FROM THE OFFICE OF PUBLIC AFFAIRS

Let me start by thanking Bart Harvey for that kind introduction, and for inviting me to speak with you today. It is gratifying to see the mission that Jim and Patty Rouse started 18 years ago - to bring people up and out of poverty and into the mainstream of American life - continuing to be realized through the work of the Enterprise Foundation and the dedicated group of community leaders assembled in this audience.

I want to talk today about one of the primary missions that Secretary Rubin set for the Treasury Department, and one that I'm proud to carry on: working to develop a financial system that benefits all Americans.

We come together at a time of remarkable prosperity in our country:

• with unemployment and inflation at or near their lowest levels in a generation;
• with productivity and wage growth higher than any could have expected just a few years ago;
• at a time when we are enjoying budget surpluses for the first time in 30 years;
• and at a time when the federal government is paying down debt and opening up room for investment, rather than running huge deficits and crowding out investment.

The progress we have made in the last six and a half years has made available nearly $2 trillion for investment in our economy.

A time of great economic strength is a time to plan for the future. It is a time to strengthen America's role in the world and, most important, it is a time to work to include every American in our prosperity.

Indeed, including ever American in our nation's prosperity is central to all of our objectives: it best prepares us for a future when we will need the efforts of every American. And it strengthens the power of our national example at a time when, more than ever before, the world is looking toward America.

The strength of our economy comes in significant part from the strength of our financial system. Think about it: Some Americans want to save for their retirement, or for their children's education. Others seek attractive returns by investing in new technologies or new infrastructure. It is the financial system that brings them together - and that has done so with unprecedented success in recent years, forcing productivity and efficiency enhancements as capital is reallocated out of traditional large ventures and into the companies of tomorrow.

But just as the right kind of financial system can be a powerful spur to economic growth, it can also be a powerful spur to inclusion - the inclusion of all Americans in the prosperity that we are seeking to create. And that is my topic today.

The First Lady has said that it takes a village to raise a child. At Treasury, we like to say that it takes capital to build a village. For if we have learned anything in recent years about the challenge of helping those who are least fortunate, it is this: Traditional solutions, based on simply providing income and assuming that opportunities will appear as a result, do not bring enduring success. But equally, a government that abandons those who are least fortunate abdicates its economic, as well as its moral, responsibility.

That is why we are working so hard on developing new approaches based on the principle of creating opportunity for all. And that is where the financial system comes in so critically.

Two primary financial priorities stand out. First, expanding access to capital. And second, ensuring that all Americans have access to financial services.

Expanding Access To Capital

It is essential that every part of the country, that every area, that every type of business that could earn a fair return have an opportunity to be funded. That, to use economic jargon for just a second, there be a strong supply and a robust effective demand for capital in the places where many Americans have in the past been left behind. This may once just have been an issue of morality or justice. But at time when, in addition to having people look for jobs, we face the issue in America of jobs looking for people, it is an especially acute imperative.

What are we doing about it? The most important things we are doing about it are:

• keeping our economy strong;
• paying down the government's debt;
• generating opportunities for investment;
• and creating an environment where barriers to market access are low and capital is readily available and seeking profitable opportunities.

But we have to do more than just create the right kind of economic environment. For many years, it has been a priority at Treasury to promote economic growth and opportunity in emerging markets around the world because of what it can mean for the people in these nations. What we've come to realize more recently, and what the President highlighted on his New Markets tour in July - which I think will be one of most remembered weeks of his Presidency - is that the most important emerging markets are those within our borders.

In my first week as Treasury Secretary, I visited Harlem, USA, a major retail and entertainment center being developed in New York. There, I saw clearly the power of cooperation between the public and private sectors. Prior to this project, Harlem, an area with a population the size of Cincinnati, had not seen any retail development in 50 years. This effort, brought together under the auspices of many projects, including the Community Reinvestment Act, is bringing major retailers to an area that has neither shopping mall nor even - until recently - a major supermarket.

Are there public benefits to this project or should it have been left only to the market? Think about this: Tax collection to New York City will pay back the public investment in Harlem, USA in just 9 months. And land values in the area have increased 5- to 10-fold.

Our most important vehicle for creating such opportunities across the country is the Community Reinvestment Act. CRA resulted in more than $88 billion in community lending last year. Many bankers have described how the investments they first made because of CRA obligations have pointed the way toward new and profitable business opportunities.

We are now engaged in a debate over financial modernization. Unfortunately, some would, at this moment of opportunity and economic success, seek to scale back CRA or erode its relevance. The President has made very clear that at a time of such economic strength, he would like to see the repeal of archaic rules governing our financial system, but he will not sign into law any bill that scales back CRA.

To finance potential profit-making ventures in areas that most lenders might still overlook, Treasury's Community Development Financial Institutions Fund provides capital for investment opportunities in underdeveloped areas. CDFIs not only spur economic development, they also offer conclusive evidence to private sector investors of the broader range of opportunities available to them in disadvantaged regions. Since its first round of funding in 1996, the CDFI Fund has provided over $200 million to local financial institutions, a sum that has been leveraged many times over in the investments it has generated.

As important as it is to ensure that financing is available in our disadvantaged communities, it is also critical that there be effective demand for funds in these areas. That is why the President's New Markets Initiative is seeking to create opportunities to tap into the almost $695 billion in purchasing power that a recent survey found exists in America's inner cities and rural areas. And that is why BusinessLINC, an Administration initiative led by Vice President Gore, is helping small businesses partner with large companies to gain advice and technical know-how through mentoring relationships and develop potential business relationships.

Our second priority is making access to high quality financial services universal. It was an important national challenge half a century ago to ensure that essentially every American had access to electricity, to running water, and to a telephone.

In the modern world, access to a basic bank account takes on a profound importance. Here in this age of the Internet, derivatives, and embedded options, between 10 and 20 percent of American households still do not have any type of transaction account - checking or savings. One new survey in Chicago finds that 44 percent of recipients of the Earned Income Tax Credit used a check cashing service to cash their EITC refund check. Moreover, estimates suggest that the costs over a lifetime for low- and middle-income families of paying fees for each check that they cash and for every bill that they pay could exceed $15,000.

Access to banking in society today means access to the modern economy. One recent study found that, controlling for income, wealth, age and other factors, individuals without a bank account are 43 percent less likely to have positive net financial assets and 13 percent less likely to own a home.

The problem of the unbanked is widespread and, as figures suggest, is of critical concern. As with the spread of electricity or telephone service, it is a problem best addressed through the right kind of cooperation between the public and private sectors.

Let me tell you about some of the things that we are working on to address this issue.

The federal government recognized in 1996 that we could save money, prevent crime, and help beneficiaries through the Electronic Funds Transfer program. EFT '99, as the program is known, will save the government $100 million and will prevent $100 million in crime.

But it will not work for those who do not have a bank account. That is why Treasury is contracting with financial institutions to offer Electronic Transfer Accounts or ETAs - low-cost electronic accounts that would essentially allow federal benefit recipients to "direct deposit" their benefits in a bank account. Participants are guaranteed a low-cost account - which in some cases will pay interest on balances - with the start-up costs subsidized by the government. We have been pleased with banks' response to the program thus far. Since the announcement of the program in July, over 175 insured financial institutions have indicated their interest in offering the account.

This clearly represents progress. But it is not enough, since millions of the unbanked are not recipients of federal checks. All of us need to bring the same kind of innovative spirit that has brought such changes in our financial landscape to the important question of how Americans can get their checks cashed without being subjected to interest rates that too often can be measured in hundreds of percent.

One area that we are now exploring is helping the Postal Service provide access to ATMs at post offices in low-income neighborhoods. Given the presence of Post Offices in almost every community in this nation, this program holds considerable promise in increasing access to financial services in neighborhoods that have been left behind by mainstream financial institutions.

But basic banking services go beyond the chance to cash a check - to the accumulation of savings. It is only through savings that people can protect themselves against the vicissitudes of economic life.

Tens of millions of dollars are spent in this country to help the higher-income Americans who do save. We need to extend these same opportunities to those in this country who may not have ready access to a 401(k). That is why, as a second way of promoting access to financial services, the Administration continues to support funding of Individual Development Accounts. The lower-income Americans who participate in IDA programs set up a savings account at a mainstream financial institution, receive matching funds for their contributions, and take part in financial education programs.

here is a third component of access to financial services: access to personal credit. The opportunity for personal credit must be open to all Americans. One of our less heralded achievements is the progress that our nation's fair lending laws have made in improving the accessibility of lending to minorities and low-income Americans. These opportunities should be available to all those who are willing and able to pay for them. But this opportunity will be lost if we fail to vigorously enforce our fair lending laws. That is why we are strongly committed to that goal.

I have talked today about some of the steps that we at Treasury and in government are taking to address the financial aspects of the challenges of including every American in our nation's prosperity and empowering every community in its ability to thrive. But ultimately, the lesson of America is that prosperity and strength do not trickle down. They bubble up. That is why the work that all of you are engaged in is so very important. Thank you.