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88 Locavesting quickly write off nonperforming loans. Despite that, their net charge- off rates were lower than those at FDIC- insured banks. While the loan funds themselves were in good shape, the entities that supply much of their funding were reeling. In 2008, funding from banks cratered along with the housing market. In New York City, the largest banks cut their community development lending by 20 percent in 2008—despite a 10 percent jump in deposits. A study by the Association for Neighborhood and Housing Development said the decline was part of a longer term and worrisome decline in the “quantity and quality” of Community Reinvestment Act activity. As banks consolidate, there are simply fewer to go around. That’s been partially offset by the conversion of several fi nancial fi rms into bank holding companies in order to participate in the government bailout assistance. These new banks, including Goldman Sachs, American Express, Morgan Stanley, and GMAC, the fi nancing arm of General Motors, are now subject to the CRA. In addition, with much fanfare, some of the biggest banks have made fresh commitments to small business lending through CDFIs—about $1 billion worth between Citigroup, Goldman, JPMorgan Chase, Bank of America, and Wells Fargo from the fall of 2009 through the summer of 2010 (roughly coinciding with the nadir of their public images). On the surface, these commitments are admirable. But in reality, the loan terms in many cases are too expensive or too short term for many community development loan funds. “They’re tailored for maximum PR,” one loan fund executive told me. Indeed, these efforts only underscore how far the big banks have gotten from community- level lending. Writing on the web site JustMeans.com, blogger Michael Hasset observed the irony in one such program, Citigroup’s elaborate $200 million Communities at Work Fund, in which it partnered with the Calvert Foundation and OFN: Genuine cheers notwithstanding, hold on a minute. In order to do neighborhood level lending, Citi now needs to set up a special fund, in which it is a limited partner with
The Biggest- Impact Financial Sector You’ve Never Heard Of 89 two general partners who do all the work. This special fund then lends only to other funds. The other funds then actually make loans to real small businesses and charitable organizations. This seems like a fairly complex reinvention of an ancient wheel once known as banking. Remember institutions like Farmers Loan & Trust, Citizens Building & Loan, Bowery National Bank, Richmond Borough National Bank? They all sound like the bank manager was George Bailey from a It’s a Wonderful Life, don’t they. Bet these banks knew how to “make loans . . . rooted in local communities.” They have something else in common too, all these banks, by acquisition, merger, etc. are part of today’s Citi. 3 But we digress. Foundations, the other major funding pillar for loan funds, have seen their asset values plummet, and many are focused on rebuilding their endowments rather than giving. The only true bright spot for loan funds and CDFIs in general has been an increased level of support by the Obama administration. Individual Investors Play a Bigger Role With CDFIs scrambling to keep pace with demand, many are reassessing the role of individual investors. Today, individuals make up a tiny slice of overall community development loan fund investment. It is easier to collect large investments rather than chase hundreds of individuals, so most loan funds don’t market themselves to the public. In fact, it can be downright hard to fi nd one in your area. “We are not well known and we know it,” says Donna Fabiani of the Opportunity Finance Network. “We need to do a much better job of getting the word out. Micro-enterprise is a household word, but people don’t know what community development fi nance is.” That’s one reason that so many individual investors have turned to the Calvert Foundation, a Bethesda, Maryland–based nonprofi t that acts as an intermediary between CDFIs and individual investors. The foundation’s Community Investment Notes can be bought from most major brokers for a minimum investment
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Locavesting THE REVOLUTION IN LOCAL
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For my Mother
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vi Contents Chapter 7 A Model to LI
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viii Preface The moment was ripe wi
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x Preface Cooperatives—businesses
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xii Preface Chapters 7 through 13 e
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Introduction Cereal Milk for the Go
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iconic glass bottles are also sold
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Introduction xix funds from the pub
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1 C H A P T E R Motherhood, Apple P
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Motherhood, Apple Pie, and Politica
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20 Locavesting freewheeling markets
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22 Locavesting A fl urry of legisla
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24 Locavesting put up a sign at a f
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26 Locavesting of the late 1980s) h
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28 Locavesting three of those banks
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30 Locavesting A Return to Value As
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32 Locavesting produced in their re
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34 Locavesting pickles to gin and k
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36 Locavesting is a hot marketplace
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Page 62 and 63: 40 Locavesting A Grassroots Movemen
Page 64 and 65: 42 Locavesting to dodge their fair
Page 66 and 67: 44 Locavesting Americans know most
Page 68 and 69: 46 Locavesting It’s a powerful qu
Page 70 and 71: 48 Locavesting three employees but
Page 72 and 73: 50 Locavesting to keep in our lives
Page 74 and 75: 52 Locavesting and they can draw on
Page 76 and 77: 54 Locavesting Since 2006, Walmart
Page 78 and 79: 56 Locavesting and political organi
Page 80 and 81: 58 Locavesting havens. Google, the
Page 82 and 83: 60 Locavesting Some of the measures
Page 85: II P A R T Experiments in Citizen F
Page 88 and 89: 66 Locavesting As an editorial in V
Page 90 and 91: 68 Locavesting The community bank b
Page 92 and 93: 70 Locavesting their homes to forec
Page 94 and 95: 72 Locavesting And you don’t have
Page 96 and 97: 74 Locavesting As depositors, we’
Page 98 and 99: 76 Locavesting The Washington Inves
Page 100 and 101: 78 Locavesting The Bottom Line: A n
Page 102 and 103: 80 Locavesting her daughter was enr
Page 104 and 105: 82 Locavesting whom traditional fi
Page 106 and 107: 84 Locavesting Taking the Middle Pa
Page 108 and 109: 86 Locavesting Angel investors poli
Page 112 and 113: 90 Locavesting of $1,000. The notes
Page 114 and 115: 92 Locavesting funds that absorb an
Page 116 and 117: 94 Locavesting • Many CDFIs do no
Page 118 and 119: 96 Locavesting In a twist of fate,
Page 120 and 121: 98 Locavesting private electric com
Page 122 and 123: 100 Locavesting “The numbers were
Page 124 and 125: 102 Locavesting offering. “In a c
Page 127 and 128: 8 C H A P T E R Community Capital I
Page 129 and 130: Community Capital 107 For all the j
Page 131 and 132: Community Capital 109 So it is espe
Page 133 and 134: Community Capital 111 what she did
Page 135 and 136: Community Capital 113 three young e
Page 137 and 138: Community Capital 115 triples every
Page 139 and 140: Community Capital 117 investment is
Page 141 and 142: Community Capital 119 Farmers Diner
Page 143 and 144: Community Capital 121 That’s wher
Page 145 and 146: Game Plan for Locavestors Community
Page 147 and 148: 9 C H A P T E R Pennies from Many W
Page 149 and 150: Crowdfunding Pennies from Many 127
Page 151 and 152: Pennies from Many 129 a 27- year- o
Page 153 and 154: Pennies from Many 131 It’s a win-
Page 155 and 156: Pennies from Many 133 the company w
Page 157 and 158: Pennies from Many 135 there’s a g
Page 159 and 160: Pennies from Many 137 loans. 9 With
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Pennies from Many 139 UK regulators
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Pennies from Many 141 to make the m
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Pennies from Many 143 business—co
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Pennies from Many 145 “Crowdfundi
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10 C H A P T E R Slow Money Finance
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Slow Money 149 like the nearly 8,00
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Slow Money 151 Slow Money, however,
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Slow Money 153 terms that are destr
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Slow Money 155 that overrode that i
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Slow Money 157 Zentay put together
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11 C H A P T E R From Brown Rice to
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From Brown Rice to Biofuels 161 rep
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From Brown Rice to Biofuels 163 Mem
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From Brown Rice to Biofuels 165 $75
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From Brown Rice to Biofuels 167 Wes
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From Brown Rice to Biofuels 169 Inv
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From Brown Rice to Biofuels 171 One
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From Brown Rice to Biofuels 173 tha
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From Brown Rice to Biofuels 175 are
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From Brown Rice to Biofuels 177 rai
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Game Plan for Locavestors From Brow
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12 C H A P T E R The Do- It- Yourse
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The Do- It- Yourself Public Offerin
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• • The Do- It- Yourself Public
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200 Locavesting The exchanges were
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202 Locavesting time, they became m
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204 Locavesting Scott Gehsmann, cap
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206 Locavesting public, while ventu
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208 Locavesting at least $490,000 t
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210 Locavesting been there, he says
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212 Locavesting Schmid would love t
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214 Locavesting their money in some
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216 Locavesting are looking to crea
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218 Locavesting Van Patten, a triat
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220 Locavesting Game Plan for Locav
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222 Conclusion small investments. T
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224 Conclusion investors. “Normal
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Unless otherwise noted, all quotes
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25. John K. Paglia, “2011 Economi
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16. Binyamin Appelbaum, “Investor
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Notes 233 9. Sima J. Gandhi, “Eli
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Notes 235 3. Gary S. Corner and Raj
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2. online.wsj.com/article/SB1200623
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4. Steven Deller, Ann Hoyt, Brent H
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Notes 241 11. Ibid. 12. NYSE Eurone
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244 Acknowledgments Dan Keeler, and
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246 Index CDFI. See Community Devel
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248 Index H Hamilton, John, 84-86 H
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250 Index Newman, Paul, 150 Niman R
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252 Index taxes, on Internet sales,
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