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Community Affairs

Fall 1996

m this Issue:

C: 0

M M lJ



Community .Affairs 1
lntemsliip 3
■ Index 5
■ 1lesouP£es 8
■ Calendar 9
■ CDFIFunds 10





Federal Reserve Bank of MfnneapGlis

- What is Community Affairs?
e on the Commuity
Affairs staff regularly
meet with community
development professionals,
attend seminars, and otherwise
participate in community development activities. Frequently, other
participants ask why we are there.
Spedfically, they want to know the
interests the Federal Reserve
Bank of Minneapolis has in community development and what the
Reserve Bank does to further community development efforts.


In this article, we will answer these
questions. Because you are our
partners in community development, we want you to understand
that the Federal Reserve System
and its twelve Reserve Banks have
a stated commitmer_1t to community development.

We also want you to understand
the unique position of the Federal
Reserve Bank in community development. First, we have a voice
outside that of the banks, community organizations or develop-

ers. We can bring these active
participants together to help find
solutions to community development issues. Furthermore, we have
specialized knowledge of and offer educational programs on the
Community Reinvestment Act
(CRA), Home Mortgage Disclosure Act (HMDA) and fair lending
regulations. And while the Community Affairs and examination
functions at each Reserve Bank are
separate, they often work together
on training and other educational

The economic vitality ofindividual
communities ultimately affects the
health of our overall economy, and
a community's economic vitality
depends on people's access to
credit to build businesses and purchase homes.
Thus, the Community Affairs function at the Reserve Banks consists

"We simply cannot as a nation tolerate unfair and illegal
activity that puts some of our citizens at a disadvantage
as they try to participate in the credit markets. "
- Alan Greenspan
Chairman of the Federal Reserve Board

"Through our Community
Affairs program, the Federal .
Reserve conducts outreach and ·
technical assistance to help
financial institutions and the
public understand and address
community development and
reinvestment issues."
- Lawrence B. Lindsey
Federal Reserve Board of Governors

of helping every participant--be it
an individual or a community--gain
equal access to the credit markets
and to the information necessary
to participate in those markets.
Since lower-income individuals and
communities are most in need of
such help, the Reserve Banks concentrate their efforts on those participants.
As early as 1981, the Board of
Governors of the Federal Reserve
System recognized the need for
community reinvestment education. Fifteen years later, Community Affairs fulfills the System's
mission of suppo~ing community
development activities and promoting fair and equal access to
credit. To that end, Community Affairs:
• encourages partnerships
among public and private organizations to help deliver








cr~dit to low- and moderateincome iQdividuals and
• informs financial institutions
and community organizations about the availability
of public and private development resources;
• promotes understanding of
the rights and responsibilities of individuals, communities and financial institutions regarding CRA and
HMDA; and
• provides information to increase understanding of
community needs for affordable housing and small business development.
Notice that the Fed does not participate directly in specific projects.
We neither make loans nor provide
grants to organizations or programs. We leave direct participation to governmental agencies
such as the Department of Housing and Urban Development and
the Small Business Administration, which are chartered for this


The need for community development assistance varies greatly
across the Ninth District. For example, some communities have
many active community development participants while others are
trying to mobilize their resources.
Thus, we have divided our Community Affairs program into three
sectors: small cities/rural areas,
Indian country and the Twin Cities metropolitan area. We based
these sectors on the geography
and demographics of the district,
the types of issues facing each
sector and the need for community development assistance.
Small Cities/Rural Areas

1n the Ninth District, we have one

Small cities and rural areas comprise the largest part of our district. About 60 percent of the Ninth
District population lives in these
areas. Often, the most pressing
development need is for affordable housing. The need for community development assistance in
these communities varies. Banks
and others in the community also
look to us and the other banking
regulators for training and education on CRA and fair lending.

large metropolitan area, approximately 50 Indian reservations and
a geographically large area of
smaller cities, towns and rural ar-

During 1995 and 1996, we sponsored four training sessions on
CRA aimed at community repre-




eas. Just as the demographics vary
across the district, so do the development issues facing our communities. Some communities have
a need for additional affordable
housing that is so acute it impedes
job creation efforts. Other communities have housing that needs
renovation and residents who need
jobs close to home. Finally, some
communities' most urgent need is
job creation.

Within the overall mission of supporting community development
and promoting fair and equal access to credit, each of the twelve
Reserve Banks sets its own community development program
based on local needs.

sentatives and bankers and participated in four sessions aimed
just at bankers.
To address affordable housing
needs, we met numerous times
with public and private community
members to seek understanding of
and solutions to affordable housing issues in the small cities and
rural areas in our district. We also
participated in meetings of rural
housing partnerships in two
states, South Dakota and Minnesota.
Last, along with representatives
from state and federal public agencies and private organizations, we
helped plan an Affordable Homes
Congress in Brainerd, Minn., in
October 1996. The goal of this
seminal event was to seek solutions to single-family affordable
housing problems. The congress
provided a venue for discussion
of successful partnership arrangements and new and creative public and private affordable housing
To continue addressing the need
for affordable housing, Community Affairs plans to sponsor an
initiative in 1997 to address housing development issues present in
rural areas and small cities of the
Ninth District.
Indian Country

The collective population of the
approximately 50 Indian reservations in the Ninth District represen!s about 2 percent of the
district's population. Most of the
reservations face chronic and severe development issues. Some
reservations have unemployment
rates as high as 50 percent to 80
percent, and much of the housing
is substandard.





My Federal Reserve Bank Internship Experience
By Stephen Turner


recently spent the summer
as a Community Affairs intern
in the Banking Supervisiqn
Department of the Federal Reserve
Bank of Minneapolis. I'm now
entering my last year of college at
the University ofMinnesota-Morris, where I'm majoring in business
management and minoring in economics and music.
I was hired to work primarily
on the Pine Ridge banking and
community development initiative, which deals with economic
development and housing possibilities on the Pine Ridge Indian
Reservation in southwestern
South Dakota. Problems such as
housing shortages and a stagnant
or nonexistent economy typically
plague Indian reservations and
Pine Ridge is no exception. To deal
with the problems on Pine Ridge,
the Federal Reserve Bank plans to
work with community and business leaders on and near the reservation to establish community
development goals and ways to
work together to achieve those
However, the Fed needed an
accurate assessment of the conditions on the reservation, so I
researched housing, insurance
and economic development on
reservations. By reading reports
about tribal economic development, I learned why many of these
types of efforts have been unsuccessful and how they could be redirected for more positive results.
I also learned about housing programs that are available specifically for Native Americans, and I
conducted a study on the availability of insurance on the Pine
Ridge Indian Reservation. I was

even able to coordinate and attend
meetings on two Indian reservations in northern Minnesota where
I could apply ideas pertaining to
economic development and housing.
This endeavor turned out to
be quite a match for me because I
was born and raised on the White
Earth Reservation in northern Minnesota, where I'm also an enrollee
in the White Earth Band of
Chippewa. As you can imagine, I
immediately saw the applicability
of this initiative.
My internship at the Federal
Reserve Bank of Minneapolis was

a very satisfying experience because I was able to get a taste of
the business world. I worked 40hour work weeks and received
better training and pay than I
would have had I worked a summer job on my reservation. For any
student, getting paid to use one's
mind and learn is a welcome scenano.
For my family and the culture
I represent, every professional
step I take is groundbreaking. I
hope not only to leave a discernible trail, but to assist others who
share my interest in community development to follow it.

Stephen Turner, a senior at the University of Minnesota - Morris, recently
performed an internship in the Community Affairs section of the Banking
Supervision Department of the Federal Reserve Bank of Minneapolis. His
internship was coordinated though the INROADS program , whose goal is
career development for talented minority students.







Our efforts in Indian country involve helping to establish the conditions necessary for community
development to occur. For example, over the past two years, we:



sponsored seminars and
produced a five-part video
series to educate bankers
and others about the cultural and legal aspects of
lending in Indian country;
began participating with
tribal governments and legal
experts to help certain tribal
governments develop the
legal structure necessary for
lending on reservations; and
began a long-range project
on one reservation in South
Dakota to assemble lenders,
tribal officials and other
tribal leaders, state and federal government agency
personnel, and others interested in community development to find mutually
satisfying solutions for the
reservation's development

The Fed neither makes
loans nor provides
grants to organizations
or programs. It leaves
direct participation to
governmental agencies
chartered for these
District's population. Many community groups, nonprofit corporations, financial institutions and
others work to advance development in the Twin Cities.
Thus, our efforts in this metropolitan area involve fostering communication and partnerships. For
example, in June we sponsored a
community development financing exposition. About 200 representatives from governmental
agencies, technical assistance providers, community groups and financial institutions from the
metropolitan area attended a full
day of workshops, roundtables
and information booths. The event
was very successful, and we plan
to sponsor it again next year.

Twin Cities Metropolitan Area


Two and a half million people live
in Minnesota's Twin Cities metropolitan area; this figure represents
about 35 percent of the Ninth

In addition to these programs, we
educate and encourage partnerships throughout the district via
our publications. For example,

Community Dividend is circulated
to more than 5,000 district community development professionals.
Our state housing finance guide,
published earlier this year, was so
well received that we are preparing a companion publication on
state economic development finance programs.

We attempt to advance the development of our communities
through the efforts discussed here
and many more. But we do not
work toward this goal alone. You,
the development professionals in
our communities, clearly understand the need for education,
training, technical assistance and
facilitation. In an effort to solve
the problems that face our communities, we offer our time and talents in partnership with you. As
we continue our community development efforts throughout the
district, we trust you will recognize us and appreciate our role.
Call us ifwe can help. It is why we
are here.
For more informatior, or to obtain a broch"crre written ~y the
Federal Reserve Bank ofRichmond QJ1 the Communijy Affairs
function, contact the ·commu- ...-nity Affairs offit~ of the Federal
R§serve Ban·k ·of MinneaRolis
at (612) 340-2277.


Omersa Joins Community Affairs
Stephanie Omersa recently joined the Minneapolis Reserve Bank's Community Affairs
staff as an associate analyst. She holds a
master's degree in community and economic
development from the Humphrey Institute at
the University of Minnesota and undergradu-

ate degrees in economics and political science from the University of Minnesota. She
is especially interested in rural development
and affordable housing concerns and is looking forward to working on community development issues throughout the district.


Index of Community Dividend Articles
The articles listed below are those that have been featured in Community Dividenq since its inception
in Decemb!;!r 1993, along with a brief description of each article. For free copies of any of these
issues, contact the Community Affairs office of the Federal Reserve Bank of Minneapolis at (612)

Reform proposed for Community
Reinvestment Act
December 1993, page 1
Summary of the status and interagency process
for revision of the 1977 Community Reinvestment Act. The purpose of the reform is to provide more objective, performance-based
assessment standards -that minimize compliance
burden while improving performance.
Extend the Comqmnity Reinvestment Act to
nonbank financial institutions?
December 1993, page 1
Outlines recent activity behind proposal. Issues
involved include the current global nature of investments in mutual funds and securities.
Institutions include~ in proposals are credit
unions; mortgage, finance, and insurance companies; securities dealers; investment bankers;
and mutual and pension funds.
The New Community Reinvestment Act:
Performance Over Process
2nd Quarter 1995, page 1
Timeline of the CRA and its revision. Highlights
of the final rule (large bank/small bank examinations, lending/investment/service tests and
strategic plan option); data collection, reporting
and disclosure requirements; dates when the
regulation goes into effect for large bank evaluations, small bank evaluations, and data collection; and plans for exam procedures.
First Reactions to ~be New Community
Reinvestment Act
2nd Quarter 1995, page 4
Results of an informal survey of some banks
and community grgups in the Ninth District. Respondents were asked for their opinions about
the effectiveness of the old CRA, the effectiveness of the new CRA, whether the new CRA

will change the way they do business and the strategic plan option.
CRA Remarks by Chairman Greenspan
2nd Q~arter 1995, page 6
Excerpt from the May 17, 1995; speech given at
the Social Compact Awards Luncheon, in which
Greenspan discusses the purpose and goals of the
new CRA, long-term profitability, flexibility versus credit allocation, implementation and racial discrimination.
How Much Do You Know about the CRA?
2nd Quarter 1995, page 9
Humorous quiz about terms in the new CRA.
New CRA Means Drawing New Boundaries
for Banks' Assessment Areas Discussion
3rd Quarter 1995, page 1
Discussion of the new CRA requirement that banks
draw assessment areas in "whole geographies," the
smallest whole geography being a census tract or
a block numbering area (BNA ). Definitions of census tracts and BNAs, suggestions of ways to use
data to analyze need or loan activity and sources
for data and maps by state are given.
Community Reinvestment Act Q & A .
Winter 1995-96, page 7
Answers to some of the most frequently asked
questions about the new regulation.
Community Development and the CRA
Summer 1996, page 1
Discussion of "community development" as defined by the CRA; specifically, a bank's loans, investments and services that will be considered
community development for CRA purposes.
Examination Process under the New CRA
Summer 1996, page 2
An interview with the Federal Reserve Bank of










Minneapolis' assistant vice president in charge of
CRA examinations.

Cultural and Legal Considerations
for Lending in Indian Country
1st Quarter 1994, page 1
Presentation of important issues on reservations,
including sovereign immunity, collections, tribal
courts, legal status ofland, cultural perceptions and
the influence ofa barter economy (from the "Credit
and Finance in Indian Country" seminar).
Ninth Federal Reserve District American
Indian Reservations
1st Quarter 1994, page 4
List of reservation, government seat, tribe/band and
area for each reservation in the Ninth District.
Innovative Peer Lending in South Dakota
1st Quarter 1994, page 6
Discussion of the Lakota Fund, a private, nonprofit
community loan fund for the Lakota People of the
Pine Ridge Indian Reservation that provides capital
and technical assistance for small businesses and
microenterprises using traditional loan programs and
peer lending. Also, discussion of Sicangu Enterprise Center, which promotes regional economic
self-sufficiency on the Rosebud Reservation and
provides credit, training and support to local businesses through a revolving loan program modeled
on peer group lending.


Microenterprise Lending and Economic
4th Quarter 1994, page 6
Discussion of the Pine Ridge Indian Reservation's
Lakota Fund, which provides training and loans to
tribal members with little or no income, assets or
business training, and no credit history. The fund
uses a peer lending method rather than collateral.

eral agencies that lending discrimination based on
any prohibited factor is destructive, morally repugnant and against the law, and will not be tolerated
in any form. Definitions and examples of prohibited factors and discrimination are given.

River town of La Crosse finds success
in diversificatjon
2nd Quarter 1994, page 1
Overview of the La Crosse, Wis., region's economy,
industry base, demographics and current efforts in
housing and economic development.
Downtown Revitalization: A Retail Perspective
3rd Quarter 1994, page 1
Overview of issues that contribute to the success
or failure of downtown retail, including knowing
and capitalizing on shopping patterns and demographics.
The Value and Risks of Small Businesses
4th Quarter 1994, page 1
Discussion of the small business sector of the Ninth
District economy. Issues presented include success or failure as a function of the economic health
of the region and outcomes for small businesses,
including failure, growth or acquisition.
Profile of St. Cloud's Downtown Council
3rd Quarter 1994, page 4
Discussion of revitalization efforts of the St. Cloud,
Minn., downtown council, including financing
through a loan fund and collaboration with St. Cloud
State Small Business Development Center.
Five Acres Under a Fir Roof
1st Quarter 1995, page 7
Discussion of the world's largest wooden domed
stadium, located at Northern Michigan University,
Marquette, Mich. The stadium is an economic tool
used for community-building activities.

Federal Agencies Adopt Joint Policy
Statement on Lending Discrimination
1st Quarter 1994, page 7
Presentation of policy statement issued by ten fed-

CDC and Tech College to Build Houses
2nd Quarter 1994, page 3
Outlines collaboration between a community deCONTINUED










velopment corporation (CDC) that sQpplied the lot,
materials, and subcontractors, and a technical college that supplied the labor and supervision. Students received education and experience, and the
CDC received an affordable house to sell to f\m.d
more housing and rehabilitation.

2nd Quarter 1994, page 2
What is a limited liability company and why are
they so popular?

Safe Investing in Affordable Housing
2nd Quarter 1994, page 4
Issues to consider when developing affordable
housing, including available programs, demand,
risk and yield. Includes information about two
popular national programs: Low Income Housing Tax Credit (LIHTC) and Affordable Housing
Program (AHP).

4th Quarter 1994, page 2
We are considering offering Small Business Administration-guaranteed loans for the first time.
How many loans does the SBA guarantee?

A Guide to State-Sponsored Housing
Finance Programs
Winter 1995-96, page 1
Introduction to the supplement, which lists and
describes state housing programs, along with eligibility requirements and contact phone numbers
for Michigan, Minnesota, Montana, North Dakota,
South Dakota, and Wisconsin.
Layering: The Art of Finding the
Money Somewhere
Winter 1995-96, page 1
Discusston of the purpose of layering, when no
one resource is able to finance an entire project.
Includes an example of affordable housing in
Bemidji, Minn., built through a combination of
money and in-kind services from local banks, government agencies, community development organizations, a not-for-profit housing developer, the
local high school and the local technical college.
Federal Reserve Governor Addresses
Homeownership Issues
Summer 1996, page 4
Excerpt from Governor Lawrence Lindsey's Nov.
30, 1995, speech in which he discusses future strategies for housing development.
HA! (Humor in Acronyms)
Winter 1995-96, page 6
Acronyms used in housing programs in the Ninth

3rd Quarter 1994, page 2
What is the "Fair Lending Policy Statement" and
what does the Fed expect it to accomplish?

1st Quarter 1995, page 2
We tum the tables and ask you. Multiple-choice
definitions of banking terms.
3rd Quarter 1995; page 2
What are the regulatory agencies doing to ensure
that the new Community Reinvestment Act will be
enforced uniformly by all the banking and thrift

Dispelling the Myths of Nonprofit
1st Quarter 1995, page 1
Discussion of the goals, structure and decisionmaking processes of nonprofits, and how they differ from private businesses and yet require the same
amount of business know-how. Issues that a bank
must examine before approving a loan to a nonprofit are included.
Terms Used in the Nonprofit Sector
1st Quarter 1995, page 4
List of terms.
Assistance for Minnesota Nonprofits
1st Quarter 1995, page 5
Discussion of the Minnesota Nonprofits Assistance
Fund (MNAF), a program of the Minneapolis
Foundation created to increase the financial stability of nonprofit organizations throughout Minnesota through loans and technical assistance.



Doing the Undoable Deal, Summer
1996 issue of Community Reinvestment, Federal Reserve Bank of
Kansas City, is a resource guide to
financing housing and economic
development. Call the Kansas City
Community Affairs Department,
(816) 881-2867.
Access to Credit: Women, Lenders, and Small Business Loans, A
new publication from the Federal
Reserve Bank of Chicago and the
Women's Business Development
Center is intended to foster an improved understanding of the issues that affect women's access to
small business credit. Call the Federal Reserve Bank of Chicago, (312)
Spanish language. The American Bankers Association ([800)
338-0626) has three consumer
booklets available in Spanish:

• Administrando Su Cuenta
Corriente (Managing Your
Checking Account)

• Sus Derechos Y Obligaciones
De Credito (Your Credit Rights
and Obligations)

• Todos Sabre Bancos {The Bank


The publications listed below may
be ordered from Woodstock Institute, 407 S. Dearborn St., Suite 550,
Chicago, IL 60605; (312) 427-8070.

• Banking on Communities:
Community Development
Banks in the United States by
Kathryn Tholin; 32 pages.
• Small Business Lending for
Economic Development:
Volume I. Model Strategic
Responses for Urban Communities; 29 pages.
• Small Business Lending for
Economic Development: Volume II. Model Urban Programs
by Daniel Immergluck; 63 pages.
• Moving to Economic Development: A New Goal for SBA
Loan Programs by Daniel
Irnmergluck; 20 pages.

Partners: A Public-Private Partnership Model for Home Mortgage
Lending, created by the Federal
Reserve Bank of Atlanta, for lenders and community loan counselors. Lenders input characteristics
of potential borrowers, then adjust

Where to get Jists _of
future CRA. evaluations
Many of the l?.cheduJes {or future CRA evaluations are now posteg on the Internet.
Federal ijeserve Bank Qf Minneapolis
dn the Internet .at
http://wooQrow. nipls. frb.fed. us/
banking/develop/cra-exc!m. htm
Offic~ of the Comptroller .o f the Currency
On tf1e Internet at
F~deral Deposit Insurance Corporation
On the Internet at
Office of Thrift Supervision (OTS)
Attention: Ms. Ella Allen
1700 G Street N.W.
Washington, DC 20552

variables, such as interest rate,
down payment and loan amount,
to find a loan for which the applicant qualifies. Call the Community
Affairs office of the Minneapolis
Federal Reserve Bank at (612) 3402277 to order a free electronic copy
or download from Internet at ❖

Other interesting Web sites
Comprehensive gov~rnment resources
http://www. fedworld .gov
Small Business Administration
• access to a variety of government forms
• detailed information about starting or expanding business, including easy-to-use business plan
outline and information about capita_! resources
• btJsiness deyelopm~nt software
• a full range of plain-spoken regulatory guidance and compliance assistance search engine for
additional federal resoLJrces


Dec. 4-5
Financing Rural Capital Markets. Sponsor: Federal Reserve
Bank of Kansas City. In Omaha,
Contact: (816) 881-2203.

Dec. 5-6
Affordable Housing for NonWealthy Seniors. Cosponsors: Housing and Development Reporter and The Institute for Professional and Executive Development, Inc. In
Washington, D.C.
Contact: (800) 473-3293 or (202)
331-9230. Fax (202) 973-7748.

Contact: Paul
(617) 973-3227.



Jan. 23-25

June 22-24

Redevelopment Finance.
Sponsor: The National Council
for Urban Economic Development. In Tempe, Ariz.
Contact: (202) 223-4735.

The Retail Business and Economic Development: Retail at
the Crossroad~. Sponsor: The
National Council for Urban Economic Development. In Toronto.
Contact: (202) 223-4735.

Feb. 17-21
Neighborhood Reinvestment
Training Institute. Sponsor:
Neighborhood Reinvestment
Corporation. In Atlanta.
Contact: (800) 438-5547.

Dec. 5-6
Microenterprise Training of
Trainers. Sponsor: Federal Reserve Bank of Boston. In Augusta, Maine.

Economic Development.
Washington, D.C.
Contact: (202) 223-4735.

July 21-25
Neighborhood Reinvestment
Training Institute. Sponsor:
Neighborhood Reinvestment
Corporation. In Chicago.
Contact: (800) 438-5547. ❖

Feb. 24-26
Introduction to Economic Development. Sponsor: The Nati on a I Council for Urban

Now Available!
"Lending in Indian Country: Cultural and
Legal Issues" Video and Guidebook
This 5-part video series, produced by the Federal
Reserve Bank of Minneapolis, is a live seminar recorded on video. The video explores cultural differences, land and title issues, tribal powers, sovereign
immunity, tribal courts, collateral, remedies, and other
issues of interest to those seeking to do business in
Indian Country. The package is available for $135, and
payment must accompany the order.
For a brochure and order form, call toll-free
1-800-553-9656, ext. 6008.


Articles may be reprinted if the source is credited
and we are provided with copies of reprint. Views
expressed do not necessarily represent those of
the Board of Governors of the Federal Reserve
System or the Federal Reserve Bank of

Community Dividend covers topics on community
reinvestment and neighborbood lending. It reaches
financial institutions, community-based organizations, development organizations, and government
units throughout the Ninth Federal Reserve District.

We yolll' questions and C0nGeins.
Please writi:i ill' call:
JoA;nne Lewellen, CQmmunicy .Affairs GffiGcr
(612) 340-6913


Commumt:y Afwrs staff:


Richant l811UC$011
Thomas MOQre
Cindy 1Porter


Stephanie Omersa

Marg!ll'Ct ~ I . Manager

(612) 340-53(i0

Community Affairs. BSD
Federal R~erve Bank ofMinn~Jis

Address cbangesladdiliOI1$:

Robbin Schmitt: {611) 340-c2277

P.O. Bax291

M"mneapolis, MN 35480-0291

Ninth District Corporation is awarded CDFI funds,
Community Development Venture Capital
OnJuly31, 1996, U.S. Treasury
Secretary Robert Rubin announced the selection of the first
round of Community Development Financial Institutions Fund
(CDFI) funds awards. Among
the community deveJopment organizations selected to receive
an award was Duluth, Minn.based Northeast Ventures Corp.
(NYC), which received $1 million


in equity funds. NYC was the
only organization in the Ninth
District to receive funds and
only one of three community development venture capital organizations nationwide to receive
According to Secretary Rubin,
"The CDFI Fund will facilitate the
flow of capital to our nation's dis-

tressed communities, helping to
create jobs and revitalize neighborhoods in areas that have
been left behind."