[House Report 106-183]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-183

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



 
  COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND AMENDMENTS ACT OF 
                                  1999

                                _______
                                

 June 14, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


   Mr. Leach, from the Committee on Banking and Financial Services, 
                        submitted the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 629]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Banking and Financial Services, to whom 
was referred the bill (H.R. 629) to amend the Community 
Development Banking and Financial Institutions Act of 1994 to 
reauthorize the Community Development Financial Institutions 
Fund and to more efficiently and effectively promote economic 
revitalization, community development, and community 
development financial institutions, and for other purposes, 
having considered the same, report favorably thereon without 
amendment and recommend that the bill do pass.

                          Purpose and Summary

    The purpose of H.R. 629, the ``Community Development 
Financial Institutions Fund Amendments Act of 1999'' (the 
``Act'') as reported out of the Committee on Banking and 
Financial Services, is to reauthorize the Community Development 
Financial Institutions (``CDFI'') Fund for four years and to 
provide additional management controls for administration of 
the Fund. The central purpose of the CDFI Fund is to promote 
economic revitalization and community development. The CDFI 
Fund has two main programs: the CDFI awards program, which is 
designed to assist specialized community development financial 
institutions, and the Bank Enterprise Act (``BEA'') award 
program, which rewards financial institutions that are 
increasing services provided to and loans made in distressed 
communities.
    The CDFI Fund was first authorized in 1994 by the ``Riegle 
Community Development and Regulatory Improvement Act of 1994'' 
for fiscal years 1995-1998. Funding for the program was 
extended for fiscal year 1999 in the amount of $95 million. 
Since its creation, the CDFI Fund has made over $180 million in 
awards to community development organizations and financial 
institutions. Of the awards granted, $122.8 million was in 
investments to CDFIs, including community development banks, 
loan funds, credit unions, venture capital funds, and 
microenterprise loan funds. These organizations serve both 
rural and urban areas in local, regional, statewide, and multi-
state markets in 46 states and the District of Columbia.
    The remaining $58 million was awarded to banks and thrifts 
as part of the BEA program. The BEA program provides incentives 
for banks and thrifts to invest in CDFIs and to increase their 
lending and provision of financial services in distressed 
communities. According to May 26, 1999 testimony provided by 
CDFI Director Ellen Lazar, this $58 million has been leveraged 
by awardees to provide investments in underserved communities 
of $983 million. Ms. Lazar stated that the awardees have 
invested $712 million in direct loans, investments and services 
to the community, and $271 million into CDFIs.
    The preliminary results of the CDFI Fund's review of the 
first round of grants awarded in 1996 indicate that the 
recipients generated significant development during the past 
three years. According to the Fund, these recipients have made 
$565 million in community development loans and investments. 
These loans and investments have helped to create or expand 
1,895 microenterprises and 1,148 other businesses; create or 
retain 12,412 jobs; and develop 8,617 units of affordable 
housing, 98 childcare centers serving 7,168 children, 17 health 
care facilities serving 32,723 clients and 170 additional 
community, cultural, human services and educational facilities. 
The recipient also provided business training, credit 
counseling, homebuyer training and other development services 
to 10,641 individuals.
    During the 105th Congress, the General Oversight and 
Investigations Subcommittee of the House Banking Committee 
(``Oversight Subcommittee'') reviewed the CDFI Fund's awardee 
selection process due to complaints that arose after the Fund's 
first round of awards in 1996. The Oversight Subcommittee's 
review revealed that the first round was marked by inadequate 
procedures and documentation. Accepted federal grant procedures 
were not followed; documentation failed to accurately reflect 
the factors used in selecting applicants; the evaluation 
process lacked consistency; the conflicts of interest policy 
was inadequate; and technical assistance contracts were awarded 
with little scrutiny. In addition, the Fund relied upon outside 
contractors hand-picked by CDFI Fund officials who were paid 
excessive rates and the CDFI status of certain applicants was 
not determined until after the decision had been made to grant 
funding.
    The Oversight Committee noted some improvements in the 
second round, but deficiencies remained. As noted in the Fund's 
1997 audit by KPMG Peat Marwick, a formal Federal Manager's 
Financial Integrity Act program had not been established to 
identify and design corrective actions for material weaknesses; 
a structured system of documenting awards files had not been 
established; several necessary positions had not been filled; 
formal post-award monitoring procedures had not been developed; 
monthly financial statements, accounting records, budgetary 
reports, and supporting reconciliations were not subject to 
formal review; organizational responsibilities had not been 
adequately delineated, and policies and procedures had not been 
documented. Additionally, cursory review of the documentation 
indicated that second round memoranda did not reflect a 
comprehensive commitment to an objective scoring system; the 
conflict of interest policy remained incomplete; and a decline 
in the quality of applications suggested industry saturation.
    As a result of the questionable management practices 
revealed by the Oversight Subcommittee's review, the Director 
and the Deputy Director of the Fund resigned in August 1997. 
Changes at the CDFI Fund began with the appointment of a new 
Director, Ellen Lazar, who began her tenure in January 1998.
    Ms. Lazar testified before the Subcommittee on Financial 
Institutions and Consumer Credit on June 17, 1998 and assured 
the Subcommittee that the Oversight Subcommittee's concerns had 
been or were in the process of being addressed by the new 
management team. Improvements in the administration of the Fund 
were reflected further in Ms. Lazar's May 26, 1999 testimony 
before the full Committee. Ms. Lazar testified that the Fund's 
FY98 audit verified that the Fund had successfully corrected 
all material weaknesses identified in last year's audit and no 
new material weaknesses were reported.
    The enacting legislation for the CDFI Fund provided an 
authorization period from FY95-FY98. Representatives Bruce 
Vento and Marge Roukema introduced H.R. 629, the ``CDFI Fund 
Amendments Act of 1999,'' which reauthorizes the CDFI Fund for 
four years and provides additional management controls for 
administration of the Fund. H.R. 629 as introduced and reported 
by the Committee represents essentially the same product that 
the Subcommittee on Financial Institutions and Consumer Credit 
passed by voice vote last Congress. Specifically, H.R. 629:
          Reauthorizes funding for the Fund for FY2000-FY2003, 
        at annual levels of $95 million, $100 million, $105 
        million, and $110 million;
          Allows the Fund to enter into cooperative agreements 
        for training and technical assistance;
          Enhances the usability of BEA in rural communities by 
        allowing alternate eligibility for qualified distressed 
        communities;
          Allows the Fund to participate in the Small Business 
        Capital Enhancement Program;
          Requires the Fund to use a scoring system as one of 
        the tools to evaluate the merits of applicants, which 
        would be applied by multi-person review panels;
          Requires the Fund to report annually to Congress on 
        actions taken by the Fund to rectify problems disclosed 
        by its external auditors and the Oversight 
        Subcommittee;
          Requires the Fund to notify Congress when it hires a 
        contractor under the Small Business Act Section 8(a) 
        minority contracting program to ensure compliance with 
        the law; and
          Requests the General Accounting Office to submit a 
        report to Congress evaluating the structure, 
        governance, and performance of the Fund.

                                Hearings

    On February 8, 1999, Representatives Bruce Vento and Marge 
Roukema introduced H.R. 629, the ``Community Development 
Financial Institutions Fund Amendments Act of 1999.'' The 
Committee held a hearing on the legislation on May 26, 1999. 
Testifying at the hearing were: the Honorable Edward M. 
Kennedy; the Honorable Bobby L. Rush; Gary Gensler, 
Undersecretary for Domestic Finance, Department of the 
Treasury; Ellen W. Lazar, Director, Community Development 
Financial Institutions Fund; Jason J. Friedman, Vice President, 
Institute for Social and Economic Development; Marguerite 
Sisson, Owner, River City Cleaning; Joan Dallis, Vice 
President, Rural Opportunities Enterprise, Inc.; Karla Melvin, 
Director, Employment Services, Women Venture; Peggy Clark, 
Executive Director, Economic Opportunities Program, The Aspen 
Institute; Ellen Golden, Chair, Association for Enterprise 
Opportunities; and Mark Pinsky, Chairman, Coalition of 
Community Development Financial Institutions.

                   Committee Consideration and Votes

    On May 26, 1999, the full Committee met in open session to 
mark up H.R. 629, the ``Community Development Financial 
Institutions Fund Amendments Act of 1999.'' The Committee 
called up H.R. 629 as original test for purposes of amendment. 
No amendments were offered. On the question of final passage, 
the Committee, by voice vote, favorably reported H.R. 629 to 
the full House of Representatives for consideration. Also, the 
Committee passed by voice vote a motion to authorize the 
Chairman to offer such motions as may be necessary in the House 
of Representatives to go to conference with the Senate on a 
similar bill.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representaties, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                     Committee on Government Reform

    No findings and recommendations of the Committee on 
Government Reform were received as referred to in clause 
3(c)(4) of rule XIII of the Rules of the House of 
Representatives.

                        Constitutional Authority

    In compliance with clause 3(d)(1) of rule XIII of the Rules 
of the House of Representatives, the constitutional authority 
for Congress to enact this legislation is derived from both the 
power to regulate interstate commerce (Clause 3, Section 8, 
Article I) and ``to coin money'' and ``regulate the value 
thereof'' (Clause 5, Section 8, Article I). The latter 
Constitutional power has been broadly construed to allow for 
the Federal regulation of the provision of credit and other 
forms of economic assistance via the financial services 
industry and to regulate every phase of the subject of 
currency. In addition, Congress is granted the authority to 
make laws (Clause 18, Section 8, Article I) that are necessary 
and proper to carry out the foregoing powers as well as other 
powers vested by the Constitution.

               New Budget Authority and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, please see the attached 
Congressional Budget Office cost estimate.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                    Congressional Accountability Act

    The reporting requirement under section 102(b)(3) of the 
Congressional Accountability Act (P.L. 104-1) is inapplicable 
because this legislation does not relate to terms and 
conditions of employment or access to public services or 
accommodations.

    Congressional Budget Office Cost Estimate and Unfunded Mandates 
                                Analysis

    The cost estimate pursuant to clause 3(c)(3) of rule XIII 
of the Rules of the House of Representatives and section 402 of 
the Congressional Budget Act of 1974 is attached herewith:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 11, 1999.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 629, the Community 
Development Financial Institutions Fund Amendments Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Deborah Reis.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 629--Community Development Financial Institutions Fund Amendments 
        Act of 1999

    Summary: H.R. 629 would authorize annual appropriations for 
the Community Development Financial Institutions (CDFI) Fund 
for the next four fiscal years. Specifically, the bill would 
authorize $95 million for 2000, $100 million for 2001, $105 
million for 2002, and $110 million for 2003. The fund would use 
these amounts to provide financial and other assistance to 
financial institutions that serve distressed communities under 
the CDFI program and to reimburse eligible states for loan 
guarantees they make under the Small Business Capital 
Enhancement (SBCE) Program.
    The bill also would amend the Community Development Banking 
and Financial Institutions Act of 1994 and the Bank Enterprise 
Act of 1991 to:
          Clarify that the purposes of the CDFI fund can be met 
        not only by investing in community development 
        financial institutions but also by enhancing the 
        liquidity of these institutions and by providing them 
        with appropriate incentives;
          Codify the fund, a wholly owned government 
        corporation, under the jurisdiction of the Department 
        of the Treasury;
          Remove technical barriers that block the fund from 
        administering the SBCE Program, which was established 
        in the 1994 act but has not received any funding thus 
        far; and
          Provide for new management controls on the fund, 
        including a scoring system and an independent panel to 
        evaluate applications for assistance as well as new 
        reporting requirements.
    The legislation would not affect direct spending or 
receipts; therefore, pay-as-you-go procedures would not apply. 
The bill contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on the budgets of state, local, or 
tribal governments.
    Estimated cost to the Federal Government: Assuming 
appropriation of the entire amounts authorized for each year, 
CBO estimates that the Department of the Treasury would spend 
about $290 million through fiscal year 2004 to carry out the 
CDFI and SBCE programs. (The balance of $120 million would be 
spent over the following four or five years.) The estimated 
budgetary impact of H.R. 629 is shown in the following table. 
The costs of this legislation fall within budget function 450 
(community and regional development).

----------------------------------------------------------------------------------------------------------------
                                                                    By fiscal year, in millions of dollars
                                                           -----------------------------------------------------
                                                              1999     2000     2001     2002     2003     2004
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

CDFI spending under current law:
    Budget authority \1\..................................       95        0        0        0        0        0
    Estimated outlays.....................................       54       56       44       34       16        8
Proposed changes:
    Authorization level...................................        0       95      100      105      110        0
    Estimated outlays.....................................        0       15       37       63       90       85
CDFI and SBCE spending under H.R. 629:
    Authorization level \1\...............................       95       95      100      105      110        0
    Estimated outlays.....................................       54       71       81       97      106       93
----------------------------------------------------------------------------------------------------------------
\1\ The 1999 level is the amount appropriated for that year for the CDFI program.

    Basis of estimate: For purposes of this estimate, CBO 
assumes that the full amounts authorized will be appropriated 
for each fiscal year and that outlays will occur at the recent 
spending rates for the CDFI program. Other provisions of the 
bill, including those creating new management controls, would 
have no impact on the federal budget.
    Amounts in the table include any appropriations of subsidy 
costs (as defined in section 502 of the Congressional Budget 
Act) that may be made for direct loans authorized by the 
Community Development Banking and Financial Institutes Act of 
1994. CBO cannot specify how much of the bill's annual 
authorization levels would be used for such purposes because we 
cannot predict how the Department of the Treasury would choose 
to allocate annual CDFI funding among grants, direct loans, and 
other financial and technical assistance. This allocation could 
affect future outlay rates, but CBO estimates that any 
difference from past spending patterns would not be 
significant.
    Pay-as-you-go considerations: None.
    Intergovernmental and private-sector impact: H.R. 629 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on the budgets of 
state, local, or tribal governments.
    Estimate prepared by: Deborah Reis.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

                      Section-by-Section Analysis


Section 1. Short title

    This section designates the bill as the ``Community 
Development Financial Institutions Fund Amendments Act of 
1999.''

Section 2. Technical corrections to reflect status of the fund within 
        Treasury Department; miscellaneous technical corrections

    Subsection (a) amends the purpose of the Community 
Development Banking and Financial Institutions Act of 1994 
(``the Act'') to add language that clarifies that the purpose 
of the Act is to promote economic revitalization and community 
development not only through investment in community 
development financial institutions (``CDFIs''), but also 
through enhancing the liquidity of CDFIs, and through 
incentives to insured depository institutions that increase 
lending and other assistance and investment in economically 
distressed communities under the Bank Enterprise Act of 1991.
    Subsections (b) and (c) amends the Act to reflect the 
intent of subsequent appropriations provisions that made the 
Community Development Financial Institutions Fund (``the 
Fund'') a wholly owned government corporation within the 
Treasury Department. Technical amendments to the Act eliminate 
the concept of a presidentially appointed Administrator of the 
Fund, and vest all of the duties and responsibilities of the 
Fund in the Secretary of the Treasury (subject to existing 
statutory delegation authority). The Secretary may appoint all 
officers and employees of the Fund, including the Director.
    Subsection (c) also makes technical changes to clarify that 
the Inspector General of the Treasury Department is the 
Inspector General of the Fund.

Section 3. Amendments to programs administered by the fund

    Subsection (a) provides that, for the training and 
technical assistance programs already authorized by the Act, 
the Fund may enter into cooperative agreements in addition to 
the other methods described. With respect to the Fund's 
training and technical assistance programs, the Committee 
encourages the Fund to conduct outreach programs in those 
communities and states not already served by a community 
development financial institution which are now seeking to 
create such an entity. Encouraging the development of new 
community development institutions in places not already served 
by one would also help to ensure the equitable distribution of 
the monies awarded by the CDFI Fund across the nation and 
within states.
    Subsection (b) contains amendments to the Bank Enterprise 
Act (``BEA'') Awards Program for insured depository 
institutions. The subsection provides technical amendments and 
clarifies that the Fund may provide assessment credits to 
insured depository institutions for increases in loans and 
other assistance provided to CDFIs. The provisions clarify the 
manner in which the Fund may take account of forms of 
assistance provided by insured depository institutions. In 
addition, the provisions permit the Fund to use alternative 
eligibility requirements to determine the definition of a 
``qualified distressed community.'' Current criteria are 
difficult to interpret and may exclude some insured depository 
institutions, particularly those serving rural areas, from 
participation in the BEA Program.

Section 4. Extension of authorization

    This section authorizes appropriations for fiscal years 
2000, 2001, 2002, and 2003 for $95 million, $100 million, $105 
million and $110 million, respectively.

Section 5. Amendments to the Small Business Capital Enhancement Program

    Subtitle B of Title II of the Act currently provides the 
Fund with authority to administer a program to encourage states 
to implement small business ``capital access programs'' with 
participation of certain depository institutions. These 
``capital access programs'' expand access to small business 
loans by creating a loan loss reserve, funded by the depository 
institution, the borrower, and the state. This reserve fund 
allows banks to make more difficult small business loans. The 
Fund, under the Small Business Capital Enhancement (SBCE) 
Program, could reimburse participating states for a portion of 
funds contributed to these loan loss reserve accounts.
    The amendments made by section 5 remove statutory barriers 
that currently block the Fund from administering the SBCE 
Program. Subsection (a) allows CDFIs to participate in the SBCE 
Program. Subsection (b) removes the requirement that the SBCE 
Program receive a threshold appropriation before beginning 
operations. Finally, this section will allow the Fund to 
reimburse participating states according to criteria 
established by the Fund in an amount up to fifty percent of the 
amount of contributions by the states, until funds made 
available for this purpose are expended. This permits the Fund 
to target reimbursements to states that have not yet 
established these programs or that have insufficient funds for 
effective programs.

Section 6. Additional safeguards

    This section adds the requirement that the Fund use a 
scoring system as one of the tools to evaluate the merits of 
applications. It also requires the use of multi-person review 
panels consisting of at least three persons each, to apply the 
scoring system in order to reduce discretion and provide a mix 
of perspectives in the application review process. At least 
one-third of the members of the panel shall not be officers or 
employees of any government.
    This section adds reporting requirements by the Fund to the 
Congress in their annual report. First, the Fund must annually 
report its use of outside consultants, including the services 
provided by the consultants and the fees paid for those 
services. Second, the report must detail the Fund's compliance 
with the Federal Manager's Financial Integrity Act (``FMFIA''), 
which requires Federal programs to have controls in place to 
ensure that assets are safeguards from waste, fraud, and abuse. 
Third, the Fund must report any material internal control 
weaknesses disclosed in its most recent external audit along 
with corrective action that will be taken to address such 
weaknesses. Fourth, the Fund must report on the implementation 
of the above mentioned scoring system in the first annual 
report after this legislation is enacted. In addition, this 
section requires the Fund to notify Congress in advance of 
hiring a contractor under the Small Business Act Section 8(a) 
program.
    Finally, this section requires the General Accounting 
Office to submit to Congress within eighteen months of 
enactment, a study evaluating the structure, governance and 
performance of the Fund.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

COMMUNITY DEVELOPMENT BANKING AND FINANCIAL INSTITUTIONS ACT OF 1994

           *       *       *       *       *       *       *



SEC. 102. FINDINGS AND PURPOSES.

  (a) * * *
  [(b) Purpose.--The purpose of this subtitle is to create a 
Community Development Financial Institutions Fund to promote 
economic revitalization and community development through 
investment in and assistance to community development financial 
institutions, including enhancing the liquidity of community 
development financial institutions.]
  (b) Purpose.--The purpose of this subtitle is to create a 
Community Development Financial Institutions Fund to promote 
economic revitalization and community development through 
investment in and assistance to community development financial 
institutions, including enhancing the liquidity of community 
development financial institutions, and through incentives to 
insured depository institutions that increase lending and other 
assistance and investment in both economically distressed 
communities and community development financial institutions.

SEC. 103. DEFINITIONS.

  For purposes of this subtitle, the following definitions 
shall apply:
          [(1) Administrator.--The term ``Administrator'' means 
        the Administrator of the Fund appointed under section 
        104(b).]
          [(2)] (1) Appropriate federal banking agency.--The 
        term ``appropriate Federal banking agency'' has the 
        same meaning as in section 3 of the Federal Deposit 
        Insurance Act, and also includes the National Credit 
        Union Administration Board with respect to insured 
        credit unions.
          [(3)] (2) Affiliate.--The term ``affiliate'' has the 
        same meaning as in section 2(k) of the Bank Holding 
        Company Act of 1956.
          [(4)] (3)  Board.--The term ``Board'' means the 
        Community Development Advisory Board established under 
        section 104(d).
          [(5)] (4) Community development financial 
        institution.--
                  (A) * * *

           *       *       *       *       *       *       *

          [(6)] (5) Community partner.--The term ``community 
        partner'' means a person (other than an individual) 
        that provides loans, equity investments, or development 
        services, including a depository institution holding 
        company, an insured depository institution, an insured 
        credit union, a nonprofit organization, a State or 
        local government agency, a quasi-governmental entity, 
        and an investment company authorized to operate 
        pursuant to the Small Business Investment Act of 1958.
          [(7)] (6) Community partnership.--The term 
        ``community partnership'' means an agreement between a 
        community development financial institution and a 
        community partner to provide development services, 
        loans, or equity investments, to an investment area or 
        targeted population.
          [(8)] (7) Depository institution holding company.--
        The term ``depository institution holding company'' has 
        the same meaning as in section 3 of the Federal Deposit 
        Insurance Act.
          [(9)] (8) Development services.--The term 
        ``development services'' means activities that promote 
        community development and are integral to lending or 
        investment activities, including--
                  (A) business planning;
                  (B) financial and credit counseling; and
                  (C) marketing and management assistance.
          [(10)] (9) Fund.--The term ``Fund'' means the 
        Community Development Financial Institutions Fund 
        established under section 104(a).
          [(11)] (10) Indian reservation.--The term ``Indian 
        reservation'' has the same meaning as in section 4(10) 
        of the Indian Child Welfare Act of 1978, and shall 
        include land held by incorporated Native groups, 
        regional corporations, and village corporations, as 
        defined in or established pursuant to the Alaska Native 
        Claims Settlement Act, public domain Indian allotments, 
        and former Indian reservations in the State of 
        Oklahoma.
          [(12)] (11) Indian tribe.--The term ``Indian tribe'' 
        means any Indian tribe, band, pueblo, nation, or other 
        organized group or community, including any Alaska 
        Native village or regional or village corporation, as 
        defined in or established pursuant to the Alaska Native 
        Claims Settlement Act, which is recognized as eligible 
        for the special programs and services provided by the 
        United States to Indians because of their status as 
        Indians.
          [(13)] (12) Insured community development financial 
        institution.--The term ``insured community development 
        financial institution'' means any community development 
        financial institution that is an insured depository 
        institution or an insured credit union.
          [(14)] (13) Insured credit union.--The term ``insured 
        credit union'' has the same meaning as in section 
        101(7) of the Federal Credit Union Act.
          [(15)] (14) Insured depository institution.--The term 
        ``insured depository institution'' has the same meaning 
        as in section 3 of the Federal Deposit Insurance Act.
          [(16)] (15) Investment area.--The term ``investment 
        area'' means a geographic area (or areas) including an 
        Indian reservation that--
                  (A) * * *

           *       *       *       *       *       *       *

          [(17)] (16) Low-income.--The term ``low-income'' 
        means having an income, adjusted for family size, of 
        not more than--
                  (A)  * * *

           *       *       *       *       *       *       *

          (17) Secretary.--Except in the case of section 
        104(d)(2), the term ``Secretary'' means the Secretary 
        of the Treasury.

           *       *       *       *       *       *       *


SEC. 104. ESTABLISHMENT OF NATIONAL FUND FOR COMMUNITY DEVELOPMENT 
                    BANKING.

  [(a) Establishment.--
          [(1) In general.--There is established a corporation 
        to be known as the Community Development Financial 
        Institutions Fund that shall have the duties and 
        responsibilities specified by this subtitle and 
        subtitle B of title II. The Fund shall have succession 
        until dissolved. The offices of the Fund shall be in 
        Washington, D.C. The Fund shall not be affiliated with 
        or be within any other agency or department of the 
        Federal Government.
          [(2) Wholly owned government corporation.--The Fund 
        shall be a wholly owned Government corporation in the 
        executive branch and shall be treated in all respects 
        as an agency of the United States, except as otherwise 
        provided in this subtitle.
  [(b) Management of Fund.--
          [(1) Appointment of administrator.--The management of 
        the Fund shall be vested in an Administrator, who shall 
        be appointed by the President, by and with the advice 
        and consent of the Senate. The Administrator shall not 
        engage in any other business or employment during 
        service as the Administrator.
          [(2) Chief financial officer.--The Administrator 
        shall appoint a chief financial officer, who shall have 
        the authority and functions of an agency Chief 
        Financial Officer under section 902 of title 31, United 
        States Code. In the event of a vacancy in the position 
        of the Administrator or during the absence or 
        disability of the Administrator, the chief financial 
        officer shall perform the duties of the position of 
        Administrator.
          [(3) Other officers and employees.--The Administrator 
        may appoint such other officers and employees of the 
        Fund as the Administrator determines to be necessary or 
        appropriate.
          [(4) Expedited hiring.--During the 2-year period 
        beginning on the date of enactment of this Act, the 
        Administrator may--
                  [(A) appoint and terminate the individuals 
                referred to in paragraphs (2) and (3) without 
                regard to the civil service laws and 
                regulations; and
                  [(B) fix the compensation of the individuals 
                referred to in paragraph (3) without regard to 
                the provisions of chapter 51 and subchapter III 
                of chapter 53 of title 5, United States Code, 
                relating to classification of positions and 
                General Schedule pay rates, except that the 
                rate of pay for such individuals may not exceed 
                the rate payable for level V of the Executive 
                Schedule under section 5316 of such title.]
  (a) Establishment.--
          (1) In general.--There is established in the 
        Department of the Treasury a Community Development 
        Financial Institutions Fund that shall have the 
        functions specified by this subtitle and subtitle B of 
        Title II. The offices of the Fund shall be in 
        Washington, D.C. The Fund shall not be affiliated with 
        any other agency or department of the Federal 
        Government.
          (2) Wholly owned government corporation.--The Fund 
        shall be a wholly owned government corporation within 
        the Department of the Treasury and shall be treated in 
        all respects as an agency of the United States, except 
        as otherwise provided in this subtitle.
  (b) Management of Fund.--
          (1) Authority of secretary of the treasury.--All 
        functions of the Fund shall be performed by or under 
        the supervision of the Secretary.
          (2) Appointment of officers and employees.--The 
        Secretary may appoint such officers and employees of 
        the Fund, including a Director, as the Secretary deems 
        necessary or appropriate.

           *       *       *       *       *       *       *


SEC. 107. SELECTION OF INSTITUTIONS.

  [(a) Selection Criteria.--Except as provided in section 113, 
the Fund shall, in its sole discretion, select community 
development financial institution applicants meeting the 
requirements of section 105 for assistance based on--]
  (a) Selection Criteria.--Except as provided in section 113, 
the Fund shall, after considering the results of the scoring 
system developed under subsection (c) and the recommendations 
of the multiperson review panels under subsection (d), select 
community development financial institution applicants meeting 
the requirements of section 105 for assistance based on--
          (1)  * * *

           *       *       *       *       *       *       *

  (c) Objective Scoring System.--
          (1) In general.--For purposes of making any 
        evaluation under subsection (a) of any application, the 
        Fund shall develop a scoring system which assigns a 
        relative point value to each factor required to be 
        considered under paragraphs (1) through (14) of 
        subsection (a) in connection with the selection of 
        applicants.
          (2) Notice of scoring system.--A description of the 
        scoring system shall be included in any notice of 
        funding availability issued by the Fund.
  (d) Neutral Multiperson Review Panel.--
          (1) In general.--The Fund shall convene multiperson 
        review panels to--
                  (A) review all applications for selection, 
                under subsection (a), on the basis of the 
                factors required to be considered under 
                paragraphs (1) through (14) of subsection (a) 
                using the objective scoring system developed 
                pursuant to subsection (c) before any selection 
                is made by the Fund under subsection (a) with 
                respect to such applications; and
                  (B) make recommendations with regard to such 
                selections to the Fund on the basis of such 
                review.
          (2) Composition.--The multiperson review panels shall 
        each consist of such number of members as the Fund 
        determines to be appropriate, but not less than 3, who 
        shall be appointed from among individuals who, by 
        virtue of their education, training, or experience, are 
        specially qualified to carry out the responsibilities 
        of the panel and at least \1/3\ of the members of each 
        panel shall be appointed from among individuals with 
        diverse experiences who are not officers or employees 
        of any government.

SEC. 108. ASSISTANCE PROVIDED BY THE FUND.

  (a) Forms of Assistance.--
          (1) In general.--The Fund may provide--
                  (A)  * * *
                  (B) technical assistance--
                          (i)  * * *

           *       *       *       *       *       *       *

                          (iii) through cooperative agreements 
                        or by contracting with organizations 
                        that possess expertise in community 
                        development finance, without regard to 
                        whether the organizations receive or 
                        are eligible to receive assistance 
                        under this subtitle.

           *       *       *       *       *       *       *


SEC. 109. TRAINING.

  (a)  * * *

           *       *       *       *       *       *       *

  [(d) Contracting.--The Fund may offer the training program 
described in this section directly or through a contract with 
other organizations. The Fund may contract to provide the 
training program through organizations that possess special 
expertise in community development, without regard to whether 
the organizations receive or are eligible to receive assistance 
under this subtitle.]
  (d) Form of Training.--The Fund may offer the training 
program described in this section--
          (1) directly; or
          (2) through grants, contracts, or cooperative 
        agreements with other organizations that possess 
        special expertise in community development, without 
        regard to whether the organizations receive or are 
        eligible to receive assistance under this subtitle.

           *       *       *       *       *       *       *


SEC. 114. INCENTIVES FOR DEPOSITORY INSTITUTION PARTICIPATION.

  (a)  * * *
  (b) Provisions Relating to Administration of This
Section.--
          (1)  * * *
          (2) Determination of assessment credit.--For the 
        purpose of this subtitle, section 233(a)(3) of the Bank 
        Enterprise Act of 1991 (12 U.S.C. 1834a(a)(3)) shall be 
        applied by substituting the following text:
          ``(3) Amount of assessment credit.--The amount of an 
        assessment credit which may be awarded to an insured 
        depository institution to carry out the qualified 
        activities of the institution or of the subsidiaries of 
        the institution pursuant to this section for any 
        semiannual period shall be equal to the sum of--
                  ``(A) with respect to qualifying activities 
                described in paragraph (2)(A) or (2)(B), the 
                amount which is equal to--
                          ``(i) 5 percent of the sum of the 
                        amounts determined under each such 
                        subparagraph, in the case of an 
                        institution which is not a community 
                        development financial institution; or
                          ``(ii) 15 percent of the sum of the 
                        amounts determined under each such 
                        subparagraph, in the case of an 
                        institution which is a community 
                        development financial institution; and
                  ``(B) with respect to qualifying activities 
                described in paragraph (2)(C), 15 percent of 
                the amounts determined under such 
                subparagraph.''.

           *       *       *       *       *       *       *


SEC. 117. STUDIES AND REPORTS; EXAMINATION AND AUDIT.

  (a)  * * *

           *       *       *       *       *       *       *

  (g) Contract and Compliance Information.--The annual report 
submitted to the Congress by the Fund pursuant to subsection 
(a) shall contain the following information:
          (1) Services of contractors.--Information on the use 
        of contractors to carry out any function of the Fund 
        under this subtitle, including--
                  (A) a description of the services provided by 
                contractors under this subtitle during the 
                period covered by the report;
                  (B) a description of the procurement process 
                utilized to obtain such services;
                  (C) the basis of the authority of the Fund to 
                contract for the services so obtained; and
                  (D) the total amount obligated by the Fund 
                for such contracts.
          (2) Compliance with other requirements.--An 
        evaluation of the extent to which the Fund is 
        maintaining compliance, in connection with the 
        activities of the Fund under this subtitle and subtitle 
        B of title II, with the requirements of, and 
        regulations prescribed pursuant to subsections (b) and 
        (d) of section 3512 of title 31, United States Code.
          (3) Plan for addressing weaknesses of internal 
        controls.--A plan for addressing any material weakness 
        in internal controls identified in the most recent 
        external audit pursuant to subsection (f).

[SEC. 118. INSPECTOR GENERAL.

  [(a) * * *
  [(b) Authorization of Appropriations.--There are authorized 
to be appropriated such sums as may be necessary for the 
operation of the Office of Inspector General established by the 
amendments made by subsection (a).]

SEC. 118. INSPECTOR GENERAL.

  The Inspector General of the Department of the Treasury shall 
be the Inspector General of the Fund.

SEC. 119. ENFORCEMENT.

  (a) Regulations.--
          [(1) In general.--Not later than 180 days after the 
        appointment and qualification of the Administrator, the 
        Fund shall promulgate such regulations as may be 
        necessary to carry out this subtitle.]
          (1) In general.--The Secretary may prescribe such 
        regulations and procedures as may be necessary to carry 
        out this subtitle.

           *       *       *       *       *       *       *


SEC. 121. AUTHORIZATION OF APPROPRIATIONS.

  (a) Fund Authorization.--
          [(1) In general.--To carry out this subtitle, there 
        are authorized to be appropriated to the Fund, to 
        remain available until expended--
                  [(A) $60,000,000 for fiscal year 1995;
                  [(B) $104,000,000 for fiscal year 1996;
                  [(C) $107,000,000 for fiscal year 1997; and
                  [(D) $111,000,000 for fiscal year 1998;
        or such greater sums as may be necessary to carry out 
        this subtitle.]
          (1) In general.--To carry out this subtitle and 
        subtitle B of title II, there are authorized to be 
        appropriated to the Fund, to remain available until 
        expended--
                  (A) $95,000,000 for fiscal year 2000;
                  (B) $100,000,000 for fiscal year 2001;
                  (C) $105,000,000 for fiscal year 2002; and
                  (D) $110,000,000 for fiscal year 2003.

           *       *       *       *       *       *       *

                              ----------                              


            SECTION 11 OF THE INSPECTOR GENERAL ACT OF 1978

                              definitions

  Sec. 11. As used in this Act--
          (1) the term ``head of the establishment'' means the 
        Secretary of Agriculture, Commerce, Defense, Education, 
        Energy, Health and Human Services, Housing and Urban 
        Development, the Interior, Labor, State, 
        Transportation, or the Treasury; the Attorney General; 
        the Administrator of the Agency for International 
        Development, Environmental Protection, General 
        Services, National Aeronautics and Space, or Small 
        Business, or Veterans' Affairs; the Director of the 
        Federal Emergency Management Agency, or the Office of 
        Personnel Management; the Chairman of the Nuclear 
        Regulatory Commission or the Railroad Retirement Board; 
        the Chairperson of the Thrift Depositor Protection 
        Oversight Board; the Chief Executive Officer of the 
        Corporation for National and Community Service[; the 
        Administrator of the Community Development Financial 
        Institutions Fund;] and the chief executive officer of 
        the Resolution Trust Corporation; and the Chairperson 
        of the Federal Deposit Insurance Corporation; or the 
        Commissioner of Social Security, Social Security 
        Administration; as the case may be;
          (2) the term ``establishment'' means the Department 
        of Agriculture, Commerce, Defense, Education, Energy, 
        Health and Human Services, Housing and Urban 
        Development, the Interior, Justice, Labor, State, 
        Transportation, or the Treasury; the Agency for 
        International Development, [the Community Development 
        Financial Institutions Fund,] the Environmental 
        Protection Agency, the Federal Emergency Management 
        Agency, the General Services Administration, the 
        National Aeronautics and Space Administration, the 
        Nuclear Regulatory Commission, the Office of Personnel 
        Management, the Railroad Retirement Board, the 
        Resolution Trust Corporation, the Federal Deposit 
        Insurance Corporation, the Small Business 
        Administration, the Corporation for National and 
        Community Service, or the Veterans' Administration, or 
        the Social Security Administration; as the case may be;

           *       *       *       *       *       *       *

                              ----------                              


             SECTION 233 OF THE BANK ENTERPRISE ACT OF 1991

SEC. 233. ASSESSMENT CREDITS FOR QUALIFYING ACTIVITIES RELATING TO 
                    DISTRESSED COMMUNITIES.

  (a) Determination of Credits for Increases in Community 
Enterprise Activities.--
          (1)  * * *
          (2) Qualifying activities.--An insured depository 
        institution may apply for [for] any community 
        enterprise assessment credit for any semiannual period 
        for--
                  (A) the amount, during such period, of new 
                originations of qualified loans and other 
                assistance provided [for low- and moderate-
                income persons] to community development 
                financial institutions, low- and moderate-
                income persons in distressed communities, or 
                enterprises integrally involved with such 
                neighborhoods, which the Board determines are 
                qualified to be taken into account for purposes 
                of this subsection;
                  (B) the amount of the increase, during such 
                period, of deposits accepted from persons 
                domiciled in the distressed community, at any 
                office of the institution (including any 
                branch) located in any qualified distressed 
                community, and new originations of any loans 
                and other [financial] assistance made within 
                that community, except that in no case shall 
                the credit for deposits at any institution or 
                branch exceed the credit for loans and other 
                [financial] assistance by the bank or branch in 
                the distressed community; and

           *       *       *       *       *       *       *

          (4) Determination of qualified loans and other 
        financial assistance.--Except as provided in paragraph 
        (6), the types of loans and other assistance which the 
        Board may determine to be qualified to be taken into 
        account under paragraph (2)(A) and (2)(B) for purposes 
        of the community enterprise assessment credit, may 
        include the following:
                  (A)  * * *

           *       *       *       *       *       *       *

                  (P) Other forms of assistance that the Board 
                determines to be appropriate.

           *       *       *       *       *       *       *

          (7) Quantitative analysis of technical assistance.--
        The Board may establish guidelines for analyzing the 
        technical and other assistance described in 
        subparagraphs (M), (N), [and (O)] (O), and (P) of 
        paragraph (4) for the purpose of quantifying the 
        results of such assistance in determining the amount of 
        any community assessment credit under this subsection.
  (b) Qualified Distressed Community Defined.--
          (1)  * * *

           *       *       *       *       *       *       *

          (4) Eligibility requirements.--For purposes of this 
        subsection, an area meets the requirements of this 
        paragraph if the following criteria are met:
                  (A)  * * *

           *       *       *       *       *       *       *

                  (C) Such additional eligibility requirements 
                or alternative as the Board may, in its 
                discretion, deem necessary to carry out the 
                provisions of this subtitle.

           *       *       *       *       *       *       *

                              ----------                              


  RIEGLE COMMUNITY DEVELOPMENT AND REGULATORY IMPROVEMENT ACT OF 1994

           *       *       *       *       *       *       *


              TITLE II--SMALL BUSINESS CAPITAL FORMATION

           *       *       *       *       *       *       *


Subtitle B--Small Business Capital Enhancement

           *       *       *       *       *       *       *


SEC. 252. DEFINITIONS.

  For purposes of this subtitle--
          (1)  * * *

           *       *       *       *       *       *       *

          (5) the term ``financial institution'' means any 
        community development financial institution (as defined 
        in section 103(5) of this Act) and, any federally 
        chartered or State-chartered commercial bank, savings 
        association, savings bank, or credit union;

           *       *       *       *       *       *       *


SEC. 253. APPROVING STATES FOR PARTICIPATION.

  (a)  * * *

           *       *       *       *       *       *       *

  [(d) Prior Appropriations Requirement.--The Fund shall not 
approve a State for participation in the Program until at least 
$50,000,000 has been appropriated to the Fund (subject to an 
appropriations Act), without fiscal year limitation, for the 
purpose of making reimbursements pursuant to section 257 and 
otherwise carrying out this subtitle.]
  [(e)] (d) Amendments to Agreements.--If a State that has been 
approved to be a participating State wishes to amend its form 
of participation agreement and continue to be a participating 
State, such State shall submit such amendment for review by the 
Fund in accordance with subsection (b)(4). Any such amendment 
shall become effective only after it has been approved by the 
Fund.

SEC. 254. PARTICIPATION AGREEMENTS.

  (a) In General.--A participating State may enter into a 
participation agreement with any financial institution 
determined by the participating State, after consultation with 
the appropriate Federal banking agency (if any), to have 
sufficient commercial lending experience and financial and 
managerial capacity to participate in the Program. The 
determination by the State shall not be reviewable by the Fund.

           *       *       *       *       *       *       *


SEC. 257. REIMBURSEMENT BY THE FUND.

  [(a) Reimbursements.--Not later than 30 calendar days after 
receiving a report filed in compliance with section 256, the 
Fund shall reimburse the participating State in an amount equal 
to 50 percent of the amount of contributions by the 
participating State to the reserve funds that are subject to 
reimbursement by the Fund pursuant to section 256 and this 
section. The Fund shall reimburse participating States, as it 
receives reports pursuant to section 256(a), until available 
funds are expended.]
  (a) Reimbursements.--
          (1) In general.--The Fund shall reimburse 
        participating States according to criteria established 
        by the Fund.
          (2) Examples of criteria.--Criteria established under 
        paragraph (1) may include whether a participating State 
        is creating a new program, is expanding in scope or 
        scale an existing State program, the need for Fund 
        reimbursement, the availability of Fund resources, and 
        other criteria established by the Fund.
          (3) Timing and amount of reimbursement.--Not later 
        than 30 calendar days after receiving a report filed in 
        compliance with section 256, the Fund shall reimburse a 
        participating State meeting such criteria in an amount 
        equal to up to 50 percent of the amount of 
        contributions by the participating State to the reserve 
        funds that are subject to reimbursement by the Fund 
        pursuant to section 256 and this section, until such 
        sums made available by the Fund for this purpose are 
        expended.

           *       *       *       *       *       *       *


[SEC. 260. AUTHORIZATION OF APPROPRIATIONS.

  [(a) Amount.--There are authorized to be appropriated to the 
Fund $50,000,000 to carry out this subtitle.
  [(b) Budgetary Treatment.--The amount authorized to be 
appropriated under subsection (a) shall be subject to 
discretionary spending caps, as provided in section 601 of the 
Congressional Budget Act of 1974, and therefore shall reduce by 
an equal amount funds made available for other discretionary 
spending programs.]

           *       *       *       *       *       *       *


                            DISSENTING VIEWS

    The CDFI fund is one of the best examples of what is wrong 
with the way our government functions. As explained in a 
Washington Post article (``The High Road to Scandal,'' by 
Michael Kelly, June 10, 1998), then-candidate Clinton proposed 
in 1992 to take the example of Chicago's South Shore Bank 
funding renovations in an impoverished neighborhood and make it 
a national program but ``instead created something more 
traditional, a new pot of money for insiders.'' The article 
went on to explain how the funds were disbursed to friends of a 
few, close, political associates who ``salt[ed] files with ex 
post facto documents'' in a belated effort to show compliance 
with mandated oversight requirements.
    Last June, the Subcommittee on General Oversight and 
Investigations, House Committee on Banking and Financial 
Services, produced an excellent report on the wanton abuse of 
the CDFI program: ``Review of Management Practices at the 
Treasury Department's Community Development Financial 
Institutions Fund.'' Says the Washington Post, ``Its 105 pages 
of dry, spare prose comprise a perfect little parable of how 
corruption works in government.''
    The Heritage Foundation explains well the problems and 
expenses of ignoring local solutions and not abiding by the 
limited government, federal principles of our constitution, 
``Because the money is routed first to Washington and then back 
to the states, a significant amount is siphoned off to support 
the HUD bureaucracy. If states and localities were to raise the 
money for necessary projects themselves, this administrative 
expense would not be lost, and more funds would be available 
for actual development.''
    Despite widely-reported problems with oversight, conflicts 
of interest, politicization of awarding funds, and doctoring of 
files so blatant that the director and her deputy had to 
resign, Congress stiffened its spine enough only to increase 
the funding for the program.
    Since the program started rewarding political cronies with 
$50 million of taxpayers' money in 1995, funding is set to 
increase to $95 million this year with $5 million increases 
each of the next four years. These rates of growth belie the 
oft-heard claims of fiscal responsibility espoused by many 
Washington politicians. This program should never have been 
initiated at the federal level, has proved to be wasteful and 
corrupt, should be abolished and the money returned to the 
taxpayers to decide for themselves the best use of their own 
money.
    ``The Community Development Financial Institutions Fund is 
still in business, but it is now a deeply suspect agency. And 
what was once a fine example of the promise that government 
still can do things that are big and bold and good is now a 
fine example of the way corruption does its corroding work, bit 
by bit, until all that is left of what was something shining is 
a tarnished little thing, not much good to anyone at all,'' 
concluded Michael Kelly in the Washington Post article just a 
year ago. How quickly we forget.

                                                          Ron Paul.

                                  
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