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A newsletter from the Philadelphia Federal Reserve Bank about consumer credit and community reinvestment

Volume 3, Number 1
July 1986

The Main Street Approach: A Tale of Three Towns
A grist mill originally built in 1725 is
rehabilitated into luxury apartments
and offices. A foundry is renovated
and converted into townhouses and
apartments. A granite railroad station
with a quarry tile roof is restored and
will be used for office space.
These projects are in Pottstown, Pa.,
one of many Main Street towns across
the country, where historic buildings
are being rehabilitated in an effort to
revitalize the downtown area. This
approach gives residents a sense of
pride and enables small businesses
to compete with nearby shopping
malls. Other aspects are the encouragement of tasteful storefronts and
signs, as well as gala street fairs and
festivals designed to increase street
traffic and sales.

business people and other local leaders; promotion of a community's unique
aspects as a place for shopping and
recreation; attractive design of building facades; and small business retention, expansion, and recruitment.
Bankers play an important role. They
often are among the leaders in small
towns and, as Main Street organization
board members, they bring valuable

organizational and planning skills.
Their institutions make grants to the
Main Street organizations.
The National Trust for Historic Preservation in Washington, D.C. developed
the Main Street idea and started implementing it in 1980. Through the Trust's
National Main Street Center, it helps
states, larger cities and small towns
to implement the approach . Mean-

One restoration often leads other
owners on the block to follow suit,
and the town soon has a "can do"
attitude. The Main Street approach is
"riding the historic preservation wave

in this country in which people appreciate the value and beauty of historic
buildings," said Diana Kerr, Main
Street Coordinator in Pennsylvania's
Department of Community Affairs
(DCA). The Main Street approach,
according to Ms. Kerr and Greg Matz,
DCA consultant, consists of the following elements: forming an effective
organization with a full-time manager
and the active involvement of small
Federal Reserve Bank of St. Louis

Chris Witmer, Main Street coordinator in Pottstown (left), and Geoffrey K.
Dailey, auistant vice president, Continental Bank, Pottstown, stand in front of
the Betty Lee building, a Main Street restoration project in Pottstown. Dailey has
been active in the program.

while, some states, including Pennsylvania, have parallel programs to
assist their communities. And some
towns are implementing the Main
Street process on their own. Pennsylvania's DCA currently provides
financial and technical assistance to
33 communities. It makes individual
area grants totaling $43,750 over three
years for hiring a local coordinator,
and may provide an additional $30,000
to stimulate facade improvements.
Some matching fund- raising is
required. To qualify, a city, borough,
or townsh ip with under 50,000 population must have a viable central business district with good potential.

Pottstown , a Main Street town , lies 38
miles northwest of Philadelphia. In a
past era, it had steel plants which
provided the superstructure for the
Golden Gate Bridge and the Empire
State Building. In more recent years,
Pottstown has witnessed the demise
of manufacturing plants and a substantial loss of jobs and was "on the
edge-it could have gone either way."
This from Geoffrey K. Dailey, an Assistant Vice President of Continental Bank
and a person active in the Main Street

Freedom Valley Bank, the latest addition to Media's banking community, had its
grand opening in June. A Mellon Bank branch is shown at right. Ten banks have
offices on a three-quarter mile stretch of Media's main street.

"The DCA program increased awareness of what was possible and provided
an incentive. About $50,000 in DCA
grants generated $5 million of renovation directly or indirectly," he said.
Five financial institutions agreed to
provide five-year 9% loans for renovations of small business storefronts
and facades . They are: Continental;
First Federal Savings and Loan; Industrial Valley Bank; National Bank of
Boyertown ; and Hill Financial Savings
Association. Of 19 Main Street projects
worth $5.9 million which have been
done or are in process, Continental
has been the direct lender or lead
bank for $2.8 million , Dailey added,
pointing out that there had not been
any defaults or late payments on
Continental loans. In order to promote
the program , Continental offered more
creative and flexible terms than conventional financing . A bank's involvement in Main Street brings benefits
such as an increase in loan volume,
new business relationships, and an
upsurge in the community's economic
activity, Dai ley commented .
Federal Reserve Bank of St. Louis

First Keystone Federal Savings, shown at its main office in Media, contributed
the entire amount of a loan fund for Main Street facade improvements there.
From left to right are: Robin Otto, Main Street coordinator; Betty Gibson, manager
of mortgage lending at First Keystone; and George A. Albany, Ill, secondary
marketing/real estate owned administrator at First Keystone.

The Industrial Valley Bank is also active,
and, like Continental, has a representative on the Main Street program's
advisory board. Erwin K. Wenner,
Vice President and regional lending
officer of IVB, said that he was
extremely pleased with the effect the
Main Street program has had on downtown restoration and development in
Pottstown . He said the program has
contributed to a resurgence of pride
in the community.

Chris Witmer, Main Street Coordinator,
pointed out that "the bottom line is
encouraging reinvestment in the
towns. " Witmer, whose grandparents
were Pennsylvan ia Dutch farmers,
said this can be done by starting
demonstration projects, giving economic incentives, and encouraging
mixed usage. Pottstown is unusual in
that the Main Street program involves
the town's housing stock, located
adjacent to the business district.

A Philadelphia suburb and a county
seat, Media has a population of 6,100
which rises to 25,000 on a typical
workday. Media has fewer historic
buildings than many other communities, but has used to good effect
those it has, adding brick, tiles and
other Victorian touches, and maintaining a harmony of storefront and
street design. The town is finishing a
three-year cycle of DCA funding,
during which about 30 rehabilitation
projects were carried out. Downtown
seems to be thriving. In fact, the Main
Street program, a " shot in the arm"
for Med ia, vividly demonstrates that a
downtown retail area can co-exist
successfully with several nearby
shopping malls.
The banking community has been
very supportive of Media's Main Street
program. First Keystone Federal Savings Bank, which has its main office
there, contributed $120,000 for a lowinterest loan pool for facade improvement at 8% fixed interest. Robin Otto,
the Main Street Coordinator, said that
it was unusual for one bank to contribute the entire amount needed for
the loans. First Federal did so, she
said, because it believed in the Main

Street program in Media and its potential.

government to work together, and a
"can do attitude."

Grants totaling about $10,000 were
made by First Keystone, Fidelity Bank,
PSFS, Mellon Bank, Provident
National Bank, Elmwood Federal
Savings Bank, and First Pennsylvania
Bank. Financial institutions also sponsored promotions and the Main Street
newsletter. The Main Street effort will
continue under the umbrella of a
municipal business authority which
raises funds by taxing wholesale,
retail and professional businesses.
The tax is based on the volume of
gross sales with a maximum cap of
$600 on the mercantile tax.


The town has also been successful in
sponsoring six outdoor promotional
events each year. These are familyoriented, involve quality merchandise
and entertainment, and encourage
pride on the part of both residents
and visitors. About 40 county restaurants participate in the Festival of Food,
which draws 30,000 people on a
Sunday afternoon.
Robin Otto said that two critical ingredients in the program's success are
the commitment of businesses and

A town of 5,000 southwest of Philadelphia with a major mushroom industry and tourist attractions, Kennett
Square recently started a Main Street
program. Marie McDaniel became
the Main Street Coordinator about six
months ago.
There are already several notable
rehabs in town, and volunteer spirit is
strong, she said. The Jaycees restored
the face of the town clock. Donations
from residents were the basis for establishing a revolving fund which ultimately will finance projects throughout
Kennett Square. Businesses have
donated time and services worth
$7,500. Over 70 merchants are
involved in a merchants' association,
and planned promotions include a
sidewalk sale, Moonlight Madness,
and a Halloween event. In an unusual
move, 25 businesses are sharing customer lists with each other. Fidelity
Bank has agreed to provide below
market rate loans for external improvements, and Fidelity and Meridian Bank
have representatives on the Main
Street association board.

Name Philadelphian To Fed Consumer Council
The Federal Reserve Board recently
named Philadelphian Jane Shull to a
three-year term on its Consumer
Advisory Council. This 30-member
group advises the Board on consumer

financial protection laws and other
consumer-related matters.
Ms. Shull is director of the Institute for
the Study of Civic Values, a non-

Mary Betts-Moore, (left), director of Technical Assistance and director of the
lnstitute's Neighborhood Development Center discusses a program with Jane
Shull, director of the Institute tor the Study of Civic Values.
Federal Reserve Bank of St. Louis

profit organization whose goal is to
promote the civic values of community,
participation, and justice. The Institute
conducts public policy research,
sponsors citizen education programs,
and provides technical assistance to
such groups as block clubs, CDCs,
credit unions, and youth and social
service agencies. It is located at 1218
Chestnut Street, Philadelphia, PA
19107. (215) 922-8960.
Ms. Shull has been active in helping
communities start credit unions, including developing a board, establishing
loan policies, and making loans. Her
community service positions include:
president, Southwest Germantown
Association Federal Credit Union;
co-chair, Mayor's Neighborhoods
Commission; member, Mayor's Economic Roundtable; board member,
Southeast Asia Coalition; and president, Philadelphia Jobs in Energy


Partee Retires from NRG; Salutes NHS
(Following are excerpts from an interview in the spring issue of Stone SoupThe Neighborhood Partnership
Report, published by the Neighborhood Reinvestment Corporation.)
J. Charles Partee recently left the Neighborhood Reinvestment Corporation
Board of Directors after eight years of
service, three of them as board Chairman. He represented the Federal
Reserve System, where he was a
Member of the Board of Governors
from 1976 until his retirement in early
Has it been difficult to make the
leap from your Federal Reserve
Board responsibilities to your work
with Neighborhood Reinvestment?

Not really. It's a different level of involvement. But the distribution and the
productive use of credit is always of
great interest to economists. Now,
unlike the general credit markets, the
NHS effort is deliberately addressed
by lenders on a non-price basis. So
long as they can get a reasonab le
rate of return with reasonable safety,
they're prepared to put extra effort
into the extension of credit in those
neighborhoods. They are supporting
a credit allocation system along
socially desirable lines.
You have said previously that you
credit the success of NHSs to their
status as small operations. What
are the advantages you see in the
small-scale approach?

I believe that if we were to greatly
expand our NHS activities on standardized grounds, according to a rigid
model, we would find that often they
wouldn't succeed . And a record of
non-success would quickly be damaging.
What other issues should NHSs and
Neighborhood Reinvestment look
out for?

The challenge of obtaining adequate
operating funds has been a growing
problem. The corporation has faced
this, and NHSA has faced it. The fundraising campaigns, and the exposure
through the national and local Ad Counci I campaigns, have been generated
as a result of that need. And it looks
fairly promising to me, but there's a
lot of development work still to be
How does the concept of commitment fit into your perception of NHSs
and neighborhood revitalization?

NHSs have to be made up of volunteers from the community who are
working together toward a common
purpose. If you don't have that participation, you're unlikely to have a successful NHS . There's nothing like
having a jury of your peers. It's a lot
different to offend your neighbor by
not performing on a commitment than
it is to offend somebody from Washington. And I think this is the secret of
success in the NHS effort. It's built on
local support, local volunteers, and
local aspirations.

CDC Training Funded by Two Philadelphia Banks
"Thanks to the banks. They made it
That's Jill Michaels, executive director
of the Community Development Coalition, Inc., saluting Provident National
Bank and PSFS for funding a financial
management training workshop for
Philadelphia community development

To be covered in the workshop are
such topics as how to generate forms
and reports, and how to maintain
adequate accounting records. The
workshop , to begin in July, will be
held at CDC, Inc., 1217 Sansom Street,
Federal Reserve Bank of St. Louis

Philadelphia. The program will also
include on-site training and monitoring,
and is designed especially for staffers
who handle daily bookkeeping, and
board members who have financial
responsibility. For further details, interest individuals should phone Ms.
Michaels at (215) 592-7334.
At the Community Development Coalition, Inc. as a summer intern is Patrick
Bond, former Philadelphia Fed
Community Affairs Representative.
He is researching the effects of
abandonment on communities, among
other projects.

Two New Councils
Emerge in 1986
Among 1986 initiatives of the Community Affairs and Regulations Assistance
Department at the Philadelphia Fed
are two of special interest to local
They involve the formation of two informal councils; one, of Community
Affairs Officers; the other, of Consumer
Compliance Officers. Both will draw
members from Philadelphia area financial institutions. The Community Affairs
Council, in fact, is already off and
running. It was born in March, when
CAOs met at the Philadelphia Fed for
the first of several 1986 meetings.
"This council has several purposes,"
Fred Manning, Assistant Vice President and Community Affairs Officer
stated. "It will reinforce the common
bond between professionals; provide
a location for exchanging ideas and
experiences; and let us hear 'out-ofour-orbit' presentations from people
with different perspectives."
The kick-off meeting, which was followed by a reception, featured remarks
by Philip Price, Jr., Deputy Director
of the Urban Affairs Partnership, and
Joseph J. James, Deputy Director of
Commerce, City of Philadelphia.
The second informal council, composed of individuals with regulatory
compliance responsibilities in local
depositories, will be launched in July.
A major purpose for this council,
Manning points out, is "to keep members abreast of current developments,
both national and regional, on compliance matters and rule-making possibilities."
Long-range plans include creating
regional councils of these types at
various locations in the Third District
to supplement the ongoing conferences and workshops of this Department. Manning added: "This way, we
focus our energies better, and, equally
important, learn from one another."
ARE YOU a financial institution or
a community group with an interesting community development
program? CASCADE may publish
an article about you. Contact: Editor,
CASCADE, Federal Reserve Bank
of Philadelphia, 10 Independence
Mall, Philadelphia, PA 19106.


Reading NHS Leads Housing Rehab Project
(Editor's note: With this article,
CASCADE continues its series on
the activities of the several Neighborhood Housing Services (NHS) affiliates
within the Third Federal Reserve District.)
Neighborhood Housing Services of
Reading (NHSR) has played a major
role in a $1.25 million rehabilitation
project in downtown Reading.
NHSR made home improvement loans
to owners of neighboring homes, several home mortgage loans to owners
of the rehabilitated homes-and conducted the project's marketing campaign. The project involves previouslyabandoned buildings on Schuylkill
Avenue. The homes were rehabbed
with funds from the federal Community

Development Block Grant program
and the Pennsylvania Department of
Community Affairs. The City of Reading
secured funding for the project and
monitored construction.
The project recently won the top design
award for residential multiple dwellings
in a statewide competition sponsored
by the Pennsylvania Historical and
Museum Commission's Bureau of
Historic Preservation.
Reading is a city of 78,600 which
depended at the turn of the century
on hosiery and iron mills, cigar factories
and breweries. Today, major employers
include AT&T, CarTech and Dana
Corp. It has experienced a decline in
manufacturing, and growth in the
professional and service sector.

Reading's median income was
reported at $12, 123 in the 1980 census.
Since becoming operational in 1978,
NHSR has made 65 home mortgage
loans totaling $781,900 at belowmarket interest, enabling lower-income
families to buy or rehab their homes.
Its foreclosure rate on loans has been
low-three out of 65 properties.
NHSR also has started to acquire,
rehab and sell homes. In addition,
NHSR has programs to clean up backyards and neighborhoods, reimburse
homeowners for the cost of exterior
paint, lend tools, and provide budget
Bankers play an important part in
NHSR's work. "The people appointed
by the banks have been very committed," said Deborah Lachina, executive director of NHSR. "They have
given a lot of volunteer hours." Among
the most active, she said, are: Robert
Hoppes, vice president of Meridian
Bank, Reading, and treasurer of
Reading NHS; and Betty Behm , assistant vice president of Hamilton Bank,
Reading, who is on NHS R's board of
directors and its finance committee.
Hoppes noted that people who previously were unbankable have obtained
loans from NHS R's high-risk loan fund
to buy and rehabilitate a property.
Calling this one of the "very positive"
aspects of its operations, he said that
NHSR is "getting people into ownership situations who otherwise wouldn't
own-and it's working!"

"Before"-Reading's 400 block of Schuylkill Avenue ...

Perhaps the biggest current problem
of this NHS is finding operating funds.
It is in the midst of a major fund-raising
drive, seeking two-year commitments.
This NHS has published an unusual
35-page document describing the
early days in Reading's history, including anecdotes about its early settlers.
It is available at nominal cost from:
Neighborhood Housing Services of
Reading, Inc., 221 West Buttonwood
St., Reading, Pa. 19601, (215) 3728433.

"After"-row houses are no longer deserted and dilapidated due to NHS rehab
Photos by J. Sheridan Evans and B. Franklin Reber
Federal Reserve Bank of St. Louis

Meanwhile, a survey by the Neighborhood Reinvestment Corporation
of loans made by local NHSs around
the country found that the default rate
on the loans was comparable to that
for conventional loans. NHS units


Around the District
LUCIANO PAVAROTTI, worldfamous tenor, appeared at Philadelphia's Spectrum, singing Verdi's
Manzoni Requiem, in a performance
benefit for Business Leadership
Organized for Catholic Schools and
the Opera Company of Philadelphia.
Provident National Bank was one of
the major sponsors of this April event.
HERE'S A "GOOD NEWS" followup to an article on York, Pa., that
appeared in a previous issue of
CASCADE. In that issue, we talked
about the Crispus Attucks Association
and its work in neighborhood revitalization. Today, the good news from
York's Al Hydeman, Economic and
Community Development Director,
is that The Enterprise Foundation of
Columbia, Md., will assist the Crispus
Attucks Association with $250,000 for
housing rehabilitation, job training,
and other projects. Additional funding
of $250,000 was obtained from the
state, city, and business community.
Financial institutions which contributed
to the matching funds drive were:
York Bank & Trust, Commonwealth
National, Hamilton Bank, Drovers &
Mechanics Bank, Dauphin Deposit
Bank, and York Federal Savings &
Loan. For additional information, contact Hydeman at (717) 843-8841.
(continued from page 5)

typically lend to people considered
"unbankable" by conventional mortgage lenders. NHS loans defaulted
at a 3.6% rate; an additional category
of delinquent loans would increase
the default rate to 6.7%-lower than
the 7.3% cumulative default rate for
all mortgage loans in the U.S. during
the past 10 years. NHSs have made
almost 11,000 loans worth nearly
$100 million.
Presenting the study to Congress,
William Whiteside, executive director
of the Neighborhood Reinvestment
Corporation, said: "NHSs' success is
directly attributable to their built-in
capacity to tailor loan terms and rates
according to each borrower's ability
to pay; to provide ongoing financial
counseling; and to recast loans if
necessitated by changes in the borrower's income."
Copies of the report on the NHS
Revolving Loan Fund are available
for $2 from : Neighborhood Reinvestment Corporation, 1324 G Street, NW,
Suite 800, Washington, DC 20005.
Federal Reserve Bank of St. Louis

Elaine Black vice president, Philadelphia Citywide Development Corporation,
pauses for a photo with Keith Rolland during a t~ur of ~rban projects.
was a preview of Philadelphia redevelopment sites which were later v1s1ted by
the Federal Reserve System's Community Affairs Officers, who attended a June
conference at the Philadelphia Fed.


Community Reinvestment Director Comes to Fed
Keith Rolland has recently come on
board as Economic Development
Analyst in the Community Affairs
Department of the Philadelphia Fed .
He previously was director of the
Community Reinvestment Program
at the Interfaith Center for Corporate
Responsibility, New York. One of his
chief responsibilities atthe Fed will be
to inform banks about federal, state
and local economic development
programs, and public and private
sector partnerships.
In his Interfaith Center position, Rolland
promoted community development
investments in several ways. He coorganized an initiative in which the
Chase Manhattan Bank, in cooperation with the City of New York, started
a $10 million weatherization loan program. In this continuing program, the
loans are going to owners of apartment
buildings in low income areas of the
city. Helping community development
organizations obtain investments from
churches and other sources was
another major accomplishment. He
also started a clearinghouse-a reporting service on community development investing-for 235 church inves-

tor groups, and organized 13 bimonthly
news "packets" on community development.
Other positions Rolland held included
editing and reporting for The American
Banker and The Windsor (Ontario)
Star. He did writing and research on
adult education in Colombia, South
America, on a scholarship from the
lnterAmerican Press Association.
Rolland was also an account executive
with John De Nigris Associates, New
York, a financial public relations firm,
and a newswire editor with Merrill
Lynch, Pierce, Fenner & Smith, New
York. He has a bachelor's degree in
finance from Fordham University and
a master's degree in journalism from
Columbia University.
CASCADE now reaches more than
1200 community groups and financial institutions. To put your organization's name on our mailing list,
or to order extra copies of this issue,
write to: Editor, CASCADE, Community Affairs Department, The Federal Reserve Bank of Philadelphia,
1O Independence Mall, Philadelphia, PA 19106.


New Inner-city Mall
Encourages Optimism
"Our neighborhood is beginning to
bounce back." That's the forecast
from Rev. Thomas Ritter, chairman,
Community Development Corporation
of Philadelphia, discussing Strawberry
Square Mall.
The 62,000 square foot shopping
complex, in an economically troubled
area of North Philadelphia, is now
totally leased, and includes the O & 0
Supermarket, where the majority of
owner/operators are minorities.
The Community Affairs department
of the Philadelphia Fed helped Equibank identify an opportunity to serve
the neighborhood. Equibank has
signed a ground lease, and is building
a branch to open late this year.
Kevin McAllister, Vice President and Area Manager of Equibank, meets with
Don Kelly, (right) at the Philadelphia Fed. McAllister visited as part of an ongoing
series of outreach luncheons, and is pictured in front of maps of financial
institutions' branch offices in Philadelphia.

Chicago Banker Joins Fed's CA Staff
Don Kelly recently moved east from
Chicago to join the Community Affairs
department of the Philadelphia Fed.
He was Assistant Vice President and
Manager of Community Relations at
Talman Home Federal Savings and
Loan Association, Chicago.

As Senior Community Affairs Specialist at the Fed he will interact with chief
executive and community affairs officers of Third District financial institutions and develop community profiles
as well as training and educational
materials affecting development
finance .
During his seven years with Talman,
Kelly managed community activities
of 56 branch office managers, and
was responsible for community development programs and CRA compliance. Some of his major Chicago
accomplishments were the design
and implementation of a training program for branch office managers that
established Talman as a good corporate citizen in over 50 communitiesa program that brought increased
savings deposits along with it. He
created a residential rehabilitation loan
Federal Reserve Bank of St. Louis

program which is now originating over
$6 million of rehab loans annually.
Kelly was also president of the Greater
Southwest Development Corporation,
an organization that was cited by the
Neighborhood Reinvestment Corporation as a national model for neighborhood revitalization.
Another recent Chicago experience
for Kelly was his work as head of a
consulting project for the Woodstock
Institute, a non-profit community planning resource. His project sought to
help a Chicago bank improve its
community lending performance. He
also analyzed a mortgage bond program to recommend ways to increase
its accessibility by the minority community.
Prior to joining Talman, he was a
community organizer, active in the
anti-redlining campaigns of the early
1970s. He also spent two years with
the Peace Corps in Guatemala as a
Community Development Specialist.
Kelly has a bachelor's degree from
St. John's University, New York, and
a master's degree in urban planning
from the University of Illinois.

"After years of depression, we now
have a successful working relationship
between banks, insurance firms, the
government, and indigenous residents,"
Ritter added . Financing for the $3.3
million project came from PSFS, the
Philadelphia National Bank, the Urban
Development Authority, the Philadelphia Industrial Development Corporation, and Local Initiatives Support
Corporation (LISC).

Kelly's Korner Renewal
To Aid Retail Area
Long ago, the aging department store
was a trolley barn . Today, the storeKelly's Korner Discount Department
Store-is undergoing a vast expansion.
The store is being expanded to double
its size, with a second floor, a supermarket, and an improved parking lot.
The renewal will preserve 30 jobs
and create 130 new ones. The project
marks the first commercial development in the Kensington-Fishtown area
of Philadelphia in over ten years, and
was funded by a loan of $300,000
from the Royal Bank of Pennsylvania,
Narberth. The bank is also handling
all financing disbursements for the
revitalization. Among other funding
was a $975,000 Urban Development
Action Grant and a $250,000 loan
from the Philadelphia Industrial Development Corporation.


(CASCADE interviews Tom Patterson,
Vice President, Public Responsibility
Department, Philadelph ia National
Bank. He is currently Chairman of the
Board of the Philadelphia Citywide
Development Corporation. Don Kelly,
of the Community Affairs Department,
Philadelphia Fed , interviewed Patterson.)
How does a large profit-oriented
institution like PNB structure itself
to relate at the neighborhood level?

We see community relations as a way
of developing networks with commu nity leaders and organizations, and
with appropriate government leaders.
I'm talking about folks who have public
resources that could be used in neighborhoods-such as Joe James at the
city's Department of Commerce. Also,
we are heavily involved in low and
moderate income housing financing .
And recently we created an urban
lending department wh ich does not
report to, but has a dotted line relationship with, this department.
Through our small business loan
department, we spend a lot of time in
neighborhood economic development. The Assistant Vice President in
charge of this department reports to
me . We're talking about the small end
of the scale. It's the kind of business
you would find in an older neighborhood , the commercial corridor, or
owned by an elderly person looking
to retire or turn it over to new management. You have to be carefu I that those
businesses don't slide out of neighborhoods.
Does the urban lending department
operate flexibly on deals that come
through this network, or does it have
a formalized policy that's somewhat
unusual for a bank?

For trad itional neighborhood housing
financing, such as the Philadelphia
Mortgage Plan and the Philadelphia
Rehabilitation Plan, the urban lending
department has developed loan policies, and that was the original intent.
We wanted to develop ways to lend in
older neighborhoods; ways the banks
would be comfortable with. In so doing,
we almost institutionalized lending
criteria. An example of th is type of
adaptive lending is using welfare
income in evaluating a loan applica
Federal Reserve Bank of St. Louis

tion . Years ago, we didn't use welfare
for income, but that is now an institutional ized and acceptable source of
income. Also, we have additional new
policies such as those dealing with
types of multi-unit property, and we
hope to incorporate some concepts
like cooperative housing .
You 've referred to the Philadelphia
Mortgage Plan and the Philadelphia
Rehabilitation Plan as programs
you had some role in, and that were
gratifying successes for you. Are
there others?

One exciting project is our mentor
relationship with a neighborhood credit
union . In older neighborhoods where
there is disinvestment you find that
banks, quite logically, have been either
downsizing or removing their branches
simply because the branches are no
longer economically viable. So we
thought the neighborhood credit union
an honest attempt to deliver financial
services at reasonable cost.
But the neighborhood cred it union
has a struggle, since it often doesn't
have access to resources . We suggested to the Institute for the Study of
Civic Values , an organization wh ich
champions cred it unions and provides
techn ical assistance to them, that
maybe there was a mentor role for us
to play. In cooperation with the Institute,
we picked the Southwest Germantown
Federal Credit Union as one we would
work with.
What is our goal here? Well , if just one
bank develops a mentor relationship,
it's not much . But if the credit union is
able to grow and provide services the
neighborhood deserves, maybe other
banks and credit unions will develop
a partnership , or mentor relationship.
We have announced our commitment,
and have been encouraged that First
Pennsylvania Banking & Trust Company has bought into the program in
West Philadelphia.
Under the Community Reinvestment
Act, social responsibility takes on a
very specific character, requiring a
financial institution to be sensitive
to the needs of modest income
neighborhoods. In what condition
are you finding the neighborhoods

I hate to say it, but we're finding dilapidated structures needing huge


amounts of resources to rehabilitate.
There are few job opportunities. Many
neighborhoods are dirty, not because
the people are dirty, but because there
are fewer public resources. The "mom
and pop" stores that were once so
successful are devastated . There are
problems of crime, drugs, and personal safety. Although all of these
cond itions are bad , there are nevertheless people who just refuse to give
Which needs are within the reach
of banks to help address?

Because we know financing, we can
figure out what does and does not
make sense. Taking part in neighborhood development is a logical role
for us, and a role we should play in
partnership with the neighborhoods,
and the public and private sectors,
because it's a tremendous problem.
Support of neighborhood economic
development activities can be done
either through small business loans
or through technical assistance to
neighborhood entrepreneurs. Working
as volunteers with local development
associations is another type of support.
Most important is to give neighborhood leaders the financial and technical support to enable them to be
true leaders.
We've identified the needs. What
about neighborhood strengths?

Philadelphia is a city of neighborhood
organizations, with very strong leaders
behind these organizations. I'm particularly sensitive to the grassroots
leadership such as a James Young at

the Neighborhood Action Bureau in
the Germantown/Lehigh area. James
has been out on the streets pounding
away since the late '60s. Without his
presence, that area's reinvestment
would just not be possible. In fact, we
have a multitude of able leaders.
Mamie Nichols, of Point Breeze Federation, is another. Certainly Philadelphia
is a better place because of her.
We should encourage the growing
sophistication among community
leadership about how to bring together
private and public resources. This is
coupled with our realization that the
federal government will no longer provide the public monies it once did in
the golden days of model cities.

What about the state-of-the-art
community banking?
Through my work at Philadelphia
Citywide Development Corporation,
I have met bankers with the imagination
to tailor traditional thinking-to restructure it so that economic development
can occur in a way that is beneficial to
the neighborhoods, and not a disaster
to the banks. However, I think the
industry as a whole, with some exceptions, has not recognized that there is
an obligation and a need in this area.
I'm impressed with the role you folks
at the Fed are playing. You are a catalyst, a convener-pulling together
groups of bank officials to expose
them to needs, and showing them
what others in the industry are doing.

How important are partnerships
between community organizations,
the public sector and the private
financial industry?
That partnership is vital. It's like trying
to milk a cow on a three-legged stool
and one of the legs falls off. Without
the partnership, you don't really know
what the true needs are, or how to
properly develop and design the
program. Also, you need that relationship to implement and deliver the
service. If you don't have a resource
that's needed and trusted by the neighborhood, it won't be used .

How important is the public sector?
The public sector is vital because it
has that big resource produced by
our tax dollars-the public subsidies
for low or moderate income housing.
Federal Reserve Bank of St. Louis

In dealing with real estate devastation
you cannot rehabilitate some of these
properties ata cost that low or middle
income people can afford. You've got
to have public monies. We're talking
about needs that would rival those we
had in Europe after the Second World

Does PNB see community development banking as give-away banking,
as a specialized aspect of profitmaking, or as a hybrid where you'll
be happy to break even?
It is never thought of as give-away
banking . It is looked at as an investment, much like research and design;
an investment in the future. And you
do your best to tailor your service as
quickly as possible, so the benefit to
the neighborhood does not cost you
enormous amounts of money. But
you don't look at it as being something
that you've got to immediately have
the normal return on assets on, because
short term investment never gives you
that kind of return. In the medium and
long term, it is exactly as you described
it: a specialized aspect of profit-making

What advice would you give to
community groups that are having
difficulty getting the cooperation of
a particular financial institution?
Let's assume that the community group
has made an attempt to approach a
financial institution; has sought out
the appropriate person; and has either
gained attention but with an unsatisfactory result, or has been rebuffed.
The next step would be to contact a
friendly banker, if the group knows
one- somebody with whom they can
have a candid discussion to see if
that banker knows an appropriate
person at the other institution, and
would be willing to provide an introduction. If this doesn't work, the
organization should solicit the support
of the Community Affairs Department
at the Philadelphia Fed, or the Urban
Affairs Partnership. Both have been
working hard to solve neighborhood
If this approach fails, the next step in
escalation would be to write to the
chief executive officer of the financial
institution. The letter should point out
that the group is a viable organization,
representing a constituency with legitimate concerns to discuss, and hoping

for mutual cooperation. The chairman
may not respond personally, but he
will designate people who will do that.
As a last resort, a Community Reinvestment Act challenge is a very effective way to get the attention of a local
bank. There are some examples of
that around the Philadelphia area.
Nothing will interest a banker more
than seeing folks who are genuinely
concerned about their neighborhoods
sit down and talk about their needs in
a rational way.

What should community groups
avoid doing?
Avoid making assumptions that the
bank knows what their needs are and
is automatically interested in answering
those needs. A group should assume
that the banker needs some education.
This education initially should not be
in the form of threats, but should take
the form of data presentation .

What advice would you give a bank
that was trying to overcome hostility?
The bank should acknowledge that
the organization has a right to exist,
and not stonewall it. If the group
requests a meeting or support, a walk
around the neigborhood with the
leadership to see what strengths and
weaknesses exist would be worthwhile.
However, if this isn't possible, the bank
ought to invite representatives to come
in and talk about the issues. This is a
good step because it says, "Hey, I
respect you. You have a right to your
opinions. Let's talk about them, and
see what the issues really are."

Need a Speaker?
Staff members of the Philadelphia
Federal Reserve Bank may be available on request to talk to various audiences. They will discuss the Federal
Reserve's interest and involvement in
community and consumer banking,
and in regulatory compliance issues.
Speakers and their topics are: Fred
Manning, Community Affairs; Jim
Dygert, Consumer Banking ; and Phil
Farley, Regulatory Compliance. Inquiries should be sent to the particular
speaker desired , at the following
Philadelphia Federal Reserve Bank
10 Independence Mall
Philadelphia, PA 19106


Philadelphia Fed's Regulations Hotline
Serves Many Callers

Philadelphia Fed Hosts
System Conference

The expression, "The phone is ringing
off the hook," certainly applies to the
Regulations Assistance unit at the
Philadelphia Fed.

Staff members of the Board of Governors, along with Community Affairs
Officers from the nation's 12 Federal
Reserve District Banks, attended a
June 25-27 Community Affairs conference here. The Philadelphia Fed is
the first Reserve Bank to host this
annual meeting, usually held in
Washington, D.C.

So far this year, the Regulations Hotline
has rung on an average of 213 times
a month. Each call means a question
for Manager Phil Farley or Senior
Analyst Barry Cutler, who together
have a total of 22 years experience in
providing regulations compliance
Callers are most often financial institution compliance officers. The function
serves the compliance personnel of
315 depositories in the Third District.
Regulators and bank attorneys are
among other callers. Questions arise
because the provisions of credit regulations are often difficultto understand.
"After all , regulations are written by
lawyers in language that inevitably
becomes technical," Farley pointed
out. "So we try to make the meaning
of the regulation clearer."
About 80% of callers ask about consumer credit, Farley explained. Two
of the most commonly asked questions
are, "What is the formula for com puting an annual percentage rate under
Truth in Lending?" and "When does
the Right of Rescission apply?"
Regulations regarding Truth in Lending
and Interest on Deposits have been
of special concern due to recent real
estate activities, the large number of
refinancings due to reductions in interest rates, and the elimination of all
time deposit ceiling rates, Farley
He emphasized that the department's
goal is to promote voluntary compl iance by banks with federal banking
laws: "We start with the premise that
the creditor wants to comply."
There's more to the unit than phone
calls. There is outreach. In April, for
the first time, Farley circulated a sum mary of some typical questions
received and answers given on regulations to members of the compliance
community. Both Farley and Cutler
are available for talks, workshops,
Federal Reserve Bank of St. Louis

The Community Affairs function at
the Federal Reserve Banks was
established several years ago as a
consequence of the Community
Reinvestment Act. This activity has
been growing rapidly in System visibility, momentum and importance in
recent years, a fact now reflected in
the annual conference's setting.

Barry Cutler

and training sessions with compliance
officers. To date, their 1986 schedule
has included talks on the reinforcement and clarification of the regulatory
provisions to the Atlantic states regional
conference of the Consumer Bankers
Association , the American Institute of
Banking , and the Independent Bankers Association.
Accord ing to Fred Manning, Community Affairs Officer at the Philadelphia
Fed, "Phil and Barry not only bring
great credit to themselves and to the
Fed by their in-depth knowledge of
complicated regulatory requirements,
they perform an important service for
bankers and the public by facilitating
the compliance responsibility. Best
of all, they achieve this goal in a friendly
and instructive way. It is little wonder
that they have legions of admirers in
the industry and among consumer
credit protection groups."

CASCADE readers are reminded
that Phil Farley and Barry Cutler
may be available for speaking
engagements and compliance
workshops, and that their Hotline
is open for call during business
hours, Monday through Friday. For
either service, phone (215) 5746458.

Community Affairs personnel at the
District Banks are involved in ascertaining community economic needs;
in promoting constructive dialogues
with financial institutions, local governments, development agencies, and
neighborhood groups about these
needs; and in intermediating knowledge about effective strategies and
partnership programs relating to them.
Assistant Vice President Fred Manning
is this Bank's Community Affairs Officer.

Celebrate Model
Financing Plan
The largest multi-family housing project ever developed in Philadelphia
by a non-profit organization was
saluted at a May ground-breaking
ceremony attended by the Mayor,
business leaders, and an audience
of 150 persons.
A million-dollar low-income housing
development in North Philadelphia is
now under rehabilitation, representing
what the National Temple Non-Profit
Corporation (NTNP) calls a "model
financing partnership." In addition to
NTNP, the partnership includes the
City of Philadelphia, CIGNA Insurance,
and Mellon Bank. This financing will
allow National Temple to leverage City
funds to begin another low-income
housing project in August.
For details, contact Marie Nahikian at
NTNP, (215) 787-2790.


PRP, Inc. Spurs
Housing Complex Plan

Theveny To Handle Consumer Affairs
Her new title at the Fed is Consumer
Affairs Representative, and her major
responsibility is the handling of con sumertelephone inquiries. This includes
advising consumers on their credit
rights; explaining such laws as the
Equal Credit Opportunity Act; assisting
them in learning how to establish
credit; and referring them to additional
sources for advice.

Housing financing has begun at
Jefferson Manor, an inner-city apartmenVtownhouse complex in North
Philadelphia near the main campus
of Temple University.
The complex is owned by Jefferson
Manor Development Corporation
(JMDC), an association of Jefferson
Manor tenants. The new purchase
plan involves 120 apartments and
106 townhouses. Initially, the Philadelphia Housing Development Corporation provided a low interest loan of
$1,094,000 that allowed tenants to
buy the apartments, and subsequently
has offered a $700,000 rehabilitation
PSFS provided a $2.5 million swing
loan to JMDC to buy the complex,
and JMDC will hold the mortgage for
the cooperatively owned apartments.
The townhouse purchase program is
progressing rapidly, assisted by the
Philadelphia Rehabilitation Plan, Inc.,
whose staff is offering counseling and
financial packaging to prospective
buyers . At press time, financing for
about half of the townhouses is nearing
settlement. Individual home mortgages
for the townhouses are being made
available by Philadelphia Federal
Credit Union, Frankford Trust, First
Pennsylvania Bank, Fidelity Bank and
PSFS. For more information, contact
James Wilcox, executive director, PAP,
Inc., at (215) 561-1173.

Name Manning to
Coalition Committee
The Neighborhood Enterprise Committee of the Greater Philadelphia
Economic Development Coalition has
a new member. He's Fred Manning,
Assistant Vice President and Community Affairs Officer of the Philadelphia
This committee is a vehicle for exchanging ideas among lenders, government agencies, foundations, and
community development corporations.
Successful projects completed by
the Coalition include the selection
and hiring of five economic development specialists to work in five neighborhoods. The chairman of the Coalition is Walter D'Alessio and John P.
Claypool is executive director.
Federal Reserve Bank of St. Louis

Grace Theveny instructs a consumer
at National Consumers Week fair.

Grace Theveny is a new staff member
in the Community Affairs and Regulations Assistance department of the
Philadelphia Fed.
One of her recent responsibilities was
to manage the Fed's booth at the annual
National Consumers Week fair at
Philadelphia's Gallery shopping mall.
Here she provided the public with
Fed publications on consumer credit
protection and other information to
help them make wise financial decisions.

Ms. Theveny has had wide experience
in working with and educating the
public . She was formerly Economic
Education Coordinator with the Fed's
Public Services department, where
she planned and participated in economic education seminars for teachers,
and edited a newsletter for 3500
In 1985, she was named the Bank's
Loaned Executive with the United Way
of Southeastern Pennsylvania, where
she coordinated the fund-raising
campaign in area businesses and
hospitals. Previously, she spent seven
years with the Bank's auditing department and was internal auditor there
when she was selected as a work
scholarship recipient by the Bank,
taking time off to complete an undergraduate degree in business administration at Holy Family College, Philadelphia.

Public/Private Plan Offers Low-cost Loans
The City of Philadelphia's Redevelopment Authority has homeowner programs for Bottom Line Mortgages and
Action Loans "designed to create
homeownership opportunities for
lower-income City residents through
low-cost loan programs," according
to RobertG. Hazen, Executive Director
of the Redevelopment Authority.
"The fact that area banks are participating in these programs fosters a
healthy partnership between the public
and private sectors in the city, and
cannot serve but to enhance the success of these programs," he added .
Persons buying a house for $65,000
or less in Philadelphia, with an annual
income of $35,000 or less, may qualify
for a Bottom Line Mortgage ( 10. 1%
interest; 5% down.) Among the financial institutions offering these mortgages

are: First Pennsylvania Bank, Frankford Trust Company, Mellon Bank
East, Meridian Mortgage Corporation,
Philadelphia National Bank, and
Liberty Federal Savings & Loan
Action Loans are below market rate
home improvement loans, for such
purposes as weatherization, additions,
modernizations, painting, siding,
plumbing, and heating. Eligible properties include one to four family units,
owner occupied . Persons who wish
details should phone the Philadelphia
Redevelopment Authority, (215)
The following local banks are participating in the Action Loan Program:
Mellon Bank; Philadelphia National
Bank; PSFS; Provident National Bank;
Continental Bank; and Fidelity Bank.

UEFP Represents Public/
Private Partnership


The Urban Education Foundation of
Philadelphia (UEFP) is coming alive
with educational activities-and it all
began with a partnership of the public
and private sectors.
First, the Provident Mutual Insurance
Company gave away their 22-acre
headquarters at 4601 Market Street,
Philadelphia. It was deeded to the
non-profit U EFP in 1983. Then there
was a $5 million grant from the federal
government, through the Department
of Education and the Economic Development Administration. This was of
particular importance because UEFP
is anchored by two major institutions,
Lincoln University and Cheyney
University, and serves as the urban
campus for these historically-black
The lastest news is that UEFP has a
new chairman of its board of directors.
He is H.H. Holloway, Senior Vice
President and General Counsel, Philadelphia Federal Reserve Bank.






The guide assists compliance officers
and internal audit personnel in assuring compliance with consumer-related
federal banking regulations and statutes. It outlines the purpose and coverage of each regulation, and
describes the Federal Reserve System's
enforcement guidelines and compliance examination procedures. Financial institutions can obtain one free
copy upon request; additional copies
are $5 each .



i~ ~~~.

::.::= ::.--=

[t~ W
}~ : ~';

Options is a directory of government
and private partnerships in community
revitalization , covering h_ousing, small
business and economic development.
It describes federal, state and city
initiatives in Pennsylvania, Delaware,
and southern New Jersey. Financial
institutions and non-profit organizations can obtain one free copy upon
request; additional copies are $1 O

The news1etter, CASCADE, gives
bankers and the public information
on developments in consumer banking
and community reinvestment. It is
distributed free of charge upon

To order any of these publications,
contact: Betty Carol Floyd, Department
of Community Affairs and Regulations
Assistance, Federal Reserve Bank of

Philadelphia, 10 Independence Mall,
Philadelphia, PA 19106. (215) 5746458.



This guide provides a topical reference
to the Federal Reserve Board regulations and to selected federal legislation
affecting banks in commercial transactions. It is intended for use by bank
officers or lending authorities with
compliance responsibilities . Financial
institutions can obtain one free copy
upon request; additional copies are
$5 each .


" In addition to providing universities
with adjuncts to their main campuses,
we will have an 'educational condominium' this fall when the YMCA opens
its academy for grades five through
eight. We also operate programs in
basic skills, such as computer repair,
food services, and security guard training ," Holloway commented .
" Inner-city education is terribly important. Research shows that, citywide,
15% of our youngsters leave high
school with no plans for college, military service, or jobs. In West Philadelphia, where UEFP is located, the
percentage, 29% , is even more distressing. However, as we move forward
with the selection of a new executive
director, we draw closer to our goals
of helping unemployed and underemployed residents," he added. For
more information on UEFP, contact
the office of the director, (215) 4764021.




 Ten Independence Mall, Philadelphia, PA 19106,(2 15) 57 4-6000
Federal Reserve Bank of St. Louis