Overview
Title
To make reforms to provide support for minority depository institutions, community development financial institutions, and minority lending institutions to promote and advance communities of color through inclusive lending, and for other purposes.
ELI5 AI
H.R. 9767 is like a big plan to help banks that support people with less money, especially in neighborhoods where lots of different people live. It wants to give these banks extra money and tools so they can help even more people start businesses and make their communities better.
Summary AI
H.R. 9767 aims to strengthen financial institutions that serve minority communities by providing additional support and resources. It establishes an Office of Diverse and Mission-Driven Community Financial Institutions within the U.S. Treasury, promotes diversity through data submission requirements, and allocates $4 billion for capital investments and grants to enhance technology and support new institutions. Furthermore, the bill introduces programs to assist young entrepreneurs and increase transparency by mapping these financial institutions' locations and activities.
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AnalysisAI
General Summary of the Bill
The proposed legislation, entitled the "Promoting and Advancing Communities of Color Through Inclusive Lending Act," aims to reform financial support structures in the United States, particularly focusing on institutions that serve communities of color. The bill targets minority depository institutions (MDIs), community development financial institutions (CDFIs), and minority lending institutions, intending to enhance financial inclusivity and support economic development in underserved communities. The bill outlines measures such as financial incentives, technological support, creation of new financial programs, and the establishment of an interactive map to track and promote these community-focused financial entities.
Summary of Significant Issues
One primary concern highlighted is the allocation of $4 billion to the Emergency Capital Investment Fund without detailed accountability mechanisms, raising potential risks of inefficient or wasteful spending. Additionally, the bill mandates that 40% of assistance to CDFIs be exclusively reserved for minority lending institutions. While well-intentioned, this directive could inadvertently sideline other community institutions in need of funds, thus leading to possible inequities.
Another notable issue is the establishment of new offices and roles, such as the Office of Diverse and Mission-Driven Community Financial Institutions, which could increase administrative costs without assured outcomes. The bill also carries ambiguities regarding terms like "minority lending institution" and "young entrepreneurs," which may lead to legal uncertainties and inconsistent eligibility across programs.
Potential Impact on the Public
The proposed legislation may broadly impact the public by promoting financial access and economic participation among communities of color. By channeling resources to financial institutions tailored to underserved areas, the bill seeks to boost financial literacy, inclusivity, and economic growth in these regions. However, questions about resource allocation and administrative costs may lead to concerns about the effectiveness of these measures among taxpayers.
Impact on Specific Stakeholders
Minority Lending Institutions and Communities of Color: These groups stand to benefit substantially from the bill's provisions, particularly from reserved funding and technology grants aimed at increasing financial service access and reducing systemic barriers.
Community Development Financial Institutions: CDFIs could face mixed outcomes; while some institutions may receive increased funding and support, others might experience restrictions due to the mandated funding allocations favoring minority lending institutions.
Young Entrepreneurs: For young individuals aspiring to start businesses, especially in underserved communities, the Supporting Young Entrepreneurs Program could provide much-needed financial assistance. However, without clear criteria for participation, some young entrepreneurs might be excluded.
Financial Regulators and Treasury: These entities would take on new responsibilities, potentially increasing their workload. While intended to foster better interagency cooperation and support financial institutions, the added bureaucracy could lead to inefficiencies or barriers unless managed efficiently.
In summary, while aiming to foster economic progress in communities of color, the bill carries potential drawbacks related to financial governance, implementation complexities, and defining clear guidelines for stakeholders. As it moves forward, careful consideration of these aspects will be crucial to achieving its intended goals effectively.
Financial Assessment
Summary of Financial Allocations in H.R. 9767
The bill introduces significant financial measures to support institutions that lend to minority communities. One of the primary financial allocations is the authorization of $4 billion to the Emergency Capital Investment Fund. This allocation aims to provide capital investments and grants, enhancing technology and supporting new financial institutions. Additionally, the bill outlines provisions for technology grants and assistance programs, with set funding limits for certain initiatives.
Detailed Financial References and Associated Issues
$4 Billion Authorization: Section 3(a) authorizes up to $4 billion for the Emergency Capital Investment Fund. While this amount signifies a substantial investment in minority depository institutions (MDIs) and community development financial institutions (CDFIs), it raises concerns about the potential for inadequate accountability mechanisms. With such a sizeable allocation, there is a risk of wasteful spending unless stringent oversight and accountability measures are in place to track how the funds are utilized.
Technology and Grant Funding: The bill authorizes up to $250 million in aggregate for technology grants under Section 3(d)(3). Additionally, there is a pilot program for establishing new CDFIs and MDIs with up to $100 million in funding, as outlined in Section 3(e)(4). Although these allocations aim to address specific challenges and promote growth, the issue of broad discretion given to the Secretary in determining appropriate activities could lead to favoritism and lack of transparency. Clear guidelines are necessary to ensure fair and transparent distribution of these funds.
Young Entrepreneurs Program: Section 4 proposes a program to support young entrepreneurs with financial awards, drawing from the Emergency Capital Investment Fund and other appropriated funds, but not exceeding $100 million. However, the lack of clear criteria for evaluating the effectiveness of this program and the absence of a defined term for "young entrepreneurs" might result in financial mismanagement and inequitable distribution of funds.
Additional Concerns: There are concerns about potential inequities due to the reservation of 40% of assistance for minority lending institutions, as specified in Section 2(a)(1). This could inadvertently restrict funding from reaching other deserving institutions. Furthermore, the creation and maintenance of an interactive map, as described in Section 5, does not include specified funding limits or safeguards, leading to potential unchecked spending.
Conclusion
H.R. 9767 makes significant financial commitments to bolster minority lending institutions and related efforts. While the proposed allocations exhibit an intent to foster inclusivity and economic empowerment, several issues highlight the need for clear governance structures, defined eligibility criteria, and regular oversight to ensure accountability and prevent financial mismanagement.
Issues
The authorization of $4,000,000,000 for the Emergency Capital Investment Fund in Section 3(a) raises concerns about inadequate accountability mechanisms, which could potentially lead to wasteful spending.
In Section 2(a)(1), the requirement that 40% of assistance to CDFIs be reserved for minority lending institutions may inadvertently neglect the funding needs of other deserving community institutions, potentially leading to inequities.
Section 2 defines 'minority lending institution' by referencing another Act, which could cause confusion if the definition in that Act changes over time, introducing legal ambiguity.
The establishment of multiple new offices and positions in Section 2(e) might raise concerns about increased administrative costs without clear evidence of efficacy or necessity in achieving the intended outcomes.
Section 3(d)(2)(C)(ii) gives broad discretion to the Secretary in determining what constitutes appropriate activities for grant funds, which could lead to favoritism and lack of transparency.
The provision in Section 4 allowing the Fund to use up to $100,000,000 from the Emergency Capital Investment Fund without clear criteria for evaluating the effectiveness of programs for young entrepreneurs could lead to financial mismanagement.
The language in Section 4 does not define 'young entrepreneurs,' leading to uncertainty and potential unfairness in program eligibility.
Section 5 does not specify funding limits or safeguards for creating and maintaining an interactive, searchable map, leading to concerns about unchecked spending.
In Section 8, the lack of clear criteria or process for granting access to the discount window for MDIs and CDFIs could result in inconsistent application, potentially causing financial mismanagement.
Section 6 imposes additional data collection requirements on CDFIs without clear justification, potentially increasing the operational burden on these institutions.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The section provides the short title of the Act, which can be referred to as the "Promoting and Advancing Communities of Color Through Inclusive Lending Act."
2. Strengthening diverse and mission-driven community financial institutions Read Opens in new tab
Summary AI
The bill amends the Riegle Community Development and Regulatory Improvement Act to strengthen support for minority lending institutions by reserving a portion of assistance for them, establishing an office to oversee this support, and requiring detailed diversity reports. It also creates an Office of Diverse and Mission-Driven Community Financial Institutions within the Department of the Treasury to provide resources, monitor financial inclusion, and enhance coordination among federal agencies to promote diverse community financial institutions.
3. Capital investments, grants, and technology support for MDIs and CDFIs Read Opens in new tab
Summary AI
The section provides for $4 billion to be allocated to support minority depository institutions (MDIs) and community development financial institutions (CDFIs) with capital investments, grants, and technology support. It includes funding for technology improvements, a pilot program for establishing new MDIs and CDFIs, and requires a study and report on technology challenges faced by these institutions, with a specific focus on enhancing their technological capabilities.
Money References
- (a) Authorization of appropriation.—There is authorized to be appropriated to the Emergency Capital Investment Fund $4,000,000,000.
- “(3) FUNDING.—The Secretary may use amounts in the Emergency Capital Investment Fund to make grants under paragraph (2), but not to exceed $250,000,000 in the aggregate.”
- “(4) FUNDING.—The Secretary may use amounts in the Emergency Capital Investment Fund to make grants under paragraph (2), but not to exceed $100,000,000 in the aggregate.”. (f) Guidance for subchapter S and mutual banks.—Not later than 30 days after the date of enactment of this Act, the Board of Governors of the Federal Reserve System and the Secretary shall issue guidance regarding how Emergency Capital Investment Program investments (whether made before or after the date of enactment of this Act) are considered for purposes of various prudential requirements, including debt to equity, leverage ratio, and double leverage ratio requirements with respect to subchapter S and mutual bank recipients of such investments. ---
4. Supporting Young Entrepreneurs Program Read Opens in new tab
Summary AI
The Supporting Young Entrepreneurs Program is a new initiative established by the Fund to provide financial support to community development financial institutions with successful programs that assist young entrepreneurs in obtaining startup capital for small businesses. The program does not require matching funds and may use up to $100 million from the Emergency Capital Investment Fund, as well as any additional funds Congress allocates for it.
Money References
- “(3) FUNDING.—In carrying out this subsection, the Fund may use— “(A) amounts in the Emergency Capital Investment Fund, but not to exceed $100,000,000 in the aggregate; and “(B) such other funds as may be appropriated by Congress to the Fund to carry out the Supporting Young Entrepreneurs Program.”.
5. Map of minority depository institutions and community development financial institutions Read Opens in new tab
Summary AI
The section requires the Secretary of the Treasury, with input from the CDFI Fund and Federal banking agencies, to create an online map showing the locations of minority depository institutions and community development financial institutions. This map will also include links to each institution's website and uses specific definitions for terms like "CDFI Fund," "community development financial institution," "Federal banking agency," and "minority depository institution."
6. Report on certified community development financial institutions Read Opens in new tab
Summary AI
The section amends the Riegle Community Development and Regulatory Improvement Act of 1994 to require an annual report on certified community development financial institutions (CDFIs). This report must include detailed information about the types, locations, and services of these CDFIs, as well as data on loans, investments, and services offered in their target markets, to increase transparency while minimizing reporting burdens.
7. Consultation and minimization of data requests Read Opens in new tab
Summary AI
The amendment to the Riegle Community Development and Regulatory Improvement Act requires the Fund to consult at least annually with Federal regulators of community development financial institutions (CDFIs) to reduce duplicate data requests and speed up certification processes. It also defines which Federal agency acts as the 'applicable Federal regulator' based on whether a CDFI is regulated by the Bureau of Consumer Financial Protection or an appropriate Federal banking agency.
8. Access to the discount window of the Federal Reserve System for MDIs and CDFIs Read Opens in new tab
Summary AI
The Federal Reserve Board of Governors is required to create a system that allows minority depository institutions and community development financial institutions to use the discount window at the current seasonal credit interest rate listed in the Federal Reserve's statistical releases.
9. Study on securitization by CDFIs Read Opens in new tab
Summary AI
The Secretary of the Treasury is tasked with conducting a study on how Community Development Financial Institutions (CDFIs) use securitization, any challenges they face in using it to gain liquidity, and any governmental powers that could help support its use to benefit underserved communities. Within one year of the law's passage, a report on the findings and suggestions for encouraging responsible securitization to assist CDFIs will be provided to key congressional committees.