Table Of ContentACCESS TO CREDIT IN "DISTRESSED"
COMMUNITIES
Y4,SM 1:103-33
Access to Credit Ir "Distressed** Co...
HEARING
BEFORE THE
SUBCOMMITTEE ON MINORITY ENTERPRISE,
FINANCE, AND URBAN DEVELOPMENT
OF THE
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
FIRST SESSION
COMPTON, CA, JUNE 25, 1993
Printed for the use of the Committee on Small Business
Serial No. 103-33
JUL
J 9
or^ot
U.S. GOVERNMENT PRINTING OFFICE
70-190^ WASHINGTON 1994
:
ForsalebyiheU.S.GovemnienlPrimingOffice
Sui)erintendeniofDocuments.CongressionalSalesOffice,Washington,DC 2t>402
ISBN 0-16-0442A1-9
^0
ACCESS TO CREDIT IN "DISTRESSED"
^
COMMUNITIES
\
Y4.SM 1:103-33
Access to Credit in "Distressed" Co...
HEARING
BEFORE THE
SUBCOMMITTEE ON MINORITY ENTERPRISE,
FINANCE, AND URBAN DEVELOPMENT
OF THE
COMMITTEB ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
FIRST SESSION
COMPTON, CA, JUNE 25, 1993
Printed for the use of the Committee on Small Business
Serial No. 103-33
JUL 9 jppA
I
U.S. GOVERNMENT PRINTING OFFICE
70-190ti WASHINGTON 1994
:
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocumenl.s,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-044241-9
COMMITTEE ON SMALL BUSINESS
JOHN J. LaFALCE, New York, Chairman
NEAL SMITH, Iowa JAN MEYERS, Kansas
IKE SKELTON, Missouri LARRY COMBEST, Texas
ROMANO L. MAZZOLI, Kentucky RICHARD H. BAKER, Louisiana
RON WYDEN, Oregon JOEL HEFLEY, Colorado
NORMAN SISISKY, Virginia RONALD K. MACHTLEY, Rhode Island
JOHN CONYERS, Jr., Michigan JIM RAMSTAD, Minnesota
JAMES H. BILBRAY, Nevada SAM JOHNSON, Texas
KWEISI MFUME, Maryland WILLIAM H. ZELIFF, Jr., New Hampshire
FLOYD H. FLAKE, New York MICHAEL A. "MAC" COLLINS, Georgia
BILL SARPALIUS, Texas SCOTT McINNIS, Colorado
GLENN POSHARD, Illinois MICHAEL HUFFINGTON, California
EVA M. CLAYTON, North Carolina JAMES M. TALENT, Missouri
MARTIN T. MEEHAN, Massachusetts JOE KNOLLENBERG, Michigan
PAT DANNER, Missouri JAY DICKEY, Arkansas
TED STRICKLAND, Ohio JAY KIM, California
NYDIA M. VELAZQUEZ, New York DONALD A. MANZULLO, Illinois
CLEO FIELDS, Louisiana PETER G. TORKILDSEN, Massachusetts
MARJORIE MARGOLIES-MEZVINSKY, ROB PORTMAN, Ohio
Pennsylvania
WALTER R. TUCKER UI, California
RON KLINK, Pennsylvania
LUCILLE ROYBAL-ALLARD, California
EARL F. HILLIARD, Alabama
H. MARTIN LANCASTER, North Carolina
THOMAS H. ANDREWS, Maine
MAXINE WATERS, California
BENNIE G. THOMPSON, Mississippi
Jeanne M. Roslanowick, StaffDirector
Steven Lynch, Minority StaffDirector
Subcommittee on Minority Enterprise, Finance, and Urban Development
KWEISI MFUME, Maryland Chairman
JOHN CONYERS, Jr., Michigan RONALD K. MACHTLEY, Rhode Island
FLOYD H. FLAKE, New York JAMES M. TALENT, Missouri
NYDIA M. VELAZQUEZ, New York JOE KNOLLENBERG, Michigan
WALTER R. TUCKER m, California JAY DICKEY, Arkansas
CLEO FIELDS, Louisiana
LUCILLE ROYBAI^ALLARD, California
EARL F. HILLIARD, Alabama
Bruce Gamble, Subcommittee StaffDirector
Aluson Baird, Minority Subcommittee Professional StaffMember
(U)
CONTENTS
Page
Hearing held on June 25, 1993 1
WITNESSES
Friday, June 25, 1993
BryantJohn, chairman and CEO, BryantGroup Consulting and Management
Inc., and Operation Hope, Los Angeles 34
Mantle, Mike, president. Bank of America, Community Development Bank
and chairman, American Bankers Association's Community Development
LendingCommittee ". 22
Watkins, Dayton, Counselor to the Administrator ofthe SBA accompanied by
Bernard Kulik, Assistant Administrator for Disaster Assistance and Mike
Lee, District DirectorofLosAngeles District Office 5
APPENDIX
Openingstatement:
Mfume, Hon. Kweisi 51
Prepared statements:
Mantle, Mike 81
Watkins, Dayton 54
(III)
ACCESS TO CREDIT IN "DISTRESSED"
COMMUNITIES
FRIDAY, JUNE 25, 1993
House of Representatives,
Subcommittee on Minority Enterprise,
Finance, and Urban Development,
Committee on Small Business,
Washington DC.
The subcommittee met, pursuant to notice, at 9:50 a.m., at Comp-
ton City Hall, 205 S. Willowbrook Avenue, City Council Chambers,
Compton, CA, Hon. Kweisi Mfume (chairman of the subcommittee)
presiding.
Chairman Mfume. Ladies and gentlemen, good morning, and
welcome to this hearing of the Subcommittee on Minority Enter-
prise, Finance and Urban Development. I'd like to thank you for
being here and thank also the members of this committee who
have traveled a great distance to join us this morning. I'm pleased
to welcome you to today's hearing, and pleased also that it is our
first field hearing and that it's being convened here in this congres-
sional district in California, a district now represented by former
mayor of Compton, my colleague and friend Walter Tucker, III. Al-
though Walter, as many ofyou know, is serving in his first term in
Congress, he has already demonstrated leadership and a tenacious
commitment to work toward solutions to critical problems that are
confronting urban America that we believe will serve him and his
constituents well over the years to come. He is a valued member of
this committee. We look forward to and respect his wisdom and his
insight. It's a pleasure for this committee tojoin him and tojoin all
ofyou here in Compton today.
Today's hearing will focus on concerted efforts by the Small Busi-
ness Administration and private lending institutions to provide
credit to economically distressed communities through loans, to
small and minority businesses and, through other innovative meth-
ods, utilizing public and private sector resources. Small business
development is central to the recovery and sustained growth of our
economy in this country. Minority business development in particu-
lar is essential for economic revitalization of urban city communi-
ties where crime is commonplace and unemployment levels contin-
ue in an upward trend, a trend that is intolerable in many re-
spects.
Given that many of you and many other residents across this
country who reside in urban communities tend, as many of us are,
to be members of ethnic minority groups, we believe that the per-
(1)
sistent negative stereotype and the racial barriers further hinder
us and our Nation, quite frankly, with respect to social and eco-
nomic progress. It has been estimated that small businesses, as
most ofyou know, provide at least two-thirds ofall newjobs in this
country, and firms of fewer than 20 employees contribute most of
the employment opportunities.
As large firms reduce and restructure their work force, the role
and importance of small minority businesses become even more
critical to our Nation. Hence, this realization makes the issue
before our subcommittee today fundamentally important to all citi-
zens of this Nation. Without access to capital, small and minority
owned business concerns cannot grow, expand, or provide employ-
ment opportunities that urban residents so desperately need.
As chairman of this subcommittee, I am deeply committed to in-
suring that Federal policies promote the formation and the devel-
opment of minority owned businesses in our major cities, which ul-
timately fosters domestic tranquility. I, like many of my collesigues
on this committee, have long been concerned about the availability
of credit to minority businesses and the minority business market-
place. This subcommittee's jurisdiction requires that we focus par-
ticular attention on this issue because it largely determines the
ability of minority firms to grow and to prosper. It has been dem-
onstrated that minority owned businesses confront more obstacles
in obtaining capital than small nonminority businesses in general.
Some have even suggested that the disparity in the total number of
minority-owned businesses as compared to the overall minority
population, is creating societal problems affecting families, neigh-
borhoods, unemployment, crime, and the general welfare of our
cities and ofour Nation as a whole.
While the United States has spent over 2 years in a slow econom-
ic recovery, the small and minority business community h£is been,
and continues, in my estimation, to be plagued by a chronic and
debilitating capital crisis. Although there has been much rhetoric
tossed about, particularly following the civil rebellion which oc-
curred here last year, the problem continues unaddressed, in our
opinion, in any realistic way in urban and rural communities all
across this Nation. I have heard first-hand concerns of minority
businesses that suggested both equity and debt capital are in short
supply. When debt capital is made available, it is relatively more
costly to this segment ofthe business community, in contrast to the
experience ofnonminority business owners.
In its 1992 report to Congress and to the President, the U.S.
Commission on Minority Business Development stated, and I quote,
that "minority business which historically start out under capital-
ized, quite often find it next to impossible to secure financial assist-
ance to grow and expand their companies." Moreover, access to
capital and credit for minorities in businesses is at the heart of re-
solving many of the problems in American that are both economic
and social.
I would be, therefore, unreasonable to suggest that as a result of
the testimony we receive today, members ofthis subcommittee will
be prepared to develop comprehensive strategies to address the
many ills facing our communities; however, we are very much com-
mitted to focus the attention ofCongress and the Executive Branch
and, for that matter, to the entire business community, on the eco-
nomic development needs in our urban centers and to propose solu-
tions that are meaningful and desirable for all concerned.
This morning, we will hear from a senior official from the U.S.
Small Business Administration who will give us an overview of
available programs that promote small business development. He
will also share with us the measures taken by the SBA in response
to the unique needs in the Los Angeles small business community.
We will also hear today from local private lending institutions who
have been widely recognized as being the avant garde of providing
credit to underserved communities here in Los Angeles and in the
Los Angeles area. Finally, we will hear from a local entrepreneur
and civic leader who will share his personal experiences in develop-
ing coalitions to revitalize communities throughout the greater Los
Angeles County area.
Before I introduce witnesses, I would, however, like to introduce
members of this subcommittee. Those members, as you know, have
traveled a great distance to be here and are very anxious to partici-
pate in this hearing. I would be remiss if I did not yield first for
opening remarks to my colleague, who represents this area, Walter
Tucker, who I spoke about earlier in my remarks. Again, it's the
pleasure ofthis subcommittee to have him as a member and to par-
ticipate in these hearings in his district. Congressman Tucker.
[Chairman Mfume's statement may be found in the appendix.]
Mr. Tucker. Thank you very much, Mr. Chairman. This is an op-
portunity and an occasion that is unparalleled and unprecedented.
It is most certainly a time for me of personal excitement and per-
sonal interest. This is the edifice and the hall in which I served for
a year-and-a-half as mayor of this fine city, the city of Compton,
and this is the seat that I served in many a nights of great battle
and great political discussions. But now I come back here as the
native son to represent the interests not only of Compton, but of
this entire district and this entire country as well, as a U.S. Con-
gressman.
I want to congratulate Chairman Mfume, who is not only the
chairman of the Subcommittee on Minority Enterprise, Finance,
and Urban Development, but who is, and has distinguished himself
as a very preeminent leader as the chairman of the Congressional
Black Caucus, which of course is a national organization. We're so
happy to have other Congress Members here representing the
Black Caucus and also representing this subcommittee. We have, of
course, and not to get too far ahead of you, Mr. Chairman, but I
want to congratulate to my left, Congressman Earl Hilliard from
Alabama for being here and showing a commitment and conscien-
tiousness to be a part ofthis hearing.
Also, to my far right, it gives me great pleasure to recognize and
introduce to you the youngest Member of Congress, black, white, or
otherwise, and that is none other than Cleo Fields from the State
of Louisiana. Once again, this is a part of and, in fact, the kick-off
of history in the making, and that is, the Black Caucus, coming to
Los Angeles for the very first time in history. The Black Caucus'
Public Policy Conference will take place at the Airport Hyatt Hotel
that will be going on this entire weekend. This is the first event of
what promises to be a very eventful weekend, and once again, I
want to congratulate Chairman Mfume, and I want to congratulate
the staff members for all the work that they have done, and we
look forward to the testimony ofthe participants.
Chairman Mfume. Thank you very much, Walter. I'll take a
minute to sort of reintroduce following the remarks of Mr. Tucker,
in alphabetical order the other two Members of Congress who are
here with us and to advise you that to my immediate right and to
your left is Bruce Gamble, the Staff Director of this subcommittee.
Joining us from the State of Louisiana, as you heard earlier, is
Cleo Fields, who has really juggled her schedule this morning and
who is supposed to be part of another hearing that's taking place
out at the airport and is here instead as a member of this subcom-
mittee, a rather distinguished member, to participate in today's
hearing. Mr. Fields from Louisiana.
Mr. Fields. Thank you, Mr. Chairman. I want to also thank you,
Mr. Tucker, for giving us the opportunity to come to a fine place
called Compton, and also a fine place in your congressional district.
It's always good to be a part of a district that's moving and eco-
nomical development is certainly an aspect that we must deal with
today.
I want to also thank you, Mr. Watkins and other members of the
panel for being here this morning. I've had the opportunity to meet
with Mr. Watkins, and we've talked about several economic devel-
opment aspects of the African-American community. We've also
talked about the 8(a) Program which is very important to this com-
munity as well as this country. We've had an opportunity to talk
about how we can get the SBA to network with colleges and uni-
versities, particularly historically black colleges and universities
across the country, because I do think a place where you can get a
lot of research as well as a place where you can also serve as a nu-
cleus and educational platform for a bunch of kids, a bunch of col-
lege students.
Last, I'm concerned about the credit, that many businesses find
themselves in a credit crunch because they're not able to borrow
the necessary moneys to expand their business, and that's some-
thing that I'm sure that we'll get into later on in this hearing. I
just want to thank you, Mr. Watkins, along with Mr. Hilliard and
Mr. Bernard. I want to thank each of you for being here. Mr.
Chairman, it's a pleasure to be here, and Walter, thank you for the
invitation to your district.
Chairman Mfume. Thank you very much, Mr. Fields. Thanks for
We
adjusting your schedule also to be a part ofthis hearing. appre-
ciate that. Finally, let me introduce to you the other member of
this committee. Earl Hilliard, who is from the State of Alabama
and a former distinguished member of that State's legislature. He
is a contributing member of this committee. We are very happy
that he could find it in his schedule also to come out here to Comp-
ton and to be with us this morning. The gentleman from Alabama,
Mr. Hilliard.
Mr. Hilliard. Thank you very much, Mr. Chairman. Mr. Chair-
man, I'm very happy to be here, and I'd like to thank Congressman
Tucker for the invitation that he extended to this committee to
come and talk about a subject that is very dear to America. If we
are to strengthen America, we must make sure that we reveal or
