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New Markets - 1 pager - 1-99 - rtf.rtf
Page 1
SBA'S NEW MARKETS INITIATIVES
President Clinton's New Markets Initiative is a sweeping new public/private
partnership designed to boost business opportunities in underserved rural and inner
city communities. The key elements include: tax credits, loan guarantee incentives,
a network of private venture capital companies, and technical assistance and
mentoring programs.
SBA defines New Markets as current and prospective small businesses owned by
minorities, women, veterans and handicapped individuals, who are
underrepresented in the population of business owners compared to their
representation in the overall population, as well as businesses located or locating in
low- and moderate-income urban and rural areas.
The President's New Markets Initiative includes:
New Markets Tax Credits, worth up to 25 percent for investments in a wide
range of investment vehicles serving these communities, including community
development banks, venture funds and corporations, and other targeted
investment funds.
New Markets Venture Capital Companies (NMVCs), operating in a manner
similar to the SBA's Small Business Investment Company (SBIC) program, will
combine equity venture capital financing and technical assistance to smaller
businesses located in low- and moderate-income (LMI) areas. SBA's program of
between 10 and 20 NMVCs would have up to $100 million in SBA-backed
funding and $30 million in technical assistance grants.
LMI Investments and Outreach Workshops - SBA will create a new funding
mechanism to provide financial incentives to encourage SBICs and Specialized
SBICs to invest in low- and moderate-income (LMI) areas. The funding will be
provided to licensees in amounts that match the level of their investments in
small businesses that: 1) are located in LMI areas, or 2) hire at least 35 percent
of their workforce from among residents of LMI areas.
SBA also has organized a series of workshops to recruit potential SBIC investors
and management teams with experience in investing in small businesses in LMI
areas. Beginning in late March, workshops are scheduled for Chicago, Kansas
City, New York, Atlanta, Dallas and San Francisco.
America's Private Investment Companies (APICs), modeled on the Overseas
Private Investment Corporation, will provide up to $1.5 billion per year in
combined private capital and government-backed funding to finance equity
capital investment incentives for the creation or relocation of large-scale
businesses in inner cities and rural areas. The program will be a Department of
New Markets - 1 pager - 1-99 - rtf.rtf
Page 2
Housing and Urban Development (HUD) program administered jointly by HUD
and SBA.
BusinessLINC Initiative, a partnership between SBA, the Treasury Department
and the business community to encourage large businesses to work with small
business owners and entrepreneurs as technical advisors and mentors -
especially in America's rural areas and inner cities.
New Markets Lending Companies (NMLCs), a pilot program to involve
approximately 10 non-depository lending institutions that will make
SBA-guaranteed loans under the 7(a) loan program targeted to New Market
small businesses.
2/1/99 10:30 am
tax
SBA'S NEW MARKETS INITIATIVES
President Clinton's New Markets Initiative is a sweeping new public/private partnership designed
to boost business opportunities in underserved rural and inner city communities. The key
elements include: tax credits, loan guarantee incentives, a network of private venture capital
companies, and technical assistance and mentoring programs.
SBA defines New Markets as current and prospective small businesses owned by minorities,
women, veterans and handicapped individuals, who are underrepresented in the population of
business owners compared to their representation in the overall population, as well as businesses
located or locating in low- and moderate-income urban and rural areas.
The President's New Markets Initiative includes:
New Markets Tax Credits, worth up to 25 percent for investments in a wide range of
investment vehicles serving these communities, including community development banks,
venture funds and corporations, and other targeted investment funds.
New Markets Venture Capital Companies (NMVCs), operating in a manner similar to the
SBA's Small Business Investment Company (SBIC) program, will combine equity venture
capital financing and technical assistance to smaller businesses located in low- and moderate-
income (LMI) areas. SBA's program of between 10 and 20 NMVCs would have up to $100
million in SBA-backed funding and $30 million in technical assistance grants.
LMI Investments and Outreach Workshops - SBA will create a new funding mechanism
to provide financial incentives to encourage SBICs and Specialized SBICs to invest in low-
and moderate-income (LMI) areas. The funding will be provided to licensees in amounts that
match the level of their investments in small businesses that: 1) are located in LMI areas, or 2)
hire at least 35 percent of their workforce from among residents of LMI areas.
SBA also has organized a series of workshops to recruit potential SBIC investors and
management teams with experience in investing in small businesses in LMI areas. Beginning
in late March, workshops are scheduled for Chicago, Kansas City, New York, Atlanta, Dallas
and San Francisco.
America's Private Investment Companies (APICs), modeled on the Overseas Private
Investment Corporation, will provide up to $1.5 billion per year in combined private capital
and government-backed funding to finance equity capital investment incentives for the
creation or relocation of large-scale businesses in inner cities and rural areas. The program
will be a Department of Housing and Urban Development (HUD) program administered
jointly by HUD and SBA.
BusinessLINC Initiative, a partnership between SBA, the Treasury Department and the
business community to encourage large businesses to work with small business owners and
entrepreneurs as technical advisors and mentors - especially in America's rural areas and inner
cities.
New Markets Lending Companies (NMLCs), a pilot program to involve approximately 10
non-depository lending institutions that will make SBA-guaranteed loans under the 7(a) loan
program targeted to New Market small businesses.
NEW MARKETS TAX CREDIT
Summary
President Clinton announced January 15 that his FY 2000 budget includes a New Markets Tax
Credit to help spur $6 billion in private sector investment for business growth in low- and
moderate-income rural and urban communities.
Businesses in our nation's isolated rural communities and inner cities often lack access to equity
capital to grow and succeed. To help attract new capital to these businesses, President Clinton is
proposing a new tax credit for equity investments in these communities. Investors would be able
to claim a tax credit worth 25 percent of the amount invested, in present-value terms.
Investments in a wide range of investment vehicles focused on serving these communities would
be eligible for the credit. Over the next five years, these funds would be able to attract an
aggregate of $6 billion in new equity capital eligible for the tax credit.
What investment funds can use the tax credit? To provide flexibility and attract a range of
investors, investments in a wide range of community development investment vehicles would
qualify. Under the proposal, the Treasury Department would allocate tax credits to these
community development investment vehicles, entities whose primary mission is to serve low-
and moderate- income communities. These might include community development banks or
venture capital funds, community development corporations (including for-profit subsidiaries or
nonprofits), SBA-licensed Small Business Investment Companies focused on low- and
moderate-income communities, funds established under SBA's New Markets Venture Capital
Companies (NMVCs) - or other investment funds set up to serve low- and moderate-income
communities. Tax credits could also be provided for investments in designated national or
regional funds that, in turn, invest in local community development organizations.
What businesses would qualify? The community development investment entities would make
their own decisions, based on local knowledge and expertise, about what investments or loans to
make to help create and grow businesses in low- and moderate-income communities, subject to
certain rules designed to ensure that the businesses are operating in these communities. A wide
range of businesses could be funded by these investment entities, from small technology firms to
inner city shopping centers, from manufacturers with hundreds of employees, to retail stores.
How would the tax credit work? Community development investment entities - - whether local
organizations or national and regional funds - would apply to the Treasury Department for
designation. Designated entities would be given the authority to allocate a given amount of tax
credits to investors. The entities would use the tax credits to attract investment capital, and then
provide the investors with tax credit authorizations, worth approximately 25 percent of their
investment (in present-value terms). On their tax returns, the investors would claim a 6 percent
tax credit for each of five years of a mandatory minimum holding period on their investment.
The community development entities would report to the Treasury Department on the tax credit
allocations made, as well as on the use of the investment funds for qualified purposes.
The New Markets Tax Credits require authorizing legislation.
NEW MARKETS VENTURE CAPITAL COMPANIES
Summary
In the six years since President Clinton took office, the economy has created nearly 17.7 million
new jobs. Yet even during one of the greatest periods of sustained economic growth in American
history, we still have not achieved true equality of opportunity. Concentrations of poverty and
joblessness continue to have a devastating effect on the social and economic fabric of
communities across the country. This lack of opportunity is at the heart of our deepest social
divisions.
The evidence strongly suggests that there are attractive business opportunities in rural and inner
city communities that are not being met. Among the most critical needs of these communities is
access to equity investment and technical assistance.
President Clinton's New Markets Initiative is designed to make it more attractive to invest in
these communities and ensure that the opportunity to stimulate job growth, neighborhood
revitalization and economic development of America's untapped new markets is not lost.
SBA's New Markets Venture Capital Company (NMVC) is a key component of the President's
New Markets Initiative. It complements SBA's existing equity investment program,
encouraging small business expansion by providing intensive technical assistance and equity-
type capital in rural and inner city areas.
New Markets Venture Capital Companies
The SBA is proposing a program to fund between 10 and 20 New Markets Venture Capital
Companies (NMVC).
NMVCs will be venture capital companies that provide a combination of equity venture capital
financing and technical assistance to smaller businesses located in low- and moderate-income
(LMI) areas.
LMI areas are census tracts where at least 20 percent of the population is beneath the poverty
level, or where median family income is less than 80 percent of median family income for the
surrounding area. SBA also intends to include other areas in which economic development is
lagging, including HUBZones, Enterprise Communities, Empowerment Zones and counties with
persistent poverty.
The NMVC program will involve community-based development organizations whose managers
have established successful records in venture capital investing in small businesses. By providing
equity capital with intensive technical assistance, they play a major role in the creation and
expansion of small businesses in these areas. Their efforts have been severely limited by a lack of
adequate funding for both investments and technical assistance.
The NMVC program will meet this need by providing government-guaranteed long-term funding,
combined with technical assistance grants, to private for-profit community development venture
capital companies that will target their efforts in these geographical areas.
SBA will select applicants that meet the program's public policy goals. Existing community
development venture capital companies and groups with equivalent experience will be encouraged
to apply for NMVC status. SBA's objective is to fund a variety of organizational structures and
operating strategies, and provide the broadest geographical coverage possible.
NMVCs must be organized as for-profit entities and raise at least $5 million in investment capital,
which SBA will match up to $10 million for any single NMVC. The interest on the Government
funding will be deferred for the first five years. NMVCs must also obtain commitments to
provide at least $1.5 million in technical assistance funding over five years. SBA will provide
matching technical assistance grants. These grants will cover the costs of technical assistance
provided by NMVCs to the small businesses in which they invest.
SBA will require each NMVC to invest principally in smaller businesses located in LMI areas.
These venture capital investments will typically range between $50,000 and $300,000.
SBA is requesting $15 million to support a program level of $100 million, and $30 million in
technical assistance grants in the FY 2000 budget. Establishing the program will require
authorizing legislation.
SBA's SBIC Program
The NMVC pilot program will complement SBA's existing Small Business Investment Company
(SBIC) program. At the end of FY 98, the SBIC program had a total investment pool of $9
billion, up by more than $2.1 billion from FY 97. In FY 98, licensees made 3,456 investments
worth $3.2 billion in small businesses. Over the past 40 years, the SBIC program has provided
roughly $20 billion in equity and debt financing to more than 85,000 different companies. Many
of them have become household names: Intel, Apple Computer, Federal Express, America On
Line, Callaway Golf, Compaq, Sports Authority, Outback Steakhouse, Staples and Sun
Microsystems.
NEW MARKETS OUTREACH AND THE LOW- AND
MODERATE-INCOME INVESTMENT INITIATIVE
Summary
In the six years since President Clinton took office, the economy has created nearly 17.7 million
new jobs. Yet even during one of the greatest periods of sustained economic growth in American
history, we still have not achieved true equality of opportunity. Concentrations of poverty and
joblessness continue to have a devastating effect on the social and economic fabric of
communities across the country. This lack of opportunity is at the heart of our deepest social
divisions.
The evidence strongly suggests that there are attractive business opportunities in untapped rural
and inner city communities that are not being met. One of the most critical needs of these
communities is access to equity investment.
The president's New Markets Initiative is designed to make it more attractive to invest in these
communities and ensure that the opportunity to stimulate job growth, neighborhood revitalization
and economic development of America's untapped new markets is not lost.
SBA's New Markets Outreach and Low- and Moderate-Income Investment Initiative for
Small Business Investment Companies (SBICs) are key components of the President's New
Markets Initiative. They complement SBA's existing equity investment program, encouraging
small business expansion by providing equity-type capital in rural and inner city areas.
Outreach Workshops
President Clinton directed SBA to hold workshops to promote the Small Business Investment
Company (SBIC) program with the primary goal of encouraging the formation of SBICs focused
on meeting the needs of the underserved, primarily in rural and inner city areas. As a result, SBA
has expanded its existing efforts to recruit potential SBIC investors and management teams with
experience in investing in small businesses in these areas.
SBA has organized a series of six workshops designed to bring together three main
constituencies: 1) funding sources, primarily the banking community; 2) venture managers,
including existing SBICs and Specialized SBICs; and 3) community development organizations.
Beginning in late March, workshops are scheduled for Chicago, Kansas City, New York, Atlanta,
Dallas and San Francisco.
These workshops will result in the creation of new SBIC licensees, new interest in rural and inner
city investing, and a database of investment and community development professionals that will be
available to work with SBA on this effort.
LMI Investment Program
As part of its outreach effort, SBA is encouraging existing SBA licensed SBICs to seek out
investment opportunities in low- and moderate-income (LMI) areas, and is encouraging formation
of new SBICs that will focus their investments in these areas. In addition, the SBA will create a
new funding mechanism to provide financial incentives to encourage SBICs and Specialized
SBICs to invest in these areas.
LMI areas are census tracts where at least 20 percent of the population is beneath the poverty
level, or where median family income is less than 80 percent of median family income for the
surrounding area. SBA also intends to include other areas in which economic development is
lagging, including HUBZones, Enterprise Communities, Empowerment Zones and counties with
persistent poverty.
Under the LMI Investment program, SBA will create a new funding mechanism for licensees in
SBA's SBIC and Specialized SBIC programs. The funding will be provided to licensees in
amounts that match the level of their investments in small businesses that: 1) are located in LMI
areas, or 2) hire at least 35 percent of their workforce from among residents of LMI areas.
SBICs making LMI investments will be eligible for a new form of debenture financing, known as
LMI debentures. LMI debentures are debt instruments that are sold with an SBA guarantee in the
Nation's capital markets to raise funds. The funds raised are, in turn, provided to SBICs to
augment their private capital. The SBICs combine the debenture funds and their private capital to
finance their investments in small businesses. Interest on the Government funding will be deferred
for the first five years of the 10-year term. That gives SBICs more time to nurture their
investments in small businesses before they have to start making payments on the money used to
finance them.
As an additional incentive for LMI Investments, SBA will modify some SBIC regulations
involving control, minimum investment terms and the use of royalty payments.
The LMI Investment Initiative will fit within SBA's FY 1999 and proposed FY 2000 budget
levels for the Small Business Investment Company (SBIC) program. It will not require
authorizing legislation and can be established through changes in SBA's regulations.
SBA's SBIC Program
At the end of FY 98, the SBIC program had a total investment pool of $9 billion, up by more than
$2.1 billion from the end of FY 97. In FY 98, licensees made 3,456 investments worth $3.2
billion in small businesses. Over the past 40 years, the SBIC program has provided roughly $20
billion in equity and debt financing to more than 85,000 different companies. Many of them have
become household names: Intel, Apple Computer, Federal Express, America On Line, Callaway
Golf, Compaq, Sports Authority, Outback Steakhouse, Staples and Sun Microsystems.
P.8
U.S. SMALL BUSINESS ADMINISTRATION
ADMINISTA
AMOUNT
WASHINGTON, D.C. 20416
1933
AMERICA'S PRIVATE INVESTMENT COMPANIES
Summary
In the six years since President Clinton took office, the economy has created nearly 17.7
million new jobs. But we have not yet ensured that no community will be left behind.
Concentrations of poverty and joblessness continue to have a devastating effect on the
social and economic fabric of communities across the country.
The evidence is clear--there are attractive busi. opportunities in distressed inner city
and rural communities that are not being served. A key step to tapping these markets—
with purchasing power of over $85 billion per year according to the Harvard Business
School-is expanding access to private equity investment in business and industry that
serve these communities.
The President's New Markets Initiative is designed to make it more attractive to invest in
these communities and ensure that the opportunity to stimulate job growth, neighborhood
and economic development of America's untapped new markets is not lost.
The America's Private Investment Companies (APIC) initiative is a key component of
the president's New Markets Initiative. It will be a Department of Housing and Urban
Development (HUD) program administered by HUD and supported by SBA to combine
SBA's venture investment expertise with HUD's expertise in large scale economic
revitalization in distressed areas. It complements SBA's equity investment programs,
encouraging substantial business expansion into inner cities and rural areas.
America's Private Investment Companies
Described as "the domestic OPIC," it was inspired in part by the Overseas Private
Investment Corporation which encourages investing in emerging markets overseas. This
new program will provide equity capital for larger-scale businesses in inner cities and rural
areas. It will fund large, investment partnerships formed by private investors for this
purpose.
APICs will be organized as for-profit private venture capital funds with an estimated
minimum private capitalization of $100 million each. APICs will be eligible for twice that
amount in government guaranties on loans obtained from private sources. These
significant pools of investment capital will be available to take advantage of the
opportunities described above and will help to create good jobs in inner cities and rural
areas.
P.9
HUD and SBA will jointly solicit proposals for the creation of the investment partnerships.
Approximately five organizations will be selected. HUD and SBA will enter into a
negotiated financing agreement with each selected APIC. APIC investments will be in low
and moderate-income areas and have prior government approval for conformance with the
APIC program's public policy objectives. But it is private investors who will identify and
pursue the most promising business opportunities in the communities.
HUD/SBA anticipate that the budget request of $37 million in FY 2000 will provide $1
billion of government-backed private loans. Combined with a private equity investment of
$500 million by investors in the selected organizations, the program is expected to have a
total impact of $1.5 billion per year.
GANE
for
Cot
BUSINESSLINC
Summary
In the six years since President Clinton took office, the economy has created 17.7 million
new jobs. Yet even during one of the greatest periods of sustained economic growth in
American history, we still have not achieved true equality of opportunity. Concentrations
of poverty and joblessness continue to have a devastating effect on the social and
economic fabric of communities across the country. This lack of opportunity is at the
heart of our deepest social divisions.
The evidence strongly suggests that there are attractive business opportunities in
underserved rural and inner city communities that are not being met. One of the most
critical needs of these communities is access to technical assistance.
The President's BusinessLINC Initiative is designed to encourage and support mentoring
relationships between businesses. This will improve the commercial prospects of small
businesses and ensure that the opportunity to stimulate job growth, neighborhood
revitalization and economic development of America's untapped new markets are not lost.
BusinessLINC is a key component of the president's New Markets Initiative. It
complements SBA's existing small business counseling programs and encourages
small business expansion by providing mentoring and technical assistance from larger
businesses.
BusinessLINC Initiative
The BusinessLINC Initiative is a new partnership between the Federal government and
America's business community to encourage large businesses to work with small business
owners and entrepreneurs, especially in America's rural areas and inner cities.
BusinessLINC, which stands for Learning, Information, Networking, and Collaboration, is
designed to stimulate business-to-business relationships that will produce one-on-one
technical advice and consulting, classroom and group training, peer group consulting,
strategic alliances, and supplier and marketing development for small businesses.
BusinessLINC will help facilitate the technical advice and assistance, access to resources
and personal contacts that are necessary for small businesses to compete successfully.
SBA is requesting $3 million for this initiative in FY 2000.
The SBA and the Department of Treasury will jointly create mentor-protégé programs.
The Treasury Department program - Success Partnerships - will help increase the
participation of small, disadvantaged and women-owned businesses as contractors and
subcontractors by offering technical advice, financial and management skills, endorsement
credibility, and one-on-one advice from large companies. The SBA counterpart will seek
to enhance the capabilities of participants in the Agency's 8(a) business development
program, and to improve their ability to compete and receive Federal Government
contracts. In addition, SBA will expand ACENet (Angel Capital Electronic Network),
which helps link minority and women-owned businesses with investment capital.
SBA will recruit national and local organizations to advocate BusinessLINC strategies
through their networks, and encourage companies to 1) build them into their core business
strategies, 2) disseminate best practices, 3) create forums for businesses to exchange
information and practices, and 4) support an Internet website to encourage BusinessLINC
activities.
SBA will assemble a BusinessLINC leadership coalition of experts, comprised of both
public and private sector representatives. The coalition will work to expand
business-to-business relationships between large and small businesses and will provide
businesses with on-line information, resources, and a database of companies with an
interest in mentor or protégé programs (www.busineslinc.sba.gov)
SBA also will support activities throughout the Country that foster direct business
relationships between larger and smaller firms on specific projects.
The Federal Government's HUBZone Empowerment Contracting program also will
support the BusinessLINC initiative. Under the HUBZone program, up to $6 billion in
new federal contracts will be targeted to small businesses and distressed areas by the year
2000. In addition, it will widen the pool of potential government contractors and create
an estimated 25,000 new jobs in more than 7,000 rural and inner city communities.
Several large private sector firms have already committed resources to the project. Those
include:
GE Capital will expand its Small Business Colleges, which offer business advice to
entrepreneurs in distressed areas, and to open a fifth college in St. Louis and a new
pilot program for women business owners in Washington, D.C.
Science Applications International Corporation (SAIC) will execute joint marketing
agreements with small businesses and support relationships with small businesses in the
new HUBZone areas.
Chase Manhattan Bank will create a new program that will connect its senior bank
officers with women and minority small business owners, and a new partnership with
the National Association of Black Management Consultants.
Bell Atlantic will spend $1.8 billion, through a partnership with SBA, to increase
purchasing and subcontracting with minority and women-owned businesses.
NEW MARKETS LENDING COMPANY PROGRAM
Summary
In the six years since President Clinton took office, the economy has created nearly 17.7
million new jobs. Yet even during one of the greatest periods of sustained economic
growth in American history, we still have not achieved true equality of opportunity.
Concentrations of poverty and joblessness continue to have a devastating effect on the
social and economic fabric of communities across the country. This lack of opportunity is
at the heart of our deepest social divisions.
The evidence strongly suggests that there are attractive business opportunities in untapped
markets that are not being met. One of the most critical needs of these communities is
access to affordable commercial credit.
The President's New Markets Initiative is designed to make it more attractive to lend in
these communities and ensure that the opportunity to stimulate job growth, neighborhood
revitalization and economic development of America's untapped New Markets is not lost.
New Markets are current and prospective small businesses owned by minorities, women,
veterans and handicapped individuals, who are underrepresented in the population of
business owners compared to their representation in the overall population, as well as
businesses located or locating in low- and moderate-income urban and rural areas.
SBA's New Markets Lending Company Initiative is a key component of the President's
New Markets Initiative. It complements SBA's lending network, encouraging small
business expansion by providing debt financing to these untapped markets.
New Markets Lending Companies (NMLC)
SBA's proposed NMLC program is a limited term, limited participation pilot lasting
between 5 and 10 years. Under the pilot, the SBA will select approximately 10 non-
depository lending institutions to make SBA guaranteed loans targeted to New Market
small businesses.
NMLCs will make SBA guaranteed loans under the 7(a) General Business Loan Guaranty
program, the Agency's largest financial assistance program. Under the 7(a) program,
SBA guarantees up to 80 percent of a loan that is made by a commercial lender to a
creditworthy small business that cannot otherwise secure financing on reasonable terms.
SBA will select the NMLCs from applicants experienced in all phases of making, servicing
and liquidating loans, with a capital base sufficient to finance loan-making activities and a
strategy consistent with the program's public policy purpose of making loans to New
Markets small businesses.
SBA's monitoring and oversight of NMLCs will include annual safety and soundness
examinations, as well as the same program reviews that are required of other SBA lenders.
SBA will publish program eligibility criteria shortly, and expects to implement the program
no later than October 1, 1999.
Funding for loan guaranties made under the NMLC program will come from the SBA's
appropriation for 7(a) program loans, which is funded at a level of $10 billion for the
current fiscal year.
The NMLC program will fit into the existing SBA framework of the 7(a) program, which
provided guaranties on loans to nearly 42,270 small businesses in FY 1998. Those loans
amounted to more than $9 billion. Since 1992, SBA has guaranteed more than $49 billion
in commercial loans to more than 252,000 small businesses, more than in the previous 12
years combined.
atti .unk
Page 1
Remarks Prepared for Delivery
Wall Street Project Conference
Secretary Robert E. Rubin
January 15, 1998
I appreciate the opportunity to speak with you today. I would like to thank
Reverend Jackson for this invitation and applaud him for his leadership on the
issue of fostering opportunity in America's economically distressed areas. I
know Reverend Jackson has been enormously focused on this project. Since I
spoke at the first Wall Street project last year, he has held meetings around the
country with experts in finance, investors, bankers, and community leaders to
find practical ways to attract more capital to low income communities.
We meet at a time of tremendous strength in the U.S. economy. December
marked the 93rd month of the current expansion, making it the longest peacetime
expansion in history. Inflation is low. The unemployment rate is the lowest in a
generation and more Americans are working than ever before with 131 million
Americans working in December. The economy has created more than 17 million
net new jobs since January 1993.
And incomes are rising -- at all income levels. Economic expansion has
not always helped those at the low end of the pay scale. Low-wage workers were
left behind in the expansion of the 1980; in fact, their income actually fell during
the decade and a half before President Clinton took office, and income inequality
grew. But during the current expansion that trend may have started to reverse.
Families in all income groups have seen gains in income since 1993 and families
att1 unk
Page 2
in the bottom fifth of the income scale have experienced the largest increases in
income in recent years.
Moreover, this strong economy has greatly benefitted America's cities.
Unemployment in the fifty largest cities is down to 5.1 percent from 8.4 percent in
1992. And crime is down substantially.
But, while these developments are important, the reality remains that there
is an enormous amount to do to promote growth and opportunity in America's
urban and rural economically distressed areas, places fraught with poverty and
economic duress. I have long held the belief -- and more importantly, President
Clinton deeply believes -- that this country will fall far short of its full economic
potential for all Americans, unless our least well off have a real opportunity to
join the economic mainstream. Providing this opportunity is not simply a social
issue or a moral issue, but an economic issue of great personal importance to
each of us, no matter what our income may be or where we may reside. Just
think of the difference it would make in terms of higher productivity and reduced
social costs if we can bring the residents of these areas into the economic
mainstream.
From the beginning of his Administration, President Clinton has made
promoting growth in distressed areas a high priority. One of the most important
steps we can take for our inner cities and other distressed areas is to continue to
pursue the economic strategy of fiscal discipline, opening markets and investing
in people that has proved so successful for our economy as a whole. The
foundation for a successful strategy of promoting growth in distressed areas is
att1 unk
Page 3
strong economic growth, which in turn creates a tighter labor market, as we have
now, and thereby increases the availability of jobs and tends to increase incomes
at all levels. Too often, those who believe in the importance of fostering
opportunity in distressed areas underemphasize the importance of a strong
national economy in that pursuit, while those who do focus on a strong economy
too often neglect all else that is require for fostering growth in distressed areas.
Beyond economic growth, this Administration has focused on three key
areas -- three areas that are mutually reinforcing -- to promote opportunity and
growth in the inner cities and other distressed areas: first, investing in people
through education and training so they will have the tools to succeed in the
modern economy; second, improving public safety, by putting 100,000 new police
on the streets, enacting tougher gun laws and other measures, in part because
safe communities are an obvious prerequisite to attracting business; and third --
an area we are intensely focused on at Treasury -- expanding access to capital.
Let me now focus on that third area for a few moments.
Despite the fact that financial markets in the United States are today the
most innovative, the broadest and deepest in the world, we still have a severe
shortage of financial institutions and credit to create housing and jobs in our
inner cities and distressed rural communities. Treasury has been bringing its
broad expertise in capital markets to address these problems.
As a reflection of the importance we place on these issues, we have
established, for the first time in the history of the Treasury Department, an office
specializing in these issues, as well as on tax incentives for development in
att'i unk
Page 4
distressed areas, the Office of Community Development Policy.
Through that office - which has accomplished a lot in its relatively brief life
- we are focusing on three fundamental challenges going forward.
First, we must protect the Community Reinvestment Act, which expands
access to capital from mainstream financial institutions. We have greatly
improved CRA by streamlining its regulations so that they focus on performance,
not paperwork. CRA has been an enormous success. Over the last six years,
according to non-profit community groups, banks and thrifts have made
commitments to provide over $1 trillion in capital to low income communities.
Home Mortgage Disclosure Act data shows that since 1993, home loans to
African-Americans have increased by 58 percent, to Hispanics by 62 percent, to
Asians by 29 percent and to low and moderate income borrowers by 38 percent,
all well above the overall market. CRA is working. We believe strongly that it is
important to maintain CRA and we are opposed to any efforts to weaken CRA.
Second, we must strengthen the Community Development Financial
Institutions Fund, or CDFI. We will ask Congress this year for $125 million for
CDFI in the new budget to give this critical program the necessary resources to
continue its success. Over the last several years we have implemented President
Clinton's vision of a CDFI fund, which gives funding to small, community
development organizations. Through their local knowledge and expertise, CDFIs
are expanding the reach of the private sector marketplace, helping to
demonstrate how to make effective loans and investments in low income
communities, and drawing in mainstream institutions in partnership. We are also
encouraging more banks to get involved through Bank Enterprise Awards, which
att1 .unk
Page 5
are awarded to mainstream financial institutions that are active in distressed
areas.
At the same time, under the Vice President's leadership, we have started
BusinessLinc to connect local businesses with larger businesses, because
access to capital is most effective when married to access to business expertise
and technical assistance. Those of you in the business community can be of
enormous assistance to smaller firms, particularly firms in the inner cities, that
may be cut off from mainstream business networks. At the same time, experience
suggests that these BusinessLinc strategies are good for the larger firms' bottom
line as well. The Administration is seeking $3 million in SBA's budget to move
this initiative forward and would like to work with you to expand BusinessLinc
strategies across the country.
Third, we must build on our efforts to encourage economic growth in low
income communities through tax incentives for business investment. Over the
last several years, we have enacted a number of incentives, from the so-called
brownfields tax incentive to spur the clean up and redevelopment of thousands
of abandoned, environmentally contaminated sites in under-served communities
to two rounds of Empowerment Zones. We made the low income housing tax
credit permanent, and we are now proposing to expand it by 40 percent.
Building on these efforts, the President announced today a proposal for a
new tax incentive to spur the private sector to make equity investments to help
grow businesses in our nation=s cities and rural communities. This New Markets
Tax Credit could help foster $6 billion in new equity investment in low-income
atti.unk
Page 6
communities over the next five years. A community development investment
fund, if selected, would be able to offer potential investors a 6 percent tax credit
for five years, cutting the investors' cost of capital by 25 percent.
To provide flexibility and attract a range of investors, the tax incentive
would be available for investments in a broad array of community development
investment vehicles, from CDFIs and rural venture capital funds, to Community
Development Corporations that set up partnerships to attract new retailers in low
income communities. You heard this morning that SBA is creating two new
programs: New Market Entrepreneur Funds and America's Private Investment
Companies to invest in businesses in these communities. Investors in these
funds will also be able to obtain the tax credit.
1 remember from my time on Wall Street that there really had been no
practical means, even for professional investors, to invest in inner cities even if
they wished to do so. Hopefully, the creation of CDFI and other vehicles, and
this new tax credit, will interact to make investment opportunity more readily
available and to provide incentive for such investment. And that is not only good
for the inner cities and rural areas, it is a good for investors and for the country.
In the past few years, in Los Angeles, Boston, Chicago, and the Bronx, I have
seen firsthand the positive effects these community development institutions can
have in economically rejuvenating distressed neighborhoods.
This past year has been a year of significant crisis in the global economy, a
crisis that has affected hundreds of millions of people around the globe, in nearly
every country, including our own. While we must be and have been intensely
att1.unk
Page 7
focused on this crisis, because our own economic well being is integrally related
to the well being of the global economy, we must also remain focused on being
strong at home, and making sure the residents of our distressed areas have a
real opportunity to enter the economic mainstream.
The current strength of the U.S. economy provides an enormous
opportunity to make progress in promoting growth in our nation's communities.
The President's announcements today build on successful programs such as
CRA, the CDFI fund and a host of tax initiatives in a strong effort to make real
progress in bringing all Americans into the economic mainstream. And we at
Treasury look forward to continuing to work with you on a bipartisan basis on
these critical issues as we move ahead. Thank you very much.
Inc.'s first-ever "Inner City 100" issue
will draw. national attention to the
magnitude and breadth of inner-city
entrepreneurship and business growth.
Don't miss the opportunity to showcase
your advertising message in this
high-profile issue.
This major report is a unique collaboration between Inc. magazine and the Initiative for a Competitive
Inner City (ICIC), a national not-for-profit organization and dominant force in inner-city economic
development. Harvard Business School Professor Michael E. Porter, Chairman and CEO, has led the
four-year-old ICIC in its quest to identify successful inner-city companies and market opportunities,
competitive advantages of inner-city locations and the best practices for operating in these locations.
"By uncovering the most exciting growth companies in the inner-cities we hope to promote further
entrepreneurship and business growth and accelerate corporate America's recognition of the urban
business opportunity." - Michael E. Porter, Chairman and CEO, ICIC
The inaugural report on the fastest growing companies in core urban areas will be published in
Inc.'s May 1999 issue. Key features will include:
Ranking of the fastest growing inner-city companies in America
Stories behind the building of the "Inner City 100" companies
Urban Almanac: Identifies the biggest opportunities, the advantages of inner-cities for
entrepreneurs and the cities that dominate entrepreneurial growth
Best Practices: What to learn from growing inner-city businesses, such as
great hiring and training practices and where to find capital when banks say no
police distrixinkins of the Ad:
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to
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The "Inner City 100" are ranked based on their compound rate of revenue growth over the past five
years. Qualifying companies are independent, privately-held, for-profit corporations, partnerships or
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51% or more of physical operation in inner-city areas
Sales of at least $1 million in 1997
A five-year operating history that shows higher revenues
in 1997 than 1996
10 or more employees
Inc. defined the growing company market and for
20 years has delivered the most relevant business
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Contact your Inc. sales representative today!
Issue Date: May 1999
Closing Date: March 15, 1999
At a Conference on Wall Street Diversity, the President Finds His Own Stock Soaring
By JAMES BENNET
red, as speaker after speaker saluted his
seize the moment."
100, Mr. President
While under attack again by House pros-
achievements in a session that combined
To that end, Mr. Clinton proposed a Fed.
The President's predicament was much
ecutors in Washington. President Clinton
the whooping of a revival with the statistics-
eral initiative intended to stimulate $15 bil-
on the minds of those in the room An
was doused with praise yesterday for the
spouting of a shareholders meeting.
hon of new private investment in poor areas
appreciative murmur rippled through, for
economy's strength. likened to the Rev. Dr
When he finally stepped to the lectern, Mr.
over several years One element of the
example. when Ms. Taylor, the Essence
Martin Luther King Jr and generally cele.
Clinton observed that such nice compli-
proposal is $1 billion in tax credits spread
editor told him that because of his "brav
brated at a Wall Street conference bringing
ments were usually paid at funerals Break-
over five years. Another would provide $608
ery" in hiring women and members of mi-
together minority and white business lead-
ing into a grin, he jabbed a hand in front of
million in Federal spending, mostly for
nority groups, some hardened hearts are
ers
him and added, "And I don't think we're
guaranteed loans 10 increase such invest-
bent on punishing you
You done good. William Jefferson Clin-
there yet''' The crowd rose in a clamorous
ment
"We black women," she continued. "we
ion." said Susan Taylor, the editor of Es-
ovation.
Mr Clinton, who flew up to New York
just want to say thank you. thank you for
sence magazine. who advised him to "be
For Mr Clinton, It was another day of the
yesterday morning after icy weather had
including us. and not demonizing our men
gentle with yourself" because "only God is
brutal juxtapositions that have come to de.
postponed a flight scheduled for Thursday.
Dr Emma Chappell, president of the
perfect
fine his Presidency. As the House prosecu-
returned to Washington after the conference
United Bank of Philadelphia, said Mr Clin
Richard Grasso, the president of the New
tors declared that he had corroded his of-
for a fund-raiser last night on behalf of the
ton shared with Dr King. who would have
York Stock Exchange. told Mr. Clinton that
fice, he spoke, in speeches in New York and
Democratic National Committee.
turned 70 yesterday, a love of justice and
Dr. King was surely smiling down on the
Washington, of his hopes for renewing faith
For the White House, the day was another
civil rights
gathering
in government.
opportunity to demonstrate that neither
Tragically she said, "one was assassi-
He's recognizing what you've done for
In a wide-ranging. ruminative address
sleet nor snow nor prosecution in the Senate
this country, said Mr. Grasso, who de.
nated and one is now persecuted."
yesterday morning, the President spoke to a
would stay Mr. Clinton from his duties Such
C Michael Armstrong. chairman of the
scribed how the Clinton Presidency had
conference at the State Department on mak-
strategy aside, the President was plainly
benefited my little corner of southern Man-
AT&T Corporation. did not refer to the Pres-
ing government more efficient, saying that
enjoying himself. He clearly relished the
Associated Press
hartan
ident travails but nor was he stinting in
"this IS about, in my judgment, the preser-
praise as well as the opportunities to talk
President Clinton and Vice President A)
And the Rev Jesse Jackson, who organ-
praise of Mr Clinton's stewardship of an
vation of the vitality of democracy.
before appreciative audiences about the
Gore at a State Department gathering
economic boom
1200 the conference 10 promote diversity on
"To the extent that people do not believe
sorts of issues - government reform and
Wall Street, told the President that the only
yesterday on "reinventing government
"You had the courage to get it started."
their representatives will handle their mon-
economic development - that have been
people with "clean uniforms" were those
Mr Armstrong said. adding that everyone
ey for public purposes the way they them-
hallmarks of his quarter-century political
whose coaches lacked confidence that they
career
inged hall and, to an interviewer's question
was then able to take the greatest "econom-
selves would.' he said, 'democracy IS itself
could play the game
diminished.'
Yet the Senate trial was never far from
about the House prosecution, said "Been
1C ride in the history of the country.
Those who play have stains on their
Mr. Jackson also compared the President
Then, in his half-hour speech in Manhat-
sight One participant in the Wall Street
there. done that. There's nothing new in this
uniforms," Mr Jackson said as the crowd.
10 Dr King
tan, he argued that now was the time to act
conference was Lanny J Davis, former
whole thing.'
gathered at Windows on the World. at the
to "build a bridge between Wall Street and
What you are about as a public policy
White House strategist and spokesman, who
Several members of Congress, including
top of the World Trade Center. responded
leader represents the fulfillment of his
our greatest untapped markets": low-in-
now IS a lawyer in private practice - his
Representative Richard A. Gephardt of Mis-
with cheers and applause
dream," said Mr. Jackson, who then likened
come areas in the cities and the countryside.
name tag identified him as a representative
souri, the House minority leader, also at.
White House aides said they had learned
Mr Clinton to Babe Ruth. noting that Ruth
'If we can't do It now. when in the wide
of Motel 6, a client - but informally advises
tended the conference. Jack Kemp, the 1996
only at the last minute that Mr. Jackson had
was remembered for his home runs rather
world will we ever get around to it?" he
the President.
Republican Vice-Presidential nominee, was
than his strikeouts
arranged for the series of eight testimoni-
said "If there was ever a time when none of
Moments before Mr. Clinton arrived, Mr
seated before the lectern as Mr. Clinton
als, delivered before Mr Clinton spoke. The
"At the end of the day. what IS your box
us have an excuse, this is that time But the
Davis, illuminated by a television light,
President sat solemnly. his face growing
spoke. When the President said, "I always
score?' Mr. Jackson said "That's how God
world changes very fast, and we have to
stood at the back of the jammed, low-ceil-
liked him," Mr. Kemp shot back, 1 like you
judges us.
THE NEW YORK TIMES, TUESDAY, JANUARY 19, 1999
Keith Meyers/The New York Times
As his trial continued yesterday, President Clinton basked in praise at an economic conference in New York
City. It was organized by the Rev. Jesse Jackson, who greeted Representative Richard Gephardt. Page A9.
"All the News
That's Fit to Print"
The New York Times
VOL. CXLVIII
No. 51,402
Copyright o 1999 The New Yerk Times
NEW YORK, THURSDAY, JANUARY 14, 1999
" be yond the greater New York metropolitan
Project for Minorities Aims to Show Its Broader Mandate
also encouraged MCI Worldcom Inc.
Target Is Wall Street
and six other companies to include
minority-owned banks in their secu-
And Well Beyond
rities sales last year
Mr. Jackson's effort has embold-
ened some minority business leaders
By DIANA B. HENRIQUES
to promote his agenda. In one exam-
ple, analysts from Arlel Capital Man-
agement, a black-controlled mutual
Senior executives from several
fund and money-management com-
dozen blue-chip corporations will
pany in Chicago, now routinely ask
gather in New York today with hun-
executives about the diversity of
dreds of their counterparts at minor-
their boards and senior manage-
ity-owned companies for the second
ment, said John W. Rogers Jr., Ari-
annual economic conference organ-
el's president. "The Wall Street
ized by the Rev Jesse L. Jackson's
Project has made it easier to ask the
advocacy initiative, the Wall Street
question," he added. "And it is a
Project.
great way to see whether top man-
Like last year's event, the two-day
agement at a corporation gets it."
conference has a high-kilowatt guest
The project's leaders have lobbied
list that includes C. Michael Arm-
for Improvements In Federal Com-
strong, chairman of AT&T, and San-
munications Commission rules about
ford I. Weill, the co-chief executive of
minority ownership of media outlets
Citigroup - and, by the way, Presi-
and Small Business Administration
dent Clinton, three Cablnet members
Reuters
programs aimed at financing less
and other officials.
The Rev. Jesse L. Jackson, accompanied by Richard A. Grasso, New
affluent entrepreneurs. And it has
Once again, Mr. Jackson will use
York Stock Exchange chairman, recently gave reporters a preview of
pushed for new public-private pro-
the occasion to exhort corporate
the Wall Street Project's second annual economic conference.
grams to steer capital to the Inner
America to expand its "trade rela-
cities and Appalachia.
tionships" with the "emerging mar-
kets" in Inner cities and rural back-
picket lines and attended rallies -
But in a departure from both tradi-
in 107 American corporations, and It
tional shareholder activism and
waters, through employment, capital
proving that the fledgling project is,
intends to be an active shareholder.
investment and the purchase of
at the very least, a bully pulpit for
grass-roots political work, the Wall
Mr. Jackson has attended annual
the economic agenda that he has
Street project has as much to say to
goods and services.
meetings 10 urge corporations to re-
its supporters as it does to its adver-
But this year, Mr. Jackson will
promoted through his Rainbow/
solve existing disputes with minority
saries. And its message, Mr. Jackson
also be trying to demonstrate per-
PUSH Coalition for many years.
employees and to expand the busi-
says, is that "casting a ballot to vote
suasively that the Wall Street
And, like the grass-roots civil
ness they do with minority-owned
is not enough."
Project is operating with a broader
rights movement that first brought
suppliers, professionals and banks.
"We have to cast our proxy, too,"
mandate and a clearer focus than it
Mr. Jackson to prominence as a top
"This has always been part of Jes-
he said. "We have to exercise our
demonstrated at its debut confer-
aide to the Rev. Dr. Martin Luther
se Jackson's broader rhetorical
power as Investors."
ence last year.
King Jr., the Wall Street project IS
agenda, but now they're putting it
At least 30 corporations are help-
Despite its name, the project is
emerging as a first-class networking
into action," said Timothy H. Smith,
ing to sponsor this year's conference
aimed at expanding opportunities for
arena for minority business leaders,
the director of the Interfaith Center
events, up from barely a dozen last
women and minorities all across cor-
introducing them not only to main-
on Corporate Responsibility in New
year. And while last year's sponsors
porate America, not just on Wall
stream executives like Mr. Weill at
York. "I don't think any company
were largely from the financial-serv-
Street. "The term 'Wall Street' is
Citigroup but also to one another.
could ignore him. He can jawbone or
ices industry, this year's sponsors
simply symbolic of the entire finance
Emma C. Chappell, the founder
encourage or praise - and he also
and business culture," Mr. Jackson
include Boeing, the Frito-Lay subsid-
and chairman of the United Bank of
has the ability to launch a major
said in a recent Interview.
lary of Pepsico, the Xerox Corpora-
Philadelphia, cites her encounter
campaign against you If you don't
When he met with local groups
tion and the Stop and Shop super-
with Vernon Duckrey, who owns
respond."
market unit of Royal Ahold N V.
over the last year, he said, he fre-
more than 100 Burger King and
The Wall Street Project already
quently asked them to name five top
The Wall Street Project is a pro-
Pizza Hut franchises in southern
claims some successes. Several com-
political leaders, and "they all could.
gram of the Citizenship Education
New Jersey. The two black entrepre-
panies have added minority direc-
"Then I asked them to name five
Fund, an Ohio-chartered charitable
neurs have built their businesses a
tors to their boards at the group's
foundation that Mr. Jackson formed
top corporate C.E.O.'s, and there was
short distance away from each other,
dead silence," he continued. "We've
urging, and others, like the Boeing
15 years ago. The fund has supported
"But I had no Idea he existed until
Company, have begun to resolve
got to change that."
the project during Its embryonic
the Wall Street Project referred him
longstanding employee disputes af-
The Wall Street Project still has
stages and monitors its finances,
to me," Ms. Chappell said. "Now we
ter Mr. Jackson intervened
much of the fervor and facets of a
said Janice Mathis, an officer of the
are getting ready to finance some of
The project persuaded the General
fund and general counsel of the Rain-
grass-roots political organization. It
his new construction, and I've got a
Motors Corporation to undertake a
relies heavily on its founder's cha-
bow/PUSH Coalition In Chicago.
good new customer."
yearlong independent review of its
risma and access to top executives.
But most of the project's 1998 rev-
A new element added to the
And while Mr. Jackson says he pre-
minority dealer development pro-
enues consisted of the approximately
project's grass-roots format, Mr.
gram That review resulted in a blue-
fers private negotiations, in the last
$400,000 raised at last year's confer-
Jackson sald, is shareholder activ-
print to improve the program, which
year he has also led marches, visited
ence, Ms. Mathis said, and its 1999
ism. The project has purchased stock
is now being carried out. The project
budget relies heavily on tonight's
benefit, at which the poet Maya An-
gelou and President Clinton will be
the guests of honor.
A Test Case for Investing Inclusion
The project's main office IS in New
York Each of its new regional out-
posts in Chicago, Detroit and Los
By DAVID BARBOZA
Jackson and Mr. Farr say is all about investing in the
Angeles - is expected to be self-
"emerging markets of urban areas."
sustaining through local fund-rais-
"He comes to Wall Street looking for access to
ing. Ms. Mathis said. These offices, in
When the Rev. Jesse I.. Jackson opens up the Wall
capital," Mr. Jackson said last night. "And we're
most cases, are built around "trade
Street Project conference on minorities and invest-
going to work hard for him." Of Wall Street, he added:
bureaus," the local minority busi-
ment today, one of the central players is expected to
"They can't say they can't find a guy. They have a
ness clubs that have been run for
be Mel Farr, who heads the nation's largest black-
guy He comes to the plate with all the qualities."
years by the Rainbow/PUSH Coali-
owned auto dealership.
Indeed, over the last few decades, Mr. Farr, a
tion. Trade bureau members contrib-
Mr Farr, who operates dealerships in Michigan,
former pro football player, says he has turned a bunch
ute a minimum of $250 to join, their
Ohio and Texas, has been held up by Mr. Jackson as
of failing dealerships in the Detroit area Into a busi-
dues now entitle them to receive the
one of the nation's leading minority entrepreneurs, a
ness with more than $600 million in revenue. He built
Wall Street Project's monthly news-
prime candidate for Wall Street to look to If it is going
his business selling and leasing cars in poor neighbor-
letter, which says It has 3,500 sub-
to invest In minority businesses and neighborhoods
hoods, to minorities with little or no credit, often at
scribers
But Wall Street has not yet embraced Mr Farr's
high Interest rates He says that for many It is their
The Wall Street Project will be
effort to raise $45 million in a private placement of
only way to get transportation for some jobs.
constantly tempted to expand be-
asset-backed securities to expand his Mel Farr Auto-
Although he caters primarily to minorities, he
yond its shoestring budget simply
motive Group dealerships.
also has dealerships in largely white neighborhoods.
because the needs are so great, said
"I don't have anything concrete yet," said Mr.
His sales are often bolstered by television ads aimed
Chee Chee Williams, who directs the
Farr, who plans to meet this week with officials at
at blacks that feature "Superstar Mel Farr" with Mr
New York office. And Mr. Jackson
Citigroup and Goldman, Sachs & Company. "This is a
Farr in a sult and a red cape. And until recently, there
has often been criticized for spread-
test. We want inclusion I've got a portfolio of invest-
were also television ads that spotlighted a white actor
ing himself 100 thin and not following
ment grade, and now I want to see If they're going to
in commercials done for a dealership in Fairfield,
through on his ambitious agenda
Invest in an African-American business that does
Ohio, which Mr. Farr says illustrates how difficult it is
But his supporters do not seem
business in the African-American community."
to cross over in some areas. "It's a market that is
worried "I don't think we should
In some ways, Mr. Farr, 54, might be seen as a
primarily white Americans, and I didn't want to turn
expect him to do the follow-through,"
test case for the Wall Street Project. which Mr.
off those customers because 1 am black," he said
said Ms. Chappell, the Philadelphia
banker. "It is up to all of us to do
that."