I mean, obviously, given what I do -- or maybe it's not so obvious. But the fact of the matter is, I've never applied for a small business loan. I've applied for others. Are you saying that when people come in for a small business loan, other than the somewhat obvious attributes of the person in front of them, there's nothing on the form that says, black, white, green, yellow, red? There's nothing on the form that says 104 11/12/02 - COMMERCE - RES. 000691, 020522 male, female? There's nothing on the form that asks for an address or where the business is?
I am saying that it is only permitted to be on a form for certain types of residential mortgage credit. So even if you came and asked for a car loan --
Well, I understand that. We're not talking about residential mortgage credit. We're talking about businesses, I think, right?
Not permitted to be on an application. Councilman Goode.
Thank you, Ms. Myers. It is not permitted under the Equal Credit Opportunity Act, is your testimony?
The Fed can allow financial institutions to volunteer that information and borrowers to volunteer that information.
Well, borrowers would certainly provide that information if they thought 105 11/12/02 - COMMERCE - RES. 000691, 020522 it was important --
It's my understanding from NCRC's testimony that they're lobbying the Federal Reserve to allow borrowers to volunteer that information and, therefore, allow financial institutions to volunteer that information without violating the Equal Credit Opportunity Act.
It would take a decision by the Federal Reserve Board, not the Federal Reserve Bank of Philadelphia.
I understand that. But you work with the Federal Reserve Bank, do you not?
Do you think that that's information that should be volunteered by the borrower? Do you think that's information that should be volunteered by the financial institution? Or are you going to, as Mr. Taylor testified earlier, hide behind the veil of information?
I'm sorry. I didn't hear 106 11/12/02 - COMMERCE - RES. 000691, 020522 that last phrase.
I said, you work for the Federal Reserve. Would it be your recommendation that that information be voluntarily offered by the borrower, be voluntarily offered by the financial institution, therefore able to be tracked, rather than, as Mr. Taylor from NCRC testified earlier, you hide behind the veil of the lack of information?
I said, as Dede Myers, I think that any information that you can use to understand how credit is provided is helpful information. The Federal Reserve Board will decide for the system.
And so, will you lobby the Federal Reserve Board on behalf of this region? 107 11/12/02 - COMMERCE - RES. 000691, 020522
My opinions to them are still private. I think it is helpful information.
Did you say continue? I'm sorry, I'm having a hard time hearing.
That's okay. Please continue with your testimony. I interrupted you.
All right. I think I was at the point, before the big dollar increase in 2001, the dollars originating in the City ranged from $585 million in '96 to $450 million in '98 during the previous five years. Now, I'd like to talk about loans to small businesses. And they would be loans where the small business had annual revenues at or under a million dollars. In 2001 this category of loan represented 38 percent of all reported small loans to businesses in the City. This was down from a high of 50 percent in 1999. Nationally the figure 108 11/12/02 - COMMERCE - RES. 000691, 020522 was 44 percent in 2001, down from a high of 60 percent in 1999. The total number of loans to businesses with annual revenues at or under a million dollars increased in 2001, although not quite so steeply as the total number of all small loans to businesses. Between 2000 and 2001 there was an increase of 1,983 loans, 38 percent higher than the previous year's total. The dollar volume of loans to businesses with annual revenues at or under one million increased 31 percent in Philadelphia from $206 million to $269 million, and it represented 34 percent of all small loans to businesses in 2001. Now, I'd like to talk about where the lending is occurring. To understand lending patterns in different income communities, we graphed the same data over the last six years for all reported loans to businesses in Philadelphia and for loans to small businesses, those with annual revenues. And I'm going to ask you to look at what I'm calling attachments two, three, four and five, for those of you who have the testimony. In 2001 approximately 15 percent of all small loans to 109 11/12/02 - COMMERCE - RES. 000691, 020522 businesses were in low-income census tracts; 27 percent were in moderate-income census tracts; 39 percent in middle-income census tracts; percent 5 in upper-income tracts. About 4 percent of the 6 loans could not be geo-coded to determine the 7 appropriate geography. The distribution across 8 these different income tracts has remained fairly 9 consistent over the last six years. And you can see 10 the detail on attachment one. But it has been 11 fairly consistent over the last six years. 12 The distribution of loans to businesses 13 with annual revenues at or under a million has a 14 pattern similar to that seen for all small loans to 15 businesses. The data show that small loans to businesses have increased, although not uniformly, in all income tracts over past year. As shown in table one, between 2000 and 2001, the percentage increase in the number of loans in low-income tracts was higher than the percentage increase in all tracts, and that would actually be on page -- it would be page eight for me, probably page four for you -- where we show the difference in the change. So between 2000 and 2001, the number of loans increased in low-income tracts 43 percent. The 110 11/12/02 - COMMERCE - RES. 000691, 020522 dollars increased 59 percent. That is more than or the same as the total of all income tracts in the City. And in only one instance is it less than, and that would be upper income, the change in dollars. For the smaller loans, meaning the loans to businesses with annual revenues at or under a million, the percent increase in number of loans was higher in low-income census tracts compared to all census tracts. The dollars originated in low-income census tracts was the same for all census tracts. And that is on table two. Who is lending in Philadelphia? The previous data indicate aggregate figures for small business loans and loans to businesses with annual revenues at or under a million dollars. The following attachments show the market share of the top lenders. Number one, in the City as a whole; 19 number two, in low and moderate-income tracts; and 20 three, to businesses with annual revenues of a 21 million or less.
The charts are sorted by dollar 22 volume rather than the number of loans because, 23 nationally and in Philadelphia, banks with credit 24 card operations originated the largest number of 25 loans, but the average balances are considerably 111 11/12/02 - COMMERCE - RES. 000691, 020522 smaller than those made by the financial institutions with branches in this City. In all instances the top lenders in 5 2000 represented 82 percent of the originated 6 dollars and more than 95 percent or more of the 7 number of loans. Yes? 8
Mr. Taylor made a 13 statement that the top five, six, and the top lender 14 in terms of minorities and poor neighborhoods was 15 Associates, which is well known for its egregious 16 lending practices. Do you agree with that? 17
Actually, in terms of number 18 of loans I do agree with that. Actually, that was 19 in the whole City -- for low-mod census tracts, did 20 you ask? 21
Well, Mr. Taylor said 22 that, in terms of minority neighborhoods and 23 low-income neighborhoods, that Associates still 24 remains the number one lender. And that, to me, 25 doesn't really bode very well for the development of 112 11/12/02 - COMMERCE - RES. 000691, 020522 minority businesses in those areas.
The particular Associates affiliate that was doing that lending is an industrial bank organized in the State of Utah. It does mostly credit card loans. It's average balance -- average loan balance in low-income census tracts, 2,000, versus the average loan balance of the banks at 132.
Okay. The trend that you see in terms of the top five or six lenders is, in fact, something that happens nationally.
About these institutions that are the main lending institutions within those areas. Are we keeping -- we, in terms of us here in the City, are we keeping a database? Are we keeping tabs on their exploitative types of loans that they give and so on down the line? Do we have any information as to that, other than the data that their own corporations produce? I mean, that 113 11/12/02 - COMMERCE - RES. 000691, 020522 doesn't really give us very much.
Because a corporation is always going to put a good face on any data they give out.
The Councilman's first question is, can you explain why the majority of the loans, the small business loans in low and moderate-income neighborhoods, are coming from credit card companies?
Actually, it's true in any income neighborhood. And the reason is that these particular financial institutions have been able to argue that the purpose of these particular credit cards are commercial in nature and, therefore, should be reported on this report.
And you believe that it's for the same purpose in every neighborhood income type?
If you take out the credit card lenders from this analysis, you see the biggest drop in middle-income census tracts in terms of the number of loans. 114 11/12/02 - COMMERCE - RES. 000691, 020522
And it does not create an economic disadvantage for low-income neighborhoods?
Well, the data doesn't tell us the interest rate on those loans. If it is high, as we have heard might be the case on predatory loans or subprime loans, then it would be a problem. But it may be access to credit that is a starter.
But with all due respect to what you would like to have presented to us, in terms of the number of small business loans or small business loan dollars increasing over the last few years, you know from the data you submitted here today that basically the share of loan dollars in terms of loans of small businesses has increased in middle and upper-income neighborhoods. It has decreased in low and moderate-income neighborhoods. You know that from 2000, 2001 that a share decreased from 39 percent to 32 percent. It increased to 63 percent in middle and upper-income neighborhoods.
Well, you can pull out your own chart. 115 11/12/02 - COMMERCE - RES. 000691, 020522
You can pull out your own chart. I'm looking at Attachment 1.
I'm looking at Attachment 1, 2000 data and the 2001 data. Loans to small businesses, meaning business generating less than one million dollars in revenue.
If you look at the amount of loan dollars in 2000 for low and moderate-income neighborhoods combined, what was it?
I don't know what combined, but I know it increased in low-income communities. It stayed almost the same for moderate.
Do you need a calculator, because the answer is 42 percent? Now, if you look at that number --
I'm seeing the numbers increase. I'm sorry. I don't see where you're seeing a decrease without a calculator. I see 25 116 11/12/02 - COMMERCE - RES. 000691, 020522 plus 55, and 34 plus --
The percentage of loan dollars. If you add low-income tracts and moderate-income tracts in 2000, it's about 39 percent; is that correct?
-- or declined in moderate-income tracts, not low-income tracts.
Excuse me. Excuse me, Ms. Myers. The numbers are in front of us. Someone can add them for you, if you'd like. The percentage in terms of the amount of loan dollars --
-- for loans to businesses with less than a million dollars in gross 117 11/12/02 - COMMERCE - RES. 000691, 020522 annual revenue in 2000, low and moderate-income figures, 12.25 percent and 26.86 percent is 39 percent. If you look at the same numbers in 2001, you see 12.94 percent and 21.12 percent, which is about 32 percent. The share dropped from 39 percent to 32 percent. Yet if you look at the same numbers in 2001 in middle-income and upper-income tracts, you see 37.3 percent and 25.84 percent, which is 63 percent. So essentially, 63 percent of the share of loan dollars in terms of loans to small businesses, businesses that generate less than a million dollars, went to middle and upper-income neighborhoods. And only 32 percent, about half, went to low and moderate-income neighborhoods. How do you explain that?
That's because the dollars that increased for all income tracts increased --
You're not going to answer my question? You're not going to answer any disparity questions, are you?
You're not going to answer any disparity questions because -- 118 11/12/02 - COMMERCE - RES. 000691, 020522
Councilman Ortiz's original question was about whether these credit card companies are exploiting low-income people. You said it doesn't make a difference because the credit card companies are basically doing business in every income neighborhood, every income tract within Philadelphia. My question was, is it an economic disadvantage for credit card companies to be doing small business lending in low-income neighborhoods? You said you don't know whether it makes a difference. But you can track from 2000, 2001 and see the share of loan dollars is going up to 63 percent for middle and upper-income neighborhoods, but it's going down to 32 percent for low and moderate-income neighborhoods. You know it makes a difference.
-- what are the interest rates between those areas? And I'd be interested to see whether the interest rates in low-income and poor neighborhoods is higher than in 119 11/12/02 - COMMERCE - RES. 000691, 020522 other areas. So if you get a $40,000 loan and somebody else gets a $40,000 loan in an upper-income neighborhood, your $40,000 are worth much less than those $40,000.
Unfortunately -- I think your questions are valid, but this data does not tell us the answer.
Well, you know, the thing is that I think we understand -- and anyone who's read the book on the Federal Reserve that was written a few years back, about the cathedral that it is. It is protective. It is protective of those interests, economic interests, that are the bigger ones in the country. But I think this hearing is based on how do we begin opening up the doors to low and poor people. (Applause.)
To gain a share of the capitalist world. You know, it's very simple. We need to be able to become, as those individuals that were here before, entrepreneurs. And depending on the interest rates, that will prevent us from going up or down. And if you have no data on that, don't you believe that that is essential data in 120 11/12/02 - COMMERCE - RES. 000691, 020522 order for us to be able to make a public policy that makes any sense?
Ms. Myers, can I ask a quick question? Can I ask one question for a minute? Why are you testifying as part of a GPUAC panel?
Because I am a member of the Community and Economic Development Committee of the GPUAC and the Chair of the Financial Literacy.
You don't find this a conflict of interest, that you shouldn't be testifying here as an independent entity?
I think that the information of lending that has gone on is very positive, and that you can look at the negative parts of this information. You could ignore --
There are other members of the GPUAC Committee that are testifying separately and were invited to testify separately. And you were invited to testify separately.
There is a problem in your presentation of the data where you do not discuss the disparity that exists, as opposed to 121 11/12/02 - COMMERCE - RES. 000691, 020522 just all the numbers going up. All the numbers went up. Disparity still exists. In fact, the disparity has been greater from the year 2000 to the year 2001.
Well, I would like to end with what I think are the positives here, and that is that the financial institutions in this City that have branches and have strong small business records are the ones who are doing most of the lending in this City. If you look at Associates doing three million dollars versus the bigger banks doing $69 or $70 million. I think the attention is in the wrong place, and that the banks who have provided credit in this City are doing a good job. I cannot tell you how much they have not done because we don't have that information.
You will not speak to disparity between low and moderate-income neighborhoods, and middle and upper-income neighborhoods, and you will not speak to disparity in terms of minority -- black and minority people, period, will you?
As Dede Myers, with years 25 of experience -- 122 11/12/02 - COMMERCE - RES. 000691, 020522
And you will not speak -- you will not speak to disparity in terms of lending to women.
-- in the community development business I am certain that there are instances of disparity. I think --
-- based on certain public data you cannot decide that it is or is not in one place.
Ms. Myers, let me ask you a couple questions. One is in the area where Councilman Goode was. And during some of the exchange, I was able to do some relatively quick calculations and -- I mean, if you don't have an answer at the moment, that's fine, but I would like to leave this question with you.
I'd be happy to answer any questions that you leave me with and come back with that information. 123 11/12/02 - COMMERCE - RES. 000691, 020522
I understand, and I appreciate that. Where the Councilman was, when you look at -- and as I said, I was doing the math while you were discussing this issue. The low and moderate-income tracts, the two tracts -- this is back on attachment one -- for the businesses that we were discussing, the less than a million dollars in gross annual revenues. The second column, or the column to the right that has the numbers 12.25 and 26.86, basically add up to about 39 percent in 2000. The next two categories, middle income and upper income, 35.35 and 22.73, add up to about 58 percent. That's for the year 2000. When you go to 2001, the low and moderate-income tracts add up to about 34 percent. And the middle and upper-income tracts add up to about 63 percent. The question now is, in the comparison between 2000 and 2001 for the low and moderate income, the numbers went from 39 percent to 34 percent. That's a 5 percent drop. And for upper and middle income, it went from 58 percent to 63 percent. That's a 5 percent increase. I don't know if those two are connected, but as you do the analysis, there is a 5 percent decrease in one 124 11/12/02 - COMMERCE - RES. 000691, 020522 category and a percent in the other category. Can you tell me the significance of those changes in the data?
Well, on a percentage basis, you're correct. When you combine two and two, low and mod, middle and upper, there is an increase between 2000 the 2001. The dollars still increased. So that low-income tracts went from million to 34 10 million in credit -- 11
Right. But you also 15 see that there is a significant increase in the 16 middle and upper in terms of what their dollar 17 amounts were. I mean, you have upper income in 2000 18 going from 46 to 69, which is about a 50 percent 19 increase, and the middle going from 72 to 100, which 20 is probably about a 40 or so plus, close to 50 21 percent increase. And you're not seeing the same 22 dollar percentage increase in the lower-income 23 categories. So, yes, the tide is rising and lifting 24 many of the boats, but clearly the tide is rising a 25 little higher for some boats than others; is that 125 11/12/02 - COMMERCE - RES. 000691, 020522 correct?
Yes. And what I did not bring with me, but I would be happy to send you is, I looked at the impact of the credit cards on that debt. 41 million was in what I -- what my staff and I identified as credit card debt. 38 million came out of middle-income census tracts, three out of low. I will send you those numbers when I leave, but I think the biggest difference is credit card debt between those two categories.
Well, let's talk a little bit about that. And I would appreciate receiving that information, and certainly I will circulate it to all members of the Committee. Let's talk now about Attachment 6. Again, this issue of Associates. Did I hear you say earlier that Associates Capital Bank is either situated or headquartered in Utah? Did I understand you to say that?
Chartered in Utah. So, I mean, at a certain level, it is -- and I understand that you probably want to stay a little more focused on total amount length for Associates 126 11/12/02 - COMMERCE - RES. 000691, 020522 versus some of the other banks as opposed to actual number of loans. But I think there is some significance in this. I mean, how is it possible that a bank in Utah -- and I was fairly decent in geography in fourth grade, but that was a few years ago. I think what I know about Utah is it's fairly far away and somewhere in the middle to close to the west coast of the country. It's at least west of the Mississippi. How could they possibly make three times as many loans in Philadelphia as compared to First Union Bank, which is two blocks down the street? I mean, how would they even be in touch with people here in Philadelphia to have that kind of loan volume? And you're absolutely right. The number of loans is very high as compared to First Union. The dollar volume is very low. Now, I'm assuming there's a reason for that.
The bank is chartered in Utah because of the laws in that state, just as Delaware is a very attractive place for banks to be chartered. MNB is based in Delaware, rather than here in Philadelphia.
And you said this is primarily credit card lending to businesses? 127 11/12/02 - COMMERCE - RES. 000691, 020522
This happens nationally. This is something we see repeated in every single one of the 3rd District communities. And as I understand it, it's national.
But they're lending to businesses, are you saying? I mean, this is what this report is coming from?
Which the person is ostensibly using to run their business?
And do you have any information that would indicate -- I mean, why would that person go or have dealings with Associates as compared to First Union, PNC, Mellon, Commerce, Sovereign, Fleet, I mean, on down the line of very well known, very active players in this particular 128 11/12/02 - COMMERCE - RES. 000691, 020522 market? I mean, why would you go to Associates? I don't have anything against them. I don't know them. Fortunately, they haven't been in touch with me. I mean, why would you do that?
I mean, we're not some kind of small place in the middle of nowhere. I mean, this is still the fifth largest city in America. We've got a bunch of banks here. Why would I be dealing with Associates?
That would be the borrower's decision. Now, the banks that are here --
Well, hold on one second. Is that a borrower's decision or is that what the borrower is left to deal with?
I mean, people make a whole lot of decisions for a whole lot of reasons.
I believe it's -- Councilman. 129 11/12/02 - COMMERCE - RES. 000691, 020522
I don't know the reason why the borrower would prefer something from Associates versus one of the financial institutions.
Okay. Well, let me ask you this last question. I mean, is this -- when you look at this, is this of any concern to the Fed or the general banking community, that this kind of activity is going on? And does it raise any red flags with anyone?
It is of concern to me as head of the Community and Consumer Affairs Department of the Philadelphia bank. We've been watching it for a couple years. We started producing this report because we were seeing names show up not only here in Philadelphia, but in other parts of the 3rd District that were alleged to be high cost and/or predatory lenders. So we've been tracking who's lending and to whom, to the best these reports enable us.
What concerns me, and I think it's right down the line that you're talking 130 11/12/02 - COMMERCE - RES. 000691, 020522 about, is when you have Associates and GE Capital at and 15 percent of the market, then you look down 4 this chart here and you see that First Union is at 5 5 percent, Mellon is at 2.1. And to me, why aren't 6 these banks that I think would have to divulge to us 7 the interest rate that they're charging and 8 everything else that they're charging for a loan 9 playing a bigger role in here? And is it 10 accessibility, availability? And the Federal 11 Reserve should be able to provide us with some of 12 those answers. And, obviously, you can't. If you 13 go into the loan fund, and you can go into the loan 14 fund of these corporations, you could get the data 15 that we're asking for right here and make that 16 public. Because I believe in terms of making reasonable public policy for developing of inner City neighborhoods, we need that data.
The Federal Reserve is very concerned that people are borrowing with terms they don't understand or are too high and we've taken a position of trying to do our best to support financial education of all types throughout this City and the 3rd District and nationally.
The best indication 131 11/12/02 - COMMERCE - RES. 000691, 020522 is to provide the data so that people can have it at their hands and they might be able then to go -- instead of Associates, they might be able to go to Mellon or First Union. I have no further questions.
Well, that was interesting. Ms. Myers, were you able to finish your testimony?
And even if you weren't, you'd like to be done, right?
I understand. And we'd be pleased to have you. Who's next on the panel? I'm sorry. Go ahead.
Excuse me. There was one piece of information you asked me to send back to you -- oh, it was on the credit cards and the income spread of where the credit cards were. Anything else?
If anything else 132 11/12/02 - COMMERCE - RES. 000691, 020522 comes up, we'll get a letter to you. Thank you so much. Please identify yourself for the record.
Good afternoon. I'm Ray Desiderio. I'm the Senior Vice President of PNC Bank in Philadelphia. I'm also Chairman of the Community and Economic Development Committee of the Greater Philadelphia Urban Affairs Coalition. If I may take the liberty, Councilman Goode, I would just like to make one comment regarding the participation of the Philadelphia Federal Reserve Bank with the Greater Philadelphia Urban Affairs Coalition. As many people may know, the Community and Economic Development Committee of the GPUAC is constituted by a number of members in the community, some 40 members. Those members come from a variety of community development corporations, nonprofit intermediaries, quasi -- public and quasi-public agencies, and to some extent, some representatives of City government. And from time to time, we've invited in City Council members to participate with the Committee to take on a number of issues that relate to community and economic development and the availability of credit in the City of Philadelphia. 133 11/12/02 - COMMERCE - RES. 000691, 020522
Mr. Desiderio, in response to that, at your invitation, I spoke to a median in GPUAC's Committee on Community and Economic Development in September 2000 on the issue of small business capital access, discussing the findings of the Greater Philadelphia Capital Access report. That committee not only did not dispute those findings of September 2000, but the committee also said they embraced the recommendations of that report. We agreed upon a solution in terms of trying to address that disparity. The solution was that the banking members of the GPUAC Committee were going to put together a small pool, small business loan pool, for low and moderate-income neighborhoods. That was going to be an effort that was going to be led by you.
I will tell you that 134 11/12/02 - COMMERCE - RES. 000691, 020522 this committee, the Community and Economic Development Committee, had taken on for most of last year the issue of predatory lending, working with Councilwoman Tasco's office. I'm happy to report to you today that the seven banks that are members of that committee have put together a proprietary loan product to deal with victims of predatory lending. Our task now is to take on the small business lending. Certainly we do not dispute your numbers, Councilman Goode. Numbers are numbers and they're there. The issue is, how do we deal with the numbers and how do we put together programs that will improve capital access to low and moderate-income individuals and minority and women-owned businesses in the City of Philadelphia? That is a task, a primary task, of the CED Committee. We've incorporated that task in our bylaws. We're dealing with that task. And we look forward to working with you, your office and the offices of other City Council members. In addition, we'll continue to work very closely with our regulator, who has seen fit to support these issues. And, on the issue of predatory lending, has taken the lead on financial 135 11/12/02 - COMMERCE - RES. 000691, 020522 literacy dealing with victims of predatory lending. I feel compelled to say that because the Federal Reserve Bank in Philadelphia has always been a leader in community development. It's been the leader throughout the whole banking system. It continues to deal with issues that relate to unfair practices and disparity and lending practices. I feel compelled to do that because I've worked with them in my 30 years in community development in Philadelphia, and I welcome them around the table when we discuss these issues. You received the numbers from the Federal Reserve Bank, the Philadelphia, today. I feel that these numbers only tell part of the story of what Philadelphia banks do to advance economic and small business development in the City of Philadelphia. Certainly, many of the reported loans are comprised of conventional small business and commercial lending products and are made through normal bank lending channels. However, what isn't obvious is that a substantial portion of the loans reported are the result of special lending programs that are usually characterized by labor intensity, flexibility and 136 11/12/02 - COMMERCE - RES. 000691, 020522 affordability in granting credit in the City of Philadelphia. These loans may be proprietary, whereby each bank customizes its own responses to the community's needs. Or they may be a product of a government program, non-profit intermediary or multi-bank collaboratives. Some examples include loans through the Small Business Administration, Collaborative Lending Initiative, Philadelphia Micro Loan Fund and the Pennsylvania Community Development Bank. In some cases, the City of Philadelphia itself is the bank's partner in lending initiatives, such as in the empowerment zones and with the financial institution in those empowerment zones. Another part of the story that is behind the numbers is that significant portion of loans are to non-profits, for social and community development purposes, such as for Charter schools or day care centers. However, much of what the Philadelphia banks do are not even incorporated in small business lending numbers that are submitted each year to the Federal regulators. These form the basis of the Federal Reserve Bank's report. 137 11/12/02 - COMMERCE - RES. 000691, 020522 For instance, banks make operating grants to and serve on the boards of loan committees, of non-profit lending intermediaries, such as the Reinvestment Fund in Philadelphia, the Philadelphia Development Partnership, which you heard from today, and the Local Initiative Support Corporation. Banks are helping agencies make loans to CDCs and to small businesses that would not normally qualify for conventional bank loans through these cooperatives.
Banks also make capital investments in funds that invest in inner City or minority-owned businesses, such as the TRF Ventures Fund of Philadelphia, an offshoot of the Reinvestment Fund, and municipal and industrial revenue bonds and development tax credits. While qualified community development investments are not part of the bank's lending records, they are part of the bank's public record, as reported in public CRA performance evaluations of the banks. To conclude, a small effort on the part of interested parties will reveal an extensive public record of individual and group performance through the data collected and reported by the regulatory agencies. But beyond that, anyone who 138 11/12/02 - COMMERCE - RES. 000691, 020522 has been actively involved with neighborhood economic development in Philadelphia knows that the banks are and will continue to be the day in and day out partners of government, community groups and intermediaries in an ongoing effort. Thank you very much.
Thank you, Mr. Chairman. Mr. Desiderio, one other question. Will the bank members of the GPUAC Committee also comply with the fair lending law that now requires them to submit an annual statement of reinvestment goals with regard to small business lending in low and moderate-income neighborhoods?
Councilman Goode, I've been distracted. I'm going to ask you one more time. I'm sorry.
Will the bank members of GPUAC's Committee comply with the fair lending law that requires them to submit annual reinvestment goals of small business lending in low and moderate-income communities?
Well, you know, a number 139 11/12/02 - COMMERCE - RES. 000691, 020522 of the banks have ways to look at this and they do have statistical data around this. I think the question is that many of us are -- well, all of us are prohibited from collecting certain data because of fair lending regulations. And while the HUMDA data does provide for a lot of good information for the banks, the data collection on small business really prohibits us from doing that. This is an issue that's before the legislation --
The legislation asks you to submit goals on an annual basis. You are not prohibited from doing that. And the question is, will the group of banks that you work with at GPUAC submit annual goals and comply with that fair lending law?
Those that see fit to comply with that regulation and do business with the City will submit. Each bank has to make their own individual decisions on whether they want to share that information or not, and I can't speak on those banks' behalf.
Each bank has to make a decision of whether they want to do business with the City? 140 11/12/02 - COMMERCE - RES. 000691, 020522
If they want to do business with the City they will need to comply.
And they will have to make those individual decisions on their behalf. I can't speak for them on that issue.
Can you speak for PNC, whether PNC will comply with the fair lending law?
The ordinance that you have proposed and the ordinance that was passed --
-- was for community reinvestment goals. It was not for fair lending goals.
It was for community reinvestment goals as it relates to small business lending, home mortgages, home improvement loans and community development investments in low and moderate-income neighborhoods. As part of that, you would have to submit your goals for small business lending in low and moderate-income neighborhoods. Does PNC intend to comply with that fair lending 141 11/12/02 - COMMERCE - RES. 000691, 020522 law?
But I just want to avoid some confusion here. Fair lending laws are different from community reinvestment laws. It will be -- under the regulations we will and we do look at our market penetration in low-income, moderate-income and minority census tracts. We are not permitted to go into individual credit files to seek that information, nor are we permitted to collect that information under the current Federal regulation of the United States Government.
I just happened to refer to that particular ordinance. It's the fair lending law.
Let me just ask one question of Mr. Desiderio possibly and also possibly, Ms. Myers. I'm not asking you to explain the Federal statute. I'm certainly not asking you to violate the Federal statute. I am trying to understand, if you know, either one, why was the distinction made between the data you can collect for home mortgages versus the business loans? And, 142 11/12/02 - COMMERCE - RES. 000691, 020522 two, if you know, what was the rationale behind prohibiting the collection of certain data on the business loan side? I'm having some difficulty just understanding why.
Quite frankly, it was felt that the information, that information could lead to disparate treatment of individuals.
Well, why doesn't the collecting of the information lead to disparate treatment on the home mortgage side? I mean, it's not making any sense.
I mean, this requires a virtual out-of-mind, out-of-body experience. That somehow having more data could potentially lead to discriminatory impact, as opposed to having no data from which you can deduce nothing, make no analysis and never determine whether there's discrimination or not. I mean, it is beyond the armed forces' notion of don't ask, don't tell.
If we never have the information, you can never accuse us of anything 143 11/12/02 - COMMERCE - RES. 000691, 020522 because the answer is, we don't know.
I agree with you wholeheartedly. There were people outside of the banking industry, outside of the regulatory agencies that felt it wasn't the banks. It was others that felt that this information could lead to discrimination, that if it was part --
I cannot understand that. I mean, I'd like to think I'm a relatively intelligent person. It's, like, beyond my comprehension to understand why the mere collecting of data would negatively impact what you do. I mean, it's not like -- maybe with the exception of Associates. It's not like people walk into PNC or First Union or any of these places with a bag over their head or a burlap sack and sit down and say, I'd like to borrow some money for my business. I might tell you my name. I cannot tell you my gender, where I live, what I look like, what ethnic group or anything. They're sitting right there in front of you.
It's the law. 144 11/12/02 - COMMERCE - RES. 000691, 020522
I understand that. I got that part. I'm not disputing the law. It's like a higher body. I'm just trying to understand the rationale, if there is one, behind why you would want less data and then say having more might lead to discriminatory practices. It is so backwards, as to be unexplainable.
I don't disagree. I don't disagree. But the only way we can determine now on a minority or ethnic basis is to look at the census data in a census tract and determine whether that census tract has a high number of minority or ethnic populations. That's the only way. And we use that data to figure out our penetration in those census tracts. We use that data. If we had more data, I'm certain we would use that data.
Gotcha. Who's next? Please identify yourself for the record.
Good afternoon, Mr. Chairman. Good afternoon, other members of Council, and thanks for giving me an opportunity to be here today. I want to thank Dede Myers for coming to share with us the information and the numbers as 145 11/12/02 - COMMERCE - RES. 000691, 020522 they exist; to Ray Desiderio, who co-chairs the CED Committee and works on many of these issues day in and day out. On behalf of the banking community and the community at large, and also, for those of you who may have not had the opportunity to meet Don Kelly, Don Kelly is the new director of the CED Committee and works with me on the day-to-day programs and moving programs forward that the Committee sees that they want to have an effect on. I'm here as the President of the Greater Philadelphia Urban Affairs Coalition. Most of you know who we are. We've been around for more than 33 years. We act as an agent for change. We serve as an intermediary and we also operate programs in Philadelphia. The GPUAC and its predecessor organization, the Philadelphia Urban Coalition, was formed by the corporate and community -- was formed by corporate community and community activist leaders in response to urban unrest in the '60s. The programmatic experience of GPUAC that is most relevant to the concerns of this Committee involves the work of GPUAC's Community and Economic Development Committee, which I said before is co-Chaired by Ray Desiderio of PNC Bank and also 146 11/12/02 - COMMERCE - RES. 000691, 020522 co-Chaired by Rick Saur of the Philadelphia Association of Community Development Corporation. For more than a decade, this group coordinated the renowned Philadelphia Mortgage Plan, which dates back to 1975, through which over 65,000 low and moderate-income households obtained homes of their own through a partnership among progressive banks and housing counseling agencies. Those banks and their successors continue to be active members of the CED Committee. The tradition of working partnerships to collaborate in addressing current credit needs in lower-income communities continues with the Committee's current initiative to devise alternative loan products for predatory lenders, which Ray has already referred to. I know that our member banks are accessible at the highest levels and ready to respond to important community credit needs. They are flexible, resourceful and skillful in working in partnership in the public sector. The banks that are members of the GPUAC Committee are also actively engaged in Committee initiatives. The bank members include Beneficial Savings Bank, Citizens Bank, Commerce Bank, First Union National Bank, Fleet 147 11/12/02 - COMMERCE - RES. 000691, 020522 Bank, MNT, PNC and Sovereign. In his testimony, Ray Desiderio described the great range and variety of bank activities in support of small business lending and economic development. I would like to take the remaining time to give you some examples. And I know that this was referred to in previous testimony as anecdotal. But I think it is important to have real life experiences and real life understanding of specific programs that the various bank members have undertaken in the small business area. 4 million commercial loan to Harambee Institute of Science and Technology in West Philadelphia. The loan enabled this afrocentric charter school to purchase a site and construct an education facility for 220 students in low-income census tracts. This project, which contributes to the revitalization of 51st and Media, has defined its mission as one to create a Charter school of science and technology and to establish itself as a community-based center. 6 million in investments in the reinvestment fund and $1,325,000 in grants to fund 148 11/12/02 - COMMERCE - RES. 000691, 020522 small business activity in Philadelphia. This included $150,000 to the Campus Boulevard Corporation in Northwest Philadelphia to fund a feasibility study for small business development.
$200,000 to the Philadelphia Development Partnership, from which you've heard from before, which is a part of the GPUAC family, to fund services for neighborhood micro business and enterprise, including assistance in obtaining financing, technical assistance, business plan preparation and resource development. $525,000 to PIDC Regional Development Corporation to fund services to retain small businesses and jobs in neighborhoods. And $450,000 to the Sustainable Jobs Funds to fund start up, small businesses and job creation. In 2002, Sovereign Bank invested one million in the Pennsylvania Community Development Bank, and PNC Bank provided a five million dollar line of credit. The Pennsylvania Community Development Bank is a certified community development finance institution serving low and moderate-income areas of Pennsylvania. PNC Bank also invested two million in GS Capital, which is a 149 11/12/02 - COMMERCE - RES. 000691, 020522 $50 million SBA-regulated small business investment corporation, which focuses on minority-owned and women-owned enterprise. , a CDFI which will finance small businesses that receive entrepreneurship training and support services from the Universal Companies Small Business Development Center. The center serves low income and minority communities with a focus on South Philadelphia. As part of a $28 million commitment to West Philadelphia over five years, Citizens Banks has earmarked $10 million for economic development, investment and partnership with local development organizations. Citizens Bank will provide financing to qualified small businesses and owner-occupied stores operating along commercial corridors, including Lancaster and Baltimore Avenues. This is a sampling of what our member banks are doing. I hope you will agree that they certainly are making an impact in our community. We certainly want to work with Council as you continue to identify activities for the CED Committee, and we 150 11/12/02 - COMMERCE - RES. 000691, 020522 look forward to being a vehicle for that partnership. Thank you.