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For release on delivery
9:00 a.m. EDT
March 24, 2014

Welcoming Remarks

Remarks by
Jeremy C. Stein
Board of Governors of the Federal Reserve System
at the
Crowdfunding for Community Development Finance Conference
Washington, D.C.

March 24, 2014

Good morning. Let me start by welcoming everyone to the Federal Reserve.
Today’s topic of crowdfunding for community development finance is an important and
topical one, and I want to thank you all for helping us think through the challenges and
opportunities presented by this new technology as it relates to raising funds for local
This gathering is particularly timely for two reasons. First, in many communities,
traditional resources for community development are shrinking, and the field is actively
seeking to identify new sources of funding. Second, the Securities and Exchange
Commission recently released its proposed rule under the Jumpstart Our Business
Startups--or JOBS--Act, which is likely to influence the environment for crowdfunding in
general and for community development finance specifically.
To the extent that most people know about crowdfunding at all, they may
associate it with tech startups or independent movie production, since the press coverage
has often focused on examples in these areas. These stories typically describe the use,
and often success, of crowdfunding, as aspiring inventors and artists are able to tap the
Internet to raise the money that can help make their visions a reality. The question for
today is whether this power of the crowd can be harnessed to support community
development, a field that has not widely benefited from crowdfunding thus far. Indeed,
when I say “power of the crowd,” it is worth noting that while individual investment
amounts may be small, the total amount of funds raised from this source can be large.
Although we lack reliable data on the current size of crowdfunding, some sources
indicate that it’s a multibillion-dollar industry, with more than 1 million separate

-2offerings each year, and that the field is growing rapidly.1
While crowdfunding may not be as well known in the community development
context, there are, in fact, existing models of crowdfunding for community development
that we can learn from. I understand that several of these existing models will be
discussed on a panel later this morning. One local example is Fundrise, an investment
platform for commercial real estate that gives individuals the opportunity to invest
directly in neighborhood businesses. Fundrise started on the H Street corridor here in
D.C., and has completed 18 real estate deals totaling more than $10 million. For
example, this platform attracted 361 people to invest a total of $350,000 toward the
redevelopment of 906 H Street, N.E. Currently a vacant building, this property, which is
located on the quickly revitalizing H Street corridor, now has the funding necessary to
renovate the property and transform it into a restaurant or retail space.
A second example is Calvert Foundation’s Community Investment Note. This is
an interesting one because Calvert Foundation was essentially doing something akin to
crowdfunding for community development before Internet platforms became available.
As you may know, Calvert Foundation is a certified Community Development Financial
Institution (CDFI) that was established in 1988 as a 501(c)3 when Calvert Investments
found strong interest among its clients to invest directly in underserved communities.
Since 1995, 13,000 people have invested in these notes, which provide a financial return
while economically empowering communities.2 According to Calvert Foundation, these
13,000 individual investments have collectively helped to create 430,000 jobs for lowincome individuals, built or rehabilitated 17,000 affordable homes, and financed close to

Massolution, “2013CF: The Crowdfunding Industry Report,”
Calvert Foundation,

-326,000 nonprofit facilities and social enterprises.3 Both the Fundrise and Calvert
Foundation examples hint at the potential of scaling up crowdfunding for community
Many of you may be wondering, “Why is the Fed interested in this topic?” First,
at a fundamental level, it’s important for us to keep our finger on the pulse of financial
innovation and the changing dynamics of the financial services industry--even in those
parts of the industry where we do not have a direct regulatory role. We know that
financial innovation can offer both opportunities and pitfalls; by carefully and evenhandedly studying each new product or service at an early stage in its lifecycle, we can
hope to better understand both the potential benefits, as well as any risks for adverse
impacts on households and communities. Also, through convenings like today’s event
and by sharing promising practices, the Federal Reserve System has a longstanding
history of supporting local and regional community and economic development efforts
that contribute to economic growth and employment. To the extent that crowdfunding
has the potential to bring new capital into low- and moderate-income communities, we
want to be involved in helping the learning process along.
As I mentioned earlier, many people associate crowdfunding with tech startups
and art initiatives. However, there may be ways that this new form of fundraising can be
adapted to community development investing. Given how wide open the issues are,
today’s event is a working meeting with discussion groups. We appreciate your
willingness to share your time with us, and we look forward to benefiting from your
Thank you.

Calvert Foundation,