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COMMUNITY DEVELOPMENT FINANCIAL 

INSTITUTIONS (CDFIs): THEIR 

UNIQUE ROLE AND CHALLENGES SERVING 

LOWER-INCOME, UNDERSERVED, 

AND MINORITY COMMUNITIES 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

MARCH 9, 2010 

Printed for the use of the Committee on Financial Services 

Serial No. 111–106 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

March 9, 2010 ................................................................................................... 1 

Appendix: 

March 9, 2010 ................................................................................................... 43 

WITNESSES 

TUESDAY, MARCH 9, 2010 

Barr, Hon. Michael S., Assistant Secretary for Financial Institutions, U.S. 

Department of the Treasury ................................................................................ 3 

Barrera, Janie, President and Chief Executive Officer, ACCION Texas-Louisiana ..................................................................................................................... 28 

Bridges, Dorothy, President and Chief Executive Officer, City First Bank 

of DC ..................................................................................................................... 30 

Bynum, William, President and Chief Executive Officer, Enterprise Corporation of the Delta ................................................................................................... 25 

Fiddler, Tanya, Vice President of Programs and Operations, First Nations 

Oweesta Corporation, Cheyenne River Reservation ......................................... 31 

Gambrell, Donna J., Director, Community Development Financial Institutions 

(CDFI) Fund ......................................................................................................... 5 

Kennedy, Judith A., President and Chief Executive Officer, National Association of Affordable Housing Lenders (NAAHL) ................................................... 33 

Moncrief, L. Ray, Executive Vice President and Chief Operating Officer, Kentucky Highlands Investment Corporation .......................................................... 27 

APPENDIX 

Prepared statements: 

Carson, Hon. Andre .......................................................................................... 44 

Barr, Hon. Michael S. ...................................................................................... 45 

Barrera, Janie ................................................................................................... 49 

Bridges, Dorothy ............................................................................................... 52 

Bynum, William ................................................................................................ 63 

Fiddler, Tanya .................................................................................................. 73 

Gambrell, Donna J. .......................................................................................... 90 

Kennedy, Judith A. ........................................................................................... 98 

Moncrief, L. Ray ............................................................................................... 108 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Gambrell, Donna: 

Written responses to questions posed by Representative Bachus during 

the hearing .................................................................................................... 117 

Community Development Financial Institutions—Activity in Select House 

Financial Services Committee Member Districts ....................................... 118 

Community Development Financial Institutions Fund, U.S. Department 

of the Treasury, Responses to Panelist’s Proposals, April 16, 2010 ......... 165 

Financial Services Provided by Community Development Financial Institutions in Latino Communities .................................................................... 177 

(1) 

COMMUNITY DEVELOPMENT FINANCIAL 

INSTITUTIONS (CDFIs): THEIR 

UNIQUE ROLE AND CHALLENGES SERVING 

LOWER-INCOME, UNDERSERVED, 

AND MINORITY COMMUNITIES 

Tuesday, March 9, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 2 p.m., in room 2128, 

Rayburn House Office Building, Hon. Barney Frank [chairman of 

the committee] presiding. 

Members present: Representatives Frank, Waters, Watt, Moore 

of Kansas, Baca, Miller of North Carolina, Scott, Green, Cleaver, 

Carson, Childers, Adler; Bachus, Biggert, Jenkins, and Lance. 

The CHAIRMAN. The hearing will come to order. This is a hearing 

that is mostly about pretty good news, so that is why not many 

people are here. We are better at complaining than praising. And 

the media also pays more attention to criticism than to good words. 

But the Community Development Financial Institutions Program 

is an example of something that works well. And, in particular, 

there have been suggestions that when the Federal Government 

tries to intervene to help lower-income communities and individuals in various ways, that somehow causes problems. The record, 

I think, is very clear that is not the case. If it is done well, this 

is very constructive. 

And we are, therefore, pleased to have before us today two panels: first, those from the Administration; and second, a group of 

practitioners. I look forward to hearing from them. 

The gentleman from Alabama is now recognized for his opening 

statement. 

Mr. BACHUS. I thank the chairman. 

I appreciate you holding a hearing on the CDFI Fund, and I appreciate our witnesses being here. 

The program dates back, or my interest in the program dates 

back to my days as chairman of the committee’s Oversight and Investigations Subcommittee in the late 1990’s, when the Oversight 

Subcommittee led an investigation that uncovered serious irregularities and conflicts of interest in the Fund’s process for awarding 

grants. And that investigation resulted in the resignation of the 

agency’s two top officials and led Treasury to adopt a number of 

reforms to address the abuses identified by the subcommittee. 

2 

While I am confident that the fund is now being operated in a 

far more professional and transparent manner than was the case 

back then, I still have concerns about the program’s effectiveness 

that I hope can be explored in today’s hearing. 

Community Development Financial Institutions are a source of 

subsidized capital to communities that face difficulties attracting 

funds for economic development. But the subsidy that the government provides is not free. We need to ensure that the CDFI Fund 

program is properly administered so that funds are provided to individuals and entities that both have productive uses for it and 

would otherwise not have access to financing. 

CDFIs have a proven track record of providing economic development dollars to underserved communities. According to the Treasury Department, CDFI initiatives created or maintained more than 

70,000 full-time jobs. This success should not, however, lead to 

looser standards. I hope our witnesses today, particularly the 

Treasury Department, will be able to be discuss the operational improvements that can be implemented as the CDFI Fund program 

evolves. 

Finally, even though the program has had some successes in promoting capital investment in underserved communities, it would be 

wrong to redirect TARP money to this program. TARP was established to stabilize the financial system in a time of extreme market 

disruption. Given the alarming deficits that the country is running, 

the extraordinary measures that were taken during the financial 

crisis should be wound down as soon as practical, and that includes 

TARP. 

And I am sure you all heard Doug Elmendorf, the CBO Director—I shouldn’t go off the record, should I—say yesterday that we 

were in unfamiliar territory as far as the debt was involved and 

the deficit, so that ought to be a wake-up call to all of us. And of 

course, Federal Reserve Chairman Bernanke testified to us just in 

the past weeks that our debt and deficit was unsustainable. So, 

given these alarming deficits that the country is running, the extraordinary measures that were taken during the financial crisis 

should be wound down, and that includes TARP. It is time for the 

government to get out of the private market and let American businesses innovate and spur economic growth without the fear of government intervention. 

I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Georgia is recognized for 2 

minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

This is indeed a timely hearing. With this very devastating economic dilemma we are in, minority communities are profoundly impacted, probably 2 to 3 times as devastating as the remainder of 

the economy is doing. And so we know that the economy is really 

going through some woes, so you can imagine what the minority 

communities are going through. 

The one good thing about the CDFIs is this: You are targeted. 

You are purposeful at a time we need targeted, purposeful, focused 

resources targeting these minority communities. In my own State 

of Georgia, we have 18 of you doing a wonderful job, and 67 percent of that impact is impacting in the urban areas, 44 percent of 

3 

that impacting minorities. I think this is crucial because the timing 

is important. 

The Treasury Department, from my information, is looking to reauthorize the CDFIs, so it is very important that we have this 

hearing, that we hear from you what you are doing, how well you 

are doing, what more you can do, how many more resources you 

need. And it is also important to share with us how you measure 

your success, so that there can be no argument. You can say you 

are successful, but we need to know how you measure that. What 

determines your success, and what would it be like if you were not 

there helping these communities? What would it be like for them? 

Because the history of it is that these CDFIs came about because 

of the outmigration of White communities. These communities became African American in many cases, and when the White community left, the banks left, and they were underserved. You came 

in, and you filled that void. 

This is a very important hearing, Mr. Chairman. Thank you very 

much. I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Texas is recognized for 2 

minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

I thank the witnesses for appearing. And I am especially grateful 

to the President. President Obama has made a request for an additional $250 million in appropriations for the CDFI Fund for 2011. 

And I want to compliment the President for making such a request. 

It is obvious that these institutions have served us well, served us 

well, by the way, at a time when many other institutions were not 

serving us well. And I think that bodes well for what the institutions represent. 

They do this, many times, on a shoe-string budget, in communities that are thought to be such that they cannot afford loans, 

cannot repay loans. But they continue to defy the odds, and they 

continue to make a difference in the lives of real people. I compliment the President and look forward to this hearing today. I 

have many questions that I would like to ask about the CDFIs, and 

I look forward to your answers. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

The CHAIRMAN. I thank the gentleman. 

The CHAIRMAN. And we will now begin. 

Our witnesses for the first panel are: Michael Barr, who is the 

Assistant Secretary for Financial Institutions at the Department of 

the Treasury; and Donna Gambrell, who is the Director of the 

CDFI Fund. Mr. Secretary? 

STATEMENT OF THE HONORABLE MICHAEL S. BARR, ASSISTANT SECRETARY FOR FINANCIAL INSTITUTIONS, U.S. DEPARTMENT OF THE TREASURY 

Mr. BARR. Thank you very much, Mr. Chairman, Ranking Member Bachus, and members of the committee. 

This committee has a long and bipartisan history of support for 

the Community Development Financial Institutions Fund and 

CDFIs across the country. I want to thank you for the opportunity 

to testify today about the role of CDFIs in growing small busiVerDate Nov 24 2008 17:53 Jul 21, 2010 Jkt 056770 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\56770.TXT TERRIE
4 

nesses, in creating jobs, and in assisting economic recovery in distressed communities across the United States. 

As we emerge from the worst economic crisis in generations, the 

Administration is focused on spurring greater job growth, ensuring 

that the recovery is firmly established. CDFIs are a critical and important piece of our broader commitment to an inclusive recovery. 

CDFIs provide capital, credit, and financial services to hard-toreach communities and underserved populations. In both rural and 

urban America, they assist entrepreneurs and small businesses 

that are the vital engines of growth. 

In today’s economic climate, CDFIs’ support to small business is 

more critical than ever. CDFIs report providing financing to over 

10,000 businesses and over 1,600 commercial real estate properties 

in 2008. CDFIs also reported that they helped to create or maintain over 70,000 full-time jobs in that period. CFDIs are also able 

to reach underserved communities through innovative, responsible, 

affordable financial products and services. And the CDFI Fund has 

provided CDFIs with the necessary capital to spur innovation in 

the sector. 

Take the example of one CDFI Fund award recipient, the North 

Side Community Development Credit Union in Chicago. North Side 

has developed an affordable small-dollar consumer loan which has 

saved community residents over $5 million compared to the alternatives. 

The current economic environment has strained the resources of 

many CDFIs. They have also, at the same time, seen a dramatic 

increase in requests for their lending services, as other sources of 

credit have dried up. However, CDFIs have faced constraints in 

meeting that increased demand, in particular, a decrease in available funding from their primary funding sources. We strongly believe that further support is needed for CDFIs to help distressed 

communities manage through the economic downturn. 

We have already worked with this committee, with all of you, to 

increase support for CDFIs through the Recovery Act, under which 

the Fund disbursed $98 million in awards within 160 days of enactment. That Act also provided the Department with an additional 

$1.5 billion in New Markets Tax Credit allocation authority for 

both Fiscal Years 2008 and 2009. We have recently announced a 

new program under EESA, the Community Development Capital 

Initiative, to extend low-cost capital to CDFI depositories and holding companies, including banks, thrifts, and credit unions. 

And as we begin to emerge from this financial crisis, our Nation’s 

distressed communities and the CDFIs that serve them will likely 

continue to lag behind broader economic growth. That is why it is 

so important to bolster the CDFI field capacity, as the President 

has suggested doing in the Fiscal Year 2011 budget. That budget 

requests $250 million for the CDFI Fund, including $140 million to 

the Fund’s Financial and Technical Assistance Awards and $12 

million in funding for Native communities. 

We have made hard choices in the Treasury’s budget. While not 

proposing funding this year for either the Capital Magnet Fund or 

for Bank Enterprise Awards, we have proposed two new initiatives. 

First, the budget request seeks $50 million for a Bank on USA initiative which will promote financial education, broader access to 

5 

bank accounts, and other financial services to help families meet 

their financial needs and build savings. 

Second, the budget requests funding for CDFI’s participation in 

a new multi-agency effort, the Healthy Food Financing Initiative. 

This initiative will help provide the financing necessary to increase 

the availability of affordable healthy foods in underserved urban 

and rural markets. Treasury will devote $250 million of New Markets Tax Credit authority and $25 million in CDFI Fund Financial 

and Technical Assistance awards to this initiative. 

In addition, we have requested $5 billion in New Markets Tax 

Credit authority for both Fiscal Years 2010 and 2011, and we have 

proposed allowing this authority to be offset against AMT liability. 

We are also working with the IRS on further reforms to make the 

credit work smoothly for small businesses. We look forward to 

working with the committee to support the CDFI Fund’s work to 

help distressed communities weather the economic downturn and 

to support an economic recovery that reaches all Americans. 

Thank you very much. 

[The prepared statement of Assistant Secretary Barr can be 

found on page 45 of the appendix.] 

The CHAIRMAN. Ms. Gambrell? 

STATEMENT OF DONNA J. GAMBRELL, DIRECTOR, COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS (CDFI) FUND 

Ms. GAMBRELL. Good afternoon, Chairman Frank, Ranking Member Bachus, and distinguished members of the House Financial 

Services Committee. It is a pleasure for me to be here today to discuss the CDFI Fund. The CDFI Fund was established in 1994, and 

our mission is to promote economic revitalization and community 

development in low-income communities, primarily through investments and assistance to CDFIs. 

There are several types of CDFIs: community development 

banks; thrifts; credit unions; loan funds; and venture capital funds. 

All of them specialize in serving low-income communities that lack 

access to credit, capital, and financial services from mainstream financial institutions. CDFIs are often the only institutions in their 

community that offer retail banking services and responsible loans 

for small businesses and micro enterprises, affordable housing 

projects, and community facilities. They also provide additional 

services, such as technical assistance for small businesses, and 

credit counseling and home buyer education to help borrowers use 

credit effectively. 

Since the onset of the recent economic crisis, the CDFI Fund has 

been called upon to play an even larger role in promoting economic 

recovery in communities that have been hardest hit by the recession. Congress and the new Administration have taken significant 

steps to expand our impact. 

We at the CDFI Fund have been mindful of the tremendous responsibility that we have been given in the midst of the economic 

crisis, and our recent accomplishments bear witness to our commitment of being a critical part of the Administration’s strategy that 

brings economic recovery to all. When the recession first deepened, 

the CDFI Fund created a new advisory board subcommittee to assess the impact of the economic crisis on CDFIs. 

6 

We have already made significant progress in implementing 

many of their critical recommendations. We have streamlined key 

business processes to enable us to get funds to the communities 

that need them more than ever. On average, we now disburse 

awards—a process which used to take over 12 months—in 60 days. 

We now make decisions on all new applications for CDFI certification within 90 days. 

Our actions implementing the Recovery Act were nothing short 

of extraordinary. Less than 100 days after the enactment of the Recovery Act, we announced financial assistance awards to 59 CDFIs 

and 10 Native CDFIs. Just 2 months later, we disbursed all $98 

million. As Assistant Secretary Barr stated, the performance of the 

CDFI industry has been equally impressive. CDFI Fund awardees 

financed more than 10,000 businesses and created or maintained 

more than 70,000 jobs reported in 2009. These numbers speak volumes about the CDFI industry’s resilience, commitment, and creativity in challenging times. 

But I encourage you to look beyond the numbers, for there is 

much more to the story than statistics alone. Each business financed, each job created, and each home purchased represents a 

critical step in the transformation of a life, a family and a community, and that is what the work of CDFIs and the CDFI Fund is 

really all about. It is about changing lives and building stronger 

and more productive communities. It is about creating opportunity 

and giving hope. 

As we celebrate the 15th anniversary of the creation of the CDFI 

Fund, this is an opportune time not just to reflect on what we have 

accomplished but to look forward and envision the steps we need 

to take next to create opportunity in our Nation’s most distressed 

communities. 

We have recently released a request for public comments and 

plan to take a thorough review of our entire authorizing statute, 

looking not only at technical and substantive revisions to existing 

provisions but also to provisions that have not yet been fully utilized. 

But some of our next steps are already clear. The President’s Fiscal Year 2011 budget builds on the CDFI Fund’s recent momentum 

and requests $250 million in funding. In addition, it proposes two 

exciting new initiatives in which the CDFI Fund will play a key 

role: the Bank on USA Initiative; and the Healthy Food Financing 

Initiative. These are just a few initiatives that we hope to undertake in the near future and beyond. Many more must follow, and 

we stand ready if Congress were to ask us to increase our role in 

serving low-income communities. 

Since the first days of the economic crisis, the CDFI Fund has 

answered the call to assist in the Nation’s recovery, and I can assure you that we are prepared to continue answering that call. This 

concludes my testimony. On behalf of the CDFI Fund, I would like 

to express our gratitude for the support of Congress and the Financial Services Committee. We look forward to continuing to work 

with you in the future. 

[The prepared statement of Director Gambrell can be found on 

page 90 of the appendix.] 

7 

The CHAIRMAN. I will begin by asking, because there is a whole 

complex of programs that we have been putting forward that aren’t 

always sorted out in the public mind, and I know this is not the 

Community Reinvestment Act, but would either of the witnesses or 

both want to discuss, is there an interaction between this program 

and the Community Reinvestment Act? 

Mr. BARR. I could say a word or two, and then maybe Director 

Gambrell would want to follow up. 

The CDFIs out in the communities often rely, as a source of 

funding, on mainstream banking organizations. And those banks 

can obtain positive consideration under the Community Reinvestment Act for their investments in CDFIs across the country. So the 

presence of CRA likely increases the flow of capital to CDFIs from 

mainstream banks. 

The CHAIRMAN. Ms. Gambrell? 

Ms. GAMBRELL. We have seen financial institutions, Chairman 

Frank, contribute to CDFIs in a number of different ways. Some 

provide deposits in these organizations. Others actually collaborate 

with them on initiatives, such as affordable housing projects, small 

business development finance, and job creation programs, as well 

as counseling services, home buyer services, and financial education. So there are a number of ways in which traditional financial institutions have also partnered with CDFIs in a very substantive way. 

The CHAIRMAN. A number of us, my colleague, Ms. Waters, who 

has joined us, and others, have felt, and we will begin the examination of that this year, that there is an argument for expanding the 

reach of the Community Reinvestment Act, because when it was 

originally enacted in 1977, it covered a much higher percentage of 

our financial institutions because of the diversification. So what I 

take from what you are saying is that if we were to expand the 

scope of the CRA, that could provide additional funds for the CDFI 

program? 

Mr. BARR. I think that it is certainly the case, Mr. Chairman, 

that with respect to the banking organizations that have traditionally funded CDFIs, one of the reasons they have often cited for the 

extent of their engagement, in addition to other factors, is the Community Reinvestment Act. 

As Director Gambrell indicated, they also appreciate the ability 

to co-invest with CDFIs as a way of reducing risks that they take. 

And so that package of activities has been beneficial to them. 

The CHAIRMAN. My final question is, we have heard, I believe, 

wildly inaccurate imputations to the Community Reinvestment Act 

of responsibility for mortgages that shouldn’t have been made. Now 

CDFI has a pretty good record. The ranking member mentioned a 

time earlier when there were problems. We have not in this current set of rules found too many people coming forward who want 

to be critical. I wonder, to the extent that the Community Reinvestment Act is sometimes blamed for things which I think there is no 

basis for, in the interaction between CDFI and CRA, would anybody have any basis to claim that this has led to imprudence of any 

kind? 

Mr. BARR. I think the record is reasonably that with the experience of CDFIs in low-income communities, that they are able to 

8 

make loans that are more difficult for other institutions to make. 

There certainly have been losses in low-income communities, as 

there have been in many communities across the country, given the 

financial crisis that we are in. I wouldn’t think that those are 

linked in any way to CRA. 

I think that if you look at the record under CRA, the Federal Reserve data, with respect to CRA, suggests that it really is not 

linked to the subprime crisis that we just experienced. That 

subprime crisis really started with a fundamental lack of a level 

playing field with respect to underwriting standards and a race to 

the bottom in our country. So that is where I would suggest the 

problem lies. 

The CHAIRMAN. The gentleman from Alabama. 

Mr. BACHUS. Thank you, Mr. Chairman. 

The CHAIRMAN. Ms. Gambrell, do me a favor, because I made a 

big thing about—stop the clock. The light that tells members on 

this side when their time is expired, we obscured it with your name 

tag. Would you just push that little doo-hickey there? All right. 

There we go. Thank you. 

Mr. BACHUS. She can wait till after I am through questioning. 

You can cover it back up till I am through. 

Thank you, Mr. Chairman. 

Given the relative stability, well, I don’t know. Let me just ask 

this: Is it appropriate to use TARP funds, Mr. Barr, to fund CDFI? 

Mr. BARR. Sir, our judgment, Mr. Bachus, was that, given the financial crisis that we have just come through and the instability 

in the financial sector, including in small banks, community banks 

across the country, community thrifts across the country, and Community Development Banks across the country, that it was important to offer a support under the Economic Stabilization Act for 

those institutions. And CDFIs are one of the kinds of institutions, 

including community banks, that we thought it was really important to provide assistance for. So I do think, in our judgment, we 

need to weigh taxpayer concerns always, but the overriding goal 

that Congress gave us with respect to financial stability, we 

thought it was an appropriate aspect of our community bank efforts. 

Mr. BACHUS. I understand that there is still economic instability 

and challenges in those communities. 

I saw Danny Davis mentioned in your testimony, Director 

Gambrell. He said it is, ‘‘the community of need in search of a sea 

of opportunity’’ or something. But I am just, is TARP, which was 

envisioned as a temporary program, and not always probably directed towards the smallest in regional communities, but I am not 

sure, I don’t think it was ever envisioned as to start using that as 

opposed to the appropriation process. 

Mr. BARR. Well, I think those are completely separate issues. 

I would agree with you, Mr. Bachus, that the appropriations 

process is to support the CDFI Fund’s ongoing work in supporting 

CDFIs across the country. 

The Emergency Economic Stabilization Act is for an emergency. 

It is a temporary program. The program that we have set up, the 

initiative we have set up for CDFIs is a temporary program. It is 

not a substitute for appropriations in any way. It is designed, as 

9 

are our broader programs, for community banks—to deal with the 

fact that it is not just big banks that got hit by the financial crisis. 

In fact, the financial crisis caused enormous harm to community 

banks and thrifts across the country. And that is why we think, 

given the emergency situation, that was an appropriate use of 

EESA funding consistent with what Congress asked us to do. 

Mr. BACHUS. Were there some CDFI institutions—not the 

banks—that participated directly in TARP? 

Mr. BARR. Under the initial community bank program, there 

were some CDFI banks and thrifts that participated in that program. 

Mr. BACHUS. But they were all banks or thrifts? 

Mr. BARR. Excuse me, sir? 

Mr. BACHUS. They were all banks or thrifts? 

Mr. BARR. Under the initiative that we announced recently, the 

institutions that are eligible are insured depositories. They have to 

be a credit union, a bank or a thrift. That is consistent with the 

community bank program from before. 

We are looking at whether there are ways to assist with the instability in the loan fund sector, but that is not something that was 

part of what the President announced or what the Secretary announced. 

Mr. BACHUS. And these are for the 2 percent loans basically? Is 

that what— 

Mr. BARR. It is 2 percent—capital with a 2 percent dividend rate; 

up to 5 percent risk weighted assets under the program. 

Mr. BACHUS. Okay. Tell me about Bank on America. Do either 

one of you want to comment on that? I know that it is a real problem in all communities, really, but obviously, it impacts our lowerincome communities. 

Ms. GAMBRELL. Correct. 

Mr. Bachus, the Bank on USA Initiative is focused on—and I 

think we all understand the impact in these communities that suffer from very high fees, have been victims of predatory lending, do 

not have affordable consumer products and services that are available. This initiative is to look at ways in which we can replicate 

models across the country, through partnerships with State and 

local government, nonprofit organizations, CDFIs, and others that 

will provide the kind of access to credit, bringing those populations 

into the economic mainstream by creating and maintaining bank 

accounts, savings accounts, individual development accounts, and 

other types of services. 

So there are a number of components to the initiative itself, but 

the underlying, and I think, the most critical piece is really looking 

at ways in which we can identify those low-income populations, or 

low-income communities and help bring people into the financial 

mainstream. 

Mr. BACHUS. I am not sure we have trouble identifying them. We 

know there is—but I do know the need for that. 

I thank you. 

Ms. WATERS. [presiding] Thank you very much. 

I would like to try and determine where the CDFI Funds are actually going and whether or not they are really impacting the poorest communities in our country. I don’t know if you have done the 

10 

kind of research that would match up your CDFI effort with the 

poorest areas in the country so that you would be able to say that, 

for example, there are CDFI institutions in Tupelo, Mississippi, 

where the poverty rate is so-and-so. Have you done that kind of 

look at where the funds are going? 

Ms. GAMBRELL. Thank you for the question, Congresswoman 

Waters. 

Our CDFI customers, when you look at the demographics, you 

can see that: 70 percent of them are low income; 60 percent are minority; and 52 percent are women. Of the 824 certified CDFIs that 

exist, we have CDFIs in every State of the country. As part of their 

certification, when they come to Treasury to be certified, one of the 

criteria that they have to meet is that they have a commitment to, 

in fact, serve those low-income areas substantively. So as we continue to do our research, as we continue to get reports from the 

CDFIs, we certainly see that they are serving those communities 

in very substantive ways. 

And you will certainly hear in the second panel ways in which 

that is done. But clearly, they are doing the work that they need 

to do to make sure that these communities’ needs are met. 

Ms. WATERS. Ms. Gambrell, one of the things you are going to 

find from many of the members of this committee is a real effort 

to determine where the resources are going that we work for. For 

the members who are present here today, they represent many of 

the areas that have not benefitted from many of the programs we 

have fought for. Some of us were here when we created the CDFI, 

but some of us look at our districts, and we are not so happy. 

So as we look at everything that we do in government, whether 

it is stimulus money or CDFI funds, we are beginning now to 

evaluate whether or not the work that we do is reflected in how 

those communities either benefit or do not benefit from our efforts. 

So one of the things I would like to do is, not for everybody on 

the committee, but for the members who are here today, we have 

1, 2, 3, 4, 5, 6 members who are present, 7 members, coming in 

with Mr. Scott. I would like to do an evaluation of each of these 

seven districts as it relates to your CDFI efforts. I would like you 

to take each of these districts. We will make sure you get the 

names and the districts of all the members who are present now. 

Any more coming in, they are not going to be added. And we would 

like to know exactly what is happening in each of our districts, not 

only—I think as I look here, the way that you have divided up the 

institutions that are available for the utilization of CDFI funds, it 

looks as if it is banks and credit unions, and then you have some 

kind of committees, etc. I want to see all of those in our districts, 

how each of those organizations work and whether or not we are 

getting the benefit of the CDFI program. 

Ms. GAMBRELL. And we would be happy to share that information. 

Congresswoman, I have also met with several of the members 

here already, provided that information to them. But we would be 

happy to do that again. 

Ms. WATERS. Okay. Just put it all in one big package so I can 

look at it, too. 

Ms. GAMBRELL. Okay. Certainly. 

11 

[The information requested by Representative Waters can be 

found on page 118 of the appendix.] 

Ms. WATERS. I thank you very much for that. 

And I am going to move on to our next member of the committee, 

Mr. Mel Watt. 

Mr. WATT. Thank you, Madam Chairwoman. 

And I want to express my thanks to the chairman of the full 

committee for convening this hearing. 

I actually have had the opportunity to meet one-on-one with Director Gambrell, and raised some questions with her, which she 

has been kind enough to respond to in writing. One of the concerns 

that I have expressed over the years is the extent to which people, 

community development institutions which ought to be a CDFI are 

actually getting into the Fund, on the one hand, and the extent to 

which the ones that are certified as CDFIs are using the fund, 

using what is available to them, on the other hand. 

I have had some discussions with Ms. Gambrell, and we are 

going to reach out to some of the institutions in my congressional 

district to try to get them more focused on the benefits of what is 

available. One of the things we have found is that, especially in the 

last couple of years, when things have been so tough, most people 

who are interested in day-to-day survival, you spend so much time 

surviving day to day, that you don’t always look at the other opportunities that might be available that where you are doing more forward-looking and global evaluation of opportunities that might 

help you to survive day to day. 

So I have already had discussions with, just yesterday in fact, 

Ms. Gambrell. You will be happy to know that I had a discussion 

with Ms. Saunders over at Mechanics and Farmers Bank, and told 

her that I was planning to send her some information. So I have 

had my opportunity to talk with Ms. Gambrell. 

I do want to ask, because one of the things Ms. Gambrell has 

provided to me is the criteria for the new program that the President just announced. And I wanted to get Mr. Barr’s assessment 

of whether that has been out there long enough for you to make 

even a preliminary assessment of the willingness or apparent willingness of CDFIs, and non CDFIs, I guess, would also be eligible 

to use that program, because a lot of the impediments that we 

thought were out there that were keeping financial institutions 

from using the top moneys and getting involved with these programs, some of those seemed to have been stripped away. Has that 

had any impact that you have discerned yet? Does it seem like this 

is going to be successful? 

Mr. BARR. Well, I think, Representative Watt, that what we did 

in designing the program really from last fall through the announcement was spend an enormous amount of time with CDFIs 

across the country, hearing their concerns, listening to their needs, 

and trying to design a program structure that was going to be responsive to the kinds of concerns that had been expressed to us. 

We had been told by them that the program we have announced 

will be useful to them. It is too early for us to judge, as an empirical matter, whether the institutions coming in are going to be able 

to use the program. We are very encouraged by the conversations 

we have had. We are very encouraged by the interest we have had. 

12 

The applicants for the program will need to come in during the 

month of April, so quite soon, and then we will have a much better 

empirical sense of the scope, scale and effectiveness overall of the 

program. 

Mr. WATT. How long will the processing time be for you to get 

somebody started on this new program and get them approved? 

Mr. BARR. I think the process should be quite rapid. They do 

need to check with their primary Federal regulator, again, a basic 

taxpayer protection. But with respect to the Treasury part of the 

program, we made the form quite simple. It is a one-page form. It 

is available online. We have been working to expedite the processing to set it up in advance so that it is quite streamlined, particularly for smaller institutions, the community banks and thrifts 

across the country, the CDFIs across the country. So I am encouraged by that. But the proof will be in the pudding. We will come 

back to you and show you what we have done. 

Mr. WATT. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman from Kansas. 

Mr. MOORE OF KANSAS. Thank you Mr. Chairman. 

At a hearing a few weeks ago which focused on job creation, the 

economist Mark Zandi included in his testimony a chart of what 

kind of multiplier effect various types of spending proposals would 

provide. 

Along the same lines, Assistant Secretary Barr, I appreciate the 

statistics you provide that, ‘‘CDFIs reported providing financing to 

over 10,000 businesses and over 1,600 commercial real estate properties in 2008.’’ In a time when the commercial real estate market 

is under immense pressure, I am sure you agree this financing can 

only help stabilize the market, even if in a small way. You also 

point out that CDFIs also report they help create or maintain over 

70,000 full time jobs in this period. How can Congress build on 

these successes we have seen with CDFIs? Are there improvements 

or other ways CDFIs can maximize their economic impact? 

Mr. BARR. Thank you, Representative Moore. 

I will start, and then Director Gambrell will add a few remarks. 

I fully agree with you. I think CDFIs can be an important additional financing tool on the commercial real estate market. And for 

small businesses and entrepreneurs across the country, they have 

a proven track record in doing that. I think we are able to get the 

funding at the President’s request for CDFI, which is $250 million 

for 2011. That will be a really strong statement of the Congress 

standing behind small businesses and small business growth. 

I think if we can get the New Markets Tax Credit that we have 

asked for, for 2010, which is still pending, if we can get that done 

for this year, together with a fix to permit New Markets Tax Credits to be offset against AMT liability, that will be another big boost 

for small business growth, and the same with 2011 for the New 

Markets Tax Credit. 

We have a number of initiatives we are trying to pursue. The 

Healthy Food Financing Initiative will help entrepreneurs provide 

green grocer kind of activities in distressed communities and help 

rural areas with farmers bringing their food to market. So I think 

it is a win/win for everybody, and we welcome working with you 

on it. 

13 

Mr. MOORE OF KANSAS. Thank you. 

Ms. Gambrell, do you have anything to add? 

Ms. GAMBRELL. Congressman Moore, thank you very much. 

I think when you look at the CDFI industry, clearly they want 

to continue to grow. That growth is very important to them. The 

expansion of CDFIs continues to be an important priority for us as 

well. So as we move toward the future, I think it is very important 

for us to look at those organizations that continue to do that good 

work in communities, have an opportunity to become certified 

CDFIs to take advantage of our funding, and for us to have that 

continued support to make sure we are helping CDFIs continue to 

grow. The leveraging that CDFIs do is extraordinary in terms of 

how they are able to use our funding. They are able to get the 

money out quickly and effectively into those communities. And I 

think that, again, their track record is something that we need to 

continue to support. 

Mr. MOORE OF KANSAS. Thank you. 

While a budget request to increase appropriations for the CDFI 

Fund by $250 million might not seem like much when we have 

gone through a major financial crisis and painful recession which 

has cost hundreds of billions of dollars, I hope the additional resources can be used effectively to the fullest extent possible. What 

oversight and fraud prevention mechanisms are currently being 

used or should be utilized to minimize any waste or fraud with the 

use of these funds? Either one of you, please. 

Ms. GAMBRELL. Congressman Moore, we thank you for the question. We have a number of systems in place within the CDFI Fund. 

Not only do we see the applications at the front end and have specific criteria for how we are actually assessing those institutions, 

but within the Fund itself, we have a Compliance Monitoring and 

Evaluation Unit that does on-site examinations, assessments, as 

well as internal assessments of those CDFIs. We get a lot of information from CDFIs through the year as well. 

In addition to their annual reporting, they are continually providing good information to us based on audit statements and other 

types of self assessments that they are doing as well. So we believe 

that we have the infrastructure in place to make sure that we have 

good information about the CDFIs, and that we clearly understand 

their soundness as they, again, continue to do the work that they 

do. 

Mr. BARR. And I should just add, Representative Moore, that in 

the CDFI Fund budget for 2011, within the $250 million, there is 

important additional money to be sure that we have the infrastructure in place, the systems in place to continue that strong record. 

Mr. MOORE OF KANSAS. My thanks to the witnesses. 

I yield back, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. 

The gentleman from California, Mr. Baca. 

Mr. BACA. Well, thank you very much, Mr. Chairman, for having 

this hearing. 

And I want to thank the minority ranking member. 

The first question I have is, I want to start off by talking about 

the Small Business Lending Initiative that was announced a few 

weeks ago by the Administration. It is my understanding that the 

14 

regulators will have a large role in deciding who is able to participate and receive funds from that initiative. My fear is that the 

Funds will have a limited role, and I state, a limited role in that 

process, and the regulators will be unable to accurately assess 

which institutions can and should take advantage of it. 

Question number one, can you comment on the role that CDFI 

Funds will have in this process? 

And then question number two, who will have the final say in 

this process, the CDFI Fund or the regulators? 

Mr. BARR. Under the program that was announced, consistent 

with prior programs announced within the Office of Financial Stability, the credit union, bank, and thrift regulators need to make 

a determination that the institution is operating in a safe and 

sound manner. Under the CDCI initiative that was announced, in 

making that assessment, the regulators will take into account the 

ability for these CDFIs to reach that safe and sound level using a 

matching fund, so not simply through private capital, but can use 

Treasury funds up to a one-to-one match to reach that appropriate 

level. So we think that that combination of insurance taxpayer protection, with Treasury matching to viability will be a quite strong 

measure for those funds going in. That program, then, once there 

is a bank regulator review, that will go to the Office of Financial 

Stability for final approval within the Treasury Department. 

Mr. BACA. So who will actually make the final decision then? 

Mr. BARR. It goes from the bank regulators to the Office of Financial Stability, and that decision is made at that point by the Office of Financial Stability. 

Mr. BACA. Okay. 

I also want to talk about the CDFIs creation. It is my understanding that there are 4 Hispanic, and I state, 4 Hispanic-focused 

CDFIs in existence now, out of 1,200. Why are there only 4 out of 

1,200 CDFIs that are Hispanics? Can you answer that? Why only 

four? 

Ms. GAMBRELL. Congressman Baca, thank you. 

I don’t have that number, and in fact, I will have to get the exact 

number. We are constantly looking at the number of newly-certified 

CDFIs. I think we have, especially this year, done some significant 

outreach, particularly to Latino community organizations as well, 

Latino communities, to really talk about and really encourage them 

to look at our programs and look at the benefits of becoming a certified CDFI. So if I could, I would like to get back with you on the 

list that we have as well of those Latino organizations. But I can 

say this— 

[The information requested by Representative Baca can be found 

on page 177 of the appendix.] 

Mr. BACA. Yes, I know which four exist right now. But beyond 

that, that is only 4 out of 1,200. And yet we are looking at our population being 17 percent total population of the United States, and 

then approximately, will be about 25 percent by the year 2030. So 

if we are lagging behind, we need to begin to start looking at providing the service to an underrepresented community right now. 

Ms. GAMBRELL. That is correct. And our interest is looking at the 

diversity of those pool of organizations that are certified CDFIs. 

And also, of course, we look at the CDFIs and the community that 

15 

they serve. So it is, for us, we want to be sure that the priorities 

are in two areas: that we have a good robust pool of certified 

CDFIs that are serving communities, including Latino communities; but also, the CDFIs that exist already, we want to be sure 

that they are also looking at those communities, identifying the 

needs and then providing products and services. We think that certainly, on one hand, certified CDFIs that already exist are doing 

that again in a very significant way. 

Mr. BACA. Okay, if I may continue my questioning, because my 

time is almost up. I see the yellow light. 

However, we know of other organizations that focus on minority 

business development interest in creating CDFIs that currently 

provide technical assistance but lack appropriate lending facilities. 

Given the value of CDFI small business lending programs, have 

you explored the possibility of accelerating the application process 

or narrowing other requirements like time requirements for financial activity in order to approve or consider those entities that 

would otherwise qualify? 

Ms. GAMBRELL. One of the things that we are doing, Congressman, is that we are continually looking at our internal processes. 

So we have reduced the amount of disbursement time that it takes 

to get awards out. We have reduced the amount of time that it is 

taking organizations to get certified. We think that there is always 

room for improvement and that we can do more. But in many 

ways, we have in this past year, in particular, decreased the 

amount of processing time anywhere between 50 and 75 percent. 

The Fund has a long reputation of working very efficiently and 

quickly to get money out the door, to get funding out the door, and 

we will continue to look for ways in which we can do an even better 

job. 

Mr. BACA. So when should we come back and assess you and 

evaluate to see what processes you have done? 

Ms. GAMBRELL. One of the things that we are putting into place 

in this current round is that we are looking at streamlining our applications, making that a little bit easier for organizations that are 

applying for our funding, cutting down on the amount of paper, 

which is always, I think, a welcome from any organization that is 

applying for funding. We are looking at ways in which we can have 

even greater impact in communities for those organizations that 

are receiving funding from us. So I would ask that you take a second look after this round is through, this current round is through, 

because I think we will clearly see some improvements as well. 

Mr. BACA. Thank you. 

The CHAIRMAN. I am going to ask, by the way, Ms. Gambrell has 

promised to give further information. I noticed in several of the 

statements that we have afterwards, there were some very specific 

proposals made, and so I will ask the Secretary and the Director 

to respond to those to us in writing. There were some specific proposals that we asked for about how to improve, change, some legislative, some administrative, so we will ask you to review those and 

get back to us. 

[Responses to panelist’s proposals can be found on page 165 of 

the appendix.] 

The CHAIRMAN. The gentleman from Georgia. 

16 

Mr. SCOTT. Yes. How does the CFDI— 

The CHAIRMAN. I apologize. We have been joined by a member 

on the other side, the gentleman from New Jersey. 

Mr. LANCE. Thank you, Mr. Chairman. 

And good afternoon to you all. I think it is clear that the Community Development Financial Institutions have been successful in 

bringing greater capital and investment into America’s economically distressed areas. And I cannot imagine that there is a congressional district anywhere in the United States that has not benefitted from your fine work. 

It seems to me that there is general agreement that CDFIs have 

played a constructive role in rebuilding poverty-stricken and transitional neighborhoods and have helped to bring economic opportunity to individuals living in markets considered to be underserved by the financial services industry. Providing access to credit 

and investment capital is a primary step toward creating and retaining jobs, and obviously, creating jobs is what is at the heart of 

our work at the moment in Congress. 

It also revitalizes neighborhoods, develops affordable housing, 

and supports small businesses. And certainly, our goal is for that 

to continue to the greatest extent possible. 

To you, Ms. Gambrell, given the historically large amounts of 

funds distributed by the CDFI Fund in 2009, and the speed of the 

disbursement, do you think that standards for awarding grants 

were in any way modified or lowered in 2009? 

Ms. GAMBRELL. Thank you for the question, Congressman. 

Mr. LANCE. Certainly. 

Ms. GAMBRELL. No, I don’t. In fact, we were very methodical and 

thorough in our review processes for the 2009 rounds. We have 

what is called a triple-blind review process where we get a number 

of outside reviewers with expertise in community economic development issues who come in and read our applications. That goes 

through several other iterations even before recommendations are 

made. That process did not change in this current round, in this 

last round that we had. We continued to be, again, very careful, 

very thoughtful about the process itself and clearly, I think, had 

not only staff in place but outside expertise as well to help us work 

through that process. 

Mr. LANCE. And could you explain in a little greater detail how 

the triple-blind process works? 

Ms. GAMBRELL. Yes. We have three reviewers who are assigned 

to one application. Each of our applications gets three sets of eyes 

on it in the initial phase. Those applications then are reviewed to 

make sure that they adhere to the criteria as set forth with that 

particular program or initiative. The reviewers then make recommendations. Their recommendations are forwarded to a second 

panel that takes a look at their ranking of those CDFIs that have 

come in for funding. A determination is then made from that list. 

The recommendations then move forward to still another round of 

reviews before a team leader is actually able to take a look and 

look at the recommendations and make a final determination. 

I don’t get involved in that process, and I think it is important 

for me to make sure that there is an understanding that this is an 

17 

arms-length process, as it should be, a firewall between that process and those reviewers. 

But when the final recommendation does come to me, those reviewers have taken great care in making sure that there is institutional diversity, geographic diversity, and that the funds are going 

to those organizations that have provided extraordinary comprehensive business plans on how they plan to use the funding. 

Mr. LANCE. Thank you. 

Mr. Barr, do you have any comments regarding that? 

Mr. BARR. I think Director Gambrell handled it very well. Thank 

you. 

Mr. LANCE. Thank you. Would you—there will be a subsequent 

panel, and I think it is probably unfair to ask you about what we 

expect the testimony to be from the subsequent panel, but obviously, on our side of the aisle, we would like you to comment as 

that subsequent panel articulates its point of view. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

The CHAIRMAN. The gentleman from Georgia. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Let me just ask, for the record, how do you target the underserved communities? Is it by something like household income? 

What is that criteria? 

Ms. GAMBRELL. Congressman Scott, we have some very specific 

criteria. We start with the qualifying census tracts, of which there 

are about 25,000 tracts that qualify that are low income, where 

there is high unemployment, high poverty, and look at those, start 

with those census tracts. But in particular, what we are doing as 

part of our outreach is making sure that those CDFIs that are in 

those highly distressed areas are aware of our programs so that 

they can come to us for that funding. And if they qualify, and if 

there is funding available—we have a high demand, as you know, 

for our programs. But if that funding is available, then those are 

the organizations that receive the funding. 

Mr. SCOTT. Very good. Let me ask you this, because I think the 

real central issue that we have to grapple with here is your lack 

of access to capital, so let’s talk about that for a moment. From 

what I understand, you have gotten about $100 million through the 

stimulus, and the Administration is asking for $250 million for the 

appropriation. And then there is something called a New Markets 

Tax Credit. Could you—and that is it. Is that enough? Can you tell 

us if that is enough of access to capital to do what you are doing? 

And if not, we need to know here today what legislative fixes we 

need to do to give you the level of capital you need. 

Mr. BARR. Let me, if I could, Representative Scott, take a first 

cut at that. 

The Administration has requested funding for the New Markets 

Tax Credit of $5 billion in 2010 and 2011. We still haven’t closed 

out the 2010 New Markets Tax Credit extension. 

Mr. SCOTT. But let me ask you something about that, because— 

can you explain what the New Markets Tax Credit is? And especially at a time when all these tax credits—and I don’t know if New 

Markets is different, but these tax credits are losing their value because of the housing stop. Isn’t that a problem? Could you explain 

what those are? 

18 

Mr. BARR. Certainly, Representative Scott. 

So, the New Markets Tax Credit is a bipartisan initiative. It was 

put in place now about 10 years ago. And it is designed to bring 

new sources of private-sector capital for business development, for 

charter schools, for community development in low- and moderateincome rural and urban communities. 

And the way it works is community development entities apply 

to the CDFI Fund on a competitive basis to receive an allocation. 

And they then use that allocation to attract private-sector resources. The tax credit then goes to the investor, and the investor 

gets a tax credit equal to 39 percent of their investment. It is patient capital investment over 7 years. 

So it is a tax credit that is allocated by the CDFI Fund on a competitive basis. And it is then used to build commercial real estate, 

to do small business, to do entrepreneurial efforts in low-income 

communities. 

It has had a more difficult time in the financial crisis. It is one 

of the reasons why we want to be sure that you can use New Markets Tax Credits to offset AMT liability, and that will expand the 

investor base. 

Mr. SCOTT. I see my yellow light coming on, so I don’t want the 

chairman to gavel me before we get to the crux of my question, 

which is: Is that sufficient? Are these sources sufficient? And, if 

not, tell us what you need us to do. 

Mr. BARR. I think the first thing I would say is, let’s get the AMT 

relief and get the $5 billion authority for 2010, let’s get the $5 billion authority for 2011, let’s get the CDFI Fund budget at $250 

million. That would make a huge difference in low- and moderateincome communities around the States. There are never enough resources, and people are hurting. But I think this is a very, very 

strong step. 

Mr. SCOTT. So those legislative fixes, again, would be the AMT 

relief, make sure we get the $250 million that he is asking for, and 

what was the other thing you needed? 

Mr. BARR. And then the 2 years, the $5 billion in New Markets 

allocation authority for 2010 and the same for 2011. That would 

make a big difference in low-income communities. 

Mr. SCOTT. Thank you, sir. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from Texas? 

Mr. GREEN. Thank you, Mr. Chairman. 

Again, I thank the witnesses for testifying. 

So that we can paint a proper picture, is it safe to assume that 

we have some low-income communities that are Anglo? I mention 

this only because— 

Mr. BARR. Of course. 

Mr. GREEN. —the perception seems to exist that this is another 

type of affirmative action program or something that is designed 

specifically for minority communities, which is not the case. This 

has benefited persons across— 

The CHAIRMAN. If the gentleman would yield, a casual observer 

looking at the attendance at the hearing might be inclined to think 

so. 

19 

Mr. GREEN. Well, sometimes the person who is the voice of a program can project an image, too. And I just want to make sure that 

people understand that this has been a great program for people, 

regardless of ethnicity. 

And I really am curious as to why you were successful to the extent that you were when we had the downturn in the economy, 

when we had other banks, community banks and other banks, institutions that were not. Can you give me just some insight as to 

what helped you to weather the storm? 

Mr. BARR. Well, I would say, first of all, Representative Green, 

that a number of low-income communities were badly hit, including 

CDFIs. But many CDFIs had performance records that were better 

than their peers in similar circumstances. And I think that is because CDFIs are used to adversity, and they are used to finding 

creative ways of doing risk mitigation. They are used— 

Mr. GREEN. Let me intercede right there. Let’s have an applesto-apples comparison. Let’s take a business loan. You make business loans, small business loans. And that is a great thing, by the 

way; I commend you for it. Why is it that your small business loans 

were successful in terms of repayment as opposed to small business 

loans that were made by some other institutions? 

Mr. BARR. I think that you are going to hear a little bit of that 

in the second panel from the CDFIs across the country that are 

making small business loans. But it is basically knowing their customer, building relationships, providing business advice and business assistance. It is knowing your community that you are serving. It is finding creative ways of sharing risks with others. 

And I think the strategies are proving effective even in this 

downturn, although, as I said, many low-income communities and 

many business loans are suffering in this downturn for CDFIs. It 

is just that, in many circumstances, they are able to weather a little bit better than their peers in similar circumstances. 

Ms. GAMBRELL. And, Congressman Green, if I may, sometimes it 

is as simple as the CDFI being physically located in that community. As Assistant Secretary Barr said, they know their customers; 

they see their customers day-in and day-out. And so this is a neighborhood that is used to seeing that CDFI, has access to the CDFI, 

knows the people who work there, and there has been a level of 

trust and comfort that has been established and nurtured over 

many years. 

Mr. GREEN. As we move forward, what would you recommend 

that we do here in Congress to assist you such that you can become 

fully capitalized, as is the case with banks? Banks would like to be 

fully capitalized. What would you recommend we do to help you become fully capitalized so that you can meet the demands of the 

market, not make loans arbitrarily and capriciously, but continue 

to make good, solid loans that people will repay and help small 

businesses to grow and flourish and help people to get jobs? What 

would we need to do to help you meet your demands? 

Ms. GAMBRELL. Well, I think the Assistant Secretary has talked 

a little bit about that. Certainly, from the New Markets Tax Credit 

side, there are parts of the program that will continue to be important for us to move the New Markets Tax Credit forward and to 

20 

make sure we have a robust program there. Clearly, even from our 

financial assistance and technical assistance grants— 

Mr. GREEN. I am more concerned about the small business loans. 

The New Markets, I am familiar with, and that deals with areas, 

generally speaking. But small business loans? 

Ms. GAMBRELL. Yes. And so, from our financial assistance and 

technical assistance grants, those grants, in fact, have been used 

to continue to spur small businesses and to help with small business investments. I think that, again, to continue to see the expansion and growth of that program is going to be important to those 

CDFIs that are supporting those small businesses. 

We are also looking at ways on the New Markets Tax Credit 

side, as well, to look at ways in which the tax credits can also be 

used to further support small— 

Mr. GREEN. My time has expired. I yield back. Thank you, Mr. 

Chairman. 

The CHAIRMAN. The gentleman from Missouri? 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Thank you, Mr. Barr. 

And, Ms. Gambrell, I thank you for being with us last Wednesday, the CBC. 

Mr. Barr, when loans are made and Treasury transmits those 

loans to the regulators, how do we know that they know that these 

are high-risk loans? And is there any way in which regulators can 

take that under consideration when they are dealing with the borrowers? 

Mr. BARR. I think that we operate, obviously, a step removed in 

the process, in the sense that community development credit 

unions, banks, and thrifts are directly making the loans. The funds 

from the Treasury are going to support their making those loans. 

We have had an ongoing process with the bank regulators to 

make sure that they are aware that CDFIs are CDFIs. There is, 

I think, enhanced information sharing that Director Gambrell has 

put in place with the bank regulators to ensure that there is a 

timely and appropriate sharing of information consistent with supervisory responsibilities and confidentiality that helps that information process. 

Mr. CLEAVER. Good. Okay, thank you. But what I am wondering 

is whether or not Treasury or Ms. Gambrell’s operation not only 

passes the money through, but if the regulators are going to act as 

they would if—I almost said General Motors, but that a healthy 

corporation is borrowing the money. 

I am not suggesting that, as some folks always suggest, that we 

are telling people to tell the regulators to turn their heads or have 

a blind spot for these. But these are risky loans; we know that from 

the very beginning. And I am interested in how that plays out with 

the borrowers. 

Mr. BARR. There is obviously a separation between the independent regulator role and the role of Treasury and the CDFI 

funds— 

Mr. CLEAVER. I understand. 

Mr. BARR. —so we have been trying to make them aware of the 

basic sets of situations. They have to make independent judgments 

with respect to institutions or loans. 

21 

Mr. CLEAVER. But they tell us they are afraid even right now. 

When we bring in the banks, they say they are going to make the 

loans, but the regulators are telling them that they have to watch 

this and watch that, and so loans are not getting out. 

So if we are doing that with healthy companies, my fear is that 

we don’t get the optimum out of this if we are doing it like we do 

any other loan. 

Mr. BARR. I share your concern. I think that there is a natural 

tendency that you are seeing playing out in the regulatory community. With respect to the economic cycle, it is more severe than it 

usually is, but I hear that concern. 

Mr. CLEAVER. What can we do about it? 

Mr. BARR. I do think that calling attention to the problem with 

the regulators is appropriate. The regulators have gotten together 

to issue guidance on commercial real estate and small businesses. 

My understanding is they are training their field staff in that new 

guidance, which is designed to promote consistency in the treatment of those loans. 

Mr. CLEAVER. Okay. Let’s shift gears. Bank Enterprise Award allocations—it has been zeroed out. This hurts, as I relate it to my 

district, in the community banks, banks that are operating in poor 

neighborhoods or in minority neighborhoods. We have a bank in 

Kansas City, Central Bank on Independence Avenue, and they 

said, this is something that is desperately needed. It has been zeroed out. Can you explain why? 

Mr. BARR. Certainly. As we were setting the CDFI Fund funding 

level, we had to make hard choices for this fiscal year. We wanted 

to explore ways of making sure that the Bank Enterprise Awards 

Program works effectively. I think for institutions that have used 

BEA in the past, it has some cumbersomeness to it that we would 

like to work our way through. 

Many of the community banks that are serving low-income communities can and do apply for CDFI core fund awards, which we 

have proposed to significantly increase under the $250 million request. 

Mr. CLEAVER. Thank you. My time has run out. 

The CHAIRMAN. The gentleman from Indiana? 

Mr. CARSON. Thank you, Mr. Chairman. 

Recent research conducted by Federal Reserve staff regarding 

the work of a CDFI in my district indicates their programs for 

mortgage and credit counseling, homeownership training, loan programs, and post-purchase counseling are able to create borrowers 

who perform significantly than borrowers who do not complete the 

CDFI’s programs. By ‘‘better,’’ I mean that after about 12 months 

their clients have delinquency rates approximately 10 percent 

lower than customers who have not gone through the program. 

The CDFI in my district does this while serving the targeted populations noted by the CDFI Fund in its financial assistance Notice 

of Funding Availability or NOFA. It is an ideal CDFI-type program. It is charitable, with private-sector funds, where they are 

combined with the significant positive leverage of bank capital to 

develop loan pools that finance long-term, stable, fixed-rate mortgages for underserved borrowers in neighborhoods. Yet, CDFIs in 

22 

Indiana have only received approximately $5 million in direct financial assistance since 1996. 

My question is, what can applicants do to highlight the impact 

of their programs and make them more visible and recognized by 

the CDFI Fund during the evaluation process for financial assistance? 

Ms. GAMBRELL. Thank you, Congressman, for the question. It is 

a great question. 

What we find oftentimes, and what we continue to tell those applicants who come to us seeking funding and, quite honestly, where 

we still see some areas where organizations could do an even better 

job is really to talk about the impact that they believe that they 

will have upon communities. There are some that are very shy 

about really promoting the work that they do and talking in very 

specific terms about the impact that their comprehensive business 

plan might have. 

And so one of the things that I would encourage and one of the 

things we continue to encourage those organizations that come to 

us seeking funding is to make sure that they are being very specific 

and very explicit about the community impact, because that carries 

a tremendous amount of weight in the application process and for 

consideration itself. 

Mr. CARSON. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman from North Carolina? 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Chairman. 

My question is not specifically about CDFIs, but about low-income communities generally, and specifically, the foreclosure problem and the problem of underwater borrowers. And, certainly, 

there has been a great disappointment in the failure of the industry of mortgage holders to modify mortgages in a way that makes 

it possible for those in the mortgages, for homeowners, to have underwater borrowers, to give them some equity to protect, to make 

it worth protecting. And, without that, even a modified mortgage 

payment is just expensive rent. 

Obviously, the foreclosure problem continues, and there are 

many who can’t seem to get the mortgage holders to foreclose so 

they could get on with things, at least take the loss and move on. 

One of the problems that we continue to hear with voluntary 

modifications is the problem of second liens, principally second 

mortgages rather than home equity lines of credit. And there seems 

to be an obvious conflict in the interest of the first lien holders and 

the second lien holders. 

But apparently, two-thirds of all servicing is controlled by the 

four biggest banks, which also hold about half of all the second 

liens, between $400 billion and $450 billion in second liens, which 

seems to be an obvious conflict of interest, particularly if the second liens are a large unrecognized loss for those institutions, which 

it appears almost certain that they must be. 

Is the Administration, is the Department of the Treasury pursuing any remedy for that conflict of interest? Have you examined 

whether there is any existing law, State or Federal, statutory, common law, regulation, anything, that could address that obvious conflict of interest? And, if not, are you considering pursuing some 

23 

kind of remedy that would prohibit a servicer from also holding 

second mortgages? 

Mr. BARR. This is obviously a thorny issue. It has bedeviled 

mortgage modification efforts for, really, since the beginning of the 

crisis. I think you are right to focus on the problem of second liens. 

I know Chairman Frank is also quite focused on that problem. I 

believe the committee is going to be having a hearing focused particularly on the issue of second liens. 

I know that we would like to see more action by the banks in 

this area. I think that the action so far has been disappointing. 

We have built into the President’s modification plan a program 

to extinguish second liens automatically when a first lien is modified. We have been encouraging the banks to sign up. We have one 

of the big four signed up thus far. We are hopeful we will get the 

others in, but they are not in yet. 

When that program—once we are able to get those big institutions in, then when a first lien is modified, the second lien would 

automatically be brought into the modification program and either 

extinguish or modify down along with the first lien. 

We are seeing some principal reduction in the modification program, but not as much as we would like. This will help that. Borrowers who come into the program, we are finding that more than 

two-thirds of them are continuing to pay, which is much better 

than prior modification programs. That is encouraging. But we 

need to do more. 

Mr. MILLER OF NORTH CAROLINA. Well, certainly, there has been 

a lot of concern that it will not be long before there will be more 

and more homeowners walking away. Yes, a surprisingly large 

number of homeowners are still paying, and I worry about, kind of, 

the loosening of the bonds of what is considered ethical conduct, of 

just deciding you are going to walk away. But, at some point, don’t 

you think that there will be a significant problem with borrowers, 

with homeowners simply not paying, walking away, renouncing 

their debt, particularly in nonrecourse States? 

Mr. BARR. Well, our judgment, Representative Miller, is that this 

is a critical issue, but we need to be careful or protective of taxpayer concerns. We need to be sure that we are helping responsible 

borrowers who want to stay in their homes. But if there is a borrower who wants to walk away from their home, I am not sure that 

is the moment that we want to step in. We want to focus on the 

responsible borrower who wants to stay in their home, who has suffered some problem. 

Mr. MILLER OF NORTH CAROLINA. Yes. The only point I was making is I feel a sense of urgency—and not saying, well, two-thirds 

are still paying—I feel a sense of urgency that will not remain the 

case. And we need to get ahead of the problem. Well, we are not 

going to get ahead of the problem, at this point, but begin to catch 

up with the problem. 

Fundamentally, do you see that as a conflict of interest, to be a 

servicer for first mortgages while holding a second mortgage? 

Mr. BARR. I do think that, in our financial services sector, there 

are a number of conflicts of interest that are built into the structure of securitization trust and the mortgage financing system. It 

is one of the reasons why we so strongly wanted to pass financial 

24 

reform, why we are pushing really hard to get it done this year, 

because I think we need to set uniform national standards that will 

improve that, going forward. 

We have a problem that is outstanding; we have to figure out a 

creative solution to get there. And that is why we have been looking in the modification effort to do it. 

Mr. MILLER OF NORTH CAROLINA. Yes, I know that there are a 

lot of conflicts of interest. Is that one? Do you think that is one, 

to service the first liens while holding a second lien? 

Mr. BARR. I think that, in some circumstances, there is a misalignment of incentives between the first and the second lien. That 

is one of the examples of that. We have been trying to correct for 

that with our second lien modification program. I agree with you, 

it needs more work. I am encouraged that the committee is interested in looking at it together with us. 

Mr. MILLER OF NORTH CAROLINA. I can’t tell what the lights 

mean now. 

The CHAIRMAN. The red means— 

Mr. MILLER OF NORTH CAROLINA. Well, yes, but I can’t—okay. 

They have been changed. I see that I have no time to yield back. 

The CHAIRMAN. Your time has expired. I am sorry. 

The gentleman from Alabama asked unanimous consent for a 

couple more questions. Without objection, the gentleman from Alabama. 

Mr. BACHUS. Thank you, Mr. Chairman. 

Mr. Barr, Mr. Green was asking you about the performance of 

the loans earlier. And it called to question—I know the testimony 

of one of the witnesses on the second panel is that CDFI banks are 

significantly underperforming peer banks. He says CDFI banks reported a median net loan charge-off rate of 1.11 and a median noncurrent loan ratio of 3.82. By contrast, a peer group for traditional 

banks—and those are banks with less than $2 billion in total assets—reported a net loan charge-off rate of .42 and a noncurrent 

loan rate of 1.71. That would be about a—that would mean that 

the peer group was actually having charge-off of about one-third of 

what the CDFI banks were. 

Now, I don’t know what that—whether we are talking about lowincome communities. Are you familiar with the testimony? 

Mr. BARR. I have not read the particular statistic that you just 

cited to me. But I think there is a question of making sure we have 

apples-to-apples. So, in my response to Mr. Green, I was focused 

on trying to think about a traditional bank making a loan in the 

same circumstances as a CDFI bank and suggesting the reasons 

why a CDFI bank may be more successful in doing that. 

I don’t want to suggest that this is easy to do or that low-income 

communities aren’t hurting. They are. And businesses in them are 

hurting more than generally in the country. 

Mr. BACHUS. Were you saying they are more successful or that 

they may be or if they are? 

Mr. BARR. I was saying if they are serving a similar borrower in 

the circumstances, these are the reasons why they might be so. But 

I certainly have not looked at and examined the statistics that you 

just described. 

25 

Mr. BACHUS. Okay, so we really don’t have those numbers, or do 

we know? 

Mr. BARR. I don’t have the numbers that you just described. 

Mr. BACHUS. Yes, and I would just say this as a follow-up: Maybe 

if there are some numbers available or if the second panel, you get 

the testimony of the witness who says that, if you would kind of 

take a look at it and maybe just respond in writing, or Ms. 

Gambrell. 

Mr. BARR. We would be happy to come back to you on that. And, 

in addition, there have been some studies of the CDFI field and 

where they are successful and where they are not, and we would 

be happy to provide that. 

Mr. BACHUS. Right. That would be helpful. I appreciate that. 

The CHAIRMAN. This panel is excused, and the next panel will 

come forward. 

We will begin with the Enterprise Corporation of the Delta. 

STATEMENT OF WILLIAM BYNUM, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ENTERPRISE CORPORATION OF THE 

DELTA 

Mr. BYNUM. Thank you, Mr. Chairman, Ranking Member Bachus, and members of the committee. Good afternoon. Thank you so 

much for convening this important hearing. And thank you for inviting me to testify. 

As you said, my name is Bill Bynum, and I am the CEO of the 

Enterprise Corporation of the Delta and its affiliate, Hope Community Credit Union, a CDFI. Since we were established in 1994, we 

have generated over $1.4 billion in financing and assisted over 

71,000 individuals in Arkansas, Louisiana, Tennessee, and Mississippi. We work in a region that encompasses the Mississippi 

Delta, the Gulf Coast regions that have been devastated by Hurricanes Katrina and Rita, and what is arguably perhaps the most 

historically distressed region in our country. 

While my comments today will be from my experience as the 

CEO of ECD/HOPE, I also serve as the chairman of the Community Development Advisory Board, which is charged with providing 

counsel to Director Gambrell regarding policies of the CDFI Fund. 

The advisory board, in October 2008, in the midst of this financial crisis, stepped up to initiate a response to the detrimental impact that this crisis was having on the industry and the communities it served. We gathered extensive input from the field, from 

trade associations, foundations, funders, and presented a series of 

recommendations to Director Gambrell that focused on increasing 

CDFI capacity through legislative and statutory actions, on improving the efficiency of the Fund’s certification, award, and reporting 

process, and on ensuring that CDFI programs are being utilized in 

areas of highest economic distress. 

I am pleased that several of the recommendations have been implemented, providing a financial lifeline to thousands of people 

struggling in distressed communities across the country. It is also 

significant that we still have work to do in some of those recommendations. 

Director Gambrell and her staff ought to be commended for expediting funding so effectively over the past year, enabling financial 

26 

assistance in communities faster than ever before. However, in the 

fourth quarter, 56 percent of CDFIs reported increased demand for 

financing due to the deterioration of secondary markets, tightening 

of credit, and smaller State budgets. And CDFIs across the country 

report capital constraints that limit them from responding to the 

increased demand that we are seeing. 

Despite more Federal funding for CDFIs relative to prior years, 

more than 200 high-scoring CDFI applications to the fund, totalling 

$328 million, could not be funded in the last fiscal year. Unfortunately, the impact of the shortfall is often greatest in areas that 

suffer historically from high levels of poverty and a lack of access 

to capital, such as the region in which I work. 

The mid-South region of Arkansas, Louisiana, and Mississippi 

has the highest poverty rates in the Nation. Mississippi and Arkansas have the lowest and third-lowest median family incomes in the 

country. We have a high percentage of unbanked residents compared to other States. High-cost mortgages are dominant in our region. Thirty-seven percent of Mississippi’s population is African 

American, the highest percentage in the Nation. And despite the 

higher concentration of minority residents, we have the lowest 

rates of minority business ownership. That is the primary reason 

the CDFIs are so critical. 

We made several recommendations that we hope that the Fund 

and this committee will consider. The first is to give higher priority 

of CDFI funding in areas of high economic distress. The advisory 

board recommended that the Fund take steps to ensure the programs are being utilized in areas of highest economic distress. And 

we recommend that Congress consider emphasizing this, perhaps 

in a way similar to what was done after Hurricane Katrina, by focusing specific resources on those areas that have highest job loss, 

highest percentages of African Americans, and highest economic 

distress. 

We also recommended that TARP funds be carved out for CDFIs. 

We appreciate the allocation of TARP funds to depository CDFIs. 

As Secretary Barr mentioned, loan funds were not included in this. 

We have made several recommendations to Treasury that we think 

provide funds to loan funds in a responsible manner. And we encourage the Treasury Department and Congress to work with the 

field to implement these recommendations. 

Lastly, I would like to encourage that CDFIs get greater access 

to Federal resources across-the-board. CDFIs are unique in providing services to distressed communities, and it stands to reason 

that we should have access to Federal resources on a par with traditional financial institutions, such as SBA programs, USDA programs, HUD, and others. And because the CDFI advisory board includes representatives of all of these agencies, we would be ready 

to play a role in facilitating this collaboration. 

Thank you. 

[The prepared statement of Mr. Bynum can be found on page 63 

of the appendix.] 

Mr. WATT. [presiding] Thank you for your testimony. 

Mr. Moncrief, you are recognized for 5 minutes. 

27 

STATEMENT OF L. RAY MONCRIEF, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER, KENTUCKY HIGHLANDS INVESTMENT CORPORATION 

Mr. MONCRIEF. Thank you, Mr. Chairman, and Ranking Member 

Bachus. Thank you for the privilege and the opportunity to testify 

on the CDFIs and the work that we are doing at Kentucky Highlands Investment Corporation in Kentucky. 

I, too, am a member of the CDFI Advisory Board, and I perform 

as the chief operating officer of Kentucky Highlands. I have been 

a practitioner in the area of community economic development for 

32 years. And I do the work that I do in Appalachia, which is a 

severely rural, distressed area of our Nation. 

I want to communicate that CDFIs do fill a vital niche in our financial services for areas that are highly distressed and are lowincome. 

Kentucky Highlands has been around since 1968 and provides a 

whole series of equity products and debt products to businesses 

that are looking to start, looking to expand, and looking to stabilize. Just for an example, Kentucky Highlands has invested more 

than $165 million in more than 500 businesses since its inception 

and deals with unemployment rates somewhere in the 15 percent 

range. 

The Kentucky Highlands service area, indeed, is rural and is frequently overlooked by traditional capital sources. We know that 

there are specific unique needs in our service area that we target 

with the CDFI Fund, and we have been able to greatly improve the 

quality of life of many people. 

An example: A company named Patriot Industries in a very severe low-income area 12 years ago began with 15 employees. We 

invested equity and provided various forms of debt and operational 

assistance to that company. Today, they closed their fiscal year 12/ 

31/09 with 545 employees and was very profitable and have 

plugged $33 million of payroll into that community over the last 

several years. 

One of the questions that Congressman Scott asked of the earlier 

panel was what would happen if we weren’t there? An example is 

that in London, Kentucky, there was a small business that did 

metal stampings and did powder coating and those sorts of things. 

When the financial crisis hit, the regional banks were looking at 

those companies that were on the bubble, and they asked this particular company to find its financing elsewhere. They came to us, 

and we syndicated a $2.5 million revolving line of credit for this 

company, a company that does about $40 million in revenue and 

have preserved 220 jobs. 

We, in our practice, have found that saving jobs in low-income 

communities is far more robust than trying to create jobs in lowincome communities. The demand for our services has spiked as a 

result of this financial crisis that we are in. 

One of the things that I would like to suggest to the committee 

is that the American Recovery and Reinvestment Act superseded or 

laid to the side the need to have matching funds when a CDFI was 

seeking a financial assistance grant. I would urge the continuous, 

at least through this existing fiscal year or the coming fiscal year, 

28 

of the waiver of that match. Finding matching funds for an FA 

grant from the CDFI Fund is almost nonexistent. 

One of the things that I want to leave with the committee is that 

the CDFI community is a very robust network of highly committed, 

on-the-ground financial executives and professionals who know how 

to invest in low-income communities because we live in the low-income communities. 

One of the things that we do is provide a high degree of technical 

assistance to these businesses. And, as such, we have found that 

our underwriting, coupled with the technical assistance and living 

with these businesses, has resulted in high performance on the 

part of these loans. 

I want to thank the committee for the privilege to testify today, 

and thank you very much. 

[The prepared statement of Mr. Moncrief can be found on page 

108 of the appendix.] 

Mr. WATT. Thank you so much for your testimony. 

Ms. Barrera, you are recognized for 5 minutes. 

STATEMENT OF JANIE BARRERA, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, ACCION TEXAS-LOUISIANA 

Ms. BARRERA. Thank you very much for the opportunity to speak 

today. 

ACCION Texas is the Nation’s largest nonprofit micro lender. We 

began our history in 1994, and we have a record of sustained 

growth in size and footprint. Our mission as a nonprofit organization is to provide credit to small businesses that do not have access 

to credit from traditional sources. 

Over our history, we have been significant beneficiaries of the 

CDFI Fund. Since 1996, the Fund has awarded ACCION Texas 

$6.8 million in a combination of grants and loans for loan capital, 

all of which were deployed, on the average, within 24 months of receipt. These funds have been essential in our expansion beyond our 

initial office is San Antonio to 14 offices across the States of Texas 

and Louisiana. 

Eighty-two percent of our small-business owners are minorities, 

and 49 percent are women. We have disbursed over 10,000 loans, 

totaling $94 million, to over 7,000 small businesses in our market. 

The average loan size is $14,000, and the average credit score of 

one of our customers is 575. We have a historical loss rate of 6 percent. Funds disbursed directly resulted in the creation of 2,200 jobs 

and the retention of 4,000 more. 

The importance of the CDFI Fund in maintaining this level of 

performance becomes even clearer in challenging economic times, 

when funding from other sources is often reduced or curtailed. The 

recent economic downturn has had a substantial impact on our activities, both positive and negative. Over the last 40 months, we 

have disbursed an average of $1 million every month. New loans 

originated increased in 2009 to a record $16 million with overall 

portfolio growth of 20 percent, to $26 million. 

We have used our portfolio repayment experience, along with appropriate credit underwriting standards, to develop a proprietary 

underwriting platform to evaluate loan requests. We use this platVerDate Nov 24 2008 17:53 Jul 21, 2010 Jkt 056770 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 K:\DOCS\56770.TXT TERRIE
29 

form to support the CDFI industry. We underwrite and perform the 

backroom services for 13 other CDFIs throughout the country. 

Despite the consistent 20 percent annual growth in our portfolio, 

the ever-increasing demand for our services and the associated 

costs continue to provide challenges from a liquidity perspective. 

We continue to maintain a heavy reliance on fund raising to support our growth. A current example is our pending $2 million CDFI 

Fund request to provide loan capital for continued expansion in 

Louisiana. We opened up our first Louisiana office in New Orleans 

in April of 2009. 

At the State level, I would like to give an example of a State program that is no longer active because the fund sits empty. It is 

called the Texas Capital Access Program, TCAP. TCAP was established during the 1997 legislative session. The State fund helps 

banks and CDFIs establish loan loss reserve funds for increasedrisk loans. The program is available to businesses of up to 500 employees. The TCAP fund helped us disburse 830 loans, totaling over 

$5 million, costing the State $93 per job. In 2010, when there were 

more people needing access to capital, ACCION Texas-Louisiana 

and other CDFIs are positioned to provide funding to those waiting 

for loans if the dollars are available to lend. Again, this fund is inactive because its fund sits empty. 

It is our hope that recent Federal efforts to increase the flow of 

funds to small businesses, such as loan guarantees or other stimuli, 

are extended to CDFI intermediaries like ACCION Texas-Louisiana. While recent efforts to encourage community banks to provide more loan capital to small businesses are certainly welcome, 

the importance of CDFI intermediaries as an alternative growing 

funding source warrant the inclusion in these programs. As noted 

earlier, we get the money out on the street. 

Additionally, given the urgency of demand and the desire to more 

quickly stimulate an economic recovery based in part on small 

business growth, I suggest revisiting the CDFI Fund application 

and evaluation process to identify opportunities to streamline and 

quicken the process, especially for prior beneficiaries with a proven 

successful track record with CDFIs. 

Our requested action steps to improve the CDFI funding process 

are to: extend a higher level of funds for the program; adjust the 

funding schedule to allow for more frequent distribution than annually; modify fund restrictions and caps to better accommodate 

proven fund performers; and establish a loan guarantee fund for 

CDFI intermediaries using State programs like the ACCION Texas 

Capital Access Program. 

It is my hope that this commentary will prove to be beneficial as 

you evaluate the current state and the potential revisions of the 

CDFI Fund. We are very grateful to have had the opportunity to 

speak today. Thank you. 

[The prepared statement of Ms. Barrera can be found on page 49 

of the appendix.] 

The CHAIRMAN. And I now ask, if there is no objection, to insert 

into the record the National Community Investment Fund study, 

the CDFI Banking Sector 2008 Annual Financial and Social Performance. Without objection, we will make that a part of the 

record. 

30 

Now, we will now hear from Ms. Dorothy Bridges, president and 

chief executive officer of City First Bank of DC. 

STATEMENT OF DOROTHY BRIDGES, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, CITY FIRST BANK OF DC 

Ms. BRIDGES. Good afternoon, Chairman Frank, Ranking Member Bachus, and members of the committee. Thank you very much 

for inviting me to discuss the important work of CDFI in the context of this current economic crisis. 

As the chairman mentioned, I am Dorothy Bridges, CEO and 

president of City First Bank of DC. We are a regulated commercial 

bank and a community development bank. We are also a certified 

CDFI that serves the Washington, DC, metro area with a focus on 

low-income communities. 

In 2009, there were 62 certified CDFI banks with over $17 billion 

in aggregate total assets and a median size of $163 million. We account for less than 10 percent of the total number of CDFIs but 

represent more than 50 percent of the total assets of that sector. 

We target at least 60 percent of our business activity to low- and 

moderate-income, LMI, communities. As depositories, we use our 

equity capital to raise 8 times the amount in deposits to support 

the direct lending that we do. 

Our lending has had a ripple effect far beyond our direct customers because it sparks further revitalization. As an example, Columbia Heights is a DC neighborhood that was abandoned by commercial and retail businesses for 40 years. In 2005, City First Bank 

invested $14.5 million in New Markets Tax Credit allocation to restore the Tivoli Theatre, which was an anchor for a mixed-use 

project that included a grocery store, housing, commercial, and retail space. The project created jobs for local residents, restored the 

property to the tax base, and sparked a new round of commercial 

and residential investment in that neighborhood. 

We believe our communities deserve the same economic opportunities as the mainstream communities and that credit is essential 

for recovery. Due to the past disinvestment, our communities are 

more challenging and more expensive to serve than others. Products are often customized, loan sizes are smaller, and higher loan 

loss reserves are often needed. Harsh economic times like this only 

makes this worse. 

While predators have fled the neighborhoods, we remain ready to 

serve the neighborhoods. Loan demand is strong, but the extended 

recession has left some CDFI banks unable to fully respond to demand due to the portfolio and regulatory challenges. 

Liquidity is also a challenge for us, as regulators classify reciprocal CDAR deposits as brokered despite strong evidence that they 

are a stable source of CDFI funding. 

Finally, encouragement by regulators to maintain higher capital 

ratios raises the bar for us. For our communities, this results in a 

tightening of credit and a suppression of economic activities. 

City First Bank has had a profitable year in 2009, but we are 

still adversely impacted, as the downturn has devastated our 

neighborhoods and threatens the gains we have worked for over 

the past decade. The CDFI Fund is an invaluable partner to us. 

Without it, our bank would probably not exist. 

31 

Beginning with an initial CDFI investment in 2000, we have participated in the Bank Enterprise Award, CDFI Financial Assistance, and New Markets Tax Credit programs. We have grown from 

a zero base to $156 million in total assets and have averaged over 

the last 2 years $30 million in lending, mostly to small businesses. 

My recommendations to the committee to help support the important work of CDFI banks are: one, support the Community Development Financial Institution Coalition request for $300 million 

in Fiscal Year 2011, including the restoration of funding for the 

Bank Enterprise Award program; two, provide oversight to ensure 

that the community development capital initiative program maximizes the participation by insured CDFIs and provides capital in 

an expeditious manner; three, help to support our efforts to count 

CDARS reciprocal deposits as core deposits; and four, recognize 

that the CDFI Fund’s programs are sound, well-designed, effectively implemented, and highly impactful in needed communities as 

you consider reauthorization. 

Thank you very much for letting me share CF Bank’s story. We 

look forward to working with the committee to ensure lower-income 

communities are not left behind in this recovery. 

[The prepared statement of Ms. Bridges can be found on page 52 

of the appendix.] 

The CHAIRMAN. Thank you. 

And next, we will hear from Ms. Tanya Fiddler, who is the vice 

president for programs and operations for the First Nations 

Oweesta Corporation, Cheyenne River Reservation. 

STATEMENT OF TANYA FIDDLER, VICE PRESIDENT OF PROGRAMS AND OPERATIONS, FIRST NATIONS OWEESTA CORPORATION, CHEYENNE RIVER RESERVATION 

Ms. FIDDLER. Thank you, Chairman. 

‘‘Mitakuyapi, Tuktel He Najin Oyate Wiyankapi Win Lakota 

emaciyapi na Tanya Fiddler English emaciyapi, k’sto.’’ 

To all of you, my Lakota name is, ‘‘She Stands Where the People 

Watch Her Woman,’’ and my English name is Tanya Fiddler. I am 

an enrolled member of the Cheyenne River Sioux Tribe. And I have 

run a nationally recognized Native CDFI in Eagle Butte, South Dakota, for the past 10 years. As the chairman said, I have recently 

taken a position as vice president of programs and operations at 

First Nations Oweesta Corporation in January, and I am the cochair of the newly formed Native CDFI Network. 

Let me begin by saying ‘‘Pilamaya ye,’’ thank you for the opportunity to appear before you on behalf of Oweesta and our Native 

communities throughout the United States, including Alaska Native and Native Hawaiian communities, some of the most impoverished communities in our country. 

I have come here today to be a witness to the unique role that 

CDFIs play in Native communities and have included their innovations and successes in my written testimony, so I hope that you are 

able to see those. I have also included recommendations to continue 

the momentum of the Native CDFI industry in alleviating poverty 

and our double-digit unemployment rates, recommendations like 

giving the Native initiatives a permanent place in the Fund’s authorizing statute. 

32 

Oweesta is a certified national Native CDFI intermediary that 

provides training, technical assistance, and investments to help 

Native communities across the country establish sustainable, vibrant, and healthy economies. Self-sufficiency, wise resource management, and entrepreneurship are all traditional Native values. 

And over the last decade, Oweesta has been leading the movement 

to renew these values in modern Native communities. 

The movement we are part of is greatly enhanced by the support 

Native communities have been receiving and will continue to receive from the CDFI Fund’s Native Initiatives Program, and I have 

a little history on it. In 1999, the CDFI conducted the Native 

American lending study that examined access to capital and financial services in Native communities and identified 17 barriers to 

Native economic development. The CDFI Fund responded by 

launching the Native Initiatives program in 2002—this, in and of 

itself, an innovation and success that has spurred our work at 

Oweesta to develop national CDFIs and provide critical funding for 

training and lending to Native CDFIs on the local level. To date, the CDFI Fund has made 220 awards totaling $46 million to Native CDFIs, including Oweesta, serving over 100 impoverished Native communities. At the time the Native initiative was 

launched, there were nine certified Native CDFIs. Today, I have 

just added two, there are 57 Native CDFIs. So the growth in the 

industry has been incredible. 

Why is the CDFI Fund’s role so important? It is because Native 

CDFIs are the leading source of capital for small business, homeownership, and asset building in reservation communities that historically have not been served by mainstream financial institutions, 

making them great targets for predatory lenders that have been 

happy to fill that void. 

One of the areas where Oweesta has done extensive work is the 

Cheyenne River Indian Reservation. The reservation encompasses 

Dewey and Ziebach counties, two of the poorest counties in America. In 2000, 80 percent of the Cheyenne River population was Native American, but less than 1 percent of the businesses were Native-owned. This disparity provided immense opportunity for the 

start-up of Four Bands Community Fund, a Native CDFI that provides entrepreneurship and asset-building services to the reservation. 

I am here to say that communities on my reservation, like many 

other Native communities with the Native CDFI, are experiencing 

real changes. We are replacing poverty with entrepreneurship and 

financial literacy skills. Having recently been the executive director 

of Four Bands, I would like to share a story to demonstrate the effect of the CDFI’s programs and what they are doing to help play 

a role in getting people on the Cheyenne River Reservation out of 

poverty. 

Four Bands began lending in 2002, and one of our first $1,000 

micro loans went to an unemployed tribal member who completed 

our business training class and wanted to start a plumbing and 

heating business. He needed to put tires on his truck so he could 

travel to jobs. We made the loan, and he was on his way. 

In 2006, D&D Plumbing and Heating was able to access a 

$200,000 loan from an authorized lender with an SBA guarantee— 

33 

which is a rarity, to see SBA guarantees in Indian country, as 

well—in order to construct a building and a machine shop. He was 

employing five to seven tribal members and was partnering with 

Four Bands to provide some youth entrepreneurship internship opportunities in our community, as well. 

Early in 2009, the effects of the recession started to hit Cheyenne 

River, and D&D came back, asking for help. We were able to take 

the loan on, and help them preserve their business—I see I am out 

of time. 

The CHAIRMAN. Don’t worry about the time. 

Ms. FIDDLER. Well, then I will finish my story. 

The CHAIRMAN. Yes, keep going. 

Ms. FIDDLER. He contacted us, asking for assistance. We took the 

loan back, brought it in-house, helping to preserve their business 

credit. We provided financial and marketing assistance to his business in order to help him get through this economic downturn. 

To date, Four Bands has trained nearly 2,000 people in personal 

finance and entrepreneurship skills. Many of them are youth. We 

have distributed $1.5 million to micro, small business, and credit 

building loans; committed $230,000 in match savings for individual 

development accounts for asset building; have supported over 70 

new businesses, new and existing businesses, creating 150 jobs; 

and have rehabilitated 30 store fronts. We have a water shortage, 

and we are not able to have new construction. We have also worked 

with the Cheyenne River Sioux Tribal Government to make policy 

improvements that support private business and personal financial 

skills among our members. 

I conclude by saying that the Native communities have come a 

long way. Ninety-five percent of our services serve exactly the lowincome community. 

On behalf of our communities, I say, ‘‘Wopila Tanka,’’ with great 

thanks, to the Fund for all it has accomplished and to the current 

Administration and Congress who have supported Native economic 

development by securing the Native Initiatives as a line item in the 

2010 and 2011 budget. 

And, again, thank you. 

[The prepared statement of Ms. Fiddler can be found on page 73 

of the appendix.] 

The CHAIRMAN. And, finally, Judy Kennedy, who is the president 

and chief executive officer of the National Association of Affordable 

Housing Lenders. 

Ms. Kennedy? 

STATEMENT OF JUDITH A. KENNEDY, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, NATIONAL ASSOCIATION OF AFFORDABLE HOUSING LENDERS (NAAHL) 

Ms. KENNEDY. It is great to be here talking about such successful 

investment. 

The Nation’s leading mission-driven nonprofit lenders for affordable housing—two of my favorites happen to be in Massachusetts 

and Alabama—are here today to talk about how much more we 

could do to help sustain our Nation’s economic recovery with more 

construction private-sector jobs if we only had more capital and liquidity. 

34 

NAAHL’s mission is to increase the flow of private capital lending and investing in low- and moderate-income persons and areas. 

We represent 100 organizations in moving private capital to those 

in need. This ‘‘who’s who’’ of private-sector lenders and investors 

includes major banks, blue-chip nonprofit lenders, CDFIs, and others in the vanguard of affordable housing. Seventy percent of 

NAAHL’s nonprofit lender members are CDFIs, and the rest are 

high-performing mission-driven organizations. 

Main Street loan demand has dramatically increased for financing affordable multi-family rental housing over the past 2 years 

and for the small businesses, the Ma and Pa landlords that drive 

the economies of our local communities. But successful missiondriven nonprofit lenders are struggling more than ever with the 

need to find capital and liquidity to meet the demand both in 

urban and rural markets to close the existing gap. 

The bottom line is that experienced mission-driven nonprofit 

lenders seem to be the victims of their own success. They have few 

troubled assets. Most have never had a loss on a loan. If they have, 

they count their losses in basis points. So the crisis has obscured 

their unique contributions and their unique ability to help turn 

this economy around. 

Our nonprofit lenders finance affordable housing that families, 

seniors, and the disabled are proud to call home. And they also preserve expiring portfolios of Section 8 project-based contracts in 

places as diverse as Massachusetts, New York, Alabama, California, Illinois, Oregon, and the Carolinas. 

Recognizing these nonprofits’ important mission and stellar track 

records, throughout the crisis, their bank investors have honored 

their traditional commitments to these loan funds. This private 

capital has enabled the lenders to continue to finance preservation 

and construction for Main Street and businesses in their States. 

But because the demand has so outstripped the supply, we have 

the following specific recommendations to increase lending on Main 

Street and financing for affordable multi-family rental housing— 

two things you could do today and two things that could take a little longer. 

Number one, expand the Treasury’s 2 percent capital initiative 

to nonbank CDFIs. The Federal Housing Finance Agency has just 

completed an extensive rulemaking process that hopes to equate 

nonbank CDFIs with current standards for CDFIs, and I think that 

is a great place to start. The Emergency Economic and Stabilization Act was enacted to restore the flow of credit to small businesses with a primary purpose to promote jobs and economic 

growth. We think now is the time to utilize that authority. 

Number two, something else you could do today is to increase access to the capital markets for Main Street borrowers through the 

GSEs or other government programs. Fannie Mae and Freddie Mac 

continue to be AWOL in financing the landlords of small multifamily properties on Main Street. Our nonprofit lenders—again, 

the ones who have no losses or losses of under 1 percent—currently 

hold more than $1.5 billion in seasoned, performing, low-balance 

multi-family mortgages. Replenishing these loan funds would spur 

thousands of private-sector jobs just in 2010. 

35 

Two things that could take a little longer: Update the Treasury 

Department’s CDFI Fund regulations for a variety of purposes. For 

example, in the Carolinas, the Community Investment Corporation 

of the Carolinas doesn’t qualify for CDFI funding because their 

parent organization, the State Bankers Association, can’t document 

that 60 percent of their mission is for low- and moderate-income 

people. But 100 percent of CICCAR’s mission is for low- and moderate-income people, so we think you need to update the definition. 

You also need to update the 2003 regulation changes that caused 

almost all of NAAHL’s CDFI members to no longer be eligible for 

funding. They are outdated. They reflect a Federal priority in 2003 

that should not be governing 2010 and 2011 decisions, so we urge 

that you do that soon. 

Finally, a national insurance program offering protection against 

the top loss on multi-family, affordable rental properties could go 

a long way in terms of expanding the pool of potential investors 

and replenishing the supply of funds to lend. 

In the State of New York, something called SONYMA, the State 

of New York Mortgage Agency, insures the top 20 percent loss on 

all qualifying multi-family mortgages. This has induced Freddie 

Mac, pension funds, and the Archbishop of Brooklyn to invest in 

these loans, which they say for 2008 were some of the best investments they had at 6 to 7 percent. 

What impact could each of NAAHL’s 25 nonprofit lenders make 

if they had the means to finance just a hundred more affordable 

apartments in 2010? Based on what the Home Builders tell us 

about estimated 1-year impacts, if each of these 25 across the country just did a hundred units more, it would generate—it is amazing—$198 million in local income. It would generate 3,050 jobs. It 

would generate $21 million more in revenue for the local governments. 

We think now is the time to expand the program to allow at least 

each of these 25 to create the jobs in the construction activity we 

know is critical to recovery. The main financial rescues of the past 

18 months have eclipsed the strong performance of these lenders. 

We appreciate your strong interest in increasing loan availability 

and jobs on Main Street and look forward to supporting your efforts. 

[The prepared statement of Ms. Kennedy can be found on page 

98 of the appendix.] 

The CHAIRMAN. Ms. Kennedy, I will begin with you. And I did, 

as you heard, ask the Administration to look at those, and your 

specifics were among those I had in mind. 

With the exception of an insurance fund, it would seem to me 

you were talking about things that all could be done without legislation. Is that accurate? 

Ms. KENNEDY. Yes. I am not sure about all of our CDFI Fund 

recommendations, but I believe most of them stem from— 

The CHAIRMAN. All right. If you would you boil that down and 

send a copy to us, and we will forward it, according to which could 

be done by regulation and which not. 

The last, an insurance fund, clearly would be legislative. And I 

would say to you at this point, we will put that one aside for now 

because we will be having hearings on the 23rd and we will begin 

36 

a process that Members on both sides have been calling for to reorganize housing finance in America. And what you were talking 

about there clearly belongs in housing finance. 

And let me ask, when you talked about that insurance, is that 

for subsidized—well, obviously, it is a form of subsidized—is there 

an affordability limit there, is there a rent limit or an income limit 

on the projects that are eligible for that? 

Ms. KENNEDY. Because it is New York, almost all the projects 

are subsidized. And there is an affordability— 

The CHAIRMAN. Well, in your proposal for the national fund, 

would there be a limit on the rents charged and the income of the 

eligible participants? 

Ms. KENNEDY. Yes. The standard that we have used is the typical Section 8 standards. So, for example, in Chicago they can do 

preservation of affordable housing without subsidy, but they rent 

to— 

The CHAIRMAN. I didn’t ask you about Chicago. I asked you what 

your proposal is. 

Ms. KENNEDY. Yes, our proposal would be Section 8 eligible tenants— 

The CHAIRMAN. That if people were building— 

Ms. KENNEDY. Under 80 percent of varying median income— 

The CHAIRMAN. So if they were building for people who were 80 

percent of median or below, they would be eligible for that insurance fund. It is just something I would say we would ask you to— 

you will resubmit that to us when we have a broader hearing. 

And on the others, there are obviously varying degrees of difficulty, but they did sound—you send us the list; we will look at 

it. You can also send it to Treasury, and we will at least get some 

responses. 

The gentleman from Alabama? 

Mr. BACHUS. Thank you. 

Ms. Barrera, you know, the hill country of Texas used to have 

a high rate of poverty. Does it still? Does it still stand out demographically, or what is the situation? 

I am talking about 30 years ago. I was stationed at Fort Sam. 

Ms. BARRERA. It is still, but that is probably a faster growing 

community now. And I would say it is the people in south Texas 

who are hurting the worst. They are the ones that are at high poverty ratios. Again, there are still the unincorporated areas, no zoning and so on. So that is really our—the border of Texas is really 

the highest. 

Mr. BACHUS. I guess with the agriculture, it is not as important, 

so it obviously wasn’t a great place to raise crops. 

Ms. BARRERA. That is right. 

Mr. BACHUS. Mr. Moncrief, I have part of Appalachia in my district. The poverty level there—and I know, Mr. Bynum, I know the 

Mississippi Delta is just a tremendously poor region, I guess Mississippi, Louisiana, and Arkansas. Appalachia is not to that extent, 

I guess, is it? But what is the situation there? 

Mr. MONCRIEF. Congressman, when you look at the Appalachian 

Mountains of eastern Kentucky, there are some of the counties that 

approach 30 percent poverty. 

37 

So, the landscape is very, very drab. Just the geography doesn’t 

lend itself to acres of flat ground, if you will, to build businesses. 

We, in eastern Kentucky, use the word ‘‘entrepreneurship’’ as the 

salvation of people working in eastern Kentucky. When you look at 

the population of eastern Kentucky and Appalachia, and certainly 

Appalachia, Alabama, compare that to the Delta of Mississippi, 

Louisiana, Arkansas; we are looking at the same situation. We all 

face the same sorts of poverty levels and use exactly the same 

tools, which really is the reason why this program is so vital. 

Many times, we have an almost absence of access to capital. But 

for organizations like ours, many people don’t want to move into 

rural parts of Louisiana, Mississippi, Arkansas, Kentucky, or Alabama to do the service delivery of financial tools that are necessary. So we are faced with stark poverty where we are. 

Mr. BACHUS. Thank you. 

I know in Alabama we have—the parts of Birmingham that are 

the inner city that are—but there is that same hopelessness and 

lack of opportunity in many rural parts of our country. I know 

Geoff Davis, who was a member of this committee for years, was 

a very good advocate for that program. I think he realized what 

Mr. Green said, that it is no respecter of color. The Rosa Parks, the 

Alabama Multifamily Loan Consortium, can you tell me a little bit 

about that? Is it in Montgomery? 

Ms. KENNEDY. I am not sure. 

Mr. BACHUS. I would assume that it is. 

Ms. KENNEDY. I think it is. Twelve years ago, the Housing Finance Agency of Alabama approached the Alabama Bankers Association and said, we need some entity to finance tax credit low-income housing in Alabama. So, much like the Carolinas, or New 

York, or Massachusetts, the State banking association worked with 

the State housing finance agency. So now, we have 53 banks in 

Alabama that, every year, invest in affordable rental housing. They 

pool their money. They diversify their risk. The same thing is true 

in California. 

And in that process, they finance with long-term, fixed-rate mortgages, all of the tax credit properties, all of which are eligible to 

under 60 percent of area median income. Rosa Parks is for seniors 

and disabled, the first affordable rental of that type in the State. 

Mr. BACHUS. And those facilities, in appearance and everything 

else, they are very desirable. 

Ms. KENNEDY. You wouldn’t know it had any subsidy attached to 

it, and sometimes that is the goal. These are units people are proud 

to call home and which are often near their families. 

Mr. BACHUS. Is that the one, what was the CDFI in Alabama you 

were— 

Ms. KENNEDY. Unfortunately, our Alabama consortium is not a 

CDFI. Truth in labeling, the complexity of qualifying for that certification, and I am just going to be honest with you, somebody said 

it earlier; when you are surviving as a nonprofit, you sometimes 

can’t afford to invest in other resources. I have no doubt that Alabama will apply for certification some day. But I think we need to 

streamline the application process first. 

Mr. BACHUS. Okay. Thank you. 

Ms. WATERS. [presiding] Thank you very much. 

38 

Ms. Kennedy, according to your testimony, CDFI fund rules need 

to be updated, including the need to prioritize leveraging public 

subsidy with private capital to increase multifamily affordable 

rental housing projects. Can you describe in more detail the need 

for more leveraging and how this would help your members and 

low-income communities in general? 

Ms. KENNEDY. Sure. In 2003, the prior Administration decided to 

prioritize single-family homeownership and investments in lending 

in certain areas. The challenge for nonprofit multifamily lenders 

has been that these reflect Federal priorities and not local priorities. 

So, again, back to Alabama, the lender doesn’t decide where 

those properties go. The State Housing Financial Agency allocates 

Low Income Housing Tax Credits according to the State’s own priorities. So if we were to go back to the pre-2003 regulations, for example, that did reflect the ability to leverage and the application 

process, did reflect responsiveness to local needs; I think we are 

down to only two of our nonprofit lenders that can qualify for funding. We could expand the pool enormously. 

Ms. WATERS. Thank you very much. 

Mr. Mel Watt? 

Mr. WATT. Thank you. 

Mr. Bynum and Ms. Bridges, I think both of you touched on a 

point that I wanted to pick up on. Mr. Bynum first, I didn’t realize 

that this new program that the President just announced didn’t include, or I guess I never focused on it. I would have asked the first 

panel why non-insured depository institutions were not included in 

that. Can you give me a little history on that? Is there some possibility that they will include it? Or what can we do to expedite that? 

Mr. BYNUM. We certainly hope that will be the case. We have 

worked with the Administration, with the Office of Financial Stability for several months now, and industry representatives have 

presented recommendations for including nondepositories in the 

TARP program. 

Mr. WATT. And what is your perception of their reaction to that? 

Are they supportive, do you think or— 

Mr. BYNUM. I think the easiest path, and that is relatively 

speaking, was to piggy-back on the previous structure that worked 

with depositories and relied on the insurers to help do the due diligence and the qualifying of who is viable and can handle TARP 

funds. 

Mr. WATT. But CDFIs have been vetted pretty aggressively to get 

through the process. The only difference there is you are not insured, and I guess the banking institutions are insured, so that reduces the risk some, I suppose. 

Mr. BYNUM. That is right. And there is a third party regulator 

that helps vet additionally. We feel that loan funds go through a 

certification that is rigorous by the CDFI Fund. The CDFI Fund 

will need additional resources in order to monitor the additional 

entities that got TARP funds, but that was our recommendation, is 

that the CDFI Fund play the role of the regulator and monitor 

those loan funds. 

39 

Mr. WATT. Okay. We will try to pick up. Give us as much information as you can about that, so maybe we can get a coalition of 

people who can push the Administration on that issue. 

Mr. BYNUM. Mr. Watt, I would like to mention that there is a 

great opportunity, there are over 30 loan funds that have new markets allocations with over almost a billion dollars that cannot get 

debt that could be leveraged if loan funds had access to TARP 

funds. 

Mr. WATT. Give us some information on that, too. We will try to 

push it. But it won’t help if the ones who are eligible for this new 

fund or new funding don’t use it. 

So, Ms. Bridges, you fit in that other category. You heard me ask 

the first panel about whether this was going to be aggressively 

used by the insured depository institutions who are eligible for it. 

Do you think this is a robust enough program that you and other 

banks similarly situated, other than the uninsured ones that I just 

got through talking about; are you going to use it? 

Ms. BRIDGES. Representative Watt, thank you very much for that 

question. Without a doubt, the Community Development Bankers 

Association that represents the 62 certified CDFIs, bank certified 

CDFIs, have been lobbying pretty hard for this. It is certainly very 

cost effective for us. We tend to have greater operating expenses 

than traditional banks. And it also offers us an opportunity to have 

that kind of cushion for a longer term than in the past. And certainly, this is something that our, my colleagues have been lobbying to have on the table for us to be able to spur our additional 

lending in that area. 

Mr. WATT. So are there any impediments in there? What about— 

I saw something in the paperwork I was given that says you can’t 

pay dividends. You can’t pay dividends to your existing stockholders, or, and maybe I was misreading it. Is that an impediment? 

Ms. BRIDGES. You are correct. For the CitiFirst Bank, it is not 

an impediment. We currently do not pay dividends. Most of our 

stock shareholders are public institutions or institutional investors 

where we currently do not— 

Mr. WATT. Some of these entities do pay dividends to their stockholder companies. 

Ms. BRIDGES. Yes. And there are a number of institutions that 

are also CDFIs that were awarded the original TARP program, and 

they have, in many cases, withheld dividend payments to some of 

their shareholders. For the most part, they have worked around 

that as an issue. That still is a little bit of a stumbling block for 

some of us. 

Mr. WATT. Thank you so much for your testimony. It has been 

great to hear some good experiences out there in the community, 

even though they need to be replicated and expanded. Thank you. 

Ms. WATERS. Thank you very much. 

Mr. Green? 

Mr. GREEN. Thank you, Madam Chairwoman. 

Ms. Barrera, good to see you again. And of course, I know of your 

good works in Texas. You mentioned streamlining the process, and 

you talked about prior beneficiaries. Would you give us a further 

explanation in terms of how it would be beneficial to have the apVerDate Nov 24 2008 17:53 Jul 21, 2010 Jkt 056770 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\56770.TXT TERRIE
40 

plication process benefit prior beneficiaries who have a good track 

record? 

Ms. BARRERA. Thank you, Representative Green. 

Yes, the fact that the customer comes in is not a problem to us, 

and we have customers coming in and applying. Our problem is the 

liquidity. So if you have an organization that has a good track 

record, a good track record of deployment, not sitting on the money, 

but putting it out on the street as soon as you get it, that is what 

we are recommending for the CDFI Fund, to look at someone, for 

example, our organization who has been deploying the funds when 

they get them since 1996 from our first award, so that it becomes 

a relationship of just—that is the way we work with our customers 

as well, where we build that relationship that is there. And of 

course, there is accountability behind it as well, that the numbers 

don’t lie in terms of our audits and so on; that if you continue to 

perform at this level, then we should be in a different category, if 

you will, than struggling, unsustainable, newer CDFIs that need 

more technical assistance and so on. 

But, Representative Green, the first 12 years of our operation, I 

believe we were in the laboratory stage. Micro lending, micro finance comes from developing countries. And a lot of organizations 

that started micro lending back in the early 1990’s are no longer 

in existence. We are now the largest micro lender serving these two 

markets and helping 13 other CDFIs across the country reach scale 

as well. 

So, in that laboratory stage, we found out what works and what 

doesn’t work. We now have a machine. What it needs is gas to continue to move the machine. And so if we could, then, raise great 

standards that we would all be working with and towards, then I 

think the CDFI allocations would then be benefiting more people. 

There is a whole theory, is it breadth or depth? Do you want to 

help as many people, or do you want to help fewer people but go 

deeper? I think there is a need for both, but in terms of technical 

assistance on the depth part, but on the breadth part, access to 

capital, as we have already described, is such a need in our country 

right now. 

Mr. GREEN. You have forged relationships with banks, have you 

not? Explain how you have worked your relationships with banks, 

please. 

Ms. BARRERA. Because of the Community Reinvestment Act, 

about a third of our funds do come from banks. And specifically, 

one example I would like to share, which was the first in the country, the first in the United States, is the relationship that we have 

with Citi; that Citi wanted to do micro finance in the United States 

and didn’t know how to underwrite these loans, but went and 

looked at our portfolio, looked at how we do our business and invested $30 million that they, we are selling part of our portfolio 

every month to Citi. So it is a secondary source, right, for us which 

was never—unheard of because we are not—in our industry, it is 

hard to get ratings. We are not rated. And so by them taking— 

what we are doing is sharing the risk and sharing the wealth, the 

revenue with Citi. And we work with many, many other banks 

across the country where they either invest in us for a return or 

41 

provide us grants through their foundations. So that is how we get 

our operational funds. 

Mr. GREEN. And have you been moving into Louisiana, after 

Hurricane Katrina? Because I know that Texas is in your name, 

and so obviously you are in Texas. But I think you are bigger than 

Texas, are you not? 

Ms. BARRERA. That is correct. We are ACCION Louisiana as 

well. And so we were asked to go in there, and were provided 

funds. And that, again, came from banks, and it came from foundations and municipalities. We presently have offices in New Orleans 

and Alexandria. We will open up an office in Shreveport within the 

next 2 months, and then in Baton Rouge, hopefully, by the end of 

the year. 

Mr. GREEN. Affordable housing, is that a part of your portfolio? 

Ms. BARRERA. No, sir. A hundred percent of our portfolio are 

small business loans. 

Mr. GREEN. Okay. Well, who is dealing with the affordable housing portfolio? 

Okay. Ms. Kennedy, tell me a little bit, if you would, about your 

affordable housing portfolio. Have you gone into areas, say, for example the Lower Ninth Ward in New Orleans? Do you have any 

projects in that area? 

Ms. KENNEDY. We don’t have a member in Louisiana. We worked 

very hard for a very long time to get the Louisiana Bankers Association to follow in the model of Alabama, California, Oregon, and 

Hawaii and start a multibank affordable housing lender. But, to 

my knowledge, it never happened. 

Mr. GREEN. Okay. I will yield back. My time is up. 

Thank you, Madam Chairwoman. 

Ms. WATERS. Thank you very much. 

Mr. Cleaver? 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Ms. Bridges, and the question is to you and Ms. Fiddler. I know 

where her bank is located. Can you tell me where in D.C. your 

bank is located? 

Ms. BRIDGES. Our branch is located at 1432 U Street, right in 

the historic district. 

Mr. CLEAVER. Have your CDFI loans performed well? 

Ms. BRIDGES. For the most part, our CDFI loans are our core 

loans in the bank, and they have performed well. However, we 

have had, like many traditional banks, some problems with and we 

have seen some deterioration. 

Mr. CLEAVER. Well, considering the economy— 

Ms. BRIDGES. Yes. We are— 

Mr. CLEAVER. Ms. Fiddler, would you say the same thing? 

Ms. FIDDLER. I think they are holding pretty strong for the most 

part. Dewey and Ziebach Counties are very rural and remote, less 

than one person per square mile, so that the markets available for 

folks out there, we do mainly Main Street private sector, trying to 

create and stimulate economy outside of this because we don’t see 

CRA; we are creating economy. So it is just a little bit different 

version than the rest of the scope. But for that high-risk market 

where you don’t have any other options, I think they are doing very 

well—less than 1 percent defaults. 

42 

Mr. CLEAVER. Well, do you think it would be interesting if we 

compared CDFIs, their loans, with some of the other banks, depository banks that are—many of them are in trouble, have been in 

trouble? I don’t know if there is any data available, but it would 

be interesting to compare the performance of loans. The reason I 

raise that question is, I think, despite the relatively high success 

in CDFIs, we find that the funding is almost—the number of applicants who seek CDFIs is twice the number that receive the loans 

because we don’t have the—the pot is virtually empty. And I have 

tried unsuccessfully, with the last panel, and one of my colleagues 

did the same, to try to find out what do we have to do to get additional dollars? I am assuming that all of you would like to have additional dollars. I know that is a difficult question, but struggle 

through it and tell me yes. All right. We have $250 million in 

grants in 2010. But as I said, that is one-half, exactly one-half of 

the people who applied. So I am—some of these questions are for 

the Treasury, obviously. But they are gone, so I need to find out 

from you, and these are probably softballs to you guys. But if we 

had more money, would we be able to better meet the demand and 

still make good loans? 

Ms. KENNEDY. Let me just say that those numbers you quoted, 

Mr. Cleaver, about half being denied don’t even reflect the true 

need. There are hundreds of CDFIs that don’t even apply since 

2003 because the regulations have so changed what is funded that 

it is not worth Alabama getting certified; it is not worth Massachusetts applying. California did apply this year and got turned down 

despite their stellar track record. So, for example, our 25 nonprofit 

CDFIs, nonprofit mission-driven lenders, could do double their 

2008 production this year if they had liquidity. 

Mr. CLEAVER. Well, in the difficult areas where you work, are 

you seeing competitive applications going forward for new market 

tax credits? 

Mr. BYNUM. In Mississippi, where, arguably, there should be a significant investment by the CDFI Fund, only $480,000 out of, I 

think, $40 million made to Mississippi. 

Mr. CLEAVER. Say that one more time, please. 

Mr. BYNUM. $480,000 out of a total of $170 million in financial 

assistance awards were in Mississippi, the poorest State. On the 

new markets, only $40 million of $14 billion in Mississippi. There 

were applications. I can’t speak to the quality of the applications. 

The CDFI Fund would have to do that. But there is certainly a demand and there is a viable demand for increased funds in our 

State and in other severely distressed areas. 

Mr. CLEAVER. Well, the red light is on, but I think the point has 

been made. 

Thank you, Madam Chairwoman. 

Ms. WATERS. Let me just thank the panel for being here today 

with the most informative testimony. And the Chair notes that 

some members may have additional questions for this panel which 

they may wish to submit in writing. Without objection, the hearing 

record will remain open for 30 days for members to submit written 

questions to these witnesses and to place their responses in the 

record. The hearing is adjourned. 

[Whereupon, at 4:26 p.m., the hearing was adjourned.] 

(43) 

A P P E N D I X 

March 9, 2010 

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