3c hapter - Index of

88 Locavesting
quickly write off nonperforming loans. Despite that, their net
charge- off rates were lower than those at FDIC- insured banks.
While the loan funds themselves were in good shape, the entities
that supply much of their funding were reeling. In 2008, funding
from banks cratered along with the housing market. In New York
City, the largest banks cut their community development lending
by 20 percent in 2008—despite a 10 percent jump in deposits.
A study by the Association for Neighborhood and Housing
Development said the decline was part of a longer term and
worrisome decline in the “quantity and quality” of Community
Reinvestment Act activity. As banks consolidate, there are simply
fewer to go around.
That’s been partially offset by the conversion of several fi nancial
fi rms into bank holding companies in order to participate in
the government bailout assistance. These new banks, including
Goldman Sachs, American Express, Morgan Stanley, and GMAC,
the fi nancing arm of General Motors, are now subject to the
CRA. In addition, with much fanfare, some of the biggest banks
have made fresh commitments to small business lending through
CDFIs—about $1 billion worth between Citigroup, Goldman,
JPMorgan Chase, Bank of America, and Wells Fargo from the fall
of 2009 through the summer of 2010 (roughly coinciding with the
nadir of their public images). On the surface, these commitments
are admirable. But in reality, the loan terms in many cases are too
expensive or too short term for many community development
loan funds. “They’re tailored for maximum PR,” one loan fund
executive told me.
Indeed, these efforts only underscore how far the big banks
have gotten from community- level lending. Writing on the web site
JustMeans.com, blogger Michael Hasset observed the irony in one
such program, Citigroup’s elaborate $200 million Communities
at Work Fund, in which it partnered with the Calvert Foundation
and OFN:
Genuine cheers notwithstanding, hold on a minute. In
order to do neighborhood level lending, Citi now needs to
set up a special fund, in which it is a limited partner with