Thank you for that kind introduction. I appreciate the opportunity to talk to you today.
It's wonderful to be meeting with the New Markets Tax Credit Coalition again. We worked very closely with you to help launch the NMTC Program in 2000, and we owe much of the success of the program not only to the efforts of the NMTC Coalition in helping to shape it, but also to your tireless efforts to educate the public and advocate on behalf of the NTMC over the years. The Coalition should be proud of what it has accomplished, and the impacts that have been realized in low-income communities across the country.
As you all are aware, low-income communities are often the first to feel the pinch when there are downturns in the economy – and I'm sure many of you are witnessing this first hand as you try and find financing for your projects. I therefore want to start today's remarks by giving you an overview of the state of the financial and economic world with which we are currently dealing, as well as providing a brief summary of the President's comprehensive plan for regulatory reform with a specific focus on the importance of financial system inclusion within the new framework; before turning to the Administration's specific goals with respect to the NMTC.
In the years leading up to the crisis, Wall Street firms took huge risks with borrowed funds with little of their own capital at stake. This was a period during which they failed to appreciate the incredible risk they were unnecessarily creating for the economy and American taxpayers. Firms offering mortgages and credit cards lured families in with promises of low interest rates and did not make them aware of the fine print, hidden fees, and future payment increases. It's true that many took on too much debt and took out loans they couldn't afford; however, millions of Americans behaved responsibly and still found themselves in jeopardy because of the sharp practices of some in the financial industry.
Regulators failed, too. Regulators of financial institutions were sometimes lax and inconsistent and capital requirements were way too low. Protections for consumers were woefully inadequate. Key parts of the system were simply not regulated. Financial regulators failed to adequately use even their existing authorities. And when the crisis struck, it quickly became apparent that the government did not have the tools to handle the failure of major firms without the risks of destabilizing the financial system and imperiling the economy.
The collapses of Washington Mutual, Wachovia, and Lehman Brothers, and the extraordinary interventions in AIG, severely tested our collective ability to respond to a financial crisis. In the panic that ensued, our financial system nearly ground to a halt. The pain suffered by many in the form of lost jobs and retirement savings, homes foreclosed upon, shuttered plants, and struggling small businesses has been truly extraordinary.
When President Obama took office, America's growth rate had hit negative 6.3 percent, and monthly job losses had reached 741,000 - the worst in decades.
Now, following unprecedented actions by the Executive branch and Congress, we have pulled the economy back from the brink. Today, important parts of the financial system are back to functioning on their own, and some of the damage to families' savings has been repaired. A swift response prevented a truly catastrophic collapse. We have taken the first steps towards both reducing the government's direct involvement in the financial system and reducing the risks that taxpayers are bearing.
However, the progress of recovery must not distract us from the need for fundamental financial reform. The regulatory system that failed so terribly leading up to the financial crisis is precisely the one we have today. The weaknesses that contributed to the financial crisis persist. To ensure the vitality and stability of our economy going forward, we need comprehensive financial reform. This is truly a critical time in our work to reform the system of regulation in the financial sector. We have a chance to achieve fundamental reform to better protect responsible consumers of all financial products and services.
There is no debating that today's consumer protection regime invites banks to choose the least restrictive supervisor while leaving non-banks without ongoing supervision, thereby encouraging a race to the bottom. And there is no debating that today's consumer protection regime is highly fragmented, with no one agency held accountable. This leads to finger-pointing in place of action. In short, there is no debating that our current system is designed for failure. And fail it did.
These deep structural flaws cannot be solved by tinkering with the consumer protection mandates or authorities of our existing agencies. The Administration has put forward comprehensive reforms and we are working closely with Congress to enact legislation. The goals of the Administration's financial reform proposal are straightforward: we need to give responsible families and investors the basic protections they deserve; we need to close loopholes and lay the foundation for a safer, more stable financial system, one less prone to panic and crisis; we need to safeguard families and taxpayers from bearing unnecessary risks and costs that ought to be borne by shareholders and creditors; and we need to ensure that our financial system and economy work for everyone.
The importance of economic inclusion was one of the primary reasons we fought for the creation of the New Markets Tax Credit back in 2000. Many investors then and now continue to overlook low-income communities or think the costs are just too high. So we created the New Markets Tax Credit to incentivize private-sector investment within domestic markets – new markets that normally would not be considered. Markets that could sustain business and provide a return, while also providing opportunity and making our economy one that works for everyone.
So I am pleased to see how successful this program has become over the last nine years. In that time, the New Markets Tax Credit has mobilized over $14.7 billion in private-sector capital for a range of impressive projects in diverse communities throughout the country, and has been successful beyond anyone's expectations in attracting investment capital to distressed areas. NMTC awardees are focusing on the census tracts characterized by the most severe levels of economic distress. Over 75 percent of NMTC investments have been made in heavily distressed communities. The New Markets Tax Credit encourages economic inclusion.
The tax credit has also been very effective at generating jobs and providing capital to businesses. NMTC investments made through 2008 have helped to create hundreds of thousands of jobs in low-income communities throughout the country, including: construction jobs at real estate projects; full time jobs for businesses and non-profits occupying commercial, retail and community facilities; and full time jobs for operating businesses receiving direct investments under the NMTC Program. These jobs represent a broad spectrum of employment opportunities, including manufacturing jobs, hospitality and service industry jobs, white collar jobs, retail and sales positions, research and scientific jobs, teachers, health care professionals, child care professionals, and social service providers.
Job creation, especially permanent jobs, is a critically important outcome of this program.
This can be accomplished if operating businesses receive assistance through the New Markets program. So I appreciated the Coalition's October letter to me outlining recommendations for ways that CDE's could provide even greater assistance to businesses. We understand that investors are reluctant to make equity investments in CDEs that lend or invest in operating businesses, be it for machinery and equipment, working capital or lines of credit, and in venture capital. And we are exploring options to increase investor interest in this sector.
I understand that with adequate credit authority and the right kind of safe harbor provision, CDEs could extend lines of credit for working capital and equipment loans to small businesses. I also understand that, while there has been a steady increase in the number of non-real estate businesses financed with New Markets Tax Credits, investors need to be assured that investments made to finance operating businesses will not be subject to an unreasonable risk of recapture. Please know that we take these issues seriously and look forward to working with you on this effort so that operating businesses can access financing for their everyday needs and to aid in business expansion.
I recall that back in May when Secretary Geithner was in Boston, Massachusetts to announce the first New Markets Tax Credit Awards made possible through the Recovery Act, he heard from some of you about the importance of allowing NMTC investments to offset the Alternative Minimum Tax. I understand the urgency of this matter since we are doing everything we can to bring the private-sector back into the lending arena and working to help businesses stay afloat. This very issue was raised at the Small Business Finance Forum that the Treasury Department and the Small Business Administration held late last month which several of you participated in.
I understand the importance of this issue since many investors are unable to fully enjoy the NMTC due to the AMT and could withdraw from investing in future NMTC. We are studying whether to permit the New Markets Tax Credit to reduce the AMT. We appreciate your comments on this topic, and we hope that you will continue to talk with Treasury about this issue.
I am also impressed with the robust demand for this program. A total of $179 billion has been requested through the seven rounds to date, compared with the $26 billion that has been allocated by Congress. We need to continue our strong push for robust allocation authority in the coming years. The New Markets Tax Credit utilizes the strengths of private and public entities working together to benefit those communities hardest hit by this economic downturn.
In closing, I am very pleased to be with you to and to share in the successes of this program over the last nine years. I commend you on the good work you are doing, and want you to know I will remain a strong advocate of the New Markets Tax Credit. The New Markets Tax Credit, along with the other CDFI Fund programs, are truly helping to develop an inclusive economy where all have equal opportunity.
Thank you very much.