Community Dividend

What is Community Affairs?

A discussion of the Community Affairs function of the Federal Reserve System.

Published October 1, 1996  |  October 1996 issue

We on the Community Affairs staff regularly meet with community development professionals, attend seminars, and otherwise participate in community development activities. Frequently, other participants ask why we are there. Specifically, they want to know the interests the Federal Reserve Bank of Minneapolis has in community development and what the Reserve Bank does to further community development efforts.

In this article, we will answer these questions. Because you are our partners in community development, we want you to understand that the Federal Reserve System and its twelve Reserve Banks have a stated commitment to community development.

We also want you to understand the unique position of the Federal Reserve Bank in community development. First, we have a voice outside that of the banks, community organizations or developers. We can bring these active participants together to help find solutions to community development issues. Furthermore, we have specialized knowledge of and offer educational programs on the Community Reinvestment Act (CRA), Home Mortgage Disclosure Act (HMDA) and fair lending regulations. And while the Community Affairs and examination functions at each Reserve Bank are separate, they often work together on training and other educational efforts.

Why the Fed is involved in community development

The economic vitality of individual communities ultimately affects the health of our overall economy, and a community's economic vitality depends on people's access to credit to build businesses and purchase homes.

Thus, the Community Affairs function at the Reserve Banks consists of helping every participant—be it an individual or a community—gain equal access to the credit markets and to the information necessary to participate in those markets. Since lower-income individuals and communities are most in need of such help, the Reserve Banks concentrate their efforts on those participants.

As early as 1981, the Board of Governors of the Federal Reserve System recognized the need for community reinvestment education. Fifteen years later, Community Affairs fulfills the System's mission of supporting community development activities and promoting fair and equal access to credit. To that end, Community Affairs:

  • encourages partnerships among public and private organizations to help deliver credit to low- and moderate-income individuals and neighborhoods;
  • informs financial institutions and community organizations about the availability of public and private development resources;
  • promotes understanding of the rights and responsibilities of individuals, communities and financial institutions regarding CRA and HMDA; and
  • provides information to increase understanding of community needs for affordable housing and small business development.

Notice that the Fed does not participate directly in specific projects. We neither make loans nor provide grants to organizations or programs. We leave direct participation to governmental agencies such as the Department of Housing and Urban Development and the Small Business Administration, which are chartered for this purpose.

What we do in our District

Within the overall mission of supporting community development and promoting fair and equal access to credit, each of the twelve Reserve Banks sets its own community development program based on local needs.

In the Ninth District, we have one large metropolitan area, approximately 50 Indian reservations and a geographically large area of smaller cities, towns and rural areas. Just as the demographics vary across the District, so do the development issues facing our communities. Some communities have a need for additional affordable housing that is so acute it impedes job-creation efforts. Other communities have housing that needs renovation and residents who need jobs close to home. Finally, some communities' most urgent need is job creation.

The need for community development assistance varies greatly across the Ninth District. For example, some communities have many active community development participants while others are trying to mobilize their resources.

Thus, we have divided our Community Affairs program into three sectors: small cities/rural areas, Indian country and the Twin Cities metropolitan area. We based these sectors on the geography and demographics of the District, the types of issues facing each sector and the need for community development assistance.

Small cities/rural areas

Small cities and rural areas comprise the largest part of our district. About 60 percent of the Ninth District population lives in these areas. Often, the most pressing development need is for affordable housing. The need for community development assistance in these communities varies. Banks and others in the community also look to us and the other banking regulators for training and education on CRA and fair lending.

During 1995 and 1996, we sponsored four training sessions on CRA aimed at community representatives and bankers and participated in four sessions aimed just at bankers.

To address affordable housing needs, we met numerous times with public and private community members to seek understanding of and solutions to affordable housing issues in the small cities and rural areas in our District. We also participated in meetings of rural housing partnerships in two states, South Dakota and Minnesota.

Lastly, along with representatives from state and federal public agencies and private organizations, we helped plan an Affordable Homes Congress in Brainerd, Minn., in October 1996. The goal of this seminal event was to seek solutions to single-family affordable housing problems. The congress provided a venue for discussion of successful partnership arrangements and new and creative public and private affordable housing initiatives.

Indian Country

The collective population of the approximately 50 Indian reservations in the Ninth District represents about 2 percent of the District's population. Most of the reservations face chronic and severe development issues. Some reservations have unemployment rates as high as 50 percent to 80 percent, and much of the housing is substandard.

Our efforts in Indian Country involve helping to establish the conditions necessary for community development to occur. For example, over the past two years, we:

  • sponsored seminars and produced a five-part video series to educate bankers and others about the cultural and legal aspects of lending in Indian Country;
  • began participating with tribal governments and legal experts to help certain tribal governments develop the legal structure necessary for lending on reservations; and
  • began a long-range project on one reservation in South Dakota to assemble lenders, tribal officials and other tribal leaders, state and federal government agency personnel, and others interested in community development to find mutually satisfying solutions for the reservation's development challenges.

Twin Cities metropolitan area

Two and a half million people live in Minnesota's Twin Cities metropolitan area; this figure represents about 35 percent of the Ninth District's population. Many community groups, nonprofit corporations, financial institutions and others work to advance development in the Twin Cities.

Thus, our efforts in this metropolitan area involve fostering communication and partnerships. For example, in June we sponsored a community development financing exposition. About 200 representatives from governmental agencies, technical assistance providers, community groups and financial institutions from the metropolitan area attended a full day of workshops, roundtables and information booths.

What else do we do

In addition to these programs, we educate and encourage partnerships throughout the District via our publications. For example, Community Dividendis circulated to more than 5,000 District community development professionals. Our state housing finance guide, published earlier this year, was so well received that we are preparing a companion publication on state economic development finance programs.

We attempt to advance the development of our communities through the efforts discussed here and many more. But we do not work toward this goal alone. You, the development professionals in our communities, clearly understand the need for education, training, technical assistance and facilitation. In an effort to solve the problems that face our communities, we offer our time and talents in partnership with you. As we continue our community development efforts throughout the District, we trust you will recognize us and appreciate our role.

Call us if we can help. It is why we are here.

For more information or to obtain a brochure written by the Federal Reserve Bank of Richmond on the Community Affairs function, contact the Community Affairs office of the Federal Reserve Bank of Minneapolis at (612) 204-5074.

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