    [Senate Hearing 108-75]
    [From the U.S. Government Publishing Office]

                                                             S. Hrg. 108-75

         NATIVE AMERICAN CAPITAL FORMATION AND ECONOMIC DEVELOPMENT ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 FIRST SESSION

                                       ON

                                     S. 519

       TO ESTABLISH A NATIVE AMERICAN-OWNED FINANCIAL ENTITY TO PROVIDE
    FINANCIAL SERVICES TO INDIAN TRIBES, NATIVE AMERICAN ORGANIZATIONS, AND
                                NATIVE AMERICANS

                                   __________

                                 APRIL 30, 2003
                                 WASHINGTON, DC

    86-938              U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2003
    ____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpr.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

                          COMMITTEE ON INDIAN AFFAIRS

                  BEN NIGHTHORSE CAMPBELL, Colorado, Chairman

                    DANIEL K. INOUYE, Hawaii, Vice Chairman

    JOHN McCAIN, Arizona,                KENT CONRAD, North Dakota
    PETE V. DOMENICI, New Mexico         HARRY REID, Nevada
    CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
    ORRIN G. HATCH, Utah                 BYRON L. DORGAN, North Dakota
    JAMES M. INHOFE, Oklahoma            TIM JOHNSON, South Dakota
    GORDON SMITH, Oregon                 MARIA CANTWELL, Washington
    LISA MURKOWSKI, Alaska

             Paul Moorehead, Majority Staff Director/Chief Counsel

            Patricia M. Zell, Minority Staff Director/Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page
    S. 519, text of..................................................     3
    Statements:
        Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
          chairman, Committee on Indian Affairs......................     1
        Hall, Tex G., president, National Congress of American
          Indians, Washington, DC....................................    47
        Henson, Eric, Harvard Project on American Indian Economic
          Development, Cambridge, MA.................................    66
        Irwin, Mike, senior vice president, Alaska Federation of
          Natives, Anchorage, AK.....................................    60
        Murkowski, Lisa, U.S. Senator from Alaska....................    56
        Paisano, Chris, acting executive director, Navajo Nation,
          Washington, DC.............................................    51
        Russell, William, O., deputy assistant secretary, Public and
          Indian Housing, Department of Housing and Urban
          Development, Washington, DC................................    45
        Stainbrook, Cris, executive director, Indian Land Tenure
          Foundation, Little Canada, MN..............................    64
        Watchman, Derrick, board member, Native Anerican Bank
          Corporation, Denver, CO....................................    57

                                    Appendix

    Prepared statements:
        Dayish, Jr., Frank J., vice president, Navajo Nation.........    83
        Hall, Tex G..................................................    77
        Henson, Eric.................................................   135
        Kitka, Julie, president, Alaska Federation of Natives (with
          attachments)...............................................   106
        Liu, Michael, assistant secretary, Public and Indian Housing,
          Department of Housing and Urban Development, Washington, DC    75
        Murkowski, Lisa, U.S. Senator from Alaska....................    73
        Russell, William, O..........................................    74
        Stainbrook, Cris.............................................   131
        Watchman, Derrick............................................    97

         NATIVE AMERICAN CAPITAL FORMATION AND ECONOMIC DEVELOPMENT ACT

                                  ----------

                           WEDNESDAY, APRIL 30, 2003

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 2:05 p.m. in room
    485, Senate Russell Building, Hon. Ben Nighthorse Campbell
    (chairman of the committee) presiding.
        Present: Senators Campbell and Murkowski.

     STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S. SENATOR FROM
            COLORADO, CHAIRMAN, COMMITTEE ON INDIAN AFFAIRS

        The Chairman. The Committee on Indian Affairs will come to
    order.
        Indians have an average jobless rate of 50 percent, and
    lack the kind of job opportunities that most Americans take for
    granted. Every year Congress appropriates billions of dollars
    for the benefit of Indian people. In fiscal year 2002 alone,
    $12 billion was appropriated for the benefit of Indian people,
    and of this, hundreds of millions for economic development
    purposes. It seems to me that more Federal funds simply will
    not solve the core problems that we face in Indian country.
        Little, if any, attention is paid to the systemic problems
    with Indian economics, like investment inhibitors, lack of
    infrastructure, poor governance, identifying development
    opportunities, and other factors.
        I believe that the best way to bring jobs and hope to
    Indian people is to act collectively. Therefore, the bill
    before us is based on certain fundamental principles.
        First, there ought to be a full-time Indian-owned
    development organization that focuses only on Indian economic
    development. The organization should have sufficient resources.
    The organization should include all Indian tribes as
    shareholders, not just those who happen to be wealthy tribes.
    The organization needs to be much more than just a bank that
    hands out money. It needs to focus on things like political
    risk, building stronger tribal governments, and looking at
    Indian development comprehensively.
        I read some of the testimony that has been turned in
    already and I think there is a fundamental misunderstanding on
    the part of some of the people who are going to testify. I hope
    we do not get hung up on all the dotting of ``i's'' and
    crossing of ``t's'' and the language today. Any bill, in fact,
    when it is first turned in, becomes a vehicle for change. It
    just seems to me that change is long overdue in trying to help
    Indian economies, and S. 519 is going to be that vehicle.
    Hopefully we will be able to get some testimony today that will
    make the bill better.
        [Text of S. 519 follows:]

        The Chairman. Our first witness today will be William
    Russell, deputy assistant secretary, Public and Indian Housing,
    Department of Housing and Urban Development.
        Your complete testimony will be included in the record. If
    you would like to abbreviate and keep it down to 5 or 6
    minutes, that would be just fine with me. Thank you.

     STATEMENT OF WILLIAM O. RUSSELL, DEPUTY ASSISTANT SECRETARY,
      PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN
                      DEVELOPMENT, WASHINGTON, DC

        Mr. Russell. Thank you, Mr. Chairman. My name is William
    Russell and I am deputy assistant secretary for Public and
    Indian Housing. Thank you for inviting me to testify today
    before the Committee on Indian Affairs. I am glad to be with
    you today and welcome the opportunity to share with you the
    Department of Housing and Urban Development's perspective on
    many of the concepts included in your bill, S. 519, the Native
    American Capital Formation and Economic Development Act of
    2003, which has been introduced by you.
        Let me just state that Assistant Secretary Liu could not be
    here for this hearing. He is in your home State of Colorado
    participating in an important negotiated rule making with the
    tribes on the NAHASDA formula.
        The PIH is responsible for the management, operations, and
    oversight of HUD's Native American programs. These programs are
    available to over 550 federally-recognized and a limited number
    of State-recognized tribes. We serve these tribes directly, or
    through tribally-designated housing entitled by providing
    grants and loan guarantees designed to support afford housing,
    and community and economic development activities.
        I would like to express my appreciation for your continued
    efforts to improve the housing conditions of those who need it
    most. As you have heard from previous testimony, much progress
    is being made and tribes are taking advantage of new
    opportunities to improve the housing conditions of the Native
    American families residing on Indian reservations, on trust or
    restricted Indian land, and in Alaska Native villages. This
    momentum needs to be sustained as we continue to work together
    toward creating a better living environment throughout Indian
    country.
        At the outset, let me reaffirm the Department of Housing
    and Urban Development's support for the principle of
    government-to-government relations with Indian tribes. HUD is
    committed to honoring this fundamental precept in our work with
    American Indians and Alaska Natives.
        The Administration is currently actively reviewing your
    bill and hopes to soon be able to provide you with specific
    comments. In general, we agree that the goals of economic self-
    sufficiency and political self-determination can best be
    achieved through access to private capital and equity
    investments.
        HUD is committed to exploring new opportunities to surmount
    barriers to lending on tribal lands and to facilitating access
    to alternative sources of capital, financial services, and
    technical expertise. HUD's Office of Native American Programs
    is currently working with tribal governments and lenders to
    increase private housing investments through the Section 184
    Indian Housing Loan Guarantee Fund Program, and the Title VI
    Tribal Housing Activities Loan Guarantee Fund.
        We know that there are numerous barriers to accessing
    capital. Many of these were recently identified in the ``Native
    American Lending Study'' completed by the Department of the
    Treasury's Community Development Financial Institute Fund, as
    well as through other research.
        Capital in Native America tends to come from four primary
    sources: Tribal financial resources, Federal guaranteed loans,
    grants and tax credits, debt capital, and equity investors. The
    latter is woefully inadequate for many reasons. Issues raised
    by investors and private lenders include the legal status of
    tribal lands; inadequate or nonexistent legal and business
    codes; insufficient understanding of issues related to tribal
    sovereignty and sovereign immunity; a lack of technical
    assistance resources; uncertainty related to leadership changes
    in tribal governments; and a lack of financial institutions and
    services or in close proximity to Native American communities.
        Many tribes and TDHEs, as well as other tribally affiliated
    community and economic development organizations, use a
    project-by-project approach to housing and economic
    development. There is a great need to create a more
    comprehensive approach to the creation of sustainable
    economies. There are clear roles that tribal governments,
    Federal agencies, and lending institutions can play in creating
    these economies.
        The Administration would like to give careful consideration
    to whether the creation of this corporation can resolve
    impediments to lending on tribal lands and contribute to the
    establishment of sound policies that promote increased levels
    of economic growth and job creation.
        Finally, let me state for the record that we concur with
    many of the findings in your bill. We agree that much of the
    poor performance of Native American economies correlate to the
    absence of private capital and private financial institutions.
    We will continue to work in partnership with tribal
    governments, Native American organizations, the private sector,
    and other government agencies to support private investment and
    leveraging in Indian country.
        Mr. Chairman, HUD is prepared to work with you to help
    overcome these barriers to accessing capital in Indian country.
        This concludes my prepared remarks. I would ask that my
    prepared statement be inserted in the record in its entirety.
        The Chairman. Without objection.
        [Prepared statement of William Russell appears in
    appendix.]
        The Chairman Thank you. As I understand your testimony, you
    are in support of the concept of what we are doing, but the
    Administration has not totally reviewed it. Do you have any
    idea when the committee could expect that to be finished so you
    could give us an idea about what parts they support, or if they
    support it at all?
        Mr. Russell. I believe within the next several weeks you
    should have that; yes, sir.
        The Chairman. Okay. I would appreciate that. Thank you for
    your testimony.
        You spoke a little bit about the dollars that go out in the
    Federal Government through different groups. It would seem to
    me that somewhere along the line it would make sense to
    administer a lot of these Federal funds such as the Economic
    Development Administration funding, DOT funding, HUD funding,
    BIA's loan guarantee, and so on under some kind of a systematic
    development program that the tribes could understand and could
    focus on.
        I do not know if you are qualified and are an authority to
    say or not whether or not that makes sense. But let me ask you
    if it does, in your view.
        Mr. Russell. I am probably not qualified to comment on
    that. But I think one of the things that we are looking at is
    some of the expertise or programs that Departments like
    Treasury and even Agriculture obviously may have even more
    expertise than HUD in managing some of these economic
    development funds and programs. That is one of the things we
    are looking into.
        The Chairman. Okay. One way to create capital is to recycle
    home loans through a secondary market. Are you in favor of
    creating such a market for Indian home loan programs?
        Mr. Russell. We definitely think there is a need for a more
    vibrant secondary market. We would definitely support efforts
    to improve access to such a secondary market.
        The Chairman. How about a U.S. guarantee? One way to
    facilitate the corporation's ability to raise funds in the
    capital markets is to provide a U.S. guarantee on a
    corporation's commercial paper. Are you in favor of that?
        Mr. Russell. I probably cannot comment on that position at
    this point.
        The Chairman. Okay. All right. If you could get back to the
    committee as soon as the review is done and let you know what
    you think about it, I would certainly appreciate it.
        Mr. Russell. Certainly.
        The Chairman. Thank you for appearing, Mr. Russell.
        Mr. Russell. Thank you.
        We will now go to the second panel. Tex Hall is president
    of the National Congress of American Indians and Chris Paisano,
    acting executive director of the Navajo Nation, Washington
    Office.
        Welcome, Tex. I have not see you for a while. We will go
    ahead and start with you, Tex. As with the first panel, if you
    would like to submit most of your testimony, you can abbreviate
    your remarks.

       STATEMENT OF TEX G. HALL, PRESIDENT, NATIONAL CONGRESS OF
                    AMERICAN INDIANS, WASHINGTON, DC

        Mr. Hall. [Remarks in Native tongue.]
        Chairman Campbell and members of the committee, I would
    like to thank you for inviting me to testify on behalf of the
    National Congress of American Indians regarding the Native
    American Capital Formation and Economic Development Act. On
    behalf of the member tribes and individual staff and leadership
    of NCAI, I would like to express appreciation for the
    dedication of this committee. It shows Indian people your
    honorable fulfillment of Federal trust and treaty
    responsibilities.
        We also want to express our appreciation for the effort
    this committee is making to assist with economic development in
    Indian country. We all know that one of the greatest problems
    facing much of Indian country, despite the relative success of
    gaming for some tribes, is getting capital to make economic
    development efforts happen. The need for economic development
    in Indian country remains acute and impacts nearly every aspect
    of life in reservation communities.
        This bill represents one approach and a starting point for
    discussion, we believe, that has been ongoing for many years
    about how the Federal Government and the private sector can be
    brought together to assist in capital formation in Indian
    country. As you know, I am already very familiar with the
    efforts in Indian ountry to develop a means for private capital
    formation. I am not only the president of NCAI but I am also
    the chairman of the board of the holding company that owns the
    Native American Bank that was recently developed. It is an
    enterprise that in general owes its creation to the efforts of
    some members of the Indian Affairs Committee.
        The Native American Bank represents one inter-tribal
    approach to capital formation in Indian country, one of which I
    am very proud to be a part of. The Native American Bank also
    has a Community Development Corporation component that is
    undertaking some of the same tasks we believe would be assigned
    to the corporate entity established in S. 519.
        But we all know that one financial institution cannot
    provide for all the needs of Indian country with regard to the
    kind of intensive capital development that is necessary to
    sustain economic development for the long term. This makes the
    discussion started by S. 519 very important.
        This bill represents an effort by the Federal Government to
    assist in development of Native American financial
    institutions. This is a different approach to capital formation
    than something like the Native American Bank. But nevertheless,
    we believe the approach stated in S. 519 is very worthy of
    discussion and further development.
        With this background in mind, it is my hope that S. 519
    will be developed, amended, and commented on by tribal leaders,
    tribal members, financial experts, and the Congress consistent
    with the following goals:
        No. 1, any entity created federally should provide
    assistance in capital formation for institutions like the
    Native American Bank and other similar tribally-owned banking
    institutions so that they can continue to grow and assist
    economic development in Indian country as private institutions;
        No. 2, the institution created should be able to provide
    technical expertise to tribes and individual tribal members and
    other financial institutions such as banks and other investment
    companies that are working to make capital available for
    economic development in Indian country; and,
        No. 3, any institution created federally should be
    complementary to, not competitive with, existing tribal
    financial institutions when it comes to providing service such
    as lending, venture capital, and advice on business formation.
        How does S. 519 measure up in relation to these goals? At
    present I am not yet convinced that the structure of the Native
    American Capital Development Corporation outlined in S. 519
    will do everything we want it to do. But I do know that NCAI
    and I are willing to continue to work to find a structure that
    will. We want to continue to work with you on that effort,
    Chairman Campbell.
        We believe that the Native American Capital Formation and
    Economic Development Act can be a starting point for a
    discussion of how Congress and Federal Government can best
    assist tribes to solve the economic development puzzle.
        I would like to talk about the functions of the Native
    American Capital Development Corporation. It is important to
    look at what S. 519 does and does not include with regard to
    the functions of the Native American Capital Development
    Corporation created by the act.
        The act calls for the creation of an Indian Development
    Corporation to be capitalized by Indian tribes and with
    instructions, as stated in section 102, to provide technical
    assistance to help establish tribal financial institutions. It
    would provide technical assistance to existing tribal financial
    institutions as they develop a loan portfolio, and to help
    provide technical assistance to overcome barriers on mortgage
    lending on Indian land. It would assist tribes and individuals
    to work with Federal home mortgage institutions, and to act as
    an information clearinghouse on financial practices in Indian
    country. Finally, it would obtain capital investments from
    tribes.
        Because of this last function of the Corporation, to obtain
    capital investment from tribes as mentioned in the act, it is
    not clear to us whether the Corporation is intended to be a
    source of capital for tribal economic enterprises by itself, or
    if it is simply to become a technical advisor to tribal
    financial institutions who themselves are already doing a lot
    of the lending.
        As structured, we believe the Corporation could be most
    useful as a technical advisory institution and one that can
    contract with existing or newly formed tribal financial
    institutions to provide technical assistance. However, we would
    also note that some of the suggested functions of the
    Corporation may already be provided in the private sector. It
    is our hope that the Corporation will not be duplicative of
    existing private institutions.
        As you know, Chairman Campbell, there is already a lot of
    good work going on in Indian country from a variety of
    directions. Some Government programs have proven to be very
    successful. Other partnerships with educational institutions
    and non-Indian committee organizations have been doing very
    useful and important work on reservations.
        Most meaningful, however, has been the hard work and
    dedication shown by Indian people themselves. Indian
    institutions like the Native American Bank, the Lakota Fund,
    the First Nations Development Institution, the Northwest Area
    Foundation, and dozens of other smaller but no less vital
    organizations have done far and away the most work in the
    development of tribal economies.
        It is our hope that this committee strongly considers the
    suggestions that these organizations may have to improve the
    bill. We believe that the institutions created by S. 519 should
    be structured so as not to take away anything from these
    efforts thus far. We ultimately want the Corporation to be
    complementary of and supplemental to what is already going on
    in many of our communities.
        The structure of the Corporation is of great importance to
    NCAI. The Corporation should be tribally owned. It should also
    be a corporate entity operated by Indian tribes and their
    members. This will give the Corporation some additional
    credibility. That will be important if it is to be successful.
        We have some suggested improvements in this regard. The
    Board of Directors of the Corporation is only required to have
    two members from Indian tribes. We believe that de facto
    control of the organization must reside with Indian people as
    they know the needs of their people best.
        We propose that the majority of corporate board members be
    required to be tribal members. Thus, in addition to the two of
    three Presidential appointed members being tribal members, we
    would like to see three of six of those elected by class A
    shareholders and two of four of those elected by class B
    shareholders be members of Indian tribes.
        On policy analysis and Incubation Centers, S. 519 sets up
    some two corollary funds proposed in this bill. These are
    helpful additions to the work of the proposed organization. The
    Native American Economies Diagnostic Studies Fund is well
    positioned to analyze the stake of Indian economies, the
    viability of policies both applied and removed from tribal
    business, legal, and regulatory schema and their effects, as
    well as the general economic trends on our reservations.
        Hopefully the Diagnostic Fund will be able to deal directly
    both with the state of Indian country economies and as an arm
    of the Corporation, the implementation of policies that will
    eliminate the identified barriers and problems.
        The other fund, the Native American Incubation Center Fund
    could also be helpful. However, as mentioned above regarding
    the question of the purpose of the Corporation, it is unclear
    exactly what the purpose of the Incubation Center Fund would
    be. Is this Fund intended to provide financial assistance to
    tribal communities directly? Or is it simply to be a
    clearinghouse for other Federal funds that are available for
    economic development efforts on behalf of tribes?
        In summary, we believe that S. 519 acts to start the
    discussion of how the Federal Government can help the tribal
    nations and help tribal financial institutions grow and
    prosper. With a few amendments, it contains some of the most
    important elements of that assistance: control and ownership by
    tribal members and a commitment to technical assistance among
    others.
        Conceptually, the Corporation has the potential to be a
    force for financial reform for Indian country economies. But
    the success of this effort will depend largely on the
    acceptance of the concepts in S. 519 throughout Indian country.
    Indian tribes will have to be convinced that investment in a
    federally charted institution will be a good and wise
    investment. That could be a hard sell.
        Further, whether the Corporation can create and maintain
    the availability of broad-based financial services and
    technical assistance for businesses in Indian country will be
    critical to its success. It will need to show that its
    particular expertise in the area of tribal housing funding is
    useful and needed in Indian country.
        It would also need to complement existing private efforts
    that have been initiated by tribes, both individually and
    intra-tribally as has already been mentioned before in my
    testimony. Perhaps in time the Corporation can also work to
    reduce the confusion and misconception surrounding political
    differences that arise from tribal sovereignty. Like the
    Overseas Political Insurance Corporation, perhaps the
    Corporation will be able to provide some sort of insurance for
    international risk.
        NCAI has identified this as one of the keys to
    comprehensive development in Indian country, and we feel that
    the Corporation may have the potential to assist in fulfilling
    this role further down the road. Again, we would hope that the
    Corporation would do this in cooperation with existing and to
    be created tribally-owned institutions.
        Again, Senator Campbell, we thank you for the opportunity
    to testify on this important bill. We believe this bill can
    provide a good starting point for discussion on these issues.
    We encourage further dialog and work on this concept so that it
    can truly help existing tribally-owned economic development
    institutions, and can help start new ones.
        We also thank you for introducing legislation to try to
    help develop financial institutions that will enhance the lives
    of our citizens and serve and strengthen our tribal
    governments. We look forward to working with you and the
    committee to make this bill as effective and helpful to Indian
    country as possible.
        I would ask that my prepared statement be inserted in the
    record in its entirety.
        The Chairman. Without objection.
        [Prepared statement of Mr. Hall appears in appendix.]
        Mr. Hall. [Remarks in Native tongue.] Thank you, Senator.
        The Chairman. Thank you, Tex.
        Mr. Paisano.

     STATEMENT OF CHRIS PAISANO, ACTING EXECUTIVE DIRECTOR OF THE
            NAVAJO NATION WASHINGTON OFFICE, WASHINGTON, DC

        Mr. Paisano. [Remarks in Native tongue.]
        My name is Christopher James Paisano, acting executive
    director for the Navajo Nation Washington Office. I serve as
    President Joe Shirley's official Representative in Washington,
    DC. Vice President Frank J. Dayish, Jr. is not able to present
    his testimony before the committee. He sends his regrets. He
    requested that I deliver his remarks and testimony which are
    laid before you.
        I would ask that his prepared statement be inserted in the
    record in its entirety.
        The Chairman. Without objection.
        [Prepared statement of Mr. Dayish appears in appendix.]
        Mr. Paisano. In his absence and discussion, we will bring
    new ideas to the challenges of economic development that will
    initiate additional choices for Indian country. The Navajo
    people must have the opportunity to be more than what fate and
    circumstance allows us to be. The president and vice president
    seek to empower our people to have additional opportunities to
    allow them to imagine a life different than one that is imposed
    upon them by the current and outdated economic policies.
        S. 519 initiates the discussion of attracting Indian and
    non-Indian investors to Indian country. The president and vice
    president understand very well that finding solutions to
    economic challenges, or rather, nation building is a
    responsibility that is enjoined by all of us.
        We hope the committee will work with the Navajo Nation on
    S. 519 which we understand is a concept that is in the process
    of being finalized. Together we will finalize the bill that
    might assist tribes in taking the initial steps toward
    financial independence. With that in mind, we submit our
    legislative concerns and recommendations for S. 519.
        The Navajo Nation is familiar with capital drought and its
    effects on the rest of Indian country. You have seen it with
    your own eyes. As I understand it, a delegation from your
    committee recently traveled to the Navajo Nation to investigate
    Indian housing issues. We hope that the conditions of capital
    drought was well illustrated.
        Economic development will not be simply solved by writing a
    check. The larger issues are why are not more private
    businesses investing on the Navajo Nation? Private investors,
    Navajo or non-Navajo, primarily lack confidence in the current
    system of business or leasing approval. The Shirley-Dayish
    Administration seeks to change this.
        Tribal governments in the past have not been very
    supportive of businesses. This will change as we strengthen
    tribal courts, review off-reservation investment opportunities,
    and explore a new view of Indian trust lands. The Shirley-
    Dayish Administration supports existing private businesses that
    have ventured and pledged to remain in business on the Navajo
    Nation.
        One such example of such private business is MechTronics of
    Arizona. MechTronics continues to employ 90 Navajos on the
    Navajo Nation by building complex wiring for computer defense
    hardware that is fitted into F-16s, satellites, and automatic
    ship firing defenses on U.S. battleships. Unfortunately, they
    have difficulty obtaining additional defense contracts since
    they do not qualify being listed on the Small Business
    Administration's Pro-Net system because they do not qualify as
    a small business although they are entitled to give off-
    reservation contractors tax credits for doing business on
    Indian reservations.
        President Shirley is looking for options that will allow
    MechTronics to be listed on Pro-Net, thereby enjoying the same
    level playing field as other Pro-Net businesses. President
    Shirley also supports New Mexico representative Tom Udall's
    bill, H.R. 1166, the Small Business Development Center
    Assistance to Indian tribe members, Native Alaskans, and Native
    Hawaiians, and hopes that a version of this bill will pass in
    the Senate.
        Mr. Udall's bill has passed in the House and has been
    referred to the Senate Committee on Small Business and
    Entrepreneurship which seeks to establish the SBA's Small
    Business Development Centers on or near Indian reservations.
    These centers would provide the much-needed information and
    training to support local potential and existing Indian small
    businesses to increase their chances of success.
        President Shirley will work with the Small Business and
    Entrepreneurship Committee on this bill which would proactively
    provide training and support to develop Indian small
    businesses.
        The Navajo Nation understands that honesty and comfort is a
    must when negotiating with investors. Everyone must feel that
    they can be honestly and fairly heard in tribal court when
    disputes arise. Our tribal courts must be unbiased and able to
    fairly litigate these disputes.
        One successful tribal nation that has many non-Indian
    investors on their land made a suggestion to the Navajo Nation
    to have a clause in business contracts for an investor or a
    tribe that gives the option to have their dispute heard in
    Federal court at any time. The tribe claimed that to date, not
    one non-Indian investor has ever used this option. The simple
    fact that this clause exists gives the investors a very strong
    sense of comfort. It also shows that the tribe is confident
    about its own tribal courts. This is one way tribes can
    proactively help bring investors to their lands. The Navajo
    Nation will continue to explore this unique option.
        Another incentive is for the tribe to buy real estate off
    the reservation that would not be put into trust status, but
    used as collateral to secure additional loans. These examples
    are part of tribal responsibility that makes the market economy
    work, as well as putting private investors at ease regarding
    their investments.
        As part of this responsibility, the Shirley-Dayish
    Administration proposes a different way of viewing trust lands,
    not as an impediment to economic development, but a valuable
    resource that ensures our commitment to protect these lands
    that the Navajo people will have the land in perpetuity.
        We now wish to explore a not so new concept about the
    relationship to trust lands and trust responsibilities from the
    very government that the United States based its laws upon:
    England. Tribes do not fully appreciate how trust lands gives
    Indian people a unique status to establish a healthy Indian
    country now and for the future. As you know, property law in
    the United States is based upon concepts from English common
    law. While it may seem contra-intuitive, we must travel across
    the big pond to the United Kingdom to refine our views about
    Indian trust land status.
        The United Kingdom has trust land. Queen Elizabeth II's
    crown estates are essentially trust lands for the Queen. The
    Crown Estate Commissioners never let her trust land become an
    obstacle to economic development. If they can work on this
    mechanism, why cannot we? The Queen has, by right, ownership of
    a vast array of lands throughout the United Kingdom. Yet she
    cannot sell these lands for they are not her own personal
    property, but are tied to her title and position as Queen. They
    are part of the heritage and history of the United Kingdom and,
    therefore, held in trust. It is her responsibility, managed by
    the Crown Estate Commissioners, to ensure that these lands are
    controlled and administered responsibly.
        Yet the Crown Estates do not experience the same
    difficulties finding investors to invest in properties that
    they will never own. In fact, the Crown Estates own a major
    portion of Regent Street in London where that location alone
    conveys quality and high priced shops. Where did we go wrong?
        Trust land status should not set us to be impoverished, but
    should set the guidelines on how we manage our lands and our
    resources in a responsible manner for the benefit of all
    people. The Navajo Nation stance for not selling its land, and
    should not be seen as old fashioned, but seen as proactive and
    as thoughtful lands management policy that embodies true Navajo
    Nation sovereignty for a future that will benefit the Navajo
    people.
        Utilizing this concept, the Navajo Nation was successful in
    getting the Bureau of Indian Affairs out of the business of
    leasing approvals through the passage of the Navajo Nation
    Trust Leasing Act of 2000. The Navajo Nation Council must
    approve them before sending them to the Secretary of the
    Interior for her approval.
        President Shirley directed the Navajo Nation Division of
    Economic Development to step up this process and to have them
    before the Navajo Nation Council for approval by this summer.
        These examples of non-monetary support are what the Navajo
    Nation can do on behalf of private businesses that continue to
    invest on the Navajo Nation. We also encourage Navajos and non-
    Navajos to take that important and brave step toward economic
    self-sufficiency that will build a nation.
        On a final note, we urge the committee to begin writing
    legislation that is not broad or generalized. The Navajo Nation
    learned from the U.S. Supreme Court's decision on United States
    v. Navajo that Congress must be very clear on the U.S.
    Government's role and responsibility regarding Indian trust.
        What specifically is the trust responsibility in S. 519?
    What happens if either the tribe or the Federal Government does
    not live up to its agreements? What are the penalties? We hope
    that the recommendations we give will clarify what we expect
    from future Congressional bills.
        S. 519 represents a start not only in how to bring much
    needed capital to Indian tribes, but to begin crafting and
    writing responsible legislation for the full participation of
    tribal sovereign governments that have direct implications on
    your trust responsibilities towards tribes.
        Thank you.
        The Chairman. Thank you. I thank both of you.
        I think I will start with Tex. You mentioned that one bank
    cannot do it all. I think you are probably absolutely right.
    Maybe one bill cannot do it all, either. Certainly we have
    tinkered around the edge with economic development for a lot of
    years and have not taken any action. I think S. 519 is bold
    enough to really get some serious capital to tribes.
        We have known each other for a long time. For the last 10
    years since I have been either chairman or vice chairman, you
    know that my view has always been that we do not move forward
    with a bill until the tribes have had a chance to digest it,
    participate in it, and are okay with it. So when you mentioned
    that it might be a hard sell, I just want to give you my word
    that we are just trying to plant a seed here. We are not going
    to move forward with anything until the tribes are very
    comfortable with it.
        Let me just ask you a couple of questions. Do you think
    that it is time for an organization that includes all Indian
    tribes to be envisioned, as S. 519 does?
        Mr. Hall. I think it could be, Chairman Campbell. I think
    the big thing is to make sure that obviously, as you mentioned,
    that it is working with tribes on the finer points of the bill,
    especially those existing institutions that tribes are all
    working through. It should be in cooperative and enhancing
    those, not viewed as competition.
        The Chairman. Do you think that it would be viewed as
    competition by some of those institutions that tribes are
    working with now, that somehow they would get an unfair
    advantage?
        Mr. Hall. Yes; I think it does. There is a section of the
    bill that does not include banks. That obviously excludes those
    tribal banks that are already in existence. Obviously those
    institutions would be very concerned about that. Second, when
    you are looking at capital raising through tribal banks, that
    could be viewed as competition as well.
        I think everybody wants to raise capital. Everybody wants
    to develop the finer points of the bill. I think it can get
    there. Some tribes are looking at it as competition because of
    the certain section that does not include banks.
        The Chairman. Maybe I am wrong, but as I understand it,
    most tribal banks are not capitalized high enough to give the
    kinds of loans that sometimes tribes need for major industry
    development. Would that be a fair assessment or not?
        Mr. Hall. For the individually tribally-owned banks, I
    would say, yes, definitely. But for inter-tribally owned banks
    or financial institutions, they are looking at a broader scale.
    There are numerous tribes involved which are looking at getting
    larger than that, and are moving quite rapidly. So those would
    feel that they are in competition.
        The Chairman. I understand that competition is the American
    way, but sometimes when it threatens your bottom line, it
    becomes a different concept. I understand that.
        Mr. Paisano, I am going to ask you to go over one thing
    again. You talked about MechTronics, and you have 90 employees
    of MechTronics. Where is the on-reservation location they are
    working?
        Mr. Paisano. Fort Defiance, AZ.
        The Chairman. You said they did qualify for one thing and
    did not qualify for another. Please go over that again for me.
        Mr. Paisano. They are qualified to give Indian tax credits
    because they are located on a reservation. They are able to
    give other subcontractors tax credits. But they are not able to
    be listed on SBA's Pro-Net system. That is a computer system
    listing major defense contractors.
        The Chairman. So the SBA does not have a way of defining
    what is on the reservation and what is not?
        Mr. Paisano. I think it for them it is more a large
    business versus a small business.
        The Chairman. When you have the time, sit down and spend
    some time with staff and see if we cannot frame up some kind of
    an amendment, or maybe a separate bill. You have me interested.
    It seems to me that even if they are very large firms, if they
    are on reservations or helping tribal economies, there ought to
    be some benefits at least for that part of it that are working
    with tribal economies.
        Mr. Paisano. Exactly.
        The Chairman. Maybe you could give us some ideas on
    something we could frame up as a separate amendment or as an
    amendment. I would appreciate that.
        Mr. Paisano. I look forward to doing so.
        The Chairman. I do not live too far from Navajo country. I
    used to go down to Gallup quite a bit. The tribe, as I
    remember, bought a trailer manufacturing company. Is that
    before your tenure, maybe 15 or 20 years ago?
        Mr. Paisano. I do not recall. It has been a while.
        The Chairman. Well, for whatever reason, it went out of
    business. Everybody I know out in that Western country has a
    trailer or two. I thought it was a terrific opportunity for the
    Navajos. I forget what they actually called it. It seems to me
    it was called ``Navajo Trailer Manufacturers.'' It was right
    outside Gallup toward Red Rocks. A couple of years later I went
    by and it was all but abandoned.
        Thank you for your testimony.
        We are joined by Senator Murkowski of Alaska. I know you
    have missed a lot of the testimony. Do you have an opening
    statement or comments before Tex and Mr. Paisano leave?

       STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA

        Senator Murkowski. Thank you, Mr. Chairman. I do have some
    opening comments. It probably would be best if they were just
    inserted in the record.
        The Chairman. Your complete comments and opening statement
    will be included in the record.
        [Prepared statement of Senator Murkowski appears in
    appendix.]
        Senator Murkowski. I will state that I am pleased that you
    have introduced and are taking up S. 519, the Native American
    Capital Formation and Economic Development Act.
        In my State of Alaska, as we look to economic activities,
    not only within the State, but for our Native Alaskans, we
    recognize that there is a need for assistance with capital
    formation. So I am pleased to listen to the testimony here this
    afternoon.
        The Chairman. We will now go to the third panel. We have
    Derrick Watchman, board member, Native American Bank
    Corporation, Denver, CO; Cris Stainbrook, executive director,
    Indian Land Tenure Foundation, Little Canada, MN; Eric Henson,
    Harvard Project on American Indian Economic Development,
    Cambridge, MA; and Mike Irwin, senior vice president, Alaska
    Federation of Natives, Anchorage, AK.
        We will go ahead and start in that order. All of your
    written testimony will be included in the record. You can
    abbreviate your testimony.
        We will start with Mr. Watchman.

     STATEMENT OF DERRICK WATCHMAN, BOARD MEMBER, NATIVE AMERICAN
                      BANK CORPORATION, DENVER, CO

        Mr. Watchman. Thank you, Chairman Campbell and Senator
    Murkowski.
        On behalf of the Native American Bancorporation, I am
    pleased to provide testimony on S. 519, and to generally cover
    issues involving capital formation in Indian country.
        My name is Derrick Watchman. I am a member of the Navajo
    Reservation, the Navajo Tribe. I am from Wonder Rock, AZ. I am
    a member of the Native American Bancorporation.
        In our testimony today, I want to provide an overview of
    the Native American Bancorporation, to give some general
    observations on S. 519, and to give some observations on Indian
    economic development.
        In general, obviously we are a for-profit entity. Our bias
    is toward private sector initiatives which would let the
    markets do the work but also provide for minimal government
    support.
        The Native American Bancorporation is a holding company,
    certified and chartered by the Federal Reserve. It is owned by
    21 tribes and Alaska Native corporations. The board of
    directors of the Native American Bank is composed of
    representatives from these investors.
        We have 10 founding tribes. They include the Arctic Slope
    Regional Corporation; the Blackfeet Indian Nation; the Eastern
    Shoshone Tribe; the Grand Traverse Band Economic Development
    Corporation; the Mandan, Hidatsa, and Arikara Nation, the
    Mashantucket Pequot Tribe; the Mille Lacs Reservation Business
    Committee; the Navajo Nation; the Oneida Tribe of Indians of
    Wisconsin; and the Ute Mountain Ute Tribes.
        The Native American Bank has two subsidiaries. The first is
    the Native American Bank National Association which is
    chartered by the Office of the Comptroller. It is also
    considered a community development focus bank.
        NABNA offers a full range of banking services primarily to
    the Blackfeet Indian Tribe in Browning, MT. We are also
    pursuing opportunities around the reservation. Our executive
    office is located in Denver, CO, and through our offices in
    Denver, CO, we offer a full range of banking services to all
    customers. But our primary focus is those customers that are
    tribal governments, Alaska Native corporations, Indian-owned
    businesses, and Indian non-profit organizations.
        On September 29, 2001 the bank was approved and chartered
    by the OCC. Since operation, we have been primarily focusing on
    Indian customers; 80 percent of our business right now are with
    new loans in Indian country.
        We also recently opened a trust department. Our long-term
    plan calls for the opening of branches on reservations
    throughout Indian country. We are hoping to promote a teaming
    relationship with other Indian-owned and tribally-owned
    financial institutions.
        As I said earlier, our bank is chartered and certified as
    community development focus institution by the Treasury
    Department. In addition to NABNA, we also have the Native
    American Community Development Corporation. That is a 501(c)(3)
    organization. That is sponsored by NAB.
        NACDC has three missions. First, is to serve as a national
    source of loan funds for loans that will promote reservation
    development, but will make NABNA and other banks assist those
    institutions that will provide capital to tribes and areas that
    do not have bankable credit.
        The second mission is to break down barriers to credit
    faced by Indians, particularly those living on Indian
    communities where there is not a whole lot of expertise. We
    need to focus on that area. The third mission is to provide
    financial literacy and other banking programs to reservations.
        NACDC's first priority at this point is to focus on
    mortgage financing for reservation housing. We have a long-term
    approach where we are trying to provide a low-cost, low-
    interest fund source to provide housing programs on
    reservations.
        We are working with several tribes. NACDC is helping to
    break down the barriers of mortgage financing. This is a very
    critical and complicated area that the institution is working
    on. We are working with Fannie Mae, the Federal Home Loan Bank,
    and also other institutions in the area.
        NACDC's second priority is to focus on providing capital to
    deal with issues of fractionated heirship interests and to look
    at the re-acquisition of reservation lands. We are working with
    the Indian Land Tenure Foundation, whose representatives are
    here today. We are hoping to make a more positive relationship
    so we can look at the re-acquisition of lands and to look at
    the fractionated interests.
        Finally, NACDC is looking at a national re-lending program
    where we work with small businesses and reservation communities
    to focus on small businesses. We have a project called the
    Mini-Banks in the Schools program which is working with the
    Blackfeet Indian Reservation.
        I would like to spend just 1 moment on our views on S. 519.
    First of all, it is very important that we look at resources
    available to provide tribes with more options of creating
    sustainable economic development in our tribal communities.
    Tribal members need good jobs. We need to look at the prospect
    of a brighter future so that we can break the cycle of poverty
    and we can break the cycle of unemployment.
        We believe that the best way to facilitate is to work with
    tribally-owned and Indian-owned financial institutions such as
    the Native American Bank, and the Native American Community
    Development Corporation.
        With respect to S. 519, I want to point out a few items.
    First of all, we need to look at non-appropriation measures. We
    believe that we do not need new appropriations for a couple of
    reasons. One, we should look at certain grant programs that
    could be administered by Indian-owned financial institutions.
        We ask that Congress review various Federal funding
    programs to determine if it would be more productive to give
    those funds to Indian-owned financial institutions. The BIA
    recently awarded $7 million for Indian land acquisitions. We
    believe that we can partner with this and actually leverage the
    use of these dollars from $7 million to almost $70 million.
        We also think that we need to look at reducing the BIA
    redtape. One of the biggest problems that we have and one of
    the biggest problems for the affected flow of capital to Indian
    reservations is the redtape imposed by BIA. For example, with
    the Native American Bank, it takes us almost 6 to 9 months to
    do a loan for a mortgage. That is because of the title
    processing and the time involved to get the BIA to prove that
    it is a legitimate deal and that we can actually have a piece
    of paper that we can lend on.
        We also would like to look at trust funds. One of the
    biggest issues that is out there is there is no capital. For
    example, if we were to use a part of the $3 billion that is
    invested right now by BIA and the trust fund, if that were
    directed to Indian-owned institutions, such as the Native
    American Bank, that would provide more than sufficient capital
    to banks, including the Native American Bank, to have the
    assets to loan out to small businesses and big businesses.
        Meeting the Federal Government's trust responsibilities and
    allowing for those funds to contribute to economic development
    is what we think we really need to look at.
        The fourth area that we are looking at is requiring Federal
    capital formation programs to recognize the unique status in
    Indian country. Congress has established several programs
    including the CDFI and the New Markets Tax Credit Program.
        However, recently the New Markets Tax Credit Program only
    provided a grant to one financial Indian-owned institution. The
    reason for that is that they said that most of the other
    Indian-owned financial institutions just do not have the
    experience or the track record to be able to handle such a
    program as this. We ask Congress to look at this New Markets
    Program and to consider a set-aside in Indian country.
        They would like to look at Point Five as promoting business
    opportunities. One, the big areas out there is 8(a) contracting
    and using the Indian set-aside program. We would like to look
    at forming relationships with those companies that are 8(a)
    certified or that have Indian set-aside preferences so that we
    can provide a full comprehensive banking program to them.
        I want to address a couple of areas very briefly. One is
    new appropriations. We need to look at increasing the size of
    the BIA Loan Guarantee Program. Right now it is very clear that
    banks take a risk for a BIA loan of 10 percent. Right now at
    this point for fiscal year 2008, I believe that $68 million is
    being program to be funded to the BIA Loan Guarantee Program.
    This program works.
        We believe that we need to increase this program by two to
    three times--$200 to $300 million. That will provide an
    excellent source for institutions such as the Native American
    Bank to really get out there and provide the needed capital for
    loans and small business in Indian country.
        Another area which was brought up earlier is an equity
    fund. One of the most glaring deficiencies in Indian country is
    the lack of access to equity and venture capital. Financial
    institutions such as the Native American Bank are not venture
    capitalists. We are basic commercial lenders.
        We are asking that the SBA look at the program called the
    Small Business Investment Company and provide for additional
    investments, and provide for non-recourse loans into Indian
    country.
        The third area that I want to talk about briefly is a
    feasibility fund. Another form of capital that is critically
    needed is non-recourse loans to provide for feasibility and
    development funds. NAB has firsthand knowledge of this. Ten
    years ago as a part of a CRA agreement with the banking
    regulators, a large bank agreed to create a $15 million non-
    recourse loan feasibility fund. NAB was fortunate to get a loan
    for this. That is how we were able to put our operations
    together and become fully operational.
        There is a need to continue this kind of program. There is
    a need to look at these kinds of funds for Indian-owned
    financial institutions in this country.
        Mr. Chairman, and Senator Murkowski, in conclusion, Indian
    country has or is planning to create many of the entities and
    programs needed to address capital formation and the gaps on
    reservations and in Alaska Native villages.
        While they can facilitate the kind of local decision making
    that is most effective in steering capital to the highest and
    best use, what is needed, we believe, is access to significant
    amounts of capital at appropriate terms, long terms, and low
    cost interest rates.
        It would also be helpful if we were to be involved in
    decision making at the SBA level and how the SBIC works. We
    would also like to look at expanding more on the non-
    appropriation activities.
        On behalf of the Native American Bank, I appreciate your
    comments. I hope to answer your questions. I would ask that my
    prepared statement be inserted in the record in its entirety.
    Thank you.
        The Chairman. Without objection.
        [Prepared statement of Mr. Watchman appears in appendix.]
        The Chairman. I will have some questions.
        I have to tell you right off the bat when you talk about
    increasing the loan guarantee program, I agree. Unfortunately
    when you are facing over a $300-billion deficit for fiscal
    years 2003 and 2004 combined, finding $200 to $300 million more
    for anybody in any project is not so easy.
        We will ask some questions, but I would like to move
    through the whole panel first. I would like to go to Mike Irwin
    now since Senator Murkowski is here and may have to leave. I
    would at least have her hear your testimony.

        STATEMENT OF MIKE IRWIN, SENIOR VICE PRESIDENT, ALASKA
                  FEDERATION OF NATIVES, ANCHORAGE, AK

        Mr. Irwin. Thank you, Mr. Chairman.
        Mr. Chairman and Senator Murkowski, I appreciate the
    opportunity to testify before the committee today regarding S.
    519. As noted and for the record, my name is Mike Irwin and I
    am senior vice president of the Alaska Federation of Natives,
    headquartered in Anchorage, AK. I am pleased to appear here
    today to support this important legislation.
        The Alaska Federation of Natives commends Senator Campbell
    for his wisdom and foresight in developing and introducing S.
    519. As noted in the findings of the bill, there is a special
    legal and political relationship between the United States and
    Indian and Alaska Native tribes. Although the legal status of
    Alaska Native corporations is different than that of tribes, it
    has long been recognized that a special legal and political
    relationship exists between the United States and Alaska
    Natives generally.
        Also, as noted in the findings, Alaska Natives, like all
    other Native Americans, suffer high rates of unemployment,
    poverty, poor health, substandard housing, and social ills to a
    greater degree than any other group in the United States. We
    have many successes in Alaska, all of which we are quite proud.
        However, in many areas of the State our people suffer as
    they do elsewhere around the country from serious unemployment
    and underemployment, and economic development efforts that have
    not proven successful in the past. We believe that the purposes
    behind this important piece of legislation are sound and the
    bill would fulfill a need in Native American and Alaska Native
    communities.
        Despite owning and operating a number of successful
    corporations as Native-owned entities, promoting economic
    growth and reduction of poverty remains huge challenge which
    requires, in our opinion, a paradigm shift movement to the next
    level of the historically successful Federal self-determination
    policies.
        I would like to note that I am trying to abbreviate my
    remarks here today. But we have submitted much more lengthy
    testimony with all kinds of information backing up some of the
    things I will cover here today.
        The Chairman. Without objection.
        [Prepared Statement of Mr. Irwin, for Ms. Kitka, appears in
    appendix.]
        Mr. Irwin. I would like to comment specifically on title V
    of the bill entitled, ``Other Native American Funds'' which
    establishes two different financial funds--the Native American
    Economies Diagnostics Studies Fund and the Native American
    Incubation Center Fund.
        The first one is designed to provide comprehensive economic
    analysis of Indian economies and, in turn, offer
    recommendations to remove or ameliorate inhibitors to greater
    investment and job creation.
        The second development fund is designed to encourage the
    design and implementation of pro-growth economic policies to
    help stimulate Indian economies.
        AFN strongly supports the underlying rationale behind the
    establishment of funds designated to these purposes and believe
    they would assist economic development throughout Alaska if
    they were enacted into law. However, AFN would like to request
    inclusion of a new Alaska specific provision that would
    authorize a 10-year demonstration project for Alaska.
        We believe there is an urgent need in our communities for a
    native tribal development bank. I know that a lot of times we,
    as Alaska Natives, come forward and say, ``We think our
    circumstances are perhaps unique and different for many, many
    reasons.'' I will cite those here. But I think that we also
    would like to propose that there be a generally different tack
    taken with this legislation that perhaps might also be able to
    extend throughout Indian country and to Native Hawaiian
    communities.
        We, of course, have geographic differences in Alaska that
    make us much more isolated as native communities. In Alaska the
    downturns in the fishing and timber economies, two of the only
    economies that we have that touch rural Alaska where most of
    our native people live, are further stressing already
    distressed economies.
        The slow down in the Alaska economy generally, our State's
    fiscal crisis, which has been ongoing now for about 6 or 7
    years, and the continued retrenchment of the State of Alaska
    from rural and predominately native community areas, lead us to
    believe that it is imperative that Federal development
    assistance be shifted to high impact assistance.
        What would a native tribal development bank do? This is the
    special demonstration project that we are asking for you to
    consider as inclusion in S. 519. The focus of the effort is a
    coordinated and targeted approach to social, educational,
    economic, and political development acting as catalysts for
    systemic reform. The model is similar to, but not exactly the
    same, as development banks overseas, such as the Inter-American
    Development Bank, Asian Development Bank, the African
    Development Bank, or even the Islamic Development Bank.
        The purpose would be to promote growth, improve well being,
    and fight poverty and inequality with the objective to help
    native communities accelerate social progress for its own sake,
    and for poverty reduction and for growth promotion. Central to
    the idea is a focus on a people-centered development,
    strengthening and expanding existing capacities, and getting to
    the root causes of our vulnerabilities as people and as
    communities.
        Within the United States there is no valid public policy
    reason, in our opinion, that we should have areas which remain
    well below the poverty level for decades with no hope for the
    communities to see improved life opportunities, nor for remote
    rural communities to experience all the major decisions which
    affect their lives to be made from Washington, DC, Juneau, or
    Anchorage.
        There are proven ways that systemic change can happen, and
    we want to build on successes from around the world. Often
    people reference our small remote areas as intractable or just
    economically infeasible seeing all the standard obstacles to
    development in the conventional sense.
        But, for example, if you look at the experience of Korea
    and their efforts to transition to a knowledge-driven economy,
    you can see that there are other ways to address development.
    If you look at the best of the best examples of the World
    Bank's development efforts, you can see areas we are missing in
    our efforts. We hope to learn from these successes.
        The first steps that the Native Tribal Development Bank
    would be to implement the Congressional authorization by
    setting up an Alaska Native Development Assistance Committee.
        Mr. Chairman, there is a real need in many parts of remote
    and rural Alaska for something such as a Native Tribal
    Development Bank dedicated to the social, educational,
    economic, and political development. We have seen through our
    own lives and any number of studies that social well being is
    intertwined with political stability and economic prosperity.
        We simply cannot separate the health and well being of
    native people from strong economies and strong political
    institutions. We believe that a properly constructed
    institution dedicated to social, education, economic, and
    political development could and would leverage State, local,
    and private funds and be of greater assistance to communities
    throughout Alaska and which Alaska Natives live, work, and
    raise their families.
        With this in mind, we support S. 519 and believe the
    enactment of this legislation with provisions that apply
    specifically to Alaska would be highly beneficial to our
    people. Thus, our recommendation is that we are urging the
    Congress to authorize and fund an Alaska Native Tribal
    Development Assistance Committee that would function as the
    principal strategy setting, policy and performance review
    entity for educational, social, economic, and political
    development within Alaska's native communities.
        The committee would focus on the development objectives,
    promote coordination, and review effectiveness of Federal
    development assistance. The committee would work with Alaska
    Native tribes and institutions to select appropriate social and
    economic development indicators, and set measurable goals for
    increasing the economic growth and reduction of poverty.
        The broad categories of indicators would include size,
    growth, and structure of population, demographics,
    determination of population growth, including fertility, infant
    mortality, and life expectancy, labor and employment, poverty,
    and income distribution, education, and health.
        In addition, a set of indicators would be developed to
    measure the relationship between economic growth and poverty
    reduction.
        Thank you for allowing AFN the opportunity to put this idea
    on the table before you as a demonstration project proposal. We
    would be pleased to prepare a full demonstration project
    abstract for this 10-year demonstration project and legislative
    language for further review by members of the committee.
        At this point we do not know what amendments may be
    considered for this bill. We would be pleased to work with you
    and the members of the committee on amendments, particularly as
    they apply to Alaska and Alaska Natives.
        Once again, we commend you for developing such important
    legislation. We stand ready to work with you on its throughout
    the legislative process.
        The Chairman. Thank you, Mr. Irwin. We will look forward to
    any suggestions you have to make it a better bill.
        As we move along, I know Alaska is facing some of the same
    economic problems all the States are. Every State is in some
    trouble, as you know, from the downturn of the economy, after
    9/11, and from so many other things happening. But I would
    venture to say that the big States like California, New York,
    Florida, or Texas, would be delighted if they had your
    delegation here representing them. You cannot get any tougher
    voices than Senator Stevens and Senator Murkowski. I just
    wanted to pass that on to you. If you think you have it bad,
    somebody else has it tough, too, because they do not have the
    strength of voices that your delegation does.
        Mr. Irwin. We live in that appreciation every day, Mr.
    Chairman.
        The Chairman. I am sure of it.
        We will now go to Mr. Stainbrook.

     STATEMENT OF CRIS STAINBROOK, EXECUTIVE DIRECTOR, INDIAN LAND
                  TENURE FOUNDATION, LITTLE CANADA, MN

        Mr. Stainbrook. Thank you, Chairman Campbell, for the
    opportunity to come and provide some thoughts on S. 519 Let me
    take you up on your offer to be brief. I will annotate my
    comments that you have already received in writing. I would ask
    that my prepared statement be inserted in the record in its
    entirety.
        The Chairman. Without objection.
        [Prepared statement of Mr. Stainbrook appears in appendix.]
        Mr. Stainbrook. The Indian Land Tenure Foundation, of which
    I am president, is a new foundation. It was created
    approximately 1 year ago, but it comes out of a history of
    community development. That community development started
    nearly 4 years ago with a planning process throughout Indian
    country which involved hundreds of Indian people developing a
    series of strategic plans of how to address Indian land issues
    throughout the country.
        Those plans came together and ultimately resulted in a
    single plan that is somewhat daunting, but is simply
    breathtaking. That mission is to have all Indian land within
    the exterior boundaries of the reservations back in Indian
    ownership and management, as well as those lands outside the
    reservation boundaries where indigenous interests are still
    strong and culturally appropriate.
        The strategic plan includes four primary strategies
    including one of educating every land owner, individual Indian
    and tribal. Knowledge becomes power in making decisions about
    their land assets. There is the need to increase the economic
    value and leverage of Indian lands; using Indian lands to
    discover culture of the various tribes; reforming legal and
    regulatory mechanisms related to Indian lands; and also the
    strengthening of sovereignty throughout the country for all of
    the tribes.
        At the conclusion of the planning process, the Indian Land
    Tenure Foundation was formed and was the recipient of a $20
    million grant from the Northwest Area Foundation. It covers our
    operating costs for approximately 10 years. It allows us to
    recruit and distribute other resources throughout Indian
    country to deal with Indian land, and to carry on program
    development, where that is appropriate and where those programs
    do not currently exist in Indian country.
        I believe that the findings of the committee are
    appropriate and, in fact, identified some of the most
    significant issues concerning economic development in Indian
    country: The lack of investment capital, the need for
    understanding and overcoming some impediments, and also the
    fundamental connection between resolving land issues and the
    ability to develop reservation economies.
        I think those three pieces are very fundamental to
    successful economic development on reservations. In essence, it
    is those three pieces that brought the Indian Land Tenure
    Foundation to begin working on what we call the Indian Land
    Capital Fund some months ago to address both the lack of
    private capital being applied to Indian land, purchases, and
    reacquisition, and the resolution of the fractionated ownership
    in Indian country and Indian lands.
        We are within just a few months of implementing that fund.
    In essence, the design of that fund is not dissimilar from the
    Bureau of Indian Affairs Consolidation Pilot Projects which
    have been ongoing for some time. We do have different twists to
    that.
        The largest and most significant piece of it is that we
    would bring private capital, philanthropic capital, and tribal
    capital to bear leveraging Federal dollars in that fund. What
    it would essentially do is begin taking the Pilot Project
    concept to a scale that would actually have an impact. At this
    point, that scale is not there. The ability of the Bureau of
    Indian Affairs to buy small undivided interests of Indian land
    and make a dent in the fractionated ownership pattern is
    negligible.
        As part of our work on the Fund, as Derrick mentioned
    earlier, we have begun working with the Native American Bank
    Community Development Corporation. In that view, we have
    attempted to bring value to Indian land that is recovered and
    also Indian lands that are consolidated.
        This is not to say that along the way we would not need an
    injection of Federal dollars. Obviously when we begin talking
    about consolidating these fractionated ownerships, this
    situation was brought about by the various allotment acts that
    were passed. Clearly, the Federal Government should have a role
    in helping resolve some of those.
        But we do believe that those dollars could be leveraged
    substantially. Those dollars may come in the form of resources
    and may come in the form of initial seed capital to capitalize
    the fund. It may be tax credits. I was encouraged to hear the
    gentleman from HUD relate a number of options that could be
    available. That could be from borrowing from other sectors such
    as the energy savings performance contracts. That would provide
    a similar mechanism for us to work on land consolidation in
    that fashion.
        Indian Land Tenure Foundation believes in self-
    determination. It was our very basic beginning. True self-
    determination comes through the identification of the problems
    that tribes and individual Indian people have before them, and
    the ability to come to resolution around that.
        I offered the suggestion of the Indian Land Capital Fund
    not so much as putting that program before you for funding or
    even consideration, but more as an example of the types of
    activities that are going on in Indian country and being
    created by Indian people.
        One of the pieces that I would suggest in that vein is that
    as the committee goes through their decisions and their
    manipulation of S. 519, that they look to Chairman Hall's
    suggestion that there are a number of entities out there doing
    substantial work around private capital. Those entities should
    somehow be folded into the process.
        On a final note, I would also suggest that the diagnostic
    and analytic component perhaps be elevated or accelerated to
    lead the financial capital piece, as well as the incubation
    fund piece of the bill. It is through the diagnostic piece that
    I believe that could inform how the other two pieces are
    structured.
        Finally, I would also recommend that under the diagnostic
    and analytic piece that it rather quickly move from the general
    to the very specific. In our work and in years of experience in
    working in Indian country, the situations that the 500-plus
    tribes are in, are very different. To generalize about what the
    impediments may be will not get to a point where many tribes
    will be able to take that first action step and implement
    something.
        If we can do diagnostic pieces at the tribal level, I
    believe you would see economic development begin to take effect
    with each tribe having a very clear picture of what steps they
    need to undertake.
        I thank you again, Chairman Campbell, for inviting us. I
    would be happy to answer any questions.
        The Chairman. Thank you. I will have a couple of questions
    for you in a few minutes.
        We will finish up with Mr. Henson. By the way, you work
    with Professor Kalt; is that right?
        Mr. Henson. Yes, sir.
        He submitted some testimony. He has been down here in
    person a number of times to testify. He is always insightful
    and always well thought out. I would appreciate it if you would
    thank him personally from me and from the committee for his
    testimony, I would certainly appreciate it.
        Mr. Henson. I will do that.
        The Chairman. Please go ahead. You may also abbreviate your
    testimony, if you would like.
        Mr. Henson. I will be brief.

     STATEMENT OF ERIC HENSON, HARVARD PROJECT ON AMERICAN INDIAN
                  ECONOMIC DEVELOPMENT, CAMBRIDGE, MA

        Mr. Henson. Good afternoon, Mr. Chairman. My name is Eric
    Henson. I would like to thank you for the opportunity to appear
    today. I am employed as a senior consultant by Lexecon,
    Incorporated. I serve as a Research Fellow at the Harvard
    Project on American Indian Economic Development, both in
    Cambridge, MA. I am a member of the Chickasaw Nation.
        I want to very briefly talk about two things today. First,
    I will touch on the research findings of the Harvard Project,
    and second, I will talk about the conceptual component of this
    bill that Mr. Stainbrook ended with, the diagnostic analyses
    contemplated.
        In the course of my comments I would like to convey that
    although there are some unanswered questions you have heard
    from the other witnesses testifying, this bill is a commendable
    attempt to overcome one of the most vexing problems facing
    Indian country--the perpetual lack of capital formation.
        As some of you may know, the Harvard Project has found that
    no single event, such as increasing capital flows into Indian
    country or securing one big grant, will be sufficient. The
    fundamental challenge is to create political and institutional
    environments that will attract capital and, thus, ensure
    sustained economic development.
        The first of the core components for the sustained
    development is capable institutions. This includes governmental
    bodies as well as informal social and cultural institutions. As
    in any society, Indian or non-Indian, capable institutions are
    the mechanisms that get things done.
        Second is a cultural match. The underlying norms of a
    society must match the governing system for these institutions
    to function effectively. In other words, tribes need to make
    sure the institutions have legitimacy among the people they
    serve.
        Third is sovereignty and self-determination. Vigorous
    exercises of sovereignty are critical to this long-term
    development, including such actions as contracting and
    compacting which have both proven successful in promoting
    economic development and enhancing self-governance. This is
    important because it places tribes in the driver's seat for
    decisionmaking.
        Some of the activities contemplated under the funds as
    spelled out in the bill echo the lessons of the Harvard Project
    Research and present an opportunity to target efforts of the
    Native American Capital Development Corporation, or the NACDC,
    toward capacity building for Indian nations.
        Through the diagnostic research envisioned, the
    capabilities of participating nations may increase and the
    NACDC will be attempting to help establish, tribe-by-tribe,
    settings into which capital will more freely flow. This tribe-
    by-tribe approach does two closely related and important
    things.
        One, it avoids the mistake of attempting to approach every
    Indian problem with a one size fits all remedy. It recognizes
    that each tribal circumstance is different, that each nation
    faces different obstacles hindering capital formation, and that
    the solutions needed will vary from situation-to-situation.
        Two, it avoids the mistake of attempting to impose Federal
    solutions onto tribal challenges by involving tribes on a
    participatory basis. The past attempts to impose Federal
    solutions have consistently failed by presenting supposed
    solutions that nations are not prepared to implement and not
    prepared to enact because they were not involved in the
    formulation of the legislation in question. This legislation
    was mandated in Washington, DC and imposed upon the tribes.
        What does this capacity building approach entail for a
    given diagnosis carried out under the funds? It is impossible
    to provide a completely generalized answer. The need to tailor
    each analysis precludes formulation of an adequate check list
    for every such study.
        However, our research at the Harvard Project directly
    coincides with the diagnostic projects envisioned here and can
    inform NACDC's initial efforts to understand a given tribe's
    developmental infrastructure. This includes assessing the
    presence and effective implementation of at least five things
    and fostering their development where they are missing. These
    five things are:
        No. 1, financial and budgetary controls, such as third-
    party audits. Every commercial venture needs to know where it
    stands financially.
        No. 2, principles of corporate governance, including the
    separation of tribal politics from tribal businesses. We found
    that tribally-owned businesses have greatly increased success
    rates when separated from tribal politics.
        No. 3, regulatory codes, including land-use ordinances,
    commercial codes, and taxing provisions. These are rules under
    which businesses and commercial ventures will operate when
    under tribal jurisdiction.
        No. 4, planning and development policies, such as strategic
    visions or planning documents. These chart the future as
    developmental opportunities arise.
        No. 5, a separation of powers between the branches of
    tribal government. This includes independent tribal courts to
    ensure fair and non-arbitrary adjudication of commercial
    disputes which are bound to arise in any commercial setting.
        These components of developmental infrastructure represent
    the nexus of our research and the diagnostic activities
    contemplated in this bill.
        Mr. Chairman, I believe this is important because these
    components of developmental infrastructure help an economy
    develop by instilling confidence on the part of outside
    commercial interests; depoliticizing dispute resolution
    proceedings; standardizing and streamlining commercial
    practices; and enhancing tribal sovereignty by allowing tribes
    to exert regulatory authority over business activities.
        In short, they help create the environment for increased
    commercial and business enterprises and, thus, create increased
    capital flows and long-term capital formation.
        I would like to close by noting that this bill, if
    thoughtfully implemented, and as you discussed with Mr. Hall
    with the backing of the Indian nations, can help overcome the
    obstacles of capital formation, and can help establish the
    settings in which economic development will take hold.
        To the extent that this legislation can do these things, it
    should fully receive the support of this committee. Thank you.
    I would ask that my prepared statement be inserted in the
    record in its entirety.
        The Chairman. Without objection.
        [Prepared statement of Mr. Henson appears in appendix.]
        The Chairman. Thank you.
        Since you are last up, let me just tell you that I think
    your testimony is really right on when you talk about the key
    to economic help is to combine structural reforms and stable
    government, with other assistance. I know for a fact that in
    some cases tribes have signed contracts with outside interests
    to build factories and because of some turmoil within the
    tribes, the outside investors after a few years pull up their
    roots and leave.
        In a case of the Navajos, the electronics factory down by
    Shroud was a good example 20 years ago, Mr. Watchman. I have
    also seen that happen with the Crows with a carpet factory. I
    am also convinced that there has been increased stable
    government as well as structural changes and reforms with an
    independent court system, coupled with economic help.
        Let me ask you one question, Mr. Henson. Do you see any
    impediments in this bill of having all Indian tribes as
    shareholders in the Corporation? There are 562 tribes.
        Mr. Henson. I discussed this briefly with Mr. Moorehead on
    your staff. He believes that the split class A and class B
    stock could be appropriately situated so that tribal voting is
    sorted out sothat perhaps smaller tribes with fewer shares
    would be in the class A category with perhaps more money to
    contribute to the capitalization of the Corporation would not
    be outvoted by a tribe that simply has a higher population, and
    I think that with the thoughtful implementation of that kind of
    system you can overcome the problems of potentially misaligning
    the capital injection from the tribe and their relative voice
    in the administration of the corporation..
        The Chairman. Thank you.
        Thank you also for making a very strong statement on self-
    determination and the feeling that we should not move any
    faster than the tribes are able to move with us. As Tex Hall
    knows, this is something I believe in.
        Let me go to Mr. Irwin. You mentioned a demonstration
    project. Since almost half of the Federally recognized tribes
    are in Alaska, I assume that you might suggest that if we did a
    demonstration project, it ought to be in Alaska; is that
    correct?
        Mr. Irwin. Yes, sir; what we are proposing, it is very
    specific to what we in Alaska have identified as being the
    underpinnings for true economic sustainable economies in rural
    Alaska which have to do with the social, educational, and
    political development that is needed in order for that to take
    place.
        We have many obstacles to development such as
    transportation, infrastructure, and the cost of doing business.
    But even if those are solved, the educational attainment
    levels, the social ills that we experience in our communities,
    and the need for stable political development, really even in
    the best of worlds from an economic development point of view,
    would still not allow us to have all that we could have in the
    way of our strong economies.
        The Chairman. You spoke about the size of Alaska and it
    being rural and largely undeveloped. Just now some of the
    things that I assume you might call the American Federation of
    Natives' vision of what they would like to do. Is most of that
    consistent with what we are trying to do in S. 519?
        Mr. Irwin. I think it is. I think it is a much broader
    approach to the problem than is being proposed here, and a much
    more long term developmentally oriented as far as the people
    development side of it goes.
        It is a somewhat radial departure from S. 519. But as far
    back as 1994, the Alaska Natives submitted the Alaska Natives
    Commission report, which really contained many of these same
    recommendations for what would really work for getting
    sustainable economies in rural Alaska.
        We are using this as an opportunity to remind Congress that
    they have had that for nine years and things really have not
    changed in Alaska.
        The Chairman. You use the word ``radical'' and I use the
    word ``bold.'' I am just convinced that what we have been doing
    is not inclusive enough and not moving fast enough to help
    native communities. That was the interest in introducing it.
        Let me now ask Mr. Stainbrook a question or two. Do you
    think S. 519's Corporation would be a good financing mechanism
    for the purpose of Indian land resocialization financing?
        Mr. Stainbrook. Yes; I believe it could be. I think there
    are certain advantages to having this overarching piece of
    principle there.
        The Chairman. Your testimony indicates that it would take
    more than $1 billion to buy out all the fractional interests of
    Indian country, and that the fiscal year 2004 request proposes
    only $21 million. You are probably right on both assumptions.
        Does that not make the point that we are probably never
    going to be ahead of the curve if we just keep waiting for the
    Federal Government to put up the money?
        Mr. Stainbrook. That is exactly our position. In fact, if
    this is not taken to scale soon, some form of the pilot
    project, or, in fact, the capital fund that we are suggesting
    be put together to buy those fractionated interests, that
    exponential growth of fractionated interests will not allow for
    any reduction in the near future, no matter how much money is
    spent on it.
        The Chairman. Is your tribe a member of the Native Bank?
        Mr. Stainbrook. No, sir; I am not here representing a
    tribe.
        The Chairman. Okay.
        Let me go to Mr. Watchman. How many tribes are shareholders
    of your bank? Did I hear you say 21?
        Mr. Watchman. We have 21 tribes participating. We have 10
    founding tribes that I outlined.
        The Chairman. So, 10 are shareholders.
        Mr. Watchman. They contributed $1 million apiece.
        The Chairman. Can any tribe be a member of your bank?
        Mr. Watchman. Yes; any tribe can be a member of the bank,
    but initially when we were looking at becoming a founding
    tribe, we were looking at $1 million apiece. That is for the
    class A shareholders. Class B shareholders is any amount less
    than $1 million. But any tribe can be a member.
        The Chairman. What advantage does a class A shareholder
    have that a class B shareholder would not have?
        Mr. Watchman. The advantages between A and B shareholders
    is that the class A shareholders can actually vote and
    participate in bank activities and bank affairs.
        The Chairman. But they can both borrow money?
        Mr. Watchman. Yes.
        The Chairman. What is the paid-in capital for your bank?
        Mr. Watchman. The paid-in capital initially was $12
    million. After 1\1/2\ years of operations, we have an asset
    base of about $35 million.
        The Chairman. You talked a little bit in your testimony
    about the long-range plans of expanding branch offices; is that
    correct?
        Mr. Watchman. That is correct.
        The Chairman. Do you see any benefit of having all Indian
    tribes some day being a part of your bank?
        Mr. Watchman. I do. There is a certain amount of economic
    scale and expertise that is acquired by operating on separate
    reservations. Each tribe is different with rules and
    regulations and land acquisition. In my area, the tribes in the
    Southwest because of working with the BIA, they do business
    differently than the tribes in the other districts.
        With the economies of scale, you can learn the process. The
    biggest issue is how do you work with BIA to have the title and
    approvals. It can be used as a financing mechanism to do loans.
        The Chairman. I am a supporter of the BIA, but believe me,
    there are a few people around here that are not sure how they
    operate, either. [Laughter.]
        Let me ask you a couple of more questions about your bank
    and if it is proprietary or something, you do not need to
    answer. But I am interested in how many loans has the bank made
    since it was chartered? It is now in the second year of
    charter?
        Mr. Watchman. We are in our second year of charter; that is
    correct.
        We have a loan portfolio of about $20 million.
        The Chairman. Have you had any of those to go into default
    yet? These are loans to tribes?
        Mr. Watchman. These are loans to tribes, tribal entities,
    tribal organizations.
        The Chairman. Tribal member-owned businesses and things of
    that nature?
        Mr. Watchman. Yes; we have some loans with tribally owned
    enterprises and Indian owned companies.
        The Chairman. What was that total dollar amount that you
    have loaned so far?
        Mr. Watchman. We are in the range of $20 million.
        The Chairman. What about your default rate? Have you had
    many defaults?
        Mr. Watchman. One of the big things is that we are actually
    governed by the Office of Comptroller Currencies so we do have
    to meet the criteria. We do have to watch our loan loss
    reserves.
        So far we have been operating within the guidelines that
    the OCC wants us to operate. We are actually in norm with other
    banks in the country.
        The Chairman. You are capitalized at about $20 million. You
    heard Mr. Stainbrook's testimony that it might take $1 billion
    or more to buy up fractionated interests in Indian country.
    Could you even begin to handle something like that if it came
    through a bank that is capitalized for $20 million?
        Mr. Watchman. Well, the other issue I should point out, Mr.
    Chairman, is that in addition to the paid-in capital, if we
    could get business from Federal agencies, or tap into the trust
    funds, that would give us additional assets. For every dollar
    of deposit that we get in, we can actually leverage that out
    almost 10-to-1.
        That is really what we are trying to do. That is the whole
    purpose of a bank is that we turn that money around and we do
    invest in Indian country or in loans. That is the big issue
    that we are trying to look at.
        If you look at most minority-owned banks in this country,
    the average is about $5 million in capital. But they have been
    able to secure business. They have been able to secure loans.
    They, in turn, leverage it. That is the big concept behind
    banks.
        That is what we are looking at all. If we get more
    business, we certainly can get into the business of land
    consolidation and land re-acquisition. It is just a matter of
    trying to get people interested in the Native American Bank
    which, as we said earlier, is Indian owned.
        We are trying to provide some expertise behind it. There is
    a lot of subtleties and nuances in Indian credit. You have to
    understand the BIA process. You have to learn how you would
    like with the tribal councils and so forth.
        The Chairman. I understand. Sometimes that is not too easy.
        I have no further questions. Other Senators may have
    questions that they might submit in writing.
        I want to thank all the witnesses for being here today.
    Very frankly, I feel better about the bill now than when we
    started out. I think there are some real seeds that we can
    germinate and with your help and with your suggestions, we can
    do something that is long overdue in helping to provide some
    economic help for Indian communities.
        We will keep the record open for 2 weeks if you have any
    additional statements you would like to submit, or if anyone in
    the audience have any statements they would like to submit, I
    would appreciate your doing that before 2 weeks are over.
        The Chairman. Thank you for appearing today.
        The committee is adjourned.
        [Whereupon, at 3:35 p.m., the committee was adjourned, to
    reconvene at the call of the chair.]

    =======================================================================

                                A P P E N D I X

                                  ----------

                  Additional Material Submitted for the Record

    =======================================================================

           STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA

        Good afternoon, Mr. Chairman. I would like to extend a special
    welcome my constituent, Mike Irwin, Senior Vice President of the Alaska
    Federation of Natives. Mr. Irwin wears many hats, one of which is
    Chairman of the Board of Doyon, Limited, which is based in Fairbanks,
    Alaska. Doyon is one of the most successful of the Alaska Native
    Corporations when it comes to generating employment opportunities for
    Native shareholders. It is also one of the most consistently profitable
    Native corporations. I will come back to this in a moment.
        We have come together today to explore an exciting new idea to
    promote economic development in our Native communities. The Native
    American Capital Development Corporation, created under this
    legislation, will be charged with identifying obstacles to economic
    development and proposing strategies to overcome them. Sometimes it is
    the lack of capital that inhibits economic development, but often it is
    also the lack of viable, sustainable business opportunities that
    stymies development. The lack of infrastructure, be it the lack of
    roads or the lack of power capacity, is a particular obstacle in
    Alaska. The corporation could help address all of these obstacles.
        Since the enactment of the Alaska Native Claims Settlement Act some
    30 years ago, our villages have been grappling with these very issues.
    Today, our Alaska Native Corporations are recognized as engines of
    economic development in the State. However, much of their investment
    and job creation has taken place in the cities, in communities on the
    road system that are accessible to tourists, and on the North Slope.
        This is not for lack of desire. Our Native corporations must invest
    in profitable ventures in order to return dividends to their
    shareholders. They are constantly seeking viable business concepts in
    the villages where their people live.
        The villages too yearn for year-round, good wage employment. Until
    then, Native people in Alaska must leave their families behind and
    travel long distances, to other parts of our vast state, often working
    2 weeks on--2 weeks off, if they are to enjoy year round employment.
        Mike Irwin's company, Doyon, Limited, generates jobs for its
    shareholders through two businesses which are wholly dependent on the
    health of Alaska's oil and gas industry. Doyon Drilling, which is one
    of only two major oilfield drillers in the State, trains rural
    shareholders for entry level positions on the drilling rigs, transports
    them to work on the North Slope and promotes from within.
        And Doyon Universal Services provides catering, security and other
    remote site services in support for the North Slope oil producers and
    the Trans Alaska pipeline. It uses a similar shareholder hiring and
    promotion model.
        Mr. Chairman, if you will indulge me briefly, I need to point out
    that the continued opposition to oil and gas development in the Arctic
    National Wildlife Refuge has a direct, adverse effect on economic
    opportunities for Alaska Natives. The continued success of Doyon's
    business ventures, and similar ventures owned by other Alaska Native
    Corporations, depends on a robust Alaska oil and gas industry. When
    there are no wells to drill, rigs go down. . . camps go down. . . and
    Native shareholders are laid off. We don't want to see that.
        Just as there is much work to be done in creating opportunities in
    Indian country in the Lower 48, we have much work to do to grow
    enterprises in our rural villages. Our Native people tell us that the
    jobs they value most are the jobs in their. villages. I think S. 519
    could provide the spark to expand employment opportunities in the
    villages as well as in Lower 48 Indian country.
        Mr. Chairman, I am very pleased that you have introduced S. 519 and
    organized this hearing today. By inviting investment from Alaska Native
    Corporations to a fund which could potentially loan money to ventures
    on Lower 48 reservations, your bill helps strengthen the ties between
    Alaska Natives and the broader community of Native Americans. That is a
    very welcome idea and one that I hope can be enacted into law.
        I thank the witnesses and look forward to their testimony.
                                     ______

     Prepared Statement of William O. Russell, Deputy Assistant Secretary,
     Public and Indian Housing, Department of Housing and Urban Development

        Chairman Campbell, Vice Chairman Inouye, and Members of the
    Committee, thank you for inviting me to testify before the Committee on
    Indian Affairs. I am glad to be with you today and welcome the
    opportunity to share with you the Department of Housing and Urban
    Development's perspective on many of the concepts included in S. 519,
    the Native American Capital Formation and Economic Development Act of
    2003, which has been introduced by Chairman Campbell.
        My name is Bill Russell, and I am the Deputy Assistant Secretary
    for Public and Indian Housing. PIH is responsible for the management,
    operation and oversight of HUD's Native American programs. These
    programs are available to over 550 federally recognized and a limited
    number of State-recognized Indian tribes. We serve these tribes
    directly, or through tribally designated housing entities (TDHEs), by
    providing grants and loan guarantees designed to support affordable
    housing, and community and economic development activities.
        In addition to those duties, our jurisdiction encompasses the
    public housing program, which aids the nation's 3,000-plus public
    housing agencies in providing housing and housing-related assistance to
    low-income families.
        It is a pleasure to again appear before you, and I would like to
    express my appreciation for your continuing efforts to improve the
    housing conditions of those who need it most. As you have heard from
    previous testimony, much progress is being made and tribes are taking
    advantage of new opportunities to improve the housing conditions of the
    Native American families residing on Indian reservations, on trust or
    restricted Indian land, and in Alaska Native Villages. This momentum
    needs to be sustained as we continue to work together toward creating a
    better living environment throughout Indian country.
        At the outset, let me reaffirm the Department of Housing and Urban
    Development's support for the principle of government-to-government
    relations with Indian tribes. HUD is committed to honoring this
    fundamental precept in our work with American Indians and Alaska
    Natives.
        As you know, the Administration is actively reviewing S. 519 and
    hopes to soon be able to provide you with specific comments. In
    general, however, it is a little hard to understand exactly what the
    Native American Capital Development Corporation created by S. 519 is
    and whether it duplicates capabilities that already exist within HUD
    and the Department of Treasury.
        HUD is committed to exploring new opportunities to surmount
    barriers to lending on tribal lands and facilitate access to
    alternative sources of capital, financial services and technical
    expertise. HUD's Office of Native American Programs (ONAP) is currently
    working with tribal governments, TDHEs, and lenders to increase private
    housing investments through the Section 184 Indian Housing Loan
    Guarantee Fund Program, and the Title VI Tribal Housing Activities Loan
    Guarantee Fund.
        We know that there are numerous barriers to accessing capital. Many
    of these were recently identified in the ``Native American Lending
    Study,'' completed by the Department of the Treasury's Community
    Development Financial Institute Fund, as well as through other recent
    research.
        Capital in Native America tends to come from four primary sources:
    Tribal financial resources, Federal guaranteed loans, grants and tax
    credits, debt capital, and equity investors. The latter is woefully
    inadequate for many reasons. Issues raised by investors and private
    lenders include: The legal status of tribal lands, inadequate or
    nonexistent legal and business codes; insufficient understanding of
    issues related to tribal sovereignty and sovereign immunity; a lack of
    technical assistance resources; uncertainty related to leadership
    changes in tribal governments, and a lack of financial institutions and
    services on or in close proximity to Native American communities.
        Many tribes and TDHEs, as well as other tribally affiliated
    community and economic development organizations, use a project-by-
    project approach to housing and economic development. There is a great
    need to create a more comprehensive approach to the creation of
    sustainable economies. There are clear roles that tribal governments,
    Federal agencies and lending institutions can play in creating these
    economies. The Administration would like to give careful consideration
    to whether the creation of a Corporation could resolve impediments to
    lending on tribal lands and contribute to the establishment of sound
    economic and political policies that promote increased levels of
    economic growth and job creation on tribal lands.
        Finally, let me state for the record that we concur with many of
    the findings as outlined in S. 519. We agree that much of the poor
    performance of Native American economies correlates to the absence of
    private capital and private financial institutions. We will continue to
    work in partnership with tribal governments, Native American
    organizations, the private sector, and other government agencies to
    support private investment and leveraging in Indian Country. And, Mr.
    Chairman, HUD is prepared to work with you to help overcome these
    barriers to accessing capital in Indian County.
        This concludes my prepared remarks. Thank you again for this
    opportunity to testify, and I would be happy to answer any questions
    you may have.
                                     ______

      Prepared Statement of Michael Liu, Assistant Secretary, Public and
          Indian Housing, Department of Housing and Urban Development

        Chairman Campbell, Vice Chairman Inouye, and Members of the
    Committee, thank you for inviting me to testify before the Committee on
    Indian Affairs. I am glad to be with you today and welcome the
    opportunity to share with you the Department of Housing and Urban
    Development's perspective on many of the concepts included in S. 519,
    the Native American Capital Formation and Economic Development Act of
    2003, which has been introduced by Chairman Campbell.
        My name is Michael Liu, and I am the Assistant Secretary for Public
    and Indian Housing. I am responsible for the management, operation and
    oversight of HUD's Native American programs. These programs are
    available to over 550 federally recognized and a limited number of
    state-recognized Indian tribes. We serve these tribes directly, or
    through tribally designated housing entities (TDHEs), by providing
    grants and loan guarantees designed to support affordable housing, and
    community and economic development activities.
        In addition to those duties, my jurisdiction encompasses the public
    housing program, which aids the nation's 3,000-plus public housing
    agencies in providing housing and housing-related assistance to low-
    income families.
        It is a pleasure to again appear before you, and I would like to
    express my appreciation for your continuing efforts to improve the
    housing conditions of those who need it most. As you have heard from
    previous testimony, much progress is being made and tribes are taking
    advantage of new opportunities to improve the housing conditions of the
    Native American families residing on Indian reservations, on trust or
    restricted Indian land, and in Alaska Native Villages. This momentum
    needs to be sustained as we continue to work together toward creating a
    better living environment throughout Indian Country.
        At the outset, let me reaffirm the Department of Housing and Urban
    Development's support for the principle of government-to-government
    relations with Indian tribes. HUD is committed to honoring this
    fundamental precept in our work with American Indians and Alaska
    Natives.
        As you know, the Administration is actively reviewing S. 519 and
    hopes to soon be able to provide you with specific comments. In
    general, however, it is a little hard to understand exactly what the
    Native American Capital Development Corporation created by S. 519 is
    and whether it duplicates capabilities that already exist within HUD
    and the Department of Treasury.
        HUD is committed to exploring new opportunities to surmount
    barriers to lending on tribal lands and facilitate access to
    alternative sources of capital, financial services and technical
    expertise. HUD's Office of Native American Programs (ONAP) is currently
    working with tribal governments, TDHEs, and lenders to increase private
    housing investments through the Section 184 Indian Housing Loan
    Guarantee Fund Program, and the Title VI Tribal Housing Activities Loan
    Guarantee Fund.
        We know that there are numerous barriers to accessing capital. Many
    of these were recently identified in the ``Native American Lending
    Study,'' completed by the Department of the Treasury's Community
    Development Financial Institute Fund, as well as through other recent
    research.
        Capital in Native America tends to come from four primary sources:
    Tribal financial resources, Federal guaranteed loans, grants and tax
    credits, debt capital, and equity investors. The latter is woefully
    inadequate for many reasons. Issues raised by investors and private
    lenders include: the legal status of tribal lands, inadequate or
    nonexistent legal and business codes; insufficient understanding of
    issues related to tribal sovereignty and sovereign immunity; a lack of
    technical assistance resources; uncertainty related to leadership
    changes in tribal governments, and a lack of financial institutions and
    services on or in close proximity to Native American communities.
        Many tribes and TDHEs, as well as other tribally affiliated
    community and economic development organizations, use a project-by-
    project approach to housing and economic development. There is a great
    need to create a more comprehensive approach to the creation of
    sustainable economies. There are clear roles that tribal governments,
    Federal agencies and lending institutions can play in creating these
    economies. The Administration would like to give careful consideration
    to whether the creation of a Corporation could resolve impediments to
    lending on tribal lands and contribute to the establishment of sound
    economic and political policies that promote increased levels of
    economic growth and job creation on tribal lands.
        Finally, let me state for the record that we concur with many of
    the findings as outlined in S. 519. We agree that much of the poor
    performance of Native American economies correlates to the absence of
    private capital and private financial institutions. We will continue to
    work in partnership with tribal governments, Native American
    organizations, the private sector, and other government agencies to
    support private investment and leveraging in Indian Country. And, Mr.
    Chairman, HUD is prepared to work with you to help overcome these
    barriers to accessing capital in Indian Country.
        This concludes my prepared remarks. Thank you again for this
    opportunity to testify, and I would be happy to answer any questions
    you may have.

    [GRAPHIC] [TIFF OMITTED] T6938.001

    [GRAPHIC] [TIFF OMITTED] T6938.002

    [GRAPHIC] [TIFF OMITTED] T6938.003

    [GRAPHIC] [TIFF OMITTED] T6938.004

    [GRAPHIC] [TIFF OMITTED] T6938.005

    [GRAPHIC] [TIFF OMITTED] T6938.006

    [GRAPHIC] [TIFF OMITTED] T6938.007

    [GRAPHIC] [TIFF OMITTED] T6938.008

    [GRAPHIC] [TIFF OMITTED] T6938.009

    [GRAPHIC] [TIFF OMITTED] T6938.010

    [GRAPHIC] [TIFF OMITTED] T6938.011

    [GRAPHIC] [TIFF OMITTED] T6938.012

    [GRAPHIC] [TIFF OMITTED] T6938.013

    [GRAPHIC] [TIFF OMITTED] T6938.014

    [GRAPHIC] [TIFF OMITTED] T6938.015

    [GRAPHIC] [TIFF OMITTED] T6938.016

    [GRAPHIC] [TIFF OMITTED] T6938.017

    [GRAPHIC] [TIFF OMITTED] T6938.018

    [GRAPHIC] [TIFF OMITTED] T6938.019

    [GRAPHIC] [TIFF OMITTED] T6938.020

    [GRAPHIC] [TIFF OMITTED] T6938.021

    [GRAPHIC] [TIFF OMITTED] T6938.022

    [GRAPHIC] [TIFF OMITTED] T6938.023

    [GRAPHIC] [TIFF OMITTED] T6938.024

    [GRAPHIC] [TIFF OMITTED] T6938.025

    [GRAPHIC] [TIFF OMITTED] T6938.026

    [GRAPHIC] [TIFF OMITTED] T6938.027

    [GRAPHIC] [TIFF OMITTED] T6938.028

    [GRAPHIC] [TIFF OMITTED] T6938.029

    [GRAPHIC] [TIFF OMITTED] T6938.030

    [GRAPHIC] [TIFF OMITTED] T6938.031

    [GRAPHIC] [TIFF OMITTED] T6938.032

    [GRAPHIC] [TIFF OMITTED] T6938.033

    [GRAPHIC] [TIFF OMITTED] T6938.034

    [GRAPHIC] [TIFF OMITTED] T6938.035

    [GRAPHIC] [TIFF OMITTED] T6938.036

    [GRAPHIC] [TIFF OMITTED] T6938.037

    [GRAPHIC] [TIFF OMITTED] T6938.038

    [GRAPHIC] [TIFF OMITTED] T6938.039

    [GRAPHIC] [TIFF OMITTED] T6938.040

    [GRAPHIC] [TIFF OMITTED] T6938.041

    [GRAPHIC] [TIFF OMITTED] T6938.042

    [GRAPHIC] [TIFF OMITTED] T6938.043

    [GRAPHIC] [TIFF OMITTED] T6938.044

    [GRAPHIC] [TIFF OMITTED] T6938.045

    [GRAPHIC] [TIFF OMITTED] T6938.046

    [GRAPHIC] [TIFF OMITTED] T6938.047

    [GRAPHIC] [TIFF OMITTED] T6938.048

    [GRAPHIC] [TIFF OMITTED] T6938.049

    [GRAPHIC] [TIFF OMITTED] T6938.050

    [GRAPHIC] [TIFF OMITTED] T6938.051

    [GRAPHIC] [TIFF OMITTED] T6938.052

    [GRAPHIC] [TIFF OMITTED] T6938.053

    [GRAPHIC] [TIFF OMITTED] T6938.054

    [GRAPHIC] [TIFF OMITTED] T6938.055

    [GRAPHIC] [TIFF OMITTED] T6938.056

    [GRAPHIC] [TIFF OMITTED] T6938.057

    [GRAPHIC] [TIFF OMITTED] T6938.058

    [GRAPHIC] [TIFF OMITTED] T6938.059

    [GRAPHIC] [TIFF OMITTED] T6938.060

    [GRAPHIC] [TIFF OMITTED] T6938.061

    [GRAPHIC] [TIFF OMITTED] T6938.062

    [GRAPHIC] [TIFF OMITTED] T6938.063

    [GRAPHIC] [TIFF OMITTED] T6938.064

    [GRAPHIC] [TIFF OMITTED] T6938.065

    [GRAPHIC] [TIFF OMITTED] T6938.066

    [GRAPHIC] [TIFF OMITTED] T6938.067

    [GRAPHIC] [TIFF OMITTED] T6938.068

    [GRAPHIC] [TIFF OMITTED] T6938.069

    [GRAPHIC] [TIFF OMITTED] T6938.070