Rep. Ellison Introduces Bill to Enable Greater Investment in Small Business, Community Economic Development and Agriculture

Press Release

Rep. Keith Ellison (D-MN) introduced The Small Business and Community Investments Expansion Act (H.R. 3656.), which would enable community development financial institutions (CDFIs) to increase the number of loans they make to entrepreneurs, shopping centers and health care facilities in disadvantaged urban and rural communities.

"CDFIs are lenders that finance affordable housing and community development investments, create jobs and strengthen local communities," said Rep. Keith Ellison. "I have seen firsthand the effective work they do to improve local economies. This bill would provide them with greater resources to maintain their work during a painful time of austerity, and, potentially allow them to expand their investments."

In 2008, Congress passed The Housing and Economic Recovery Act, which permitted Treasury-certified CDFIs to become a member of a Federal Home Loan Bank (FHLB). CDFIs could join, pledge collateral and receive advances (loans). This change enabled CDFIs to use their current loan portfolio to raise cash to make new loans.

Unfortunately, the bill did not clarify that CDFIs could pledge small business, small agriculture and community economic development collateral, such as community financial institutions (CFIs). CDFIs were able to join as regular members which restricted their collateral to long-term housing loans. The bill would permit CDFIs who finance small business lending, charter schools, community facilities, commercial facilities, etc. to pledge those loans in exchange for advances, if they qualified for FHLB membership. This technical change to give CDFIs the same collateral flexibility as CFIs would result in greater economic activity in communities, create jobs and would be especially beneficial to rural communities and communities facing disinvestment.

"Over the past 25 years, CRF has invested $1.4 billion in distressed communities in the Twin Cities region and across the country, creating jobs and economic opportunity. This bill would help CDFIs access a new source of liquidity by allowing them to pledge small business and community economic development loans as collateral for FHLB advances," said Frank Altman, President & CEO, Community Reinvestment Fund, USA in Minneapolis. "In this time of budget cuts and uncertainty we need innovative financing options, like the one championed by Rep. Ellison in this bill, that expand resources for underserved communities and their residents."

The bill was cosponsored by Representatives Stivers, Maloney and Delaney and supported by LISC, Opportunity Finance Network, Ohio Finance Fund, Community Reinvestment Fund and TRF.

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