[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



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                            WASHINGTON : 2003
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                      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.]


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                            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.

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