Good Morning Mr. Chairman and Committee members. I am here today as President of the North American Native Bankers Association, also known as "NANBA". NANBA is an association of commercial banks and other regulated financial institutions owned by Indian tribes. I appreciate the committee’s concerns regarding Capital Investment in Indian Country and applaud your efforts to effect greater capital access. Thank you for allowing to me make a brief statement before this committee.
Native Ownership of Financial Institutions
Lack of Native ownership of financial institutions continues to be a major obstacle to greater capital access in Indian Country. This lack of native owned financial institutions has repeatedly been identified as an impediment to greater capital access. For example, the Native American Lending Study conducted at the Community Development Financial Institutions Fund at the Department of Treasury recently identified the lack of Native ownership of financial institutions as a major obstacle regarding capital access.
With respect to regulated financial institutions, at present there are only eight (8) tribally owned banks and another nine (9) banks owned by individually enrolled tribal members in the U.S. In addition, there are approximately six (6) tribally owned community development credit unions. Accordingly, there are only 23 regulated financial institutions owned and controlled by Native tribes or individuals to serve over 560 federally recognized Indian tribes and over 2,000,000 individual Indians. Clearly there is a great disparity between the number of Native owned banks and the demographics of Indian Country.
Presently, there is at least one piece of legislation currently on the books that could be utilized to address this disparity. In August, 1989 Congress enacted the Financial Reform, Recovery and Enforcement Act of 1989 known as "FIRREA". Section 308 of FIRREA established at least three salient public policy goals:
As indicated by the paucity of Native owned financial institutions, and Minority Owned Institutions in general, the will of the Congress as expressed by Section 308 of FIRREA has been frustrated by the lack of responsiveness of the federal bank regulatory agencies. At best this responsiveness could be described as "minimal", at worse, it could be described as disregarding this Congressional mandate.
In all fairness, there have been some recent positive developments with regard to efforts made by the various federal bank regulatory agencies to reach out to Indian Country. For example, the Federal Reserve Bank of San Francisco has sponsored various "Sovereign Lending Workshops", the FDIC has recently adopted a revised policy statement on Minority Owned Financial Institutions that expands the scope of their activities and the Office of the Comptroller of the Currency published, with NANBA’s assistance, a booklet entitled "A Guide to Tribal Ownership of a National Bank".
While these and other efforts are most welcome in Indian Country they fail to directly address a key goal of section 308: to promote and encourage the creation of NEW minority owned financial institutions (emphasis mine). The federal bank regulatory agencies, who have primary responsibility for implementing the goals of Section 308, have done very little to actually increase the number of Native owned banks.
NANBA, however, has been active on this point. In July, 2000 NANBA hosted the "Tribal Ownership of Banks Conference". The goal of the conference was to foster the development of additional Native owned banks. We had approximately 150 people attend the conference with over 25 tribes represented. To my knowledge, the NANBA conference was the first and only conference ever conducted to stimulate the development of additional Native owned banks. Indeed, it may stand as the ONLY conference ever held in the history of the U.S. that had the goal of creating new Minority Owned banks.
I would suggest that the Congress might provide funding to allow an Interagency Task Force of the federal bank regulatory agencies to fulfill their section 308 responsibilities by hosting a similar conference for Indian Country as well as for members of other minority groups. I would further suggest that such a conference be conducted for at least three years in a row to maximize its potential impact and outreach efforts.
In addition, the various bank charter granting federal bank agencies should work with established Indian organizations such as NANBA to continually provide outreach, training and educational efforts to both expand the number of Native owned financial institutions as well as to assist in the growth and development of existing Native institutions. We at NANBA stand ready to work together with the Congress, the Administration and the federal bank regulatory agencies to fully implement all the public policy goals of section 308 of FIRREA and especially the goal of creating NEW Native and Minority Owned Banking Institutions.
In addition to the need for additional Native owned banks and financial institutions, Indian Country badly needs to access capital investment through bond financing.
In order to stimulate access to this important sector of the capital markets, I would suggest that the Congress consider amending the Securities Act of 1933 to allow Indian Tribal Governments access to the same exemption from securities registration that state, county and local governments currently enjoy with respect to the issuance of tax exempt bonds.
Presently in order to access the mainstream bond markets tribes are forced to go through an expensive and time consuming registration process. Generally tribes naturally avoid this process and will turn to the private placement market. This entails paying higher yields on their paper than what could otherwise be expected in the mainstream bond market.
To the extent that the Congress sees fit to so amend the 1933 Securities Act, I would further suggest amending the Internal Revenue Code of 1986 to allow Indian Tribal Governments to issue "private activity bonds" in the same manner as allowed for state and local governments. In addition, I would suggest exempting tribes, under certain circumstances, from the "volume cap" requirements of Section 146 of the Internal Revenue Code.
By providing Indian Tribal Governments with equal footing as that enjoyed by state and local governments with respect to the issuance of private activity bonds it will greatly stimulate the flow of capital to Indian Country. Also, by granting an exemption to Indian tribes, under certain circumstances, from the "volume cap" restrictions will mean that tribes will not have to request a private activity allocation from a state government who may be unwilling or unable to grant such allocation as an Indian tribal government is not a political subdivision of the state.
That concludes my statement. Thank You Mr. Chairman and Committee members for allowing me the opportunity to represent NANBA before this committee. I will be pleased to entertain any questions or comments from the committee.
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