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Community Development

      Partners
in community and economic development
Federal Reserve Bank of Atlanta
Volume 9, Number 3
Winter 1999
In This Issue

Benefits of Electronic Transfer Accounts

Chairman Greenspan's View on Changes in Small Business Finance

The Big Picture About Relationship-Based Finance

Calendar of Events

About this issue

Business Access to Capital and Credit

2000 will mark the 10th year of publishing the Partners newsletter. As we contemplate this milestone, we admit that it has not always been easy to strike the right balance in its content. With an audience exceeding 6,500 community development professionals who represent a wide variety of experience and expertise, we risk being too elementary or too advanced -- focusing too much on housing and not enough on business, or too much on urban areas and not enough on rural areas. Overall, we are very proud of our efforts. But one area that really deserves greater attention is additional research.

So many issues confront us that deserve unbiased, hard deliberation based on analysis of credible data. For example, do minority-owned banks treat minorities better than non-minority owned banks? Does credit scoring work or does it impede access to credit by low- and moderate-income families or small businesses? Has the large number of bank mergers and acquisitions led to more or less small business lending?

Last March, the Federal Reserve System hosted its first research conference entitled "Business Access to Capital and Credit." Significant research on these issues and others were presented at the conference, and proceedings are now available in hard copy or via the internet. We recognize the importance of this work, and plan to do even more research in 2000 as well as host another conference in 2001. During these coming years, Partners and our collective Federal Reserve web sites will continue to publish papers of interest to community development professionals.

This issue of Partners features excerpts of Federal Reserve Chairman Alan Greenspan's keynote address from the March 1999 conference that emphasize the relevance of current and future research as well as the importance of equity financing versus debt financing for small business ventures. In addition, we feature a discussion of important research addressing relationship-based finance.

Relationship-based finance has been a topic of much conversation lately. The incidence of so many mergers and acquisitions, combined with technological advances, has led to a proliferation of transaction-based lending programs. With less personal interaction between lender and small business borrowers, many fear the loss of these relationships will lead to a decline in credit availability. Allen Berger, a senior economist at the Board of Governors of the Federal Reserve System, presents an interesting perspective on the research addressing this issue, and we are pleased to present excerpts of this discussion.

We also are pleased to present a summary of the U.S. Treasury Department's Electronic Transfer Account initiative, which allows public benefit programs to be administered by direct electronic deposit into a beneficiary's account. This new program provides substantial cost savings, increased safety, and other benefits to both banks and recipients.

Finally, as we complete our ninth year of publishing this newsletter and enter the year 2000, we would like to send a special message:

On behalf of all of us at the Federal Reserve Bank of Atlanta, and especially the Community Affairs team that has worked so closely with so many of our readers over this time, we offer our sincere best wishes for the new year.

– Editor