Press Release
Friends of Community Development Banks Contact: Too Small To Fail Community Development Banks Need Federal Government Support New York, New York November 5, 2009 Community Development Banks that serve small businesses and low-income communities are struggling to stabilize the neighborhoods and small businesses they serve that have been crippled by the financial meltdown and economic crisis. Last month President Obama announced that TARP funds will be available on favorable terms for these Community Development Financial Institutions (CDFIs). Friends of Community Development Banks now calls on the President to direct the Treasury Department to quickly, broadly and expansively implement the TARP CDFI bank program.
Community Development Banks have always loaned responsibly in low-income communities. Their legal name is Community Development Financial Institutions (CDFIs) because they are certified by the U.S. Treasury Department’s Community Development Financial Institutions Fund as targeting 60% or greater of their total business activity to low income communities and people. These are small banks (the largest has under $3 billion in assets) and there are fewer than 100 CDFI banks in the whole country.
The TARP CDFI bank program will provide Tier 1 equity capital to CDFI Banks, at 2% annually for 8 years, when the rate will rise to 9% annually. However, CDFI bank participation is “subject to approval by . . . federal bank regulators.” This program will only work if it is implemented like the very first TARP program for very large banks. That program stabilized the financial system but did not do much for on-the-ground lending; now is the time to use TARP to make sure loans are made, especially in the communities that most need access to credit.
Treasury Secretary Timothy Geithner can implement this program quickly, broadly and expansively by making funds available to all CDFI banks, including financially distressed CDFIs. Friends of Community Development Banks has been formed to support these essential institutions. CDFI Banks make a critical difference in the lives of tens of thousands of people in the communities they serve and all too often are invisible to the larger society and to public policy makers in Washington. They are too small to fail. ### |