Who Should Control the Community Development Bank? : Accountability: The bottom line of responsibility remains with the city.

Inner city entrepreneurs bemoan the difficulty of accessing capital needed to modernize and expand their business to become more competitive, and the Community Development Bank is a sign of hope. But their suspicion about promised government aid will only be overcome if the “community” bank includes them in a plan that is effective, fair and responsible.

The bank will be judged successful if it can meet its program objective: A timely distribution of funds to businesses that generate economic development. To be effective, the bank will need a governing body that is competent and representative of the communities affected.

Behind the concern about representation is the question: Whose bank is this? The proposed 15-member board would include eight appointments by the three interim bank incorporators, six by the City Council and one by the County Board of Supervisors. This structure is acceptable as long as the appointments are a broad-based group of people who collectively reflect the communities they serve and the bank’s target area. Given that the city will ultimately be held accountable for the bank, token appointments will be unacceptable.

The community has so far been given rather limited opportunity to comment on the bank’s business plan, agreement and by-laws. It is unclear whether the city has met the community participation requirements stipulated by the federal Department of Housing and Urban Development.The present plan does not give loan priority to socially beneficial businesses--say supermarkets over liquor stores.

Diligent oversight is necessary. Lending incurs risk and financial losses would have to be made up either by tapping into the city’s general fund or having future federal funds reduced. The proposal calls for oversight through a review of periodic financial documents. We should also consider the idea of creating a audit committee. The bank must also adhere to strict conflict of interest rules that disallow board members from having a financial interest in the distribution of funds. Some have sought to obtain a waiver on this. This is unacceptable.

The bank can revitalize key parts of the city if we submit an accountable plan to HUD by Friday. If we can properly put $430 million into the hands of business owners in an effective, fair and responsible manner, we can confidently bank on the target areas developing economically and at once raising the quality of life for its residents.

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In May, the government gave Los Angeles a $430- million grant to fund an innovative nonprofit community development bank. By leveraging its resources through partnerships with existing lending institutions and nonprofit economic development corporations, the new bank is expected to have working capital of $1 billion with which to make modestly risky loans to businesses in the city’s most disadvantaged areas. Today, the City Council will vote on who will oversee the bank’s operations.