Keynote Address by Director Donna Gambrell at the CDFI Coalition's 2010 CDFI Institute

March 3, 2010

Introduction

Thank you for that kind introduction and it is a pleasure to be here today. I look forward to this event all year because it brings together such a diverse cross-section of our industry.

It is also an excellent time for leaders of CDFIs from across the country to candidly discuss the most pressing issues facing community development finance with one another and with Congressional leaders, the CDFI Fund, and other critical stakeholders.

Most importantly, it is an opportunity to reflect on what needs to be done to further our shared community development goals throughout the communities we serve.

As we look around us and take stock, it is immediately apparent that 2010 has been quite an exciting year so far. And it’s only March.

Later today I have the opportunity to brief the entire Congressional Black Caucus on the CDFI Fund and the impact we have in distressed communities. I am very excited to share with this important body of legislative leaders the tremendous positive impact and even greater potential impact that CDFIs can have in their districts. This meeting is also significant because it highlights the strong and growing interest in the CDFI Fund, as the successes of community development lending stand conspicuously against the backdrop of the economic crisis.

At the CDFI Fund it is also a special year because it is our fifteenth anniversary year. Therefore, while the historic recent accomplishments of the CDFI Fund provide us with important practical motives for assessing our future course, our anniversary affords us the symbolic opportunity to review the record of the CDFI Fund as well as our strategic plan for the future.

Historian Stephen Ambrose has written, “The past is a source of knowledge, and the future is a source of hope.” Despite the exceptionally trying times that the recent past has brought to so many distressed communities, I believe there is much cause for hope and a bright future for community economic development.

We at the CDFI Fund are acutely aware that the many successes we have enjoyed would not have been possible without the hard work and dedicated missions of CDFIs working in some of the most challenging markets to make remarkable accomplishments – some nearly inconceivable – a reality. I would like to extend my deepest thanks to all of you. I believe your passion and ability to work together and commitment to common cause bode well for our continued success. I share that same passion and commitment and I am honored to be working with you to truly make a difference in underserved communities.

Cause for Hope

The turmoil of the economic crisis has profoundly affected the discussions on community development finance and its role in national economic recovery efforts. By affecting so many Americans, the crisis magnified the scale of many of the issues that distressed communities were already facing. By bringing the problems of low-income communities to the forefront, it called attention to the fundamental importance of actively promoting access to capital and local economic growth where it is needed.

Ironically, the economic crisis raised the profile of our mission among policy makers. The increased support and recognition we have received over the past several months will allow us to expand our impact in bringing economic opportunity to low-income communities. This also shows that coordinated and comprehensive measures to address community and economic development have the weight of a committed Administration behind them.

As you are all well aware, the President’s fiscal year (FY) 2011 Budget request included exceptionally strong support for the CDFI Fund, increasing appropriations to $250 million. This included $140 million - a 30 percent increase - in funding for our flagship CDFI financial and technical assistance awards to expand the availability of affordable capital and credit in distressed communities and provide specialized technical assistance and training to CDFIs through an expanded Capacity-Building Initiative. The Budget also included a 20 percent increase from the FY 2010 requested amount for the CDFI Fund’s Native Initiatives to assist Native Communities to overcome barriers to financial services.

The CDFI Fund has also been honored with the responsibility for implementing two new initiatives to address high priority community development challenges. These new initiatives will enable us to expand our assistance to underserved communities in new and highly focused ways. The FY 2011 Budget proposes $50 million to establish Bank on USA initiative to promote access to affordable and appropriate financial services and basic consumer credit products for households lacking such access.

The Bank on USA initiative will address the financial challenges residents of underserved communities continue to face by expanding access to bank accounts, developing a model of low-cost, simple banking products, and integrating financial access and financial education. It suffices to say that this is a core area that we feel very strongly about and a high priority of the Administration.

The President’s FY 2011 Budget also provides funding for a new multi-year, multi-agency effort to address the problem of food deserts and to combat childhood obesity. The Healthy Food Financing Initiative will increase the availability of affordable, healthy foods in underserved urban and rural communities. Forming a pillar of First Lady Michelle Obama’s Let’s Move! campaign to solve the epidemic of childhood obesity within a generation, it will emphasize the development or equipping of grocery stores and other healthy food retailers.

I have been fortunate enough to see many times the transformational impact that this financing can make in an underserved community. Most recently, I visited the Fresh Grocer in Philadelphia for the roll-out event of the Healthy Food Financing Initiative with the First Lady and Secretary Geithner and I can tell you how impressed they were with the diverse benefits this investment is having in the community. This is truly a landmark project of national significance whose positive effects are reverberating far beyond Philadelphia.

The Departments of Agriculture, Health and Human Services, and Treasury have partnered to make available over $400 million in financial and technical assistance to organizations with sound strategies for addressing the healthy food needs of communities. Treasury will devote $250 million of NMTC authority and $25 million of grant funding through the CDFI Program to this initiative.

With over 23 million Americans nationwide living in low-income communities that are more than a mile from a supermarket, this is an issue we cannot afford to ignore. And the CDFI Fund is honored to have a leadership role in this truly cooperative, interagency effort. I am confident that your hard work and determination will be decisive - as it has been in so many other cases - in ensuring these new programs achieve an impact even beyond what their resources suggest are possible.

While funding for the Capital Magnet Fund and Bank Enterprise Award was not included, the CDFI Fund will be undertaking a careful review of the impact of FY 2010 funding and prudently apply this analysis to future resource decisions. It is also my strong hope that the permanent funding stream originally established for the Capital Magnet Fund through Fannie Mae and Freddie Mac will be re-established.

The President’s FY 2011 Budget request also contains important enhancements to improve, extend and broaden the NMTC to focus on helping distressed communities and their small businesses to attract investments. I was able attend an event with Secretary Geithner on February 18 in Durham, North Carolina where we toured a successful project in which the Self-Help Ventures Fund used NTMC financing to turn an abandoned six-building complex into a thriving commercial center than employs 400.

This backdrop provided the perfect opportunity for the Secretary to announce the FY 2011 Budget request’s inclusion of $5 billion in New Markets Tax Credits allocation in 2010 and still another $5 billion in 2011. Crucially, we are also proposing to allow NMTCs to offset not only investors’ regular federal income taxes but also the taxes they owe under the Alternative Minimum Tax. This powerful provision will be applicable not only moving forward, but will also encompass those awards where NMTC allocations have been made but where money has not yet been invested.

Allowing the credit to off-set the AMT will enable this tool to attract even more private investors and help to speed recovery in the hardest hit communities. Treasury and the IRS are also working hard to develop guidance to help provide investors greater certainty on whether they will qualify for and be able to benefit from the credit.

Looking Forward

Tremendous and hopeful as the developments I’ve mentioned are, probably the most exciting thing that you all worked so hard to bring about is the Community Development Capital Initiative. Together, we have developed a smart way to increase access to capital in distressed areas. I cannot emphasize enough what a triumph this is for CDFIs and I am deeply grateful for all of the support and direction you provided.

This is an extraordinary initiative that will give certified CDFI banks, thrifts and credit unions access to capital investments from the Troubled Asset Relief Program at a dividend rate of two percent. As you recall, this compares to the five percent rate that was offered under the Capital Purchase Program.

In addition to providing lower-cost capital, this initiative will both increase the maximum amount of capital available to CDFIs and provide capital from Treasury to match private sector investments. Taken together, these two enhancements will not only enable a broader range of institutions to benefit from lower-cost capital, but also greatly increase their ability to serve the vital needs of their communities.

This initiative will ensure that CDFIs across the country will receive better support and be able to make credit available to small businesses looking to expand and create jobs. It is the product of the diligent work of Treasury officials, the Community Development Advisory Board and the CDFI industry. It is also a testament to your effectiveness, judgment, and track record – qualities, I hasten to add, which are also in ample supply with the loan funds. As you know, the approach that was taken with respect to loan funds centered on the issue of regulation. The evolution of this initiative has really underscored the fact that this issue is one that the industry needs to address.

I submit that the current moment is an auspicious time to reflect on such issues and that we use the occasion of the fifteenth anniversary and the recently announced review of the CDFI Fund’s statute to look forward and set a true course to realize the goals we wish to achieve. We are fortunate to face this opportunity for reflection with a strong wind at our backs, though with much ground to cover.

Building on the tremendous work we have done so far, we are using the occasion of our fifteenth anniversary year to undertake a huge effort to lay the foundation for phenomenal growth of not just the CDFI Fund, but the entire CDFI sector in the next fifteen years. The question is, how do we do that?

One of our first steps in our strategy will be undertaking a holistic review of our entire authorizing statute, looking not only at technical and substantive revisions to existing programs and procedures, but also at provisions that have not yet been exercised. As an important part of this process we will be holding listening sessions across the country to discuss proposed changes and to get your insight first-hand.

The President’s Budget request also included funding for external program evaluations of the CDFI Program and NACA Program to be managed by our Office of Financial Strategies and Research. These will assess the long-term impact of increased access to financial services for economically distressed communities and underserved populations. We hope that exploring all of these fundamental issues now will yield greater support for CDFIs in the coming years.

Our strategy to position ourselves for another 15 years of growth has also meant collaborating much more closely with other federal agencies and partnering more effectively with industry stakeholders to achieve more certifications. I’m proud to share that in FY 2009, 55 new CDFIs were certified – more than in any recent years. On this and other measures, however, we have not only been focused externally, but we have also focused a tremendous amount of energy internally on improving our own business processes and customer service.

As you saw last year, within 100 days of enactment of the Recovery Act, the CDFI Fund announced $98 million in grants, and within 60 days after that, disbursed 100 percent of the Recovery Act awards.

We now render decisions on all new applications for certification within 90 days of the date they are received. We send out assistance agreements on the same day we make award announcements. And what used to take approximately 12 months to make award disbursements, now takes on average 60 days. Our over-arching objective for all of these improvements is to get CDFIs the resources they need to do the great work they are doing.

I would like to also announce that the CDFI Fund has officially launched a new recertification initiative. The purpose of this effort is to ensure that all certified CDFIs continue to meet the statutory requirements for CDFI certification. The recertification process has begun with the currently certified banks and thrifts, and will continue through 2010 to include credit unions, loan funds, and venture capital funds. Detailed instructions, guidance documents, and the application will be sent electronically to the authorized representatives for each CDFI.

Before closing, I want to share some of the great impact data made by CDFIs. You results speak for themselves, but I can’t resist highlighting some of these accomplishments.

• Between 2006-2008, CDFIs reported approximately 11,200 loans to small businesses on average each year, representing an annual average investment of $798 million. In FY 2009 alone, CDFIs reported nearly 11,000 small businesses financed and nearly 2,000 commercial real estate properties financed.
• In FY 2009, CDFIs reported over 70,000 full-time jobs created or maintained with CDFI Fund awards.
• CDFIs provided financial literacy and other training to nearly 160,000 individuals and invested almost $6 million in individual development accounts.

I could, of course, go on for a long time reporting impressive results. But I think the message is clear and I think the message is resounding throughout Washington and indeed, the entire country.

Closing

So, it is clear that we have a lot on our plate right now. When I have visited the communities you all serve with so much dedication, I have seen and felt the adversity that is very real and far from words spoken at a conference in Northwest Washington. This is one of the most challenging times we have faced.

In the fifteenth anniversary year of the CDFI Fund, we confront unprecedented obstacles, yet, we are also fortunate to have been armed with resources to back our resolve.

As I began by saying, such moments are opportune for assessing and planning our course. I look forward to sharing in this process with you. However, above all, such moments also invite decisive action.

The commitment to community economic development which I have seen from all of you, every step of the way, has been indispensable to getting us to this point. And it leaves me with no doubt you are ready to seize this moment.

The CDFI Fund stands with you to help you continue your work revitalizing underserved communities by growing businesses, creating jobs, preserving homes, opening bank accounts and building grocery stores.

I am confident we will continue to grow together and move toward our goals. Together we have proven that the possibilities for our work and for our nation’s communities are unlimited.

I would like to thank you all for your very good work.

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