[Congressional Record Volume 153, Number 195 (Wednesday, December 19, 2007)]
[Senate]
[Page S16016]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. MENENDEZ:
  S. 2528. A bill to authorize guarantees for bonds and notes issued 
for community or economic development purposes; to the Committee on 
Banking, Housing, and Urban Affairs.
  Mr. MENENDEZ. Mr. President, I rise today to introduce the Full Faith 
& Credit in Our Communities Act of 2007. Strong communities form the 
bedrock of a successful economy and ultimately, a healthy society. For 
communities to be strong and families to prosper, there must be 
economic opportunity. Economic opportunity, in turn, depends on access 
to capital. Unfortunately, many communities across our Nation lack this 
fundamental tool for financial prosperity and self-sufficiency.
  We must provide economic opportunity not only today, but also lay the 
groundwork so that future generations can thrive and prosper, and we 
must do it in a way that fosters real and permanent change rather than 
short-term solutions. We cannot simply rely on short-term band aids 
that serve to only mask the vast inequalities in income and 
unacceptable levels of poverty that plague our Nation. We must invest 
in our Nation's future. We must close the wealth gaps that are growing 
wider each day in this country by investing in our citizens and closing 
the opportunity gap. We must invest in entrepreneurship, ownership, and 
economic growth--but we must do so in a fiscally responsible manner.
  Federal resources are scarce. We must focus our efforts and invest in 
successful programs that give us the biggest bang for our buck. CDFIs 
have a history of prudently using scarce public funds to leverage 
additional private funding to finance emerging domestic markets. They 
are able to lend successfully in these markets in part because CDFIs 
build their borrowers' capacity by combining their financing with 
technical assistance such as homeownership counseling, entrepreneurial 
training, and financial literacy education. CDFIs finance small 
businesses, homeownership, affordable rental housing, childcare 
facilities, charter schools, and other needed development resources. 
About 1,000 CDFIs operating in the U.S. manage more than $25 billion in 
assets, providing much-needed financial services to low-income 
communities across the U.S.
  Unfortunately, CDFIs have limited access to capital due to the 
relatively small size of, and lack of awareness about, their projects. 
This results in a hesitancy of Wall Street to invest in CDFIs, forcing 
them to rely largely on commercial banks which usually only offer 
short-term loans with high interest rates. Every dollar wasted on 
interest payments is another dollar lost to communities, making these 
additional costs a clear impediment to community development efforts.
  This legislation would increase the length and decrease the cost of 
capital available to CDFIs by providing them access to the enormous 
financial power of Wall Street. It would accomplish this by allowing 
the Treasury Department to guarantee up to $1 billion per year in bonds 
issued by qualified CDFIs. These bonds would be sold on Wall Street 
with the proceeds going to CDFIs to finance a myriad of community and 
economic development projects such as job-training centers and health 
care clinics. Unlike many legislative proposals that often result in 
winners and losers, this legislation is a win-win for everyone 
involved. CDFIs will have access to much-needed, low-cost capital. 
Communities will benefit from an infusion of investments in community 
and economic development projects. And investors will have an 
opportunity to make sound, long-term investments.
  Perhaps the best part of this legislation is that it should not end 
up costing the American taxpayer a single dollar. Since these bonds 
will be issued by CDFIs, they will be the ones responsible for honoring 
the bonds when they reach maturity. Considering the fact that CDFIs 
have very low loan default rates that are often below mainstream bank 
averages, the risk of insolvency is very low. To further mitigate this 
risk, CDFIs will be required to create a loan loss reserve fund, 
similar in nature, but much smaller in scope, to the FDIC.
  In addition to providing low-cost capital to underserved communities, 
this legislation would require CDFIs to pay a portion of their savings 
to a subaccount of the Treasury Department's CDFI Fund. These funds 
will be used to provide technical and financial assistance grants to 
non-profits for community and economic development purposes. CDFIs can 
apply for these grants through a competitive application process with 
the requirement to match, dollar for dollar, Federal funds with private 
investment. According to the Treasury Department, for every Federal 
dollar of investment, CDFIs leverage $19 in non-federal funds. CDFIs 
use the ``seed capital'' from the Federal Government to attract 
private-sector capital, ensuring continued community investment well 
beyond the initial Federal funding.
  A community isn't complete without places to shop and work, without 
affordable housing, without the prosperity that thriving businesses 
represent. My Full Faith & Credit in Our Communities Act will help 
CDFIs develop retail and commercial facilities, train and place 
neighborhood residents in jobs, and provide affordable housing across 
the country. This bill is essential for our people and communities most 
in need. Beyond the obvious tangible benefits, the Full Faith & Credit 
in Our Communities Act will provide our Nation's distressed communities 
with something all but lost in many: HOPE. Hope for a better future, a 
safe community, flourishing businesses, and a more prosperous future 
for generations to come.
  In closing, I urge my colleagues to support the Full Faith & Credit 
in Our Communities Act to ensure that every American has access to the 
American Dream. With this bill, we can not only change lives and 
communities today, but for generations to come.
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