Community Development Bank

Banks are in political trouble because people don't understand that they are businesses selling a product. Instead, they are seen as quasi-public agencies providing a "community service," and since they don't provide the same service to every customer at the same price, they are accused of discriminating. Some businesses sell food. Others sell clothes, shoes, appliances. Banks sell loans. That is, they will finance the purchase of a car or a house when the person lacks the cash purchase price.

President Clinton announced a scaled-back community-development bank initiative Thursday that would distribute $382 million over four years among lending institutions serving distressed urban and rural areas. Clinton said the plan, a central feature of the Administration's prescription for South-Central Los Angeles and other troubled regions, "will bring new life and new opportunity and new directions" to impoverished and credit-needy areas.

A major challenge to rebuilding Los Angeles lies in providing sustained sources of capital to finance new businesses, home loans and other much-needed community development in the inner city. Urban lending has never been a strong suit of conventional banks, but many have committed money to loan programs in the city since last spring's riots. But much more is needed.