City Tells Bank to Prepare Report in 30 Days

The Los Angeles City Council on Wednesday gave the federally funded Los Angeles Community Development Bank 30 days to draft a report responding to a Times article last week outlining problems at the nonprofit lending institution.

The bank is far behind on its core mission to create jobs for the city’s poorest residents, and more than a third of its largest loans are not performing, according to documents and interviews.

Furthermore, the bank--the federal government’s largest effort to respond to the 1992 riots--is facing allegations from borrowers of avoidable loan delays and improper meddling by loan officers, and a lawsuit alleging fraud and negligence.

Bank Chief Executive Robert Kemp has defended the bank’s record, saying it operates in a high-risk environment.

The City Council approved a motion by Councilman Rudy Svornich asking the bank to report to two council committees on its “current business practices in dealing with loan recipients, including detailed information on their loan portfolio as well as their existing underwriting policies.”

The council asked the bank to provide updated information on local jobs generated by the loans. As of November, only 132 jobs at borrower companies had gone to residents of the empowerment zone, the area the bank--funded with $430 million by the federal government--aims to help develop.

The council also asked for information on litigation “and the potential impact that it may have on [the bank’s] business operations and on [its] ability to provide much needed resources to the economic recovery of the urban core of Los Angeles.”

Svornich’s district includes the portion of Watts targeted by the bank, and the councilman has expressed concern to the bank about the lack of lending in that area, said Svornich spokesman Barry Glickman. Although Svornich has asked the bank for regular reports, the motion requests “a lot more detail,” Glickman said.

“We’ve always been curious what the policies were and how they make decisions and how prospective customers get to that money through them,” he said. “We feel that any time you play with taxpayer money, you have an obligation to look real hard at how it’s being spent.”