During the 2000 Presidential Election, President George W. Bush made a written pledge to the National Black Chamber of Commerce® (NBCC). He claimed that he would focus on the doors leading to increased capital access for minority businesses. To our astonishment, he delivered on that pledge while Candidate Al Gore refused to make such a pledge. Thus, begun eight years of positive growth in Small Business Administration (SBA) lending.
The above activity soon began to disappear for two reasons: The effects of the subprime mortgage crisis and the lethargic activity coming out of the Obama SBA. President Obama figured the quick fix would be more and more regulation. In 2010, he signed the Dodd – Frank Amendment which poured “mountains” of paperwork and rules for our banking institutions. The push back was major banks began refusing to underwrite small loans, inclusive of the guaranteed SBA loans. When President Bush stepped down the SBA was doing over 8% in loans to Black businesses. Today, under the Obama apathy and immense regulations, the SBA is doing less than 1.8% in lending to Black businesses.
It got worse than this, the SBA began attacking the NBCC for letting out the news of the downward trend. They even claimed that I had no access to the percentages of loans because no one tracks them. To my surprise, George Curry, who was editor of the National Newspaper Publishing Association took their “bait” and began believing them over the NBCC. Finally, after a white investigative reporter from the Wall Street Journal confirmed my allegations, George came around.
According to the Valley Economic Development Center, “SBA loans to African-Americans declined 47 percent between 2009 and 2013, even as overall SBA loan volume rose roughly 25 percent during the same period.” Doesn’t this paint the picture?
The subprime mortgage crisis devastated the net worth of Black families. That net worth was based on equity in our homes. The homes have disappeared in many of our communities and with it went the equity which made new entrepreneurs bankable. The biggest players in the mortgage business were Fannie Mae and Freddie Mac. These two Government Sponsored Enterprises are now “owned” by the Obama Administration as he virtually “seized” them as they approach bankruptcy. Will they bounce back? That is doubtful as right now the Obama Administration is trying to liquidate the two firms. We are fighting against this effort.
The above should be a hot topic during the presidential debates but so far there has been no traction. We are going to bang the “drums” much harder for it to become a major political issue. Despite the lack of financial activity, African – American firms offer a direct path to job opportunities. Our restaurants, service providers, IT shops, construction companies, etc. are the key to our growth and financial gain. The lifeblood for these companies is upstart capital and that necessity is fading under the current Administration and it is paramount that the next Administration will address it with a vengeance.
There is one hidden blessing coming out of the Dodd – Frank Amendment. Under current banking law, commercial banks cannot record the demographics of their lending (except SBA loans). This is called Regulation B. Our implementers of the Civil Rights Act of 1965 thought this would help prohibit discrimination. If there is discrimination in lending what better way to detect it than tracking the numbers and volume? We have been fighting for the expulsion of Regulation B for over twenty years. Thank God it is going away by way of the Dodd – Frank Amendment. It has been taking years to happen but within the next three years, under a new Administration it is going to happen. Hopefully, our Congressional Black Caucus will focus on this opportunity and police the activity.
Two other things can help our plight also. 1. Lenders must target certain markets such as Los Angeles, New York, Chicago and other markets that have a high amount of Black population and Black business opportunities and 2. We must recruit more EB-5 investors into our communities. A holder of an EB-5 visa can migrate to this nation with special status providing he or she invest at least $500 thousand (soon to be $1million) into an underserved community. Chinese, Saudis, Indians etc. are participating in this program in an exponential way. What a wonderful program to take advantage of! It is time for Black community developers and leaders to pick up the pace in EB-5 activity for their neighborhoods.
The National Black Chamber of Commerce is dedicating 2016 to the emergence of more capital access for our business members. The plans will start unfolding early next year. Stay tuned.
Mr. Alford is the co-founder, President/CEO of the National Black Chamber of Commerce®.