FROM THE OFFICE OF PUBLIC AFFAIRS

Thank you Representative Mel Watt for that kind introduction. It's a pleasure to be here in North Carolina. I would like especially to thank Representatives James Clyburn and Maxine Waters, the current and former Chair of the Congressional Black Caucus, as well as the entire CBC. All of you have been wonderful partners with the Administration on many important initiatives. I would also like to thank Representative Eva Clayton for hosting this event. I also want to extend special thanks to Representative Rangel, who has been a key partner with the Administration on important issues such as Empowerment Zones, and on our recently announced New Markets Initiative.

Secretary Summers is deeply committed to assuring that all Americans can participate in our Nation's economic growth. I know that he would have liked to be with you today.

We are gathered at a time of tremendous strength in the U.S. economy. We are in the midst of the longest peacetime expansion in history. Inflation is low. Incomes at all levels are now rising. The unemployment rate is the lowest in a generation, and more Americans are working than ever before. The ingenuity and hard work of the American people propel this economy. And under the leadership of President Clinton and Vice President Gore, we have helped to make these gains possible, by investing in people, opening markets, and promoting the fiscal discipline upon which economic confidence and growth depends.

Even in this era of general prosperity, some communities, both urban and rural, are being left behind, and this affects all of us. As former Secretary Rubin stated, "this country will fall far short of its full economic potential, unless the least well off have a real opportunity to join the economic mainstream. Providing this opportunity is not simply a social issue or a moral issue, but an economic issue of fundamental importance to all of us."

Today, you are gathered to focus on a critical goal: improving opportunity for homeownership for all Americans. Homeownership is fundamental to the American dream. It helps to stabilize neighborhoods and foster community pride. In addition, owning one's home provides a source of equity for educating one's children, saving for retirement, or even starting a business.

Affordable rental housing is important as well. That is why the President's budget includes a 40 percent increase in the Low Income Housing Tax Credit. This program has had a dramatic effect on many communities. Today it is the country's largest program for building and rehabilitating affordable rental housing. The credit draws private capital into these markets and creates incentives for private developers to address this community need. The Low Income Housing Tax Credit has not increased, however, since the program's inception in 1986. This long overdue increase has strong bipartisan support and we should get it done this year.

I would like to focus my remaining comments on the Administration's strategy for encouraging entrepreneurialism and promoting private sector investment to promote community revitalization.

There is enormous economic potential in America's low- and moderate-income communities - potential that can benefit the residents of these communities and the businesses that successfully serve these markets. As a former investment banker, let me mention at least five reasons I see for this:

• In New Markets, retail spending power is significant, and in urban areas, customer demand is quite concentrated.
• New Markets contain a range of family incomes. Sometimes the median income for a community can conceal a surprising number of middle class or even higher-income households who live there.
• Many of these markets are not as well served with retail outlets. A recent HUD analysis suggested that in many urban areas consumers must leave their community to find satisfactory shopping outlets.
• The buying power of minorities is expanding. A recent study shows that in the last several years, African American and Hispanic buying power is increasing more rapidly than the economy, at the same time that these groups are becoming a larger part of the U.S. population.
• Finally, many urban New Markets have important location advantages. For example, they are close to downtown commercial districts for business service firms, are close to highways and airports for distribution businesses, or have real estate with the appropriate infrastructure for manufacturing businesses.

We must recognize that there are very real barriers that have limited business development in these new markets. We know, however, that the strategy of bringing the private sector to these markets has worked. Let me highlight two successful examples, the Community Reinvestment Act (CRA), and the Community Development Financial Institutions Fund (CDFI).

CRA is working. In 1997 alone, banks and thrifts made over $34 billion in small business loans in low and moderate-income areas, and over $18.6 billion in other community development loans. Banks and thrifts have discovered that this is good business.

The protection of the CRA has and will continue to be a top priority of the President and this Administration. As we work to modernize our financial system, we need to make sure that CRA keeps working for our communities. The House-passed bill does just that. It requires that federally insured depository institutions and their holding companies have and maintain an adequate record on CRA as a condition for engaging in newly authorized financial activities. By contrast, the Senate bill would seriously weaken CRA. It fails to include this "have and maintain" requirement; it exempts small banks from CRA; it provides banks and thrifts with a "safe harbor" from CRA; and it imposes new reporting burdens on banks for a wide range of activities under CRA. We strongly urge the conferees to adopt the House approach.

Second, the Treasury Department's CDFI Fund. The CDFI Fund has thus far provided over $120 million in grants, loans, technical assistance and equity capital to local specialized financial institutions whose primary mission is to reach underserved customers. CDFIs are often the market pioneers -- the "R&D"-- that prove the viability of lending to new customers. Through their local knowledge and expertise, and through their partnerships with larger banks, CDFIs are expanding the reach of the private sector marketplace. To receive funding, CDFIs must demonstrate at least a dollar-for-dollar match for federal funds and submit a rigorous 5-year business plan. We are asking Congress this year to expand CDFI funding to $125 million and to re-authorize the Fund so that it can continue its important work.

But this isn't enough to fully meet the need. In early July, the President made an historic trip to highlight the considerable need and the market opportunities of low and moderate income communitites. His New Markets Initiative, a program of tax incentives and loan guarantees, will further the Administration goals of bringing more private sector capital and expertise to these communities. I had the honor to travel with the President to see this first-hand in the Delta. I was deeply impressed by several personal success stories. Very talented individuals had built businesses in these lower-income communities.

Let me briefly mention the components of this new program:

• First, the New Markets Tax Credit is a 25% tax credit to investors who provide equity to any of a range of community development entities. In aggregate, the New Markets credit would spur $6 billion in equity investments over the next 5 years.
• Second, America's Private Investment Companies (APICs) would be large investment funds, modeled after SBICs, that are focused on investing in economically distressed areas. They would borrow at lower government-guaranteed rates. APICs would fund large businesses, such as new back office operations, plant expansions, or conversions of old facilities to modern industrial "incubators" for smaller businesses.
• Third, New Markets Venture Capital Firms would be a new category of investment funds, smaller than SBICs that would provide more hands-on technical assistance to their investments. NMVCs would target firms with good growth prospects that earn a more moderate return to investors.

Access to capital, however, is not sufficient to assure success. For this reason, the New Markets Initiative also includes BusinessLINC. This initiative is a private-sector led effort that will provide needed technical assistance and management development, as well as potential business opportunities to small businesses in economically distressed communities.

Let me conclude by saying that I firmly believe that we can improve housing and business opportunities for low- and moderate-income communities by motivating more private sector involvement. We know it's worked through our experience with the Low Income Housing Tax Credit, CRA and the CDFI Fund. At this time of great economic opportunity in America,However, we need to do more. We need to enactthe New Markets Initiative and increase funding for both the Low Income Housing Tax Credit and for CDFI.

I'd like to thank you for your support and thank you again for the opportunity to speak with you today.