guarantees designed to support affordable housing, and community and economic development activities.

In addition to those duties, my jurisdiction encompasses the public housing program, which aids the nation’s 3,000-plus public housing agencies in providing housing and housing-related assistance to low-income families.

It is a pleasure to again appear before you, and I would like to express my appreciation for your continuing efforts to improve the housing conditions of those who

need it most. As you have heard from previous testimony, much progress is being

made and tribes are taking advantage of new opportunities to improve the housing

conditions of the Native American families residing on Indian reservations, on trust

or restricted Indian land, and in Alaska Native Villages. This momentum needs to

be sustained as we continue to work together toward creating a better living environment throughout Indian Country.

At the outset, let me reaffirm the Department of Housing and Urban Development’s support for the principle of government-to-government relations with Indian

tribes. HUD is committed to honoring this fundamental precept in our work with

American Indians and Alaska Natives.

As you know, the Administration is actively reviewing S. 519 and hopes to soon

be able to provide you with specific comments. In general, however, it is a little hard

to understand exactly what the Native American Capital Development Corporation

created by S. 519 is and whether it duplicates capabilities that already exist within

HUD and the Department of Treasury.

HUD is committed to exploring new opportunities to surmount barriers to lending

on tribal lands and facilitate access to alternative sources of capital, financial services and technical expertise. HUD’s Office of Native American Programs (ONAP) is

currently working with tribal governments, TDHEs, and lenders to increase private

housing investments through the Section 184 Indian Housing Loan Guarantee Fund

Program, and the Title VI Tribal Housing Activities Loan Guarantee Fund.

We know that there are numerous barriers to accessing capital. Many of these

were recently identified in the ‘‘Native American Lending Study,’’ completed by the
76

Department of the Treasury’s Community Development Financial Institute Fund, as

well as through other recent research.

Capital in Native America tends to come from four primary sources: Tribal financial resources, Federal guaranteed loans, grants and tax credits, debt capital, and

equity investors. The latter is woefully inadequate for many reasons. Issues raised

by investors and private lenders include: the legal status of tribal lands, inadequate

or nonexistent legal and business codes; insufficient understanding of issues related

to tribal sovereignty and sovereign immunity; a lack of technical assistance resources; uncertainty related to leadership changes in tribal governments, and a lack

of financial institutions and services on or in close proximity to Native American

communities.

Many tribes and TDHEs, as well as other tribally affiliated community and economic development organizations, use a project-by-project approach to housing and

economic development. There is a great need to create a more comprehensive approach to the creation of sustainable economies. There are clear roles that tribal

governments, Federal agencies and lending institutions can play in creating these

economies. The Administration would like to give careful consideration to whether

the creation of a Corporation could resolve impediments to lending on tribal lands

and contribute to the establishment of sound economic and political policies that

promote increased levels of economic growth and job creation on tribal lands.

Finally, let me state for the record that we concur with many of the findings as

outlined in S. 519. We agree that much of the poor performance of Native American

economies correlates to the absence of private capital and private financial institutions. We will continue to work in partnership with tribal governments, Native

American organizations, the private sector, and other government agencies to support private investment and leveraging in Indian Country. And, Mr. Chairman,

HUD is prepared to work with you to help overcome these barriers to accessing capital in Indian Country.

This concludes my prepared remarks. Thank you again for this opportunity to testify, and I would be happy to answer any questions you may have.
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