FROM THE OFFICE OF PUBLIC AFFAIRS

Let me start by thanking Brookings, Fannie Maeand the Fannie Mae Foundation for hosting this event. All threeorganizations play key roles in helping the inner cities --Brookings with its analysis of urban issues; the Foundation as awarehouse of information for homeowners and the largest grantmaker in housing; and Fannie Mae as an important source ofcapital for urban development. For example, between 1994 and2000, Fannie Mae will have invested or committed $75 million toCDFI -- money that goes to very good use in restoring opportunityto the inner cities.

I am honored to speak with you today at the firstJames Rouse Forum on American cities. Jim Rouse was a practicalvisionary who had a deep love for America’s cities. At atime when many were suggesting that the age of great cities hadcome and gone, he devoted his life to reviving cities and he evencame up with a name for it: urban renewal. Through the EnterpriseFoundation, he worked hard to provide affordable housing forlow-income people and make cities places where people from allsegments of society would want to work, shop and live. AsPresident Clinton said when he awarded Rouse the PresidentialMedal of Freedom, this is a man who "helped to heal the tornout heart of American cities."

My experience in both the private sector and ingovernment has reinforced for me two basic observations regardingthe inner cities. First, we all have an enormous stake in dealingwith these issues because our nation’s long-term economichealth for all of us will be greatly affected by the state ofAmerica’s cities. Second, there is a great deal of activitytaking place right now involving community groups, the privatesector, and all levels of government that is showing signs ofreal progress. Our challenge is to identify what works andreplicate it elsewhere so that the total effort has a scalecommensurate with the issues.

The progress that we have seen shows clearly thaton the one hand there is a vital role for government and that onthe other hand, no one sector -- government, communities andnonprofits, and business -- can do it alone. If we work together,we can make real progress. Today, I would like to discuss some ofthe steps I believe each of these crucial players can take tohelp meet the challenge of our inner cities.

I would like to start for a moment on theeconomy, because a strong economy is a requisite for dealing withthese issues, although it is far from being enough: necessary,but not sufficient.

When President Clinton came to office, ournation’s economy was in a morass, and, in turn, many partsof our cities were in dismal shape. Unemployment in the fiftylargest cities was at 9 percent. Crime was at all time highs inmany areas. There was a sense that the problems of the innercities were insoluble.

Today, in large measure due to the deficitreduction program of 1993, and the economic growth that itgenerated, the deficit has fallen from close to five percent ofGDP to an estimate of roughly one percent of GDP for 1997. Thatdeficit reduction was key to reducing interest rates andincreasing confidence, which, in turn, drove and sustained ournew long lived recovery.

There are also some hopeful signs of renewal inAmerica’s cities. Unemployment in America’s largestcities is down to 6.5 percent. Nearly three million people haveleft the welfare rolls in that time. Crime is down substantially.

Yesterday, the President released a report on thestate of America’s cities, the most important andcomprehensive review of the condition of urban America indecades, that provides valuable evidence that contradicts thewidespread perception that problems in the inner city areinsoluble. But the report makes clear that there is still anenormous amount to do. Just as it has taken decades for many ofthe economic and social problems in the inner cities to develop,it will take time and a concerted effort to make the progressthat needs to be made.

In order to bring new jobs and opportunity to ourinner cities and their residents, we must take action to make oururban areas safer, to invest in the education and job readinessof people and to increase access to capital to help businessesgrow. In each of these areas, partnerships among government, thebusiness sector and communities can make a real difference.

Public safety is primarily the responsibility ofgovernment, and where government fails to provide it, businesseswill be reluctant to go. From the federal to local levels,governments around the country have begun to take innovativesteps to reduce crime, from community policing to sophisticatedcrime tracking. This Administration has done its part with thePresident’s Crime Bill, his plan to put 100,000 more policeon the beat, and his strong and successful efforts to enact theBrady law and the assault weapons ban. Along these lines,Treasury’s BATF has launched very promising pilot projectsin 17 cities to track down gun dealers who push guns to kids.

In some communities, innovative partnershipsbetween the business sector, nonprofit intermediaries, communitygroups, and local police have helped strengthen their collectiveability to promote public safety. The Local Initiatives SupportCorporation (LISC), a wonderful organization with a name that hasthe resonance of a section of the Internal Revenue Code, and theEnterprise Foundation have teamed up with local community groupsand major corporations, such as Metropolitan Life, to pioneerthese efforts. What we need to do is disseminate informationabout the "best practices" of these partnerships sothat many more businesses and communities can get involved.

Businesses on their own can also play importantroles in many ways. Through decisions about everything from siteselection and lighting, to hiring from the neighborhood wherethey are located, to co-locating community police stations intheir commercial space, to establishing hot lines, businesses canadd to the safety of their neighborhood -- and that is good forthe neighborhood and for their own bottom line.

The second area I mentioned is human capital --investment in people. Through education and training we need tomake sure all Americans have the tools to succeed in today’seconomy, and that the private sector has a well-trained workforce from which it can hire.

For the federal government’s part,we’ve expanded Head Start and rewarded work with the EarnedIncome Tax Credit. Funding for education and training are keypriorities in the budget agreement, with new initiatives toincrease literacy and tax credits and deduction for college andlifelong training. The President’s welfare to work taxcredit proposal will help businesses and job placement firms todevelop innovative strategies to move low skilled people intojobs. The Administration’s job training proposal wouldreplace outmoded structures for job training with new funding forlocal strategies for job training and placement. But Congressneeds to join us in these efforts and unless the business sector-- and local communities -- are also integrally involved, theseefforts simply will not work.

In many areas, community based organizations,because of their extensive knowledge of their community, can playa most useful role: in screening job applicants, in helping themto become "job ready" with the social and work skillsnecessary to succeed, in developing long-term relationships andreputations with area businesses that permit them to act asbrokers in linking residents to available jobs, and in providingthe ongoing mentoring, intervention and support so critical tothe objective that jobs, once attained, are retained.

Businesses can get involved in the school to worktransition in partnership with local school districts. And canhelp develop vocational curricula in high schools and communitycolleges and assist with local training efforts so that they arerelevant to local economic needs. And businesses can do whatMcDonald’s has done -- create "job ladders" forlow skill employees, providing opportunities for promotion withintheir company, and developing relationships with other companiesto enhance training and opportunities for their workers.

We have seen partnerships among government,business and communities work, from San Jose’s CET toNewark’s New Community Corporation. I was in Los Angeleslast summer and met a woman named Juanita Tate, who was workingwith a community development corporation called ConcernedCitizens for South Central Los Angeles. They took anenvironmentally contaminated area, known as a brownfields site,restored it and then set up a selection and training program forinner city residents to provide an employment base forprospective businesses coming to the area.

By creating this context, they have gottencommitments from developers and manufacturing businesses and whenI was there they were well on their way to having a fully leasedindustrial park with businesses that have made economic decisionsto locate in the inner city, instead of going elsewhere. To helpefforts like these, we have proposed a new tax incentive, calledthe Brownfields tax credit, to clean up abandoned industrialproperties in economically distressed areas.

That brings me to the third area I want todiscuss, access to capital and business development. Despite thefact that financial markets in the United States are today themost innovative, the broadest, and deepest in the world, we stillhave a severe shortage of inner city financial institutions andinner city credit to create housing and jobs. As Robert Kennedyonce said, "To ignore the potential contribution of privateenterprise is to fight the war on poverty with a single platoon,while great armies are left to stand aside."

That is why, at the federal level, we've improvedthe regulations under the Community Reinvestment Act to encouragemainstream financial institutions to lend to creditworthyborrowers throughout their community. In fact, home mortgagelending in low and moderate income areas is up over 25 percentsince 1993. We also made permanent the low income housing taxcredit, helping to create 60,000 affordable units per year.

We've launched the CDFI Fund to create anationwide network of community development financialinstitutions, and we created a new Presidential awards program tohighlight best practices in micro-enterprise development. TheseCDFIs are helping to create jobs, rebuild neighborhoods andrestore hope in communities across the nation.

We need Congress’ help in many of theseefforts. On Wednesday, the VA/HUD Subcommittee in Congress willmark up its bill to fund the CDFI Fund, and I believe it is veryimportant that the President’s full request of $125 millionfor next year be granted. We have also introduced legislation forthe brownfields tax incentive I just mentioned, new empowermentzones and a new tax credit for equity investments in CDFIs.

The Congressional leadership agreed in theirletter accompanying the budget agreement, to work to includethese tax incentives in the balanced budget legislation, but thusfar the tax bills have not included these measures.

In a host of other ways the Administration isworking with communities on job creation in inner cities.Treasury and Commerce are working on an innovative project todevelop a secondary market for community development loans.Treasury is working on increasing access to financial servicesfor millions of the unbanked. The President has proposed a planfor revitalizing our Nation’s Capital, by restructuring thefederal - D.C. relationship, improving services, and proposing anew economic development corporation and tax incentives for theDistrict. And we’ve created a new Office of CommunityDevelopment Policy at Treasury to bring added focus and energy tocoming up with creative approaches to these issues.

In job creation, too, I would like to focus for amoment on the important role community based organizations play.These organizations can enhance public safety, impart tobusinesses important local knowledge of markets, and sites, helpscreen and prepare a potential workforce, and help recruitbusinesses to locate in this area. Many community basedorganizations have themselves been growing small businesses foryears.

Let me conclude by returning to where I began. Istrongly believe, and more importantly the President believes,that fostering growth in the inner cities is central to thefuture economy and sound well being of our nation and thereforeof all of us.

Simply put, this country will never reach itsfull economic potential until, as one newspaper said of Jim Rousein his 78th year, we chose "to see in our cities what mostAmericans don’t -- human potential that, given the rightresources, can be uplifted."

We must all work together to achieve thatobjective. We at Treasury need to continue to build on ourefforts to expand access to private sector capital and to promoteinner city job growth. Business needs to look at involvement ininner cities, not because it is charity, but because it makesgood business sense as a a source of new workers and new markets.Community organizations can play an enormous role, as the peopleclosest to the problems, and the many challenges andopportunities of the inner cities.

And government at all levels have a vital andintegral role. Working together, we can over time foster economicand social health in our inner cities, a social and economichealth that will benefit all Americans. Thank you very much.