Panel III - Thinking Outside the Bank: How Groups In Your Community Can Help You Reach the Unbanked

DR. SMITH: If I may have your attention, please. The final panel of the day, not necessarily the final presentation, but the final panel of the day has not just three panelists, but has four panelists because they heard the quality of questions you were using in the morning. And more people wanted to be here to make sure we can adequately respond to the brilliance of the audience.

Leading this panel and its moderator is a person who was Chief of Staff for nine years on Capitol Hill, was the Deputy Administrator for Government Contracts and Business Development for the Small Business Administration, and who currently is with the American Bankers Association as the Director of Community Development. Wait until you see this panel, it's going to be something. This is James Ballentine. Please welcome James to the platform.

MR. BALLENTINE:Good afternoon. I want to thank the FDIC for holding this event, and for putting this panel together. I thank them not only for that, but some 39 years ago, I was born over in Anacostia, Washington, D.C., southeast D.C. And for those of you that don't know Anacostia, it's two Harlems and a Brooklyn put together. And for me to be standing at the National Press Club speaking was a dream of mine, and I'm glad that it was accomplished at this event.

We are going to do two things today. We're going to practice the three Cs. We're going to be clear, we're going to be concise, and we're going to be correct for this panel. We are also going to practice the five Bs. Please, ladies, this may not apply to you. The five Bs being "Be brief, brother, be brief." And we will be brief this afternoon because we want to hear what you have to say.

Our panel is, "Thinking Outside The Bank: How Groups In Your Community Can Help You Reach The Unbanked". I don't want to brag, but I think we are the best lineup here. We have a distinguished lineup of people that we believe can provide you with the best information.

When using the word "tap" or "tapping" as a verb, Webster says that it means "to draw to, or to draw from, or to cut into, or to connect to." Webster defines markets as "a geographical area of demand for commodities." Although there is no definition of unbanked, some have said that it is people who do not have a banking relationship with a traditional financial institution, such as a commercial bank or savings and loan.

For purposes of this panel, we will try to define it as a way that banks can connect with people who do not have a banking relationship by cutting in or drawing from the profits that check cashers are making in geographical areas.

Who are those unbanked? You've heard many of the statistics that are out here, 10 million. Yesterday I heard 22 million when I was down in Atlanta. The numbers are all over the place. What we do know is that there are unbanked, and we want to reach them.

Who are these unbanked? They are family, friends, neighbors. They're black, they're white, they're Asian, they're Hispanic. How do we stop this cycle is what we want to address on this panel. It is simple. We have to stop this cycle by listening, and learning, and applying what we leave here with. My pastor often says, after he gives a prayer, he says thank you, and I hope that it is something that you not only have heard, but that you will apply. And it doesn't make any difference what we hear here today if we don't go back to our institutions and to our community organizations, and apply it, all this work was for naught.

Today's panel will share with you how bankers have formed partnerships with community networks to reach the unbanked. It is important that we be frank with each other as we discuss this important issue. For years, the relationships between banks and community groups have been fractured. For years, the relationship between banks and the unbanked have been fractured.

I believe that dramatic steps, and I want to repeat that, that dramatic steps have been taken over the past few years. But clearly, by the fact that we're having this event, more work needs to be done. I'm going to stop my preaching now because Reverend Flake, I can start preaching also, but I'm going to stop and let you all hear from our panelists today.

I will introduce them in the order that they will speak. First up is Ernest Skinner. When we were on a conference call talking about what we were going to talk about today, Ernest said, "Tell them" I can't even do your accent. "Tell them I'm a community activist", is the way he says it. But Ernest is a friend, and he is Vice President and Community Relations Director of Citibank in the Mid Atlantic region right here in Washington.

Ernest maintains an active interest in civic and professional affairs beyond his job responsibilities. He is head of a number of organizations here in the Washington, D.C. area, and he is also and Ernest, I didn't know this the 2002 winner of the Minority Business and Professionals Development Network "Fifty Influential Minorities in Business". Outstanding. Outstanding. He also has more hair on his face than I have on my head, so that's very good, Ernest.

The next person is Cynthia Amador. Cynthia is President and CEO of CHARO Community Development Corporation. She has over 18 years of economic development experience, and is nationally recognized for her program design expertise. She has also been very instrumental in designing and implementing marketing campaigns that create a new venture or business relationships with local, state, and federal entities. It's a pleasure to have you here, Cynthia.

The next speaker with be Clara Martinez. Clara joined Wachovia's Training and Development Department in 1993, and currently manages the Strategic Programs Team within the Community Development Group. Wow, very impressive. A line banker with over 20 years of commercial, real estate, and international expertise, Clara and her team are responsible for the programs generated by the Federal Home Loan Bank of Atlanta, the BEA[Bank Enterprise Awards]. You know about the BEA, don't you, Dr. Flake. You sure do. And she's also designed and implemented the Financial Literacy Services strategies, such as Borrow Smart, eCommunities First, and Money Smart. Pleasure to have you here.

Our last speaker has a two page bio here, because he's so impressive, I should read it just to punish you. But former Congressman Floyd Flake when I was on the Hill, I would literally stop him in the hall, and I was a young legislative director, younger than I am now, and he would stop and he would speak to you for as long as you wanted. And he's a very, very kind person.

Dr. Flake is Senior Pastor of the more than 17,000 member Greater Allen A.M.E. Cathedral of New York in Jamaica, Queens. And he's also President of Wilberforce University in Ohio. During his 28 year pastorate, Allen has become one of the nation's foremost Christian churches and development corporations. The church and its subsidiary corporations operate with an annual budget of over $34 million. The church also owns expansive commercial and real estate residential developments, a 500 student private school funded by Reverend Flake and his wife, Elaine. And various commercial and social services enterprises.

He is a leader that has been spotlighted on CNN, CBS, BET, C Span. Dr. Flake has been everywhere, and we just love him, and we appreciate his being here today. First person up, Ernest Skinner.

MR. SKINNER:Thank you, James. This accent is a southern accent. Yes, south of Florida in that wonderful twin nation of Trinidad and Tobago, better known as Paradise.

You know, as I came to the podium, I was thinking some wise person once said that, "At this juncture sometimes in programs that everything that had to be said had been said, but there were some people who were still to be heard." So, unfortunately, I am one of those people who are yet to be heard. And I will try to stay as a matter of fact, I promise to stay, Jim, within the time line that you accorded me. Half an hour, you said? Okay. But, ladies and gentlemen, I am happy to be one of the panelists. And given that, as James indicated, I'm the Director of Community Development for Citibank in the Metro area, I will speak about the activities, mainly what Citibank has been doing to reach out into the community. And further, given the discussions earlier about Individual Development Accounts, I thought that it might be good to give a sense of what we have done, and what we're in the process of doing.

We came into this marketplace in 1986, and by 1997, I became aware of an organization that was embarking on Individual Development Accounts program here in Washington, D.C. And I was invited to a meeting by one of my colleagues from a foundation, the Moriah Foundation, I believe. And I'm almost sure it was Christine Robinson. And I thought I was just going to another one of these meetings where we have a good meal, you know, and go back to the office.

To my surprise, I learned of this new development something similar to an Individual Retirement Account where low to moderate income people would have a matched saving program, where if they wanted to acquire an asset and an asset as defined would be purchasing a home, starting or expanding a small business, being involved in post secondary education or job training that if they were to save money, that it would be matched. And I thought to myself, what a wonderful idea.

And I went back to the office, and I called the Executive Director of the program and said I really would like to get to know more about it. And they took some time to explain to me what they were doing. And the organization involved is a group that we hear called the Capital Area Asset Building Corporation. Dick, are you in the audience? Where are you? Dick, would you stand? That's Dick Hall, the Executive Director of the Capital Area Asset Building Corporation.

You know, it was said, let's see the face of the unbanked. Well, we also need to see the faces of the people who are working to change that unbanked status. And what impressed me about the Capital Area Asset Building Corporation was that they were a group of community organizations. Remember what I said, I came here in 1986. That many of them, in my capacity as the Director of Community Development, and given that I also wear the hat being a Caribbean, we do more than one job I wear the hat of being the Director of Volunteerism. Many of these organizations were organizations that we were already making grants to, so among these ten organizations were groups, such as the Community Family Life Services, Gospel Rescue Ministries, the Latin American Youth Center, Latino Economic Development Corporation, Manna, Marshall Heights Community Development Corporation, Nations Community, the Nation's Child, Capitol Child and Family Development it used to be called a different name then See Forever, Maya Angelou's Public Charter School, Urban Alliance, and the Washington Project. I'm happy to say that I now serve as a member of the Board of Directors of the Capital Area Asset Building Corporation, and one of our Branch Managers by the name of Al Pearson, he serves on that Advisory Board.

Well, what did getting affiliated with CAAB do for me? What it did for me, as I read the names purposely, you heard organizations that have a Latino or Hispanic touch. You heard others that you would not otherwise know, but some of them are headed by African American Executive Directors. The Board of Directors might overwhelmingly be African American, and some might be headed by Anglos, but serve the need of the low to moderate income families. So I was happy to be affiliated with an organization that very much represented the group of people we were trying to meet.

Well, in short order we made grants to the Capital Area Asset Building Corporation, and I suspect in part because of the leadership role we did here in the local Citibank, and because of that of my colleague on the west coast, CitiGroup, through its foundation, made a $1 million commitment to the whole matter of program for Individual Development Accounts.

Well, by 1999, having successfully launched CAAB, we found that many organizations were coming to us and asking for support. And I remember distinctly in 1999, that Boat People S.O.S., an organization that caters to refugees from Viet Nam, approached me to provide them with a support letter so that they could start IDA program.

Well, the group was new to me. They had been referred by one of the Citibank affiliates. And after talking to them, I gave them a support letter. They were unsuccessful in that first effort. But remember what I said, the first effort. And Boat People S.O.S. was smart enough to ask the people who scored this, where were we deficient? And they found out that they had not clearly shown that they had had a long term relationship with a financial institution, but more about that in a little while.

Come 2000, another organization approached us, the Maryland Center for Community Development, which was starting a statewide IDA Initiative, and I provided them a support letter. That organization, in due course, got a $100,000 grant from the state, and later a $367,000 grant from the federal government so that they could launch their IDA Program. And of their initial groups who would run the program, we were already supporting four of those organizations. Those were Druid Heights CDC in Baltimore, the Montgomery Housing Partnership in Montgomery County, Silver Spring Housing in Prince George's County, and the Housing Initiative Partnership in Prince George's County.

Again in 2000, we were now approached by CAAB, because there is a program in the Federal Home Loan Bank of San Francisco called IDEA. It stands for Individual Development and Empowerment Accounts. And having provided a support letter, CAAB was able to be awarded $221,000 in April of 2000, for downpayment and closing cost assistance for people who are working through the programs of its member groups.

By 2001, came another request this time from the Ethiopian Economic Development Council for support of their IDA program, which I readily gave. Happily, I can say that EEDC, as they are known, they were awarded a contract wherein, in a five year course, they expect to open 1,000 new accounts with about $3.6 million in client savings and matched grants.

Again, in 2002 come a knocking, the Housing Initiative Partnership, having heard about the Federal Home Loan Bank program, approached me for a support letter, which I provided. They got a grant of $60,000 to be able to provide downpayment and closing cost assistance.

Again 2001, Boat People S.O.S. you remember that group they came a calling. They indicated that the U.S. Treasury had embarked on a program requesting RFPs for First Accounts, so I readily provided a support letter. They were able to achieve $600,000 through the First Accounts Program to be able to provide services to the Vietnamese community, not just here in D.C., but expanding through Camden, Philadelphia, Hampton Roads, and the west coast.

Why am I saying this? I'm saying this to say to you that we try creatively to reach out to groups. And as of September 30th when I checked with my branches, we had established almost 500 yes, 500 Individual Development Accounts, and we now manage the relationships for 20 individual not for profits that have IDA accounts.

I'm also happy to say that in the District of Columbia, Citibank is the only bank the only bank providing IDA services to any of these groups. In Northern Virginia, we went into a relationship with a not for profit where a competitor had the initial relationship. We now have the primary relationships. We are aggressively seeking out partnerships with not for profits, and across the board, I believe we're making success. I will hold any other comments for the questions later on. Thanks.

AMADOR: Good afternoon, and greetings from Los Angeles, California. My name is Cynthia Amador. I'm President and CEO of CHARO. It is a 37 year old community based economic development corporation. I've been with CHARO for 17 years, and became CEO this past January.

CHARO focuses on three primary areas. We look to create access to capital and promote entrepreneurship through education. We also look to create jobs, and harness financial resources for our community. And the third thing we look for is to increase economic opportunities for under served communities. All of our core competencies, all of the programs that we look to develop or to provide as a service, we look to make sure that they meet one of these thresholds.

Our business model is based on a business model created about 1990 by the National Alliance of Business. And it said to have true economic impact in a community you had to have four things. You had to have a business incubator, you had to have a business and financial center, you had to have an entrepreneur training program, and a workforce center. We have all those components. We've also added a small business incubator, and a small business procurement center.

The umbrella of our organization for our business services is the business financial center. To date, we have done $28 million in package and secured loans for hundreds of small businesses. We have done this within a period of about seven years. These businesses, about 75 percent of them, have sales of less than $1 million, so they're very small businesses that we predominantly deal with.

The services that CHARO provides, all of our services are bilingual bicultural, in that they are all served in Spanish. So you're familiar with our demographics. East Los Angeles is 95 percent Latino. We serve a five county area because of the uniqueness of our services. It's hard to find a service area or agencies that provide Spanish services at the professional level. Eighty percent of our clients speak English, but when you're talking about cash on cash, return on investment, these are real technical terms, and our clients are more comfortable speaking in Spanish.

So what the BFC does is we do loan referrals to our banks. We have set up relationships with our banking partners, and we do basically a turnkey operation. We take the 24 steps required of an SBA loan, and we ensure that the client has three years financials, the use of funds, how they're going to pay it back. We essentially do this so that we can turnkey it to a bank.

We have also launched our mortgage lending center, which we just did this past March, and that is our Home Expo en Espanol Program. Included in that component is a Money Smart en Espanol Seminar that we teach to all of the clients that go through these programs.

We also do investment referrals. We've trained close to 1,000 entrepreneurs in an 11 week program through our Entrepreneur Training Program that's offered in both English and Spanish. We offer seminars and workshops, such as QuickBooks training, and we also provide the banks with the service of pre and post loan assistance.

One of the things that the banks cannot do is provide technical assistance, so that's where an intermediary, such as CHARO, or the non profit comes in to be able to provide that pre and post loan assistance.

Our clients will come in with anywhere from a shoebox, literally, of their receipts, or they have had a bookkeeper. And that's the other battle we fight is with bookkeepers, because bookkeepers tell our clients oh, you don't want to pay taxes, so you have to show you have a loss. They come to training and they want to get a loan. And we tell them well, you can't get a loan if you've been showing your business has a loss, so we need to transfer you over to a CPA. So that we're training our clients how to read their financial statements.

The BFC focuses on bilingual technical assistance. We do pretty much all of the underwriting for our commercial loans. The commercial loan origination, we do the restructuring. Of the $28 million in small business commercial loans that we have had, we have had no defaults. We have had one client whose business failed, but we brought him back. He continued to make his payment. We helped him restructure the deal so he now is getting a new loan for a new business that he's working on. And we also do real estate and finance restructuring.

How the partnerships work the community agency, and those of you who are bankers in the audience we serve a critical role in this three ring loop; and that is, we're the trusted advisor. For a community agency such as CHARO, we've been in our community for well over 30 years. The community knows us, they trust us. We have a high integrity record. We have provided social services, community services. We have lots of outreach that we do. That's the link and the role that we provide the community needs banking services, payroll services, and the bank is providing the banking services and access to credit.

Now one of the unique things that we encounter in serving a bilingual bicultural community, and particularly the Latino community, is whether they're first generation new immigrants, second or third generation, they come from a culture where in Latin America it may take six months to get a checking account, or if you put $500 in the checking account or savings account, it might only be worth $10 the next month because of devaluation they've experienced. Or it might be based on class, whether you get a checking account or not, if you live in Argentina. So knowing these things, this is one of the cultural issues to overcome when tapping into the unbanked, and by using a trusted advisor, such as a community agency, to help bridge that link between the two parties.

What CHARO has done is we have established, because we have been doing community business lending, we do not actually lend money we work with our banking partners, so what we have established is tier partners. Our first tier partners are Tier One lenders. Those are our major banks in Los Angeles, such as Washington Mutual, Wells, Union, Citibank, Nationwide, Advantage Bank. These banks have all contributed a minimum of $25,000 or more. Wells Fargo just gave us this year a $300,000 capacity building grant. Washington Mutual gave us a $95,000 capacity building grant, so some of our banks are giving us a sizeable amount of funding for capacity building.

Those banks, what we have figured out is they're Cinderella slippers, so to speak. Each bank has a portfolio they're trying to keep in balance, and so we know what each of the banks kind of like.

We give those banks, our Tier One banks, first right of refusals on our loans. They have 10 days to say yes or no, they're going to consider it, or no, they're not going to consider it. Because of the quality of the packaging we provide them, they have all the financial statements in their packet.

The next lender is a Tier Two lender. Those are community based banks, such as Café Bank, East West, and Far East Bank, and Innovative Bank. Those banks will provide us a referral fee. It takes us anywhere from 40 to 80 hours to package a loan, and it takes us anywhere from 45 days to 90 days, depending on how much we have to beat on the client to get all their papers in, because we can't turn anything in that's not complete because otherwise, we're doing a disservice to the client, because the bank isn't going to look at it until it's ready to go. And then we're giving shoddy work to the bank. And we really pride ourselves on being able to provide very high quality services.

Then we have Tier Three lenders. These are our micro lenders in Los Angeles, FAME and VEDC. We call them, these are our dog loans. These are for clients who have bad credit, who have not been in business long enough, who are really not creditworthy for a bank. Because remember, they also are lending your savings money, in addition to whatever else money they're doing. But our micro lenders can take riskier loans, so we have established relationships with our micro lenders to be able to refer a client. Because our objective is to ensure that a client gets access to capital.

The benefits of these strategic alliances and I invite all of you who are bankers, as well as community agencies to really look at this as a win win situation. There's an established referral system, staff is trained in underwriting. We've had Wells, WaMu, all the different banks we work with come in and train us on what their underwriting criteria is. Each one has a different kind of underwriting, so we need to know that.

We also provide increased access to Latino business community, which is the fastest growing in the State of California, and increased [access] to capital.

In bringing the parties together, it's a win win situation for both the bank and the community agency, and the community. To get to the table, one of the things we found that was effective for us was participating in Greenlining the National CRC Committee type activities. A major bank, such as Wells Fargo, wouldn't know who we are if I went and called on them. I now, because of Greenling or CRC, the committees that we sit on I know the executives of these banks. I know I can talk to them, and I can say we're having troubles with getting our business loans processed through your bank. Is there someone we can talk to, so that maybe we're just missing the mark, so we can get the right kind of client to your need. The other is that we belong to a number of chambers, and this, too, provides us access to a number of hundreds of small businesses.

In bringing the partners together also, we invite you to participate in CRA type activities. These are like financial literacy training program, such as we offer the Money Smart en Espanol, and our Home Expo Training. We are also offering the Money Smart program to our child care center. This is a new initiative we're doing with the FDIC.

We serve over 200 children daily. There are well over 200 parents that we can introduce, and we can track them over a two year period from the date they enter their child, which is about two years old, to the time they exit when they're ready to go to kindergarten.

The banks have also been able to provide us with employee training. One of the challenges I have with my own staff is getting them to use automatic deposit. Forty percent of my staff don't use it, and I can't understand why. It's just so easy.

The other thing that is a good development program for the community agency and the bank is staff development. One of the things that we've had a number of our banks do is to come into CHARO and offer professional commercial lender training. City National Bank came in for about six Fridays every afternoon, they trained our business development staff on commercial lender training. Citibank does this in Los Angeles, and they offer about a week long program to an assortment of community agencies who do lender training.

In summary, one of the things we look for is a good fit, having similar values and that you both are looking to have a win win situation, and you're looking for shared outcomes. We want to create access to capital. That one, if you're a community agency you're providing a value added service to your bank and to the community. If it's not a good fit, that's when only one side benefits, and there's no return on investment, and there's no capacity building.

One of the things I tell my banks is that I'm here to serve as the bridge to the community and to you, to make sure that my community is getting access to capital. But I also will not ask you for a dime of money next year, if I have not fulfilled my requirement and my commitment of making sure I get you loans, funded loans at your bank. So that's the win win situation that we use at CHARO, and thank you for your time.

MARTINEZ:Thank you. I'm Clara Martinez, and I'm with Wachovia. And we've heard a little bit about relationships and partnerships, and I want to thank the FDIC for a wonderful relationship, particularly Chairman Powell, and [Deputy Director] Donna Gambrell, and [National Coordinator for Community Affairs] Nelson Hernandez. Let me start off by saying thank you.

And regarding partnerships and connections, I have connections with three of the panelists up here. To that end with Cynthia, I lived in Los Angeles, and I am fluent in Spanish. With Ernest, he said he came from the Paradise of the south. I was born in Cuba, and we call Cuba the Pearl of the Caribbean. And as far as James is concerned, he is honored to be here, as am I, because 41 years ago, one month and one day, I came to this country as an immigrant from Cuba. So my father would be very pleased to know that I have such an honor to be speaking to each of you today.

I am going to be very brief, because I know that Dr. Flake has a plane to catch, so I'm going to try to be very brief. And as many of you know, for me and for a Latina, that requires a lot. So I'm going to take you from the big picture point of view, and then sort of narrow the focus of our conversation specifically to efforts that Wachovia has made in deploying financial literacy to the community defined as the low to moderate income, and the LMI. To that end, I wanted to briefly just say who is Wachovia? I think most of you know, but there were some people even from the FDIC that did not know how to pronounce the name, so it is Wachovia. It's Wachovia, and we're all up and down the eastern seaboard, and up until last week when my friends, B of A, announced their merger, we were the largest bank on the east coast, so I had to delete that from my slide.

But what I want you to sort of focus on is what we did in 2002. I know that Ernest was talking about everything that his bank has done. And I think it's important for us to know that collectively, the banking community does give back to the communities in which we serve. To that end, in 2002, we made more than 19 billion in community development loans and investments. We helped 450 lower income families realize their dream of homeownership every week. We created over 6,000 units of affordable rental housing by investing $250 million in equity. That is what a bank this scale, this size can do, and does, to give back to the communities.

Wachovia's community development activities underscore the tremendous need that exists in this community. And we've already seen this particular slide. Michael Barr went into it in terms of what are the key issues, what are the needs. But I, too, have folks that I need to beg, borrow, and steal from, and sometimes it does require that we focus on the need and revisit it over, and over, and over again. But I would call your attention to the one million folks that live in this footprint in the east coast. Those are the ones that we serve, that I am focused on specifically with the job and program that I manage.

While Wachovia has depository products suited to the unbanked, we have ATM Pay Access Account that is designed for direct deposit for government proceeds as well as payroll. We have free checking, et cetera. It's not just about the availability of products. It's not going to be just products that will get the unbanked into the financial mainstream. It has to be products, coupled with financial education. That will bring them forward.

To that end, let me briefly share with you what is our vision. And we talked a little bit about some of this today, and I just want to focus as I'm running through this, the Wachovia At Work Vision, the concept of a financial institution partnering with employers to deliver financial services at the work place. And as a bundling of services to also provide financial literacy in the work place. So that is a key success for banks and something that I would sort of position as an opportunity for all of us to consider going forward.

One more thing that I'd like to share with you. Individually as a corporation, for those of you bankers and even the non profit communities, I have a question to ask you do you give your employees the opportunity to take time off paid to contribute and give back to the communities? We have that as an established H.R. practice, within our corporation for giving back to the communities, whether it's to a school or whether it's to your preferred community we allow, we provide, we encourage six paid days for our employees to give back. That's a heck a lot of opportunities for community investment, considering we have 80,000 employees. Thank you.

Let me tell you just briefly, the financial literacy program that I manage is composed of three programs. The one that I'd like to showcase is the very successful financial literacy Money Smart Program that our friends here at the FDIC have put together. I have an H.R. background, and I had an opportunity to review many of the financial literacy programs that exist out there. I chose the Money Smart Program because it was so focused and aimed at what the need was. It's very basic education that's well designed from an instructional perspective. And it stands alone, and it can be coupled together. And the unique thing is that we're looking to couple the Money Smart program with one of our programs that we have internally, which is this eCommunities First, which is about closing the digital divide. So marrying the concept of delivering and deploying products through technology, our folks also need the education around the technology. So we're looking to marry and couple two programs together going forward.

We've had a lot of successes. We've had challenges at the same time. Let me share with you some of the successes that we've had. The concept of relationships 29 relationships with non profits, some of whom may be in this room today. That's how we designed the process of deploying and delivering financial literacy. It's identifying those non profits in the communities that we serve that have similar core values and mission statements in delivering to this segment.

We enhanced the delivery of the Money Smart Program by using resources that we have within our own corporation. We wanted to ensure the consistency of the great message that Money Smart had put together. To that end, we developed videos and Train the Trainer to do and accomplish two things. Number one, ensure the consistency of the message was being delivered with each of the modules. And number two, to try to minimize the amount of work that was required by the non profit community in delivering this. You don't need to now be a skilled trainer to deliver and deploy Money Smart. We have some sort of job aides in terms of the technology. We've built some videos around that. So that's something I'd like to sort of position as a triumph the opportunities that exist.

Our opportunities are such that we need to ensure that we're aligning ourselves with the non profits, again that have like missions; that those non profits understand the concept of sustainability, the concept that we're looking to close the gap with the unbanked. To be able to bring more people into this financial mainstream means that we have to have partners that have the capacity to deliver on a consistent basis year in and year out. So adopting some business models in terms of forecasting, and adopting some terminology that exists within sort of corporate America or just standard business practices, key performance indicators.

I have more questions than I have answers, and I look to the group to sort of provide me with some opportunities for a rich discussion, but I've posted some questions up here that I'd like for us to consider. How can we together get better at closing this gap? How are we going to be able to obtain and align resources for our community partners? What's the best way for us to track behavioral changes in this community that we serve?

It is not just about counting how many classes we delivered. It truly is, truly is about changing people's behavior. That has lots of implications. It has implications around the concept of privacy. It has implications in terms of the cost to the non profit in tracking it. But unless we start now, we won't know whether we're getting any traction. We won't know what changes we will need to make. So I put these questions out there, and I encourage you to help sort of generate some rich discussion on that.

Finally, last slide. We launched Money Smart in January of this year. This is a direct quote from Ken Thompson when he was delivering and deploying this program in conjunction with the folks here in Washington, and Chairman Thompson. I'd like to just let you read it very quickly, and I'll highlight some words that resonate for me, and resonate for this particular topic; and that is, Ken talks about community. You see the word "partner" in there, and you see the words "stakeholder" and "shared success."

Each of us in this room will need to come together in the spirit of community as partners, as stakeholders to create the shared success of moving the unbanked into the financial mainstream. Thank you.

HONORABLE REV. FLOYD H. FLAKE: Thank you, Clara. And I think that that sets the stage for a segue into the final statements that I will make, and I will be brief. It is Wednesday, and during my 11 years in Congress, I made it a practice of flying back to New York most nights, but certainly on Wednesday nights to teach my own bible study. And I will be there tonight with your assistance, because as soon as I finish, I'll run out and get a plane. I've already written it, by the way, so it's not a real struggle in terms of getting it ready.

I want to thank Chairman Powell, first of all, for being on the Advisory Committee, and for bringing us together in this forum. It is important for us to understand this community that we speak of and that we speak to, so that we might be able to hopefully create synergies among them, and an understanding of what it takes to really bring people into the mainstream who have historically not been there.

I'm in my 28th year at the Greater Allen Cathedral, which is a rather large congregation, which has 11 corporations under it. And those 11 corporations have emerged in large measure by defining what the community need is. And through our own surveys, concluding that we have a responsibility not only to give the word, but to give meaning and visibility to the word through the manifestation of what I call "The Presence of God and the Life of God's People".

Through that, we have been able to demonstrate to lending institutions a responsibility to share with us in a partnership, and this has not come about easy. A partnership that started out when I first came with a dream and a vision that we should build a school, and banks telling me that that is an impossibility impossible because they had no way of being able to do an assessment of the congregation's ability to be able to handle the responsibility of paying back the note. We were going to do tuition based schooling, but also the church itself was taking responsibility for the loan itself.

They could not find a way to quantify it, and then three banks came together; Carver Federal, Citibank of Newark, and Freedom Bank which was then in business, came together and said we'll do the loan. We'll package it, and they did it.

One of the great things that happened was in the process of that becoming reality, we also started dealing with the government on the Older Americans Act, the 202 Program, with urban renewal land that had been declared such by the City of New York in 1973. So by 1976 when I arrived in the community, nothing had been built on the land. The homes had been torn down, but there was no sense of commitment either on the part of government, and certainly on the part of lending institutions of being able to make investments in the community.

It became clear to me that there had to be a reversal of a historical paradigm. First of all, the paradigm involving, as Kevin said, the people. People driven by fear factors, brought out by various events and occurrences in their lives, persons like my parents, fifth and sixth grade educated who came through the Depression and had a fear of banks. Before my mother and father died, they never had a checking account; but rather, on Fridays they took it upon themselves to go to the store, their local grocery store, get money orders and send those money orders to pay the bills because they had no trust of banks.

If you come into a community like the one I found in `76, that was pretty much the attitude of the people, which has given rise to the check cashing agencies and to those other financial entities that seem to think that they have a corner on a market. And they have the corner, in large measure, because financial institutions take an attitude and an approach that in many instances say, we can't do anything about it because we don't feel that you are bankable, or that you're worthy of making the investment.

Those three black banks came together though, and they indicated and showed that we could not only handle the mortgage, but if given the opportunity, we could do even greater works. We began to take our tithes and offerings and began investing in the community by buying up any vacant land, any boarded up stores, and places that drug dealers were operating. And in that 26 block area, we did that with tithes and offerings.

I don't want to give you my tithing lecture today, but it does make a huge difference when you can get a congregation to understand its responsibility to itself, and its responsibility to its community. That changed the minds of a lot of people in terms of their perception of church, and it also changed their perception as it relates to their responsibility to give to an institution that promised to make investments in their community.

An interesting thing began to happen. Once the school was built and an $11 million senior citizen center built on urban renewal land, people had a different concept about their own community, and began to want to make their own investments in it so that persons who were not members of the congregation started giving to the congregation, persons who were members of other congregations came and gave their tithes at this particular church, praise the Lord, and they still do. But something else happened.

Walter Shipley was Chairman of the Chemical Bank at the time, President of Chemical. And one day I got a call out of the blue. Walter Shipley called up and said, "I want to come and see you. I hear great things about your church, and great things about what you're doing. I'd like to come and see what you're doing, because our bank would like to try and find community groups in which they can make an investment, and participate as partners."

Walter came out, looked at what we were doing, all the land we had bought, the buildings we had bought, but I had no way of being able to accumulate enough resources to make full investments in them. And then what he said was, "Let's do some projects together, and let's see how they work out. Let's see whether or not this church has the capacity to do it."

I will tell you, even today with Walter having left and the bank having merged and become J.P. Morgan Chase, Chase is still our largest lending partner. There was a time when we wanted to build a school. I went to about 30 banks. Nobody would lend money on it. Now people come to us or people call us and ask us what our next project is, because they want to participate with us in a partnership.

What it brings about is, there must be an understanding on the part of both parties that it is good investment. These communities represent a great deal of hope and possibility. I would urge them that as we look at how we get people into the bank, let's look at how we create something visible for them.

Every Sunday morning my offering appeal is preceded by an appeal that every member of the congregation who is not a homeowner becomes a homeowner. And I say to them we reverse the paradigm. No longer do we buy cars we can barely afford, simply because the bank makes it possible for us to do so. Rather, we lease cars and we do what? Their response to me is that we buy homes.

My question then is, why buy homes? And they respond it is an investment and an appreciating asset. We have to build in people an educational sense of what it means to own that one piece that represents historically the number one item in one's portfolio. You cannot talk about wealth building in most of these communities without getting people out of the pattern of renting. And you do so by trying to change the face of a community.

We built, with J.P. Morgan's help, first of all, with Fannie Mae's help, because I was able to approach Fannie Mae and get guarantees, secondary market guarantee to build homes. We have built over 600 homes through my church corporations. And those homes have been sold to first time home buyers.

When you get people to take a stake in the community, you change their attitude about themselves. They make not only that investment, but they make other investments to improve the property, and they also learn what it means to develop a creditworthy portfolio.

I challenge them by bringing bankers in and various financial people to talk to them about what it means to develop the proper kind of credit, and make them understand that you cannot go to the bank and say God sent me, and expect the bank to give you a loan. It just doesn't work like that. And the power of the Holy Spirit is mighty, but the power of the Holy Spirit does not give comfort to the bank who have regulatory obligations that they must respond to.

So when you begin to challenge people in that way, you come to the realization, and they come to the realization that, indeed, they can participate. They know that they can do things for themselves, that they have not historically been able to do.

We built two family homes, one unit within the home for the home buyer, and I will finish after I make this statement. And that is, what we discovered is that there were people for the first time had an understanding of what it means to really be able not only to possess your own home, but also to be able to have that renter. And in our case, the State Mortgage Agency, I'm talking about other partners that came in State Mortgage Agency came in. We were able to discount the mortgages, so that anybody who was creditworthy would be able to purchase a home with a 5 percent down payment. My agency did all of the bank clearance, did all of the counseling, got people ready before they went to the bank so that they would not be turned down. And once we took them through that process, the banks were readily waiting because they wanted the end loans, but first they wanted the construction loans. But then, of course, long term they wanted the end loans. It was to their benefit to partner with us.

And as those home buyers moved into those homes with a mortgage of $797 a month, some of them today are renting those three bedroom units that we put with that home at $1,000 to $1,200 a month. In other words, they're living free, they're getting the equity, they're getting the tax reduction. Everything that you could possibly want in homeownership, they have learned how to make it work for them.

My challenge then for you today as we leave, look for partners. There are partners out there who have opened up a process by which they are open to doing business with persons who have historically not done business with banks. Many people are afraid. They are fearful of what's going to happen to their money when they put it in the bank. I don't understand that, because they ought to be more fearful of what's going to happen when they have to deal with these unscrupulous dealers up and down the block. But those people make billions of dollars a year simply focusing on this population.

I would urge us, therefore, to not consider ourselves as mere banks, by virtue of the building we occupy, or the platform on which we set, but deal with the reality that if we are going to be participants in wealth building, if we're going to move a population on the Fannie Mae foundation board, our studies indicate 72 percent of whites or more are homeowners, 43 percent of African Americans, 42 percent of Latinos. If we're serious about making America the kind of nation that it ought to be, one that feels free in exporting its democracy to other countries abroad, we ought to make sure that we've given the best opportunity for those who are here in this nation of our's. We ought to offer them the opportunity for homeownership. And I promise you, they will change their attitude about banking when they have to do business with banks, and they have a stake, that is that visible evidence of the manifestation of God. And that's the place where they turn the key that they call their home. Thank you very much.

Q & A PANEL III

MR. BALLENTINE: That's their story, and they're sticking to it. It's a good one, indeed. We have time for a couple of questions.

MR. SMITH: Marty Smith, Federal Reserve Bank of Philadelphia. There seems to be an interesting theme that has evolved today that needs further scrutiny. One view says that the best way that we can serve the unbanked is to form alliances between check cashing operations and traditional financial institutions. Another view says that if we are ever to bring the unbanked into the mainstream, we cannot allow such marriages to take place.

First, I'd like to hear from the panel what their thoughts are on these two opposing views. And second, if you're against these marriages, what must the traditional financial institutions do in order to provide the services that are currently being provided by these alternative service providers?

REV. DR. FLAKE: I think banks can find partners that are not necessarily those who are represented by those check cashing entities. There's too much of a mixed bag. You don't really know what you're dealing with. I think if you find community institutions that have been operative, as mine has been since 1834, when you find those community institutions, you know they're not going anywhere. They are people that have developed some viable means by which they have addressed community needs. They have not just been there to take profit from the community.

I think the other piece is that with banks' regulatory requirements, they would be better served dealing with in community institutions, as opposed to in community entities like check cashing and others. And with all of the issues surrounding how these institutions are operating now, and the prejudices and other issues relative to loans, I would be reluctant to want to see banks partner with many of them. I know some of the folk in the business, and I would be very careful about that, personally. And I have a plane to catch. Thank you.

DR. SMITH: Let's thank Reverend Flake. One more question for the panel. How do the banks you work for address the need for more ATMs in low income areas, as mentioned a little bit earlier? How do the banks you work for deal with that need for ATMs?

MR. SKINNER: In the case of Citibank, we keep ATMs where we have premises. We don't, as a general rule, do off premises ATMs.

DR. SMITH: Let me push you just a second, because I think the questioner intends okay, now we have low income communities that don't have access to the quality ATMs and your quality services then. How do you then reach, if you're going to use that policy?

MR. SKINNER: Well, in this case we don't just rely on any one form of attracting customers. As I said, we do have relationships with several not for profit and community based organizations. We do seminars monthly within our premises, as well as outside of the premises. We do have access by phone. We do have access by computers. So as a general rule, we believe that we do quite a competent job of reaching whoever is available, and who wants to use our services.

DR. SMITH: I know Wachovia wants to say something.

MS. MARTINEZ: I think I agree with Ernest. I also need to focus the fact on that from a regulatory point of view, we have got, by regulation, by law, to ensure that we are in the communities in which we serve, so we can't redline, in effect. And I know that Wachovia, like Ernest's organization, is very deliberate in looking at not just whether we're going to open up or close, but when we need to refurbish in a low mod area. So by law, we are regulated. But also, we recognize that there's a growing opportunity to deliver and deploy services to this community, so it's enlightened self interest, quite frankly, as we have heard earlier today.

DR. SMITH: Okay. Thank you. I see one more hand. We're very, very close to our time, very close. Is it a short question? Okay. We'll need a short answer.

AUDIENCE MEMBER: Okay. He's not letting go of the mic. I think this forum is very informative. I think it's great, but there's still one population that I hadn't heard much about, and that is the special needs population. We have a large group of those that are hard of hearing, blind, MS. That population goes without income limitations. How are you addressing that population?

MR. SKINNER: In the case of Citibank, if you were to visit a Citibank Financial Center, and we call them Financial Centers, not branches, and you were to look at our machines, you would notice that it has Braille amenities, and platforms that are lower, so we're in compliance, and try to stay ahead of accommodating people with those type of disabilities.

MR. BALLENTINE: Thank you all for listening, and let's thank our panel.

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