THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY SECRETARY OF THE TREASURY LLOYD BENTSEN AND UNDER SECRETARY FOR DOMESTIC FINANCE FRANK NEWMAN
The Briefing Room
12:36 P.M. EDT
SECRETARY BENTSEN: Good afternoon. I wanted to come over this afternoon with Frank Newman, our Under Secretary for Domestic Finance, and soon to be my Deputy, to go over some of the fine points of the Community Development Financial Institutions Act that the President has just signed. Frank will get into the detail with you, but before he does that, let me make a few points.
First, we're talking about an investment over the next four years of about $500 million. We're looking at that being leveraged up to something in excess of $4.8 billion that will provide loans, financing, as far as homes, starting small businesses, doing those things for some of the areas -- urban areas -- that are having a tough time insofar as unemployment, insofar as getting investment capital in there.
We're also talking about some of the rural areas that run into the same kinds of concerns. We're talking about improving the lives of people in those areas. We just heard from some of those people who have been quite successful in initiating these kinds of efforts.
In the past two years we have had a very full agenda on the financial front. This is part of that. We now are going to be doing interstate banking. We have made more credit available over the last year, particularly to small businesses. We're making the final payment on the S&L problem. And our rule-making authority for the government securities market was renewed. And we've reduced the regulatory and paperwork burden for our lenders.
We have a bit of that last item, a reduced regulatory and paperwork burden, in this bill, along with important protections for homeowners from sharp operators. There's a provision on removing the barriers to packaging small business or commercial real estate loans for investors that want to buy securities. And there's a provision to improve our ability to catch the crooks that are doing money laundering.
This is an impressive piece of legislation. We've had an excellent record in getting these things done on the economic side over the past two years.
I've been at this awhile. And it's rare to see something as complicated as the CDFI go through so quickly and to see good bipartisan support in bringing that one about. We've also had a President who made a commitment and is living up to that commitment in putting this in effect.
Now, I'd like to open it up to any questions. And they tell me I have -- I'm going to leave the tough questions for Frank -- and they tell me I have a meeting with the President that's supposed come off in a minute.
Q What's your outlook for a trade deal with the Japanese?
SECRETARY BENTSEN: Well, I was encouraged by what we got in the macroeconomic side insofar as the delay in the consumption tax being put into effect. I discussed with that Takemura and with Murayama at the Naples meeting. They at that point committed to delay the consumption tax until the economy had recovered.
Of course, that's gets into a subjective judgment question and did not have a definitive date. We then pushed that they delay it until '97. And they made a commitment to do that. So hopefully that will see stimulated demand in Japan and in turn buying more U.S. products.
Q You mentioned money laundering. Can you tell us more about what the Customs Service is doing in terms of investigating money laundering by brokerage firms?
SECRETARY BENTSEN: Well, that, obviously, is part of it. But we're also doing things through the IRS, through the banks. For example, we have 12 major cases we're working on with the Mexicans at the present time insofar as money laundering.
Q Now that this bill and interstate banking have been passed, does the administration want to look at repealing GlassSteagall in the next Congress?
SECRETARY BENTSEN: I knew you'd get some questions like that.
Q Before you leave, Mr. Secretary, can we just ask you, first of all, about the frozen assets of the Haiti rulers? Is there anything that Treasury has to do in terms of the assets for Cedras, Biamby and Francois?
SECRETARY BENTSEN: Andrea, that has not been put to me. I've been not -- (inaudible) --
Q One more, sir?
Q Mr. Secretary, do you think that the current rate of inflation will stay where it is, or would increase, or -- what is your prediction in the next year?
SECRETARY BENTSEN: As I look at these numbers, and we're at 2.7 on inflation, that's the best numbers we've had in 20 years, the economy is fundamentally sound; you are seeing substantial growth. But when you get to the point of 6.7 percent in the utilization of productive capacity, you have to remember that that's substantially less than 25 percent of the economy. If you look at the service industry, in those areas you're seeing things quite flat. So it is a mixed bag overall. And we're always concerned about inflation, but I don't see any deepening of concern at this point.
Q Do you see any need for higher short-term interest rates at any of the FOMC meetings remaining this year, either this month or --
SECRETARY BENTSEN: When I first took this job, I made a quick comment like that. I think about them a long time and I'll have to think about that one some more.
Q summit? Can we ask one question about that? The Russians are saying this morning that President Yeltsin wants investment assistance rather than aid this time around. What's the U.S. prepared to offer him?
SECRETARY BENTSEN: Well, when you get to that, it is not a question of what the U.S. has to offer. That depends principally on the investment laws and the tax laws of Russia itself. That's a determination for them. I have said to President Yeltsin, and I've said it to Mr. Chernomyrdin that with the seven major industrial countries, who were all having concerns about their own budgets, that there is far more money available from the private sector and that they have to compete for those funds. You've go major developing countries that are doing everything they can to encourage those kinds of things, so what your seeing on the Russian side -- they have to have -- they have to settle on economic policies that are incentives for the private sector to come in. They have to have stability in their laws. They have to have a set of and a body of contract law. That will give some stability to the private sector coming in.
Q Mr. Secretary, does the perception of weakness in foreign policy create problems for you at Treasury with --(inaudible) -- in between the President's foreign policy advisors?
MS. TERZANO: Mr. Newman will answer any other questions about the --
UNDER SECRETARY NEWMAN: And hopefully not about some of the topics the Secretary just handled. But let me go back to the one question that did come up before. As many of you may know, the Interstate Banking Bill, which hopefully will be signed very shortly, does call for a special study to be conducted by the Department of the Treasury with an advisory commission with members appointed by the Secretary that addresses a whole wide range of issues dealing with the U.S. financial system.
And among them will undoubtedly be a look at GlassSteagall and other issues. It's not that that necessarily is the focal point by any means. But undoubtedly in the course of that, it's a charge by Congress to produce a report and to make recommendations, and it's one we'll fulfill seriously.
Q The Secretary spoke of the last payment on the savings and loan cleanup. Do you see any need for either transferring RTC monies to the safe insurance fund or for taxpayers making some sort of contribution to that because of the differential between bank and savings and loan insurance premiums?
UNDER SECRETARY NEWMAN: Well, we haven't come to any conclusions about how that issue ought to be approached. It clearly is an issue that does need to be discussed. There have been some hearings on it. In Congress undoubtedly there will be more next year. The issue is partly just how long it's going to take for the savings association insurance fund to build itself up to the point where it is strong enough to be the source of resolving problems for that industry. And it's one of the many issues we'll look at in the context of this study also.
Anything more on the Community Development and Regulatory Burden Reduction Act?
Q Does this duplicate or overlap, or how does this fit in with CRA, which is coming out on Monday? Have you tried to make the two fit together -- seem to be --
UNDER SECRETARY NEWMAN: Yes, they'll hopefully be quite complementary. As you say, there will be another round of revisions to the latest CRA regulations coming out, hopefully, next week. They are intended to follow this theme that the President referred to a year ago, which was to make them more meaningful and less paperworkoriented and more oriented towards what actually is being done.
And the two should dovetail very well. There will be appropriate provisions in the CRA aegis as there were in the previous version that was issued for comment to give credit for community development financial institution investments and support made by financial institutions as part of the way that institutions can fulfill their CRA responsibilities, but it's not sufficient. And it's necessary for financial institutions to support all of their communities and not just a limited number of communities. This will be one piece of it, but not the totality.
Again, the theme -- one of the key themes that both the Secretary and the President referred to before is leveraging the efforts of the private sector. This CDFI bill and the fund are structured not to be just sort of giveaways by the government, but rather, investments that will be generally matched by the private sector and where the private sector will use this essentially as seed money to build into much more total loans into the communities as part of the overall process over the years, and that will dovetail very well with CRA.
Q Do you have firm commitments -- when you estimate $5.5 billion, do you have firm commitments from the private sector?
UNDER SECRETARY NEWMAN: No, although clearly we have strong indications. The President mentioned a couple of large ones this morning from large banking companies, and we have had numerous financial institutions and philanthropic institutions, foundations, express interest in this kind of a program of essentially matching funds. And everyone has been, I think, almost totally enthusiastic about it, and it's a great opportunity yet. So even though there's no way to guarantee it, we have a great deal of confidence. As a matter of fact, if anything, we are expecting that there will be more legitimate applicants and more legitimate opportunities of private sector matching than we will have authorization for, at least, initially.
Q When do you anticipate money to first start flowing to community development institutions?
UNDER SECRETARY NEWMAN: Within the first year of operation, the bill calls for us to issue a set of regulations within six months of the time that the administrator comes on board. Obviously, the President has to nominate an administrator, but we can get started in the process of developing the regulations in the meantime, and should be able to get them out so that the applicants -- it was interesting, one of the speakers this morning mentioned that his organization was definitely planning to apply the first day that the door was open for applications.
And one of the things we want to do is to within six months, to get the regulations out for how the application process is going to work so that people can work with them and get the applications in and get them processed and actually get the money rolling out before the end of the year.
Q Starting with the second half of 1995?
UNDER SECRETARY NEWMAN: Yes.
THE PRESS: Thank you.
END12:50 P.M. EDT