October 06, 2008
Book Review-Good Policies For a Great America, published by Opportunity Finance Network
by Anne Moore Odell
A new collection of essays on the impact and possibilities of the opportunity finance industry is a
guidebook for the next President and Congress.
Congress and the President have their hands full with the current economic meltdown that is
threatening to drown Wall Street and possibly deluge Main Street as well. Much has been made about
the subprime mortgages and bad lending practices have helped create the current economic crisis. At
the same time, however, the finance industry and community development finance institutions (CDFIs)
are drawing up a roadmap to economic stability.
For the last thirty years, people
working in the opportunity finance industry have helped low income and low wealth people,
communities with little or no access to traditional banking services and small businesses gain
economic stability and freedom. The new book "Good Policies For a Great America," published by Opportunity Finance Network and
edited by Sandra Kerr and Cheryl Neas, offers essays by some of the leading minds of the
opportunity finance industry with specific recommendations for domestic policies designed to create
new opportunities for economic growth.
CDFIs have successfully been lending to the
low-income markets where traditional institutions and subprime lenders have failed. The
foreclosure rate on mortgages made through CDFIs is incredibly low, under 1% for most CDFI
mortgages. This compares with the 20% of mortgages offered by subprime lenders which have been
The Opportunity Finance Network (OFN) is the national organization for
CDFIs. OFN notes that CDFIs have brought over $25 billion in financing to under-banked communities
over the past three decades. Using the market to help create opportunities, OFN points to the
success of CDFIs' use of federal funding. The US Treasury Department reports that every dollar of
federal money invested with CDFIs leverages between $19 and $27 in new private sector investments.
Although the demand for loans from the federal CDFI Fund has increased rapidly, showing a
122% increase in 2008, the level of federal funding has been lowered 46% between 2001 to 2006. One
of the top policy recommendations in "Good Policies For a Great America" is increased funding for
the US Treasury Department CDFI Fund, with a minimum of $250 million a year.
the book's strong recommendations is making the New Market Tax Credit (NMTC) permanent. The NMTC
allows individual and corporate investors to claim a tax credit worth 39% of their initial
investments in Community Development Entities (CDEs). The tax credits are distributed over seven
years. CDEs make loans and capital investments in communities underserved by traditional banks.
The collection of essays covers many topics concerning the opportunity finance industry,
including small businesses, nonprofits, homeownership, rural revitalization, the environment, and
asset accumulation and protection. While the book was written before the current financial crisis
and the shake-up at Fannie Mae and Freddie Mac, much of the CDFI community was well aware of what
was on the economic horizon, with calls throughout the text for greater regulation and oversight of
mainstream and federal banking.
One of the strengths of the diverse essays included in the
book is that instead of pointing fingers, every one of the essays offers specific and concrete
steps for the federal government to take to strengthen communities all over the United States.
Every essay also includes a case study of how an individual, small business or non-profit was able
to prosper with the help of a CDFI.
Two goals of many of the policies presented the book
are, first, encouraging the Federal government to make public markets more inclusive and, second,
developing assets to make the assets "market ready." For example, public markets can be more
inclusive by fully funding the Federal CDFI Fund and within the Fund, creating a research program
that would work to create new financial products to help poor communities.
Kerr and Neas not only poor communities gain from strengthened policies regarding funding for
opportunity finance; the entire US population is made stronger. The book states: "Markets are the
mechanism for wealth creation in our nation and determine which people, places, and assets get
included. Economics is not a zero-sum game-when one person gets richer, it does not mean that
another must get poorer. Having more people and places participate in the market economy
contributes to the country's overall economic condition. As long as significant numbers of assets
are left out, the market economy is not performing to its potential."
finance movement is not asking for handouts or special deals for only certain sections of the
population. It embraces the market and calls instead for the federal government to help make the
market more inclusive. For people inside and outside government, "Good Policies For a Great
America" is a both primer to the current federal funding sources that support opportunity finance,
and a guide for the directions the opportunity finance industry could help lead the economy in