SWLABDC-CDE

SOUTHWEST LOUISIANA BUSINESS DEVELOPMENT CENTER, INC. (SWLABDC)

RESCUE OF FANNIE MAE AND FREDDIE MAC

Charles C. Achane

Approximately one week ago the Today Show ask three economic experts for a quick solution on how to fix the current economic recession in the housing and investment markets. The experts was representatives of the following companies: 1) Ms. Liz N. Sonders of Charles Schwab Investment Group:, 2) Mr. Steve Forbes of Forbes Magazine, and Mad Money Co-Founder, Mr. Jim Cramer.

The question asked by Matt Lauer was: “How would fix the current economic problems? What solution would you recommend?”

• The representative from Ms. Liz N. Sonders of Charles Schwab recommended that: “We abandon the weak dollar strategy and focus on reinvesting in U.S. Companies to give the capital strength to compete in the global market.”

• § Mr. Steve Forbes of Forbes Magazine recommended that: “The Bush Administration should vigorously push to have Fannie and Freddie recapitalized and broken up into 10 to 12 new companies, with their ties to the government completely severed. Yes, this would mean Uncle Sam’s pumping in some $300 billion in equity capital and, perhaps, taking on some $100 billion in those questionable mortgages. But such an investment would enable these companies to have a sound debt-to-equity ratio in the vicinity of 4-to-1. Shares in Fannie and Freddie would then be exchanged for shares of common and preferred stock in the new, solvent firms. Current shareholders could ultimately recover their losses, and taxpayers could eventually get most if not all, of their money back. In fact, Uncle Sam might even make a profit.”

• Mr. Cramer agreed with both strategies and recommended diversity in economy mortgage and investment sector immediately.

A SOLUTION FOR THE PROBLEM

Recognizing the important contributions of Community Development Financial Institutions (CDFIs), the US Congress passed the bipartisan Riegle Community Development and Regulatory Improvement Act of 1994. Through this law, the CDFI Fund was created to fill financial gaps across the country by supporting the nationwide network of CDFIs, and more recently Community Development Entities (CDEs), as well as to stimulate private sector investment in underserved communities by providing incentives to traditional financial institutions. This network is an essential component of the nation’s financial system, delivering the financing and financial services needed to stimulate economic growth, start or expand businesses, and promote homeownership in underserved communities. The CDFI Fund is committed to strengthening this unique network of financial service providers, and helping to increase their sustainability and self-reliance.

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STRATEGIC GOAL OF CDEs and CDFIs

Improve the economic and living conditions of underserved communities by providing an array of community development financing and financial services through a nationwide network of sustainable regulated and non-regulated CDFIs and Community Development Entities (CDEs).

MEANS AND STRATEGIES OF CDEs and CDFIs

CDFIs and CDEs are specialized, regulated and non-regulated, for-profit and nonprofit financial service providers whose primary mission is to fill service and credit gaps in underserved communities. By successfully providing affordable financial products and services to distressed populations and communities, CDFIs and CDEs demonstrate the untapped market potential that exists in these communities and help to pull mainstream financial institutions toward these new markets. CDFIs and CDEs are essential components in the nation’s delivery of financial services and financing capital to underserved communities, where they help stimulate economic growth, start or expand businesses, and promote homeownership among low-income and minority populations. Furthermore, the counseling and technical assistance that CDFIs and CDEs provide is critical for helping these underserved communities effectively use the nation’s financial system and avoid predatory financial products. CDFIs and CDEs have proven that their strategic lending and investment activities, tailored to the unique characteristics of underserved markets, are highly effective in improving the economic well being of these communities.

As of September 5, 2003, the CDFI Fund had certified 660 entities as CDFIs, serving both rural and urban areas in local, regional, statewide, and multi-state markets in 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands. Of these, 24 are Native American CDFIs. As of September 12, 2003, the CDFI Fund had certified 1,181 entities as CDEs. Approximately 30 percent of CDEs are certified CDFIs.

It is the mission of CDFIs and CDEs to provide credit and financial services to underserved communities. This investment helps improve economic and living conditions by stimulating economic growth through business development and development of commercial real estate; promoting wealth through homeownership and savings accumulation; providing access to affordable housing; reducing transaction costs by increasing the availability of fairly-priced financial products and services; and improving access to goods and services through business and community facility start-ups and expansions.

KEY PARTNERS IN ACHIEVING THIS GOAL

To achieve this goal, the CDEs and CDFIs must coordinates and collaborates with the Small Business Administration, Department of Commerce, Department of Agriculture,

Department of the Interior, Department of Housing and Urban Development, Federal

Reserve Bank, National Credit Union Administration (NCUA), Department of Treasury, Office of the Comptroller of the Currency (OCC), Office of Thrift Supervision (OTS), and the Internal Revenue Service (IRS).

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Developing  the efficiency  of CDEs and CDFIs is the way correct this economic probles.

Source: Community Development Financial Institutions (CDFI) Fund: FY 2003 - FY 2008 Strategic Plan: Filling Financial Gaps Across America: September 15, 2003

I can be contacted for further information on this subject at:

swlabdc@charter.net

Telephone: 337-296-8580

Charles C. Achane

President, SWLABDC

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