CEBO Cease-Fire

May 03, 1991

A cease-fire has been reached in a bitter behind-the-scenes struggle between Baltimore's Council for Equal Business Opportunity and the U.S. Department of Housing and Urban Development. If the city fulfills certain bureaucratic conditions, federal funds will be released to enable CEBO to continue operating as an instrument for minority economic development in Baltimore City.

HUD has been on CEBO's case ever since an audit late last yearThe audit revealed the 24-year-old CEBO was a mess. The status of loans was difficult to determine because many records were missing. As a consequence, federal funding was frozen. The city was also ordered to reimburse $2.2 million HUD said CEBO had spent improperly.

Until the tentative settlement yesterday, HUD said it would not consider future funding until CEBO's past problems have been cleared. Never mind that the organization has been revamped and has a new executive director.

When CEBO was started, it was part of a 22-city Ford Foundation experiment. CEBO's most successful role was as a packager of loans and as a consultant to black businessmen who often had little idea what documentation was required for applications. There was as dire a need for such a business counseling then as there is now.

Over the years, other things have changed. More sources of high-risk venture capital have become available to black businesses. The biggest change, however, has been in the way successive Washington administrations have interpreted regulations governing community development block grants, CEBO's main funding source.

Considering the policy flip-flops in Washington, CEBO's long-term future seems bleak. For that reason, the council needs more than a restructuring. It must sharpen its often blurry focus on specific neighborhood targets. It has to divorce itself from reliance on federal funds and become an adjunct to local banking institutions' minority-lending activities. Those institutions should help finance what essentially would be a scaled-down CEBO.

This transformation cannot take place overnight. For that reason, we suggest that HUD certify CEBO eligible for community block grants for three years. In the meantime, thought should be given to whether its compliance with federal regulations is best monitored by the housing department or by the city comptroller's office.

"We must commit ourselves to unleashing a million seeds of entrepreneurship to bring economic growth to every inner city in the United States of America," HUD Secretary Jack Kemp declared in a recent speech. By setting up a transition for CEBO, he could prove he is as good as his word.

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