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5/12/2020 Remarks by Assistant Secretary Cyrus Amir-Mokri at the Interagency Community Reinvestment Conference on “Investment and Empow… U.S. DEPARTMENT OF THE TREASURY Press Center Remarks by Assistant Secretary Cyrus Amir-Mokri at the Interagency Community Reinvestment Conference on “Investment and Empowerment: A Holistic Approach to Community Development” 3/28/2012 As prepared for delivery SEATTLE, WASHINGTON - Thank you. I am delighted to be here, and to be speaking on the subject of community reinvestment. Today, I plan to discuss how the Treasury Department thinks about economic and community development, and how all of our efforts fit together to support communities across this country. My message is threefold: First, we must take a holistic approach to investing in communities. It is not enough to focus just on education, or just on housing, or just on clinics, or just on small businesses. Building strong communities means focusing on all of these areas in a coordinated fashion. Second, we must also empower individuals to make informed financial decisions. Developing human capital is necessary to make our investments impactful, and is essential for stable communities. Technology can and will be critical in achieving this goal. Finally, the reason why it is so important that we invest in and empower individuals goes back to a central tenet of the American creed. The promise of America is opportunity and hope. We must do everything we can to secure this promise for all of our citizens in all of our communities. The Impact of the Recent Financial Crisis As my point of departure, I simply reiterate what you know already: the financial crisis hit all of our communities very hard. Each of you has seen the effects of the crisis in your communities. You have watched unemployment rise, home values drop, and foreclosure rates increase. Yet, the impact of the crisis on those most vulnerable has been even more acute. Low-and-moderate income communities are suffering as much, if not more than other communities. Let me cite a few pieces of evidence to illustrate my point. First, low-and-moderate income communities experienced the sharpest increase in unemployment. In 2009, nearly one-fourth of the families in the bottom half of the income distribution had at least one member who had been out of work in the previous year. This rate is almost double that of higher-income households. Moreover, in some of our nation’s poorest areas, the unemployment rate is upwards of 30 percent. This is over three times our national unemployment rate of 8.2 percent. Second, low- and-moderate income households entered the recession with few financial assets to soften the impact of the downturn. One in eight households started the crisis with zero or negative net worth. And once the crisis hit, families in the bottom fifth of the income distribution saw their assets drop in value by 18 percent between 2007 and 2009. Third, following the crisis, lower-income households fell behind on their payments at a substantially higher rate than higher-income households. In 2009, among households with debt, about 11 percent of those with incomes in the bottom half of the income distribution fell 60 days or more behind on their obligations. This compared with only 3 percent of those in the highest tenth of the income distribution, who fell behind on their payments. While all of our communities have been hit hard by the crisis, these facts show that the legacy of the crisis is particularly profound for lowto-moderate income communities. https://www.treasury.gov/press-center/press-releases/Pages/tg1512.aspx 1/4 5/12/2020 Remarks by Assistant Secretary Cyrus Amir-Mokri at the Interagency Community Reinvestment Conference on “Investment and Empow… So let me turn to the work that the Treasury Department is undertaking to assist these communities and to support a broad based recovery that will touch everyone. Our work falls into two complementary categories: investment and empowerment. Investment The first critical element in community development is investment. Investment includes giving local businesses access to needed capital and credit. Without that capital, local businesses cannot hire workers, expand their facilities, or improve their services. In 2010, President Obama signed the Small Business Jobs Act, which created several initiatives to encourage lending to small businesses. Two such initiatives are administered by the Treasury Department: the Small Business Lending Fund and State Small Business Credit Initiative. Through the Small Business Lending Fund, we were able to provide $4 billion in funding to over 330 community banks and community development loan funds. This capital is critical for the institutions that do the greatest amount of small business lending. Complementing this program, the State Small Business Credit Initiative provides additional support to different state programs. To date, 54 states, territories and municipalities have already accessed more than $500 million. We expect these state programs to leverage $13 billion in new lending to small businesses, thereby providing credit to small businesses that may not have otherwise been able to access capital. But investment in small businesses and building a good business environment is only one piece of the puzzle. Businesses cannot be sustained in areas that are otherwise distressed. We must also invest in affordable housing, community centers, quality schools, and other local institutions. Therefore, the concept of investment as applied to community development should be conceived more broadly as a holistic exercise. This is the approach of the Community Development Financial Institutions Fund (CDFI Fund), which was established in 1994 to “promote access to capital and local economic growth” through direct investment, loans, tax credits and technical assistance to underserved populations. CDFIs are mission-based organizations that provide financial products and services to distressed communities. For borrowers in these communities, CDFIs may be the only source of capital and the sole engine of economic growth. Let me give two examples of I what mean by a holistic approach. Clearinghouse is a CDFI that was launched in 1997 to address unmet credit needs in San Diego. In 1998, it provided $15 million of financing to build a community center called Market Creek Plaza. The site of the future Market Creek Plaza was a former aerospace factory that had been abandoned for many years. Today, fourteen years later, this plaza has become an anchor of its local community and has bolstered local employment. It includes a bank branch, a supermarket, specialty food and beverage retailers, and an outdoor amphitheater for local performances and cultural events. The financial crisis hit the area surrounding Market Creek Plaza hard. In Southern California, foreclosure rates were roughly 2 out of every 1,000 households – a statistic that far exceeds pre-crisis levels. Clearinghouse concluded that it is not enough to build a community center if San Diego residents do not have access to affordable housing. As a result, Clearinghouse is currently planning an affordable housing complex adjacent to the Market Creek Plaza. It is also administering an anti-foreclosure program for the surrounding area. Let me turn to another example of this holistic approach in my local neighborhood of Washington, D.C. Eight years ago, six CDFIs came together to finance a new facility for Haynes Public Charter School in the Columbia Heights neighborhood. This school opened its doors to 138 students in the fall of 2004. Within its first three years, the school grew to 308 students. Two-thirds of the school’s children qualify for free or reduced cost lunch. Today, Haynes serves 600 students in grades preschool through eighth grade. This school is about to open a second location – a project that is being financed through Treasury’s New Markets Tax Credit Program. Just down the road from Haynes, two CDFIs have provided funds to renovate and expand Mary’s Center for Maternal and Child Care. Since 1988, Mary’s Center has provided primary health care and social services to under-insured and uninsured low-income residents. The CDFIs’ funding will allow Mary’s Center to increase its impact: expanding staff capacity from 12 primary care providers to 22 and increasing patient visits from 48,000 to 112,000 over four years. Both the Haynes School and Mary’s Center are examples of several CDFIs, working collaboratively, to transform one community. Adopting the holistic approach does not mean that CDFIs only have to focus on projects that are geographically proximate. It is also important that community development efforts fill critical gaps in communities in way that complements existing institutions. Carver Federal Savings Bank, a CDFI located in New York City, sponsored a project called Citicare. Citicare received an acquisition and renovation loan to consolidate several offices and expand its footprint into Harlem. This project is filling a critical gap by bringing needed medical services to local residents. Finally, I want to touch on a new initiative at the CDFI Fund, the Healthy Food Financing Initiative. This is an example of a targeted, but broadly applicable initiative to address an important gap in distressed communities. It aims to expand access to nutritious foods in low-tohttps://www.treasury.gov/press-center/press-releases/Pages/tg1512.aspx 2/4 5/12/2020 Remarks by Assistant Secretary Cyrus Amir-Mokri at the Interagency Community Reinvestment Conference on “Investment and Empow… moderate income communities. More than 23.5 million people, including 6.5 million children, live in low-income metro areas that are more than a mile from a supermarket. There are 2.3 million people that live in low-income rural and are more than 10 miles from a supermarket. This initiative seeks to extend the distribution of fresh produce to these communities. Empowerment Investment in physical infrastructure and business is necessary for community development, but it is not sufficient. Such investments must be absorbed, and they are absorbed more effectively if there is strong, financially capable human capital. Helping all Americans to understand their finances is the second critical element of community development. Our communities are more stable and have a better chance to prosper when their residents have the capability to understand financial decisions. Such empowerment brings responsibility, and responsible financial choices bring community stability. Capability also allows individuals to create their own opportunities. That is why Secretary Geithner is so committed to promoting financial literacy. Many of you are familiar with our efforts on the Financial Literacy and Education Commission and our support for the work of President Obama’s Advisory Council on Financial Capability. Through these programs, we continue to emphasize that financial education is an integral part of the school curriculum and that these skills must be taught to our students from a very early age. However, we must not stop with traditional pedagogy. Important developments in technology have the potential to introduce significant advances in financial capability. They can influence the way in which consumers interact with the financial system. The mobile phone, and particularly the smart phone, has great potential to effect the provision of financial services: close to 90 percent of the U.S. population uses mobile phones, and over 44 percent use smart phones. This technology has penetrated all communities, not simply higher income consumers. These devices can be powerful tools to help consumers make informed financial decisions. For example, applications are being developed to help individuals manage their spending and to achieve their financial goals. One application allows customers to check their spending against preset budgets. Other tools provide consumers with daily balance alerts and warnings when monthly spending limits are about to be surpassed. These applications allow individuals to manage their day-to-day financial transactions and to protect their earnings – a goal that is critically important to families across America. There are also new applications that prompt and enable consumers to make real-time savings decisions. One such program links a text message to an individual’s checking and savings account. Every time a user goes into a store and decides not to make a purchase, he or she can send a text message moving these “saved” dollars into his or her savings account. In addition to improving financial capability, technology can also improve access to basic financial services. Recently, Deputy Secretary Wolin witnessed this first-hand on his visit to the Kamuning neighborhood of Quezon City in the Philippines. Despite the fact that there is not a single ATM or bank branch in that neighborhood, he saw local residents and vendors in the public market gain access to banking services using their mobile phones. Their phones served as vehicles to deposit, withdraw and transfer funds, and even to apply for micro-loans and insurance. If individuals do not have access to basic financial services, financial training or capability may not have the desired impact. More than one out of every four U.S. households is “unbanked” or “under-banked.” The under-banked often pay high costs for financial services, such as overdraft fees, check-cashers and payday lenders. They do not have a proper vehicle to save and grow their assets. They often have no mechanism to improve or maintain credit scores. To ameliorate such problems, Treasury’s Office of Financial Access & Education has partnered with the CDFI Fund to start “Bank on USA.” This initiative helps under-banked individuals enter the financial mainstream by providing access to low-cost accounts, products and financial services, and financial education. Bank on Seattle-King County is a local example of a program that tackles the problem of access. It provides basic financial services to Seattle’s most distressed communities. In the past three years, this program has opened over 50,000 bank accounts. This program and similar efforts help the millions of Americans, who remain without access to basic financial services. Inequality and the American Promise We focus on building strong communities for one simple reason: community investment is a key in fighting inequality. Over the last several decades, income inequality has been rising in the United States. We see this trend in the measurement of wages and household income. For example, the share of income received by households in the top fifth of the income distribution rose from just under 44 percent in the 1970s to 50 percent in the first decade of this century, while the share of income received by those in the bottom fifth of the distribution declined from about 4 percent to 3 percent. This has meant a stagnant or decreasing paycheck for our lowest income citizens. https://www.treasury.gov/press-center/press-releases/Pages/tg1512.aspx 3/4 5/12/2020 Remarks by Assistant Secretary Cyrus Amir-Mokri at the Interagency Community Reinvestment Conference on “Investment and Empow… Not only is there a wider gap between rich and poor individuals, the differences among communities is growing. We must not confuse displacement and gentrification with empowerment and community revitalization. There is evidence that our communities are less socioeconomically diverse and that individuals are segregating by class. This leads to the concentration of resources, schools, parks, hospitals, social services, in certain communities. At the same time, other areas are left behind. In and of itself, education may not mitigate inequality. The data show that education alone does not make lower-income individuals as likely to move up the income distribution curve, when compared with someone whose parents were in the top part of the income distribution curve. This evidence suggests in order to effect social mobility, we must couple education with other types of investment. In other words, a holistic approach is required to improve social mobility, fight inequality, and strengthen our communities. The trends that I just noted should give us pause, but they also remind us how important economic opportunity and social mobility are to our character as a nation. I continue to believe that America offers the promise that individuals can make a better life for themselves, and transcend the circumstances into which they are born. We must see to it that this promise is secured for all Americans. Investing in our communities, and empowering our citizens, is key to doing so. I look forward to working with everyone here to achieve these goals. Thank you. ### https://www.treasury.gov/press-center/press-releases/Pages/tg1512.aspx 4/4
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