Federal aid to black firms is debated

May 14, 1994|By Ian Johnson | Ian Johnson,Sun Staff Writer

Despite record growth in the 1980s and many examples of individual success, black-owned businesses still contribute a disproportionately small amount to the national economy. But is the way to help black business through strengthening government programs or dismantling them?

That was the focus yesterday during the Black Entrepreneurship in America conference, the third annual meeting of national business and political leaders designed to promote black business.

"In order to be successful, our country has got to be more successful in spreading small business opportunity throughout the country," Vice President Al Gore told several hundred black business leaders.

Mr. Gore said the Clinton administration is taking a more activist approach than the previous two Republican administrations on this front.

For example, the administration is trying to strengthen enforcement of the Community Reinvestment Act, which requires banks to make credit available in all geographic segments of the markets they serve, including low-income and minority.

The government also is planning to set up "empowerment" zones in cities to provide investors with one-stop shopping for government aid programs to small businesses. The idea would be to simplify access to credit -- the main stumbling block for minority businesses.

Mr. Gore argued against the view that racism was a thing of the past and that government only needed to provide a level playing field. He said "special steps" are needed to help overcome the legacy of slavery, Jim Crow, segregation and racism.

On the opposite end of the spectrum was Rep. Newt Gingrich, the Georgia Republican who is expected to be elected House minority leader later this year.

Mr. Gingrich said government programs have hurt black communities and wasted money that would have been better spent as tax breaks to encourage expansion of existing minority businesses. He also said lawsuits forcing banks to make loans to minorities were a waste of time.

After initial skepticism, many in the audience warmed to Mr. Gingrich.

"I thought he made some good points. We can't keep talking about slavery all the time as an excuse for failure," said George Clair, head of Melbourne GSI Corp., a New York-based financial services company.

Part of the reason for government's failure to help black businesses -- which account for just 1 percent of total business receipts despite growing 83 percent during the 1980s -- is that government small-business programs have not

made much of an effort to lend to blacks, said Cassandra M. Pulley, deputy administrator of the U.S. Small Business Administration.

To address that problem, Ms. Pulley said the SBA would slowly get out of the business of making loans to small businesses.

Instead, it will play the role of guarantor to intermediary financial institutions, such as small banks and credit unions. They are better placed, she said, to assess customers' needs.

Conference participants and speakers agreed that capital is the largest problem for African-American businesses and, if the government should get involved, it should focus on helping black-controlled financial institutions.

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