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Banks open their doors

Report from the Pacific Northwest

PORTLAND, Ore. - There's the electrical contractor in Seattle, a tribal
member from the Southwest with an impressive credit rating, who went from
his first small business loan of $10,000 several years back to working on
multi-million dollar contracts with a $50,000 line of credit from
Washington Mutual. Then there's Sterling Savings Bank that's helping
sponsor the Portland-based Oregon Native American Business Network's
(ONABEN) Trading at the River conference for American Indian entrepreneurs
in October. And there's Wells Fargo paying very close attention to a
Cambridge study out last year that toted up a $41 billion purchasing power
figure for Indian country.

Banks are ever the conservative bastion, though, staffed with prudent folks
interested in solid returns on investments. That's why even though the
casino industry - currently ringing in $17 billion a year in revenue -
coming into its own in the late 1980s and early 1990s, only in the past few
years have bankers shown significant interest in making loans to the tribes
and Indian people.

Promising news, some might say, but still, it would be hasty to overdraw
the budding relationship between those with the capital and those
historically disenfranchised. Both difficulties in securing collateral on
reservation trust lands and problems related to less than impeccable credit
histories remain high hurdles.

"Historically banks would not lend to prospective Indian borrowers because
the federal government holds most tribal land in trust, a situation that
makes it impossible to repossess land if borrowers default on a loan,"
member of the Ricon Band of San Lusieno Mission Indians in California and
Director of Wells Fargo's Native American Banking, Steve Stallings
explained. "But in 1992 Congress authorized the Department of Housing and
Urban Development to guarantee mortgages on reservations, and that began to
ease banks' reluctance to lend to Indian people."

Ease, perhaps, but not end.

"Typically we would take a deed of property for collateral on a loan
because of all the red tape," said Community Development Manager of
Sterling Savings Bank in Spokane, Wash., Ray Mooney. "So it's easier for us
to loan on discrete items. For example, when we made loans to the Quileute
Tribe for a modular office building and two garbage trucks, our collateral
was the tribe's interest in those items." In other words, if the tribe
didn't make good on its debt, the bank could repossess the building and the
trucks. "In order to loan money on trust property, it's necessary to get a
signature from the Superintendent of the Bureau of Indian Affairs," Mooney
said, "and that process can be very cumbersome. That's why Sterling looks
for creative ways to make loans to Native Americans." Mooney added that
"The Quileute has no casino, but we've had a successful banking
relationship with the tribe for six years now."

Washington Mutual Bank also looks for ways to serve the growing tribal
market in the Pacific Northwest. Vice President and community development
officer in the Seattle branch, Juan Aguilar, pointed to one approach. "The
Yakama Nation has been exploring a plan to create a tribal electrical
utility for several years now. They needed a $1 million loan to complete
the initial phase of the study, and we provided that loan using the good
faith of the tribe itself as collateral. That was in 2001, and the loan has
been repaid."

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The nation's American Indian population has gone from a low of 350,000 in
1920 to over 4 million today, with those under 18 numbering around 40
percent. These figures combined with growing access to higher education and
tribal coffers generally, has the banks' attention. According to Steve
Stallings who looks at the national picture, "A lot of Indian people are
getting income levels where they can buy homes. Wells Fargo has 300 to 400
mortgages on reservation land alone, six full-time professionals to service
Americans Indians and tribal nations exclusively, and about $1.6 billion
out in commitment [loans] to tribes and Americans Indians nationwide right

Wells Fargo is a large, diversified financial services company with $388
billion in assets, so it can afford a high-profile approach. Regional
institutions like Sterling Savings, though, work to fill the niche of the
smaller, local banker.

"We try to build relationships with tribes in communities where we have our
branch banks," said Sterling's Ray Mooney. "While we're not large enough to
finance casino operations, we do finance tribal infrastructure as in the
case of the Quileutes. We've also dealt with the Nez Perce tribe in Lapwai,
Idaho. With the Nez Perce, much of the lending we've done has been used by
the tribe to buy back checkerboard land within their reservation
boundaries." Mooney also pointed out as did Washington Mutual with the
Yakama Nation, Sterling does consider lines of credit based solely on the
financial strength of the tribe itself. "And," he added, "We've also
financed an administrative office for the Kalispell tribe on trust property
via a long term real estate loan on which we got an endorsement from the

In addition to finding solutions to lending obstacles, banks spend
considerable effort dialoging with the tribes and facilitating access to
various federal programs. "Many of our tribes are very sophisticated in
their financial dealings," said Mooney, "while other tribes are not there
yet. Thus, part of our job is helping to educate them on how the rest of
America banks so they can take advantage of the tools that are available."

On behalf of Sterling Savings, Mooney has been involved with the Native
American Lending Task Force for the past six years. Sponsored by the
Federal Reserve Bank; NALT brings lenders and tribal leaders together to
discuss lending problems and how to increase home ownership and business
loans. Similarly, Washington Mutual joins Sterling and Wells Fargo as a
sponsor of ONABEN's Trading at the River conference.

"In the Pacific Northwest what we try to do is grow capacity in tribal
enterprise and small business lending," said Washington Mutual's Juan
Aguilar. "In order to do this, though, the tribes need to be more
proactive. They need to provide the tools and assets for tribal members who
want to create and grow small businesses at home on the reservations. Right
now what happens is that tribal money gets spent off the reservation, and
we need to turn that around."

In response to how small tribal businesses can compete against the large
corporations, Aguilar was optimistic. "It's hard," he said. "But I think
that if you localize it and fill a niche locally, you can eventually grow
these small businesses upon which solid communities rely."

Big purses. An up and coming youth population. Strong leadership. New ways
to secure collateral for loans. That's the drum beat in the Indian country
and banks are listening.