Subcommittee on Financial Institutions

Hearing on "Capital Investment in Indian Country."

Good morning, Mr. Chairman, Mr. Vice Chairman and Members of the Subcommittee.  Thank you for the opportunity to appear here today.  My name is William V. Fischer.  I am President of the American State Bank of Pierre, South Dakota, a $90 million independent commercial bank located on the Missouri River in the center of the state.  I am a third generation South Dakotan whose grandfather arrived here in 1884.  I will be testifying from my position as a commercial banker in Central South Dakota, Indian Country, for the past 36 years.

South Dakota is not unique from other states in having Indian Reservations located within its boundaries.  We have nine reservations in South Dakota, three of these reservations are located in our lending area.

There have been numerous studies compiled, some commissioned by Congress and independent studies done over the past years regarding lending in Indian Country.  Recently, there was a workshop held in Rapid City, South Dakota, sponsored by the U.S. Treasury on lending in Indian Country.  Also, the FDIC out of Kansas City has been working on the Cheyenne River Sioux Tribe Reservation since 1995 regarding lending in Indian Country.  (See attached letter from John P. Misiewicz of the Kansas City FDIC Office)

First let me address what I feel are some of the obstacles to lending in Indian Country:

• Instability of Reservation Tribal form of Government;

• No checks & balances - the legislative, executive and judicial are very interrelated and thus virtually one;

• Constant turnover, inexperience and thus lack of consistency in Tribal Governments;

• Economics - lack of financial education and economic knowledge;

• A general lack of Unified Tribal Vision, planning and business experience;

• Lack of understanding of Tribal Sovereignty and Sovereign Immunity;

• State and Federal regulations and bureaucracy;

• Lack of basic economics and credit knowledge at the enrolled members level;

• Each reservation has its own specific laws and policies with no degree of uniformity of Tribes dealing with economic issues - i.e. UCC;

• The tendency to insist on Tribal Members to manage Tribal businesses when the members have no experience in managing this type of business venture;

• The general tendency to try and run (manage) businesses without accurate financial accounting records;

Some practices that American State Bank has implemented to overcome obstacles of lending in Indian Country:

• Know the Tribe and/or Tribal member wanting to borrow money;

• Establish a professional relationship with an attorney and accountant familiar with Tribal law and the reservation involved;

• Follow basic credit criteria - character, capacity and collateral;

• Know the Tribe, its officers, council, issues and history;

• Realize that very few customers, Indian and/or non-Indian, are entrepreneurs and thus should we lend money for such a venture, we allocate time and special attention to assisting and ensuring the venture has an even chance to succeed - Tribes and Tribal members don't need more examples of failure;

• American State Bank has taken a very active position in understanding the issues and concerns on the Cheyenne River Sioux Tribe Reservation.  One employee of the Bank serves on the Four Bands Community Loan fund;

Legislative or regulatory remedies that I believe would be helpful to facilitate the flow of capital to Indian Country:

• Promote a Tribal governing system that better separates the legislative, executive, and judicial systems and thereby provide check and balance, and thus stability;

• Better separation of economics from political decisions;

• Needs to be a better working relationship between the B.I.A. and Tribes... working for the better good of all parties involved;

• Promote establishment of 1, 3, 5 and 10 year economic development plans and where necessary hire the best managers to implement them;

• Managers for Tribal businesses should be the very best that are available whether they are Indian or non-Indian - with built-in incentives for successful/profitable operation;

• Implement a series of courses both at the high school and post high school levels promoting good business practices;

• Let's re-consider loan guarantees for commercial loans that are made in Indian Country;

• Let's consider tax incentives for loans that are made in Indian Country;

• Perhaps the Congress should at least establish pilot projects on each of these ideas;

• Perhaps all Indian Reservations should be empowerment zones; or

• Possibly pick a few, well managed reservations, and make them into experimental models, empowerment zone, to implement business practices;

• And last but not least, fund the Wakpa Sica project #HR5528 and thereby establish a supreme court for the eleven Tribes of the Great Sioux Nation - this is truly the first step in bringing uniformity and creditability to a system that is very suspect by creditors.

Mr. Chairman, as you know, federal Indian policy at this point is mostly a series of programs that attempt to address basic human needs: education, housing, health care, etc.  They are very expensive and they have had mixed results, at best.  Let's try investing through private markets with the goal of creating an Indian private sector, so that the human needs will not be as great or cost as much.   As Chairman Jandreau states in his testimony, unemployment in South Dakota is under 4% yet in Indian Country the unemployment rate is, on average, 75%.  If the federal government can drive that rate down by stimulating a private sector it will save the government a lot and be a good return on investment. 

Thank you for convening this very important hearing.  I would be pleased to answer any questions.

Let me conclude by quoting Bobby Whitefeather: " I know what we need to do.  All the ingredients are there.  We just need to put the pieces together.  The challenge is, are Tribes ready and is Congress and the Administration willing to provide or create the necessary receptive environments and support to 'enable' Native Nations to prosper."-- Bobby Whitefeather, Tribal Chairman, Red Lake Band of Chippewa Indian, Minnesota

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