MASHANTUCKET, Conn. - Credit builds houses and opens small businesses. Credit gets you things now it would take years to save up for. And credit is hard to find on the Rez.
But the search for credit is picking up. Two recent conferences brought tribal leaders looking for more credit for their people together with federal officers who control credit, hoping to bring down some of the barriers.
Housing and economic development dominated one meeting at the Foxwoods Resorts and Casino, sponsored by the federal Office of Thrift Supervision and the United Southern and Eastern Tribes Inc. At the other end of the country the North American Native Bankers Association gathered in San Diego to attack the other end of the problem, the lack of Indian-controlled lenders.
Some 200 tribal officers, mainly concerned with housing and economic development, gathered in the emerald towers of the Grand Pequot Casino to hear 75 speakers from the ranks of the federal bank regulators and the Department of Housing and Urban Development. Although the title was "Visions 2000," they discussed specific and sometimes highly technical programs to overcome lending barriers built into reservation life.
"We're here to find our way through a maze of regulations," said W. Ron Allen, vice president of the National Congress of American Indians and chairman of the Jamestown S'Klallam Tribe.
Speakers again and again returned to the historic source of many of the barriers, the trust status of tribal lands. When bankers lend to private homebuyers in most of the country, they know that if the borrower doesn't pay back the mortgage, the bank can go to court as a last resort and take the property. But that step is impossible on reservations. So banks can't make home loans and money for new housing has to come from under-funded federal and tribal programs.
Panels went through the details of several federal programs that try to make an end run around these barriers, such as HUD guarantees for tribal land mortgages and leveraged loans from the Rural Housing Services of the U.S. Department of Agriculture.
But one of the freshest approaches came from Michigan consultant Thomas Wright who called for the education of private bankers in the ways of dealing with Indian country.
"The first thing is to recognize sovereignty," he said in a summary of the conference. "Asking for a waiver of sovereign immunity is not the way to start. It draws an emotional battle-line."
He said private bankers should recognize tribal courts "as a proper jurisdiction for mortgage related matters.
"Concern about the tribal court is a valid question, but the tribal court does work."
On the other hand, he said tribal governments should work with banks in educating mortgage borrowers about the burden they are taking on. A long-term credit commitment "is a very big step."
Wright helped negotiate two ground-breaking agreements giving the Bay Mills Indian Community and the Menominee Tribe of Wisconsin access to conventional financing. A key to this success was the use of a tribal master lease for a large development tract, he said. With BIA approval in place for the master lease, the tribe was able to parcel out subleases without going through the whole, time-consuming process once more. A conventional bank was able to make mortgage loans on the subleases using the improvements, that is the buildings, as security and the tribal government as co-signer.
Another promising program focused on micro-lending, setting up community-based entities, either non-profit or for-profit, to make small loans on the reservation. Their numbers are expected to grow rapidly, said Maurice Jones, a U. S. Treasury official in charge of the programs of the Community Development Financial Institutions Fund. This fund has made 365 awards totaling $215.7 million in its four years of operation. Based on applications in the pipeline, he said the fund expected to certify an additional 75 to 100 community lenders a year.
With the federal blessing these local outfits could also attract financing from banks seeking compliance with the Community Reinvestment Act, Jones said. The community institutions in turn provide financial services, housing loans and venture capital. "VC is a pretty vital niche right now."
Rockling Todea, Navajo, described one of these groups, the New Mexico Community Loan Fund. He said it began in 1987 with a group of people who held hands over a Rio Grande bridge as part of the Hands Across America project. "This is an example of a grass-roots movement taking root at the national level."
The fund administers $4 million, with loans ranging from $5,000 to $100,000, Todea said. It sponsors small businesses, such as galleries, and provides technical support. "Our technical assistance program reassures people that you'll stay with them." As a result, the fund's default rate is a respectable 3 percent.
The Native bankers conference in San Diego earlier this month took an even more ambitious approach, encouraging tribes to set up their own banks and open their own access to credit. Representatives of the 10 functioning tribal banks mingled with tribal delegates drawn heavily from Oklahoma and the West Coast, highly supportive federal regulators and Wall Street financiers sensing the birth of an important new credit market.
"It's a bit early to tell," said NANBA President J.D. Colbert, who also attended the Foxwoods conference. "But we expect at least five new banks to come out of it."