Re: Policy Recommendations to create jobs using existing Administration authority

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1 August 30, 2011 Don Graves, Jr. Executive Director President's Council on Jobs and Competitiveness The White House 1600 Pennsylvania Avenue Washington, DC Re: Policy Recommendations to create jobs using existing Administration authority Dear Mr. Graves: As President Obama considers specific measures to create jobs and spur economic growth, the Corporation for Enterprise Development (CFED) recommends three proposals that would use existing Administration authority to help those most in need secure good jobs and build assets. These include: 1) Leveraging the Federal Home Loan Bank System an existing source of private capital and liquidity for community investment and economic development. 2) Enabling owners of substandard mobile homes to buy new, energy-efficient manufactured homes. 3) Supporting programs that encourage entrepreneurship and self-employment. I. Leverage the Federal Home Loan Bank system The Federal Home Loan Banks (FHLBanks) can and should play an increased role in supporting community investment and economic development. The nation s financial institutions comprise the membership of the FHLBanks. Individual bank members benefit not only from dividends paid on the preferred stock they purchase, but also from access to low-cost financing known as advances, which they use to maintain liquidity for operations, finance mortgage loans, and invest in GSE mission requirements related to housing and community economic development. CFED: Job Creation Suggestions August 30, 2011 Page 1

2 Each FHLBank operates a Community Investment Program and Community Investment Cash Advance (CICA) programs, which are intended to meet the economic, affordable housing and community needs of each region. Since 1990, the FHLBanks have provided $2 trillion in advances, but only $16 billion of those funded loans went to community economic development projects in targeted mostly disadvantaged urban and rural- communities, resulting in the creation of just 164,264 jobs. In response, Congress included stronger oversight for economic development activities of the FHLBanks in the Housing and Economic Recovery Act of The Federal Housing Finance Agency, which regulates FHLBanks, should move quickly to use its oversight responsibility to make economic development a priority by: Requiring each FHLBank to standardize its community lending plans including affordable housing and community economic development activities. Requiring each community lending plan to include goals for the upcoming year with specific investment figures and number of deals. Using the Community Support Program Review to capture and encourage economic development investments. Pursuing alternative options to improve the Community Support Review process, such as tracking the progress made on recommendations from previous reviews, requesting feedback from local governments, and considering intermediate penalties for below average but not failing performance. These measures have no cost to the Treasury and would encourage private investment by nearly every financial institution in community economic development activities that lead to recovery and job growth in the hardest hit, highest need areas of the country. II. Replace substandard mobile homes with updated manufactured homes The President should support a job creation strategy that replaces mobile homes built prior to the institution of Department of Housing and Urban Development codes with ENERGY STAR manufactured homes. The 111 th Congress passed a $600 million program to provide up to $10,000 in down payment assistance to low- CFED: Job Creation Suggestions August 30, 2011 Page 2

3 income owners of pre-1976 mobile homes to enable them to buy ENERGY STAR manufactured homes. Each home replaced is estimated to create one job so the House proposal would have created about 55,000 jobs. While this proposal never passed the Senate, existing resources from the Department of Health and Human Services and the Department of Energy can be used to replace theses homes with new ENERGY STAR manufactured homes. Using federal funds for replacement of outdated mobile homes would create jobs in the hard hit manufactured housing industry, save energy and provide affordable and attractive homes to low-income families struggling with high energy costs. We recommend that the President: Allow owners of these outdated homes to use Low Income Housing Energy Assistance Program (LIHEAP) funds as down payment assistance for buying new ENERGY STAR manufactured homes. Allow the Assets for Independence program at HHS to use its funds to allow owners of these homes to qualify as first-time homebuyers. Request waiver authority in the 2013 budget request. Through Executive Order, permit DOE to use Weatherization funds for replacement of pre-1976 mobile homes. III. Support Entrepreneurship and the Self-Employed Small businesses continue to report that they cannot get the credit they need at reasonable terms from bank lenders to grow their businesses.. Financial institutions, however, report that weak demand from businesses and consumers alike and internal constraints the need to build more capital and the ongoing trend of falling profits both limit the amount of funds that banks make available for lending. This disconnect makes it difficult for policymakers to effectively design and implement strategies to support small business lending and economic growth. Since the majority of jobs are created by new, very small businesses, addressing this problem offers the Administration its best opportunity to improve the employment situation. We recommend the President: Quickly implement the Dodd-Frank Act s new data collection requirement regarding small business loans. The Consumer Financial Protection Bureau (CFPB) will collect, report and analyze data on loan applications, answering critical questions about where capital is and is not flowing efficiently to business owners. CFED: Job Creation Suggestions August 30, 2011 Page 3

4 Consider immediate action to improve the Small Business Loan Fund (SBLF). Authorization to award money from this fund expires on September 27, Although the SBLF has $30 billion to lend to small community banks, credit unions and Community Development Financial Institutions (CDFIs), applicants have only. requested approximately $11 billion and just $1 billion had been disbursed as of August 17. Treasury Department officials should first ensure that all viable pending applications are approved by September 27. If necessary, it should issue conditional approvals for applications that have been delayed due to concerns from the Federal Reserve regarding dividends waivers. Because of these regulatory concerns, the Administration should consider asking Congress to approve an extension of the deadline for disbursing the funds. Consider the request from the Credit Union National Association (CUNA) to increase the proportion of credit union portfolios that may be business loans. CUNA has asked that the cap, which currently stands at percent of total assets, be increased to 27.5 percent of assets. The organization estimates that this would inject more than $13 billion in new funds into the economy, creating up to 140,000 jobs in the first year. Additionally, small business lending has become the fastest-growing segment of credit union activity, making it likely that these financial institutions can readily meet business owners needs. Maintain funding for federal microenterprise technical assistance and financing programs. The technical assistance programs, including the Program for Investment in Microentrepreneurs (PRIME), CDFI Fund Technical Assistance grants and others, help business owners take advantage of growth and financing opportunities. They directly support the capacity of new entrepreneurs and small business owners to apply for microloans, such as those available from the Small Business Administration s Microloan Program or the Department of Agriculture s Rural Microentrepreneur Assistance Program (RMAP). They also help businesses develop the credit record they need to successfully access financing from mainstream lenders in the future. Revise Department of Labor regulations for the Self-Employment Assistance Program (SEA) and the Workforce Investment Act (WIA). SEA is a costeffective strategy that assists unemployed workers who want to start CFED: Job Creation Suggestions August 30, 2011 Page 4

5 businesses and create their own jobs but its reach is limited by unnecessary regulatory burdens; in fact, SEA is only available in 7 states. DOL should o Give states additional incentives to participate in SEA by providing them with detailed information, guidance and technical assistance related to implementation of the program. o Enhance the training and counseling options available to all SEA participants by working with the Small Business Administration (SBA) to establish. o collaborative relationships whereby DOL s One Stop Career Centers provide referrals to SEA participants to receive entrepreneurship training from SBA s Small Business Development Centers and Women s Business Centers. o Amend the regulations for the Workforce Investment Act such that performance measures used to evaluate One Stop Career Centers and local Workforce Investment Boards (WIBs) include referrals entrepreneurship among their goals. Currently, such referrals are not counted as successful outcomes, leading officials who are focused on achieving successful evaluations to avoid making them. o Establish a dedicated fund for entrepreneurial training within WIA s Dislocated Worker program to help states pay for the provision of entrepreneurial training services. CFED appreciates your commitment to reduce unemployment, spur economic growth and build an inclusive economy. To follow up on any of these recommendations, please don t hesitate to contact me at cwayman@cfed.org or Sincerely, Carol E. Wayman Carol E. Wayman Director of Federal Policy Cc: CFED: Job Creation Suggestions August 30, 2011 Page 5

6 Valerie Jarrett, senior advisor, assistant to the President for Intergovernmental Affairs and Public Engagement, the White House Raj Date, acting director, Consumer Financial Protection Bureau Ed DeMarco, acting director, the Federal Housing Finance Agency Stephen Cross, director, Federal Home Loan Bank Enforcement, FHFA Kathleen Sebelius, secretary, Department of Health and Human Services George Sheldon, acting assistant secretary, Administration for Children and Families, Department of Health and Human Services Hilda Solis, assistant secretary, Department of Labor Jane Oates, assistant secretary, Department of Labor Karen Mills, director, Small Business Administration Steven Chu, secretary, Department of Energy Henry Kelly, assistant secretary for Energy Efficiency and Renewable Energy, Department of Energy CFED is a national nonpartisan, nonprofit organization dedicated to expanding economic opportunity to include all people. We believe such economic opportunity will bring greater social equity, alleviate poverty and lead to a more sustainable economy. As a leader in economic development for nearly three decades, CFED collaborates with diverse partners at the national, regional, state and local levels. We bring together community practice, public policy and private markets in new and effective ways. CFED: Job Creation Suggestions August 30, 2011 Page 6