Magazine article American Banker

Does the U.S. Need a Network of Community Development Banks to Provide Loans in Poor Neighborhoods?

Magazine article American Banker

Does the U.S. Need a Network of Community Development Banks to Provide Loans in Poor Neighborhoods?

Article excerpt

* Robert W. Hawkins Chairman Southern Commercial Bank St. Louis

We are an urban bank with $200 million in assets. From our point of view, we think creating this network would be a great deal like reinventing the wheel. We already have the facilities for making the loans, but we don't have the credit enhancements available that would make the loans pass muster with our [regulatory] supervisors.

Without credit enhancements, I don't see the feasibility of funding those types of loans with private money.

We make loans representative of the community we operate in, which is south St. Louis, an area with a significant minority population. A pool guarantee program makes a lot more sense.

* John S. Shivers Chairman, president, and CEO Southwest Bank Fort Worth

That would be like creating a third type of banking system. We already have a network of community banks, at a lot less cost than creating another type of bureaucracy.

There's been some talk about setting up development banks like farm credit banks, or a cooperative bank, but I say let the community banks handle loans to communities, but add some programs like the Small Business Administration or expand the SBA to aid the banks.

President Clinton's idea came from the model of South Shore Bank in Chicago. The chairman of South Shore says the model would only work in a narrowly focused geographic area.

That bank is part of another bank holding company that can feed it, and it has help from every state and federal aid program. We had a development bank that tried to make it here in Fort Worth.

It attempted to revamp small businesses, but they went down because the neighborhoods they were in started to deteriorate.

The idea could work very well with existing community banks, without creating a lot of additional overhead. Community development banks would compete with existing community banks, but at a higher cost. …

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