FROM THE OFFICE OF PUBLIC AFFAIRS

Good morning. I'd like to take this opportunity to thank all of you for the vital work you are doing in helping to fight social and economic exclusion in communities around the country. We hear a lot - and we quite rightly focus a lot - on the fact that that we about to pass an historic milestone in achieving a record period of unbroken economic expansion in this country. But this must not and will not distract us from the challenge of ensuring that more Americans are included.

Our macro-economic success during the past decade will not be my main focus this morning. But let me make two broad comments:

• Without economic growth we cannot hope to reduce significantly the levels of poverty that persist in too many of our urban centers and deprived rural areas. In the past few years we have made genuine progress in reducing poverty - in large part because of the spectacular performance of our economy. Growth, in that sense, is the best social policy we have.
• However - and this is equally important - economic growth, on its own, will not be enough to prevent certain areas from being left behind. In that sense, growth is a necessary condition for defeating poverty. But it is very far from being a sufficient one.

What can we do to channel the benefits of growth to the communities that have previously been excluded? The challenge is to give people the means to help themselves. And here, we at Treasury believe that expanded access to capital can play a vital role. As the First Lady says, it takes a village to raise a child. She's right. And it takes capital to build a successful village.

This will be a many-sided effort. Let me just highlight three that have been a particularly high priority at the Treasury Department:

• First, universalizing access to capital.
• Second, supporting economic development across the country.
• And third, broadening access to financial services.

Each century brings its own challenges of inclusion. The challenges of the 20^th century were universalizing access to the vote, to education, to electricity and to running water. The challenges of this new century include universalizing access to information technology, and something that we at Treasury are especially concerned with, universalizing access to finance.

Providing better access to finance is good economics when it goes to those who can use it most well:

• A recent survey of projects and businesses that benefited from Community Development Financial Institutions Fund investments in 1996 shows that the average value of their assets more than doubled since the initial investment. There are many in the Fortune 500 that would dream about seeing that kind of rate of return.
• On a more personal note, a while ago I visited a business in Philadelphia called PWRT ComServ that was set up by a minority businessman with the help of public sector seed capital. Within two years of its launch, the business, which out-sources electronic tasks from Fortune 500 companies, was already servicing Bell Atlantic and American Express. Every dollar provided by CDFIs raised four dollars more in private venture capital.
• My first visit as Treasury secretary last year was to the Harlem, USA project, a major retail and entertainment center on 125^th Street being built, among others, with the help of CRA. Although it has a population the same size as Cincinnati, there had been no a major retail development in Harlem since the second world war. Until recently, there has not even been a supermarket in the area. And the taxpayer will not go unrewarded. By conservative estimates, Harlem, USA will repay the public funding for the project in additional New York sales tax revenues in just nine months.

And it makes a difference on a human level as well. When I visited that project that has been so successful in Philadelphia, I talked to a working mother who was now a telephonist for PWRT ComServ. I asked her what has been the most important thing about the project for her. She said that now when her children looked at her, they had pride in their eyes. Their house was happier, their bills were easier to pay, and her children were doing better in school. All because she had a job.

Creating many more examples like these ones has been and continues to be a major priority for this Administration. For example, earlier this month I joined the First Lady and the Reverend Jesse Jackson in voicing the Treasury's strong support for the objectives of the Rainbow-Push Wall Street Project conference, which aims to increase the participation of minorities and the socially excluded in the mainstream economy.

We want to push out the frontiers of capital access even further in the future:

• That is why we have fought to protect and to strengthen the Community Reinvestment Act, to help channel billions more in conventional bank lending to inner city and other deprived areas. Last year alone, a revitalized CRA generated $88bn in private investments for home ownership and small businesses in disadvantaged communities.
• And that is why we are pushing for Congress to reauthorize the CDFI Fund and support President Clinton's request for $125m in new funding for the CDFI in FY 2001 - some $30m more than last year. Since its birth more than five years ago, the fund has invested more than $300m in projects and communities around the country leveraging several billion dollars worth of private sector investment. Many of these projects have acted as beacons for strategies that have subsequently been launched solely with private sector capital. Time and again, CDFIs are teaching us that seed capital that is well planted in these communities will spread and it will multiply.

Our economic success has created an environment where jobs look for people more than people look for jobs. And by bringing access to capital to the areas that businesses tend to overlook, we have worked to ensure that every part of America is included in the nation's economic success.

At the same time, we have learned that success in this effort is about more than expanding the capacity to borrow money. Enhanced access to capital is only useful if people have the tools and skills to use that capital well: notably, equity and the kind of technical expertise and business networks that firms in the mainstream economy take for granted.

That is why the President launched his New Markets Initiative last year, to unlock the potential of America's inner cities and rural areas. This initiative includes a New Markets Tax Credit, providing a 25 percent tax credit for equity investment in locally based, specialized financial institutions that will in turn invest in local businesses. As you know, last week the President announced his proposal for a major expansion of the New Markets Tax Credit to $4.5 billion for the FY2001 budget. In turn, the funds would be permitted to issue $15 billion in equity over five years or 2.5 times the size of last year's initiative.

And that is also why, through BusinessLINC, led by Vice President Al Gore, we are encouraging businesses throughout the nation to take a second look at opportunities for partnering with firms in inner cities and rural areas. And experience suggests that BusinessLINC strategies can also be good for both sides, providing large firms with a new partner, an agile source of products and an entree into new markets in an increasingly diverse and global consumer market.

When we think about finance in this context we need also to think about financial services for individuals. Like money itself, the benefits that a bank account provides are easy to take for granted. Until you do not have one. And today, in the age of the Internet, derivatives, and embedded options, as many as one in five American households still lack that basic passport to the broader economy. This is roughly equivalent to the population of Spain.

Without access to a checking account, the individual is deprived of the most basic link to the mainstream economy. A recent survey showed that almost half of EITC recipients used a check-cashing service to cash their refund benefits. And estimates suggest that the costs over a lifetime for low and middle-income families of paying fees for every check or bill payment can exceed $15,000. But these are just the surface costs. Imagine trying to start a small business without access to a deposit or knowledge of the services that banks can offer.

In the months ahead we will be fighting to broaden access to financial services in several ways:

• By working to passing the President's new initiative - First Accounts - to bring the "unbanked" into the financial mainstream. The President's upcoming budget will include $30 million for this initiative, to finance pilot strategies to help low- and moderate-income Americans benefit from the basic financial services that most of us take so much for granted.
• By expanding the Electronic Transfer Account, which enables recipients of Federal Benefits to open an account for the first time. More than 300 banks are taking part in a scheme that will benefit both those who are opening their first account - and the banks themselves.
• By working to provide safe and easy access to banking services within previously under-served communities. At the Treasury we have established a pilot program to place ATMs in local post offices. This will give families access to funds at a low cost, and with less fear for their safety.
• And by encouraging states to help families that are making the transition from welfare to work to open bank accounts, or Individual Development Accounts. We are also encouraging states to educate Americans about the importance of financial literacy and building wealth through savings.

Under the Bank Enterprise Award, the CDFI has granted almost $80m of funds to banks for increasing their investment strategies. It gives me great pleasure to report that the scheme, which has already helped to encourage more than $1bn in investments, has attracted almost three times as many applicants this year as when it was launched. But just as Treasury has provided incentives for banks to create assets where none existed before, by lending to start-up businesses in deprived areas, so we want to give banks equally strong incentives to create liabilities in socially excluded areas. That is to say, we also want to give banks stronger incentives to open checking accounts in areas that are traditionally "under-banked". I am asking he the CDFI Fund to look at ways of strengthening incentives in this area in the future.

Let me conclude where I began. Too many people, perhaps, see little connection between the goal of maintaining rapid economic growth rates, on the one hand - and the drive to push back the frontiers of social exclusion on the other. That could not be more wrong.

In a high-pressure economy, we all have a stake in including more Americans in the productive enterprise of the nation. Because every new member of the active labor force represents a reduction in potential inflationary threats - and a greater scope for continued sustainable growth. So fighting against social deprivation is both a moral imperative, and an economic imperative. With the initiatives that I have discussed, and the commitment of the people in this room and the organizations that you represent, I am confident we can continue to make real progress. Thank you.