Reps. Ellison, Stivers Introduce Bipartisan Bill to Enable Greater Investment in Small Business, Community Economic Development, and Agriculture
WASHINGTON—Rep. Keith Ellison (D-MN) and Rep. Steve Stivers (R-OH) introduced The Small Business and Community Investments Expansion Act (H.R. 704) last week, which would enable community development financial institutions (CDFIs) to increase the amount of loans they make to entrepreneurs, shopping centers and health care facilities in disadvantaged urban and rural communities.
“CDFIs are lenders that finance affordable housing and community development investments, create jobs and strengthen our local communities,” said Rep. Keith Ellison. “The effective work they do transforms local communities. The bill introduced today will allow them to maintain and expand their investments in the Twin Cities and around the country.”
"This bill will help unlock new economic opportunities for communities in my district and around the country," Rep. Steve Stivers said. "I am proud to join Representative Ellison in this bill to foster job creation and support small businesses, communities facilities, and charters schools to make these communities better places to live."
“We at Community Reinvestment Fund wish to congratulate Congressman Ellison for seeking innovative ways to make more resources of the Federal Home Loan Bank System available to support economic development activities,” said Frank Altman, President and CEO of Community Reinvestment Fund. “The bill Rep. Ellison is introducing today would provide a powerful new tool for CRF, and other organizations like ours, to leverage our existing portfolio to make new loans that create jobs and strengthen our economy. We commend him for his hard work on this important piece of legislation.
In 2008, Congress passed The Housing and Economic Recovery Act, which permitted Treasury-certified non-depository CDFIs to become a member of a Federal Home Loan Bank (FHLB). CDFIs could join, pledge collateral and receive advances (loans). This change enabled CDFIs to use their current loan portfolio to raise cash to make new loans.
Unfortunately, the bill did not clarify that CDFIs could pledge small business, small agriculture and community economic development collateral. CDFIs were able to join as regular members, which restricted their collateral to long-term housing loans. The bill would permit CDFIs who finance small business lending, charter schools, community facilities, commercial facilities, etc. to pledge those loans in exchange for advances, if they qualified for FHLB membership. This technical change to give CDFIs the same collateral flexibility as the existing membership category of community financial institutions (CFIs). CFIs, small banks, are able to pledge non-housing collateral. This bill would result in greater economic activity in communities, create jobs and would be especially beneficial to inner-city and rural communities and communities facing disinvestment. A March 2015 GAO report 15-352, Collateral Requirements Discourage Some Community Development Financial Institutions from Seeking Membership documented the harm done by the current policy.
The bill is cosponsored by Representatives Maloney, Pittenger, Delaney, Paulsen, and Sinema. It is supported by Supported by LISC, Opportunity Finance Network, Capital Impact Partners, Ohio Finance Fund, Community Reinvestment Fund and TRF.