WASHINGTON ? Acknowledging sovereignty by allowing tribal governments to issue bonds under the same conditions as state and local governments would help bring desperately needed capital into Indian country, the U.S. Senate heard.
In addition, Senators were advised that funding more community loan funds that are able to take on more risky lending than banks or thrifts would also bring more investment.
At a June hearing of the Senate subcommittee on financial institutions, J.D. Colbert, president of the North American Native Bankers Association, Norman, Okla., asked that tribes get the same exemption from securities registration for tax-exempt bonds as state, county and local governments currently enjoy.
"Presently tribes are forced to go through an expensive and time-consuming registration process," Colbert said in his statement to the hearing on capital investment in Indian country. "Tribes naturally avoid this process and will instead turn to the private placement market. This entails paying higher yields n their paper than would otherwise be expected in the mainstream bond market."
Colbert also asked that tribes be allowed to issue "private activity bonds" on the same level playing field as state and local governments. This "will greatly stimulate the flow of capital to Indian country," he stated. Furthermore, tribal exemption from "volume cap" restrictions "will result in tribes not having to request a private activity allocation from a state government that may be unwilling or unable to grant such allocation."
Elsie Meeks, executive director of First Nations Oweesta Corp., testified before the committee, which is chaired by Sen. Tim Johnson, D-S.D., that local loan funds called community development financial institutions (CDFIs) "are able to take on more risk than banks and other regulated financial institutions."
Meeks, whose company is a unit of First Nations Development Institute, Fredericksburg, Va., said "another important reason why most lenders have trouble lending in Indian country is security and collateral issues, especially for home mortgages." Native CDFIs "can safely make concessions which allow them to provide flexible financing for home buyers."
The government's CDFI Fund is essential to the effort, said Meeks, formerly the director of The Lakota Fund, a CDFI on the Pine Ridge reservation in South Dakota. She advocated funding the CDFI Fund with $125 million yearly, of which $5 million would be set aside for the development of Native CDFIs. She noted that in recent years nine other Native CDFIs have been chartered, and said 47 organizations applied for technical assistance under the Native component of the program.
Colbert also underscored the absence of Native financial institutions in his testimony. He said there are currently eight tribally owned banks in the country, with another nine owned by tribal members, and six tribally owned community development credit unions, for a paltry total of 23. He advocated Congress act to encourage more.
Michael B. Jandreau, chairman of the Lower Brule Sioux Tribal Council, said in his prepared remarks to the committee that the perception "among non-Indians that the legal systems in Indian country are unstable or unreliable" is one of the key barriers to capital access.
He said that the creation of the "Wakpa Sica Reconciliation Place" for the various Sioux nations would include "the establishment of a more reliable court system in order to attract private capital."
The chairman offered a long list of possible solutions to the Senate, including a federal equity fund to encourage private investment, a task force to demystify federal economic development programs, and the creation of Indian business incubators.
William V. Fischer, president of American State Bank, Pierre, S.D., supported funding of Wakpa Sica, which he termed "a supreme court for the eleven tribes of the Great Sioux Nation."
But he underlined Flandreau's observations on non-Indians' suspicion of tribal legal systems by saying tribes have "no checks and balances ? the legislative, executive and judicial are very interrelated and thus virtually one." He advocated changing the tribal form of government and also asked for "better separation of economics from political decisions."
He also said tribes have a tendency to insist tribal members run their businesses, even without prior business experience.
Fischer noted that one of his bank's officers serves on the Four Bands Community Fund, a CDFI that has started on the Cheyenne River Sioux Tribe's reservation in South Dakota.
Adding corporate star power to the proceedings, Franklin Raines, chairman of the government-sponsored mortgage agency Fannie Mae, detailed his firm's efforts in Indian country. Raines said Fannie Mae has in the past four years provided more than $6 billion in affordable financing to Indians off trust lands, for 50,500 families, and $174 million on reservations for 1,900 families.
For the first quarter of this year, he said $38 million has been financed for members of 42 tribes. In addition, Fannie Mae's investments in Low Income Housing Tax Credits last year helped create 156 units of Indian housing, with 232 more planned for this year.