In the current economic environment, one of the most significant challenges for a new financial institution is raising the substantial level of capital required to begin operations.  Currently, a financial institution must be operating to receive certification and be eligible for funding from the Community Development Financial Institution (CDFI) Fund.  A recent Woodstock Institute request to Treasury asked to change this policy and allow financial institutions planning to operate as a CDFI to qualify for funding.

The foreclosure crisis shows no signs of stopping—in the Chicago region, new filings rose by over 20 percent in 2009. Every foreclosure leaves behind a property that stays vacant for a period of time. Such vacant properties can drain municipal resources, lower property values, and raise crime rates. Since real estate demand remains weak despite record low interest rates and government incentives, it is likely that these vacant homes will remain a burden on neighborhoods—and on lenders’ books—for a significant period of time. Woodstock research has found that lender-owned properties in Chicago take, on average, close to 16 months to be purchased by new owners and are disproportionately concentrated in communities of color.

Momentum continues to build in Washington around expanding small business access to sustainable credit, despite the postponement of the hearing to consider the state of small business lending in local markets in the House Small Business and Financial Services Committees. Keeping credit flowing to small businesses is critical, especially in times of recession and high unemployment. Small businesses are engines for job creation, creating roughly 80 percent of new jobs and employing over half of private sector employees. Ensuring that small businesses are equipped to grow through productive, sustainable credit and create new jobs will be a vital component of economic recovery.