New Haven Independent

Dodd (D-Conn.), chairman of the Senate Banking Committee, paid the visit Monday afternoon along the main commercial strip of New Haven’s Fair Haven neighborhood. He toured an avenue filled with immigrant-run restaurants and stores whose hopes for obtaining vital loans are tied to the federal government response to the country’s fiscal crisis, a response Dodd has been instrumental in crafting.

Dodd (pictured with La Voz Hispana Publisher Norma Rodriguez-Reyes) spoke in Spanish with waitress Leslie Negrini about the Peruvian, Puerto Rican and Ecuadorian dishes at Spanish Buffet (where he tasted the empanadilla). He heard about Severiano Burgos’s efforts to improve a neglected building near the El Jibaro barber shop he’s run for 10 years.

And he received a tour from neighborhood developer Angelo Reyes of an abandoned commercial building Reyes is rescuing and turning into offices and, he hopes, a first-floor bakery at 258-260 Grand. Click on the play arrow to watch highlights of those visits.

The interaction with Reyes was particularly relevant to Dodd’s current work in Washington. Shunned by traditional banks, Reyes has managed to rebuild swaths of Fair Haven over the past decade one property at a time through higher-interest unconventional financing — including the kind of subprime loans that helped shatter the U.S., and then the world, economy. (Click here and here to read about Reyes’ work.)

But as Dodd noted in his conversation with Reyes and Frank Alvarado, executive director of the Spanish American Merchants Association (SAMA), the role of subprime loans is more complicated than popularly portrayed in the current national debate. The subprime loans that brought down the economy, Dodd noted, were predatory loans, loans based on false premises to people who couldn’t pay them back. But other kinds of “subprime” loans — like those Reyes has put to good use — help working-class families buy homes and builders in neglected urban neighborhoods revive areas neglected by traditional lenders.

“People confuse the words ‘predatory lending’ and ‘subprime lending.’ It bothers me,” Dodd (pictured outside the building with Mutual Housing chief Seila Mosquera) told Reyes and Alvarado. “Subprime lending done well has been a great source of growth and employment. Done well, you can take people of limited means and put them into commercial enterprises, into housing. If you do it right.

“Let’s see if we can help.”

That leads to a second way in which Reyes’ case is relevant to Dodd’s work: To be successful, he needs access to more conventional financing. So he doesn’t have to continue paying 10 percent on loans, a high rate that makes it more difficult to survive in an already shaky economic climate. Dodd said he hopes the emergence of community banks — like New Haven’s fledgling First City (read about that here and here) — can help fill that gap. Alvarado stressed that groups like SAMA and the small businesses they assist need access to more federal small-business lending, especially now that New Haven government has killed its Small Business Initiative.

Out-of-town speculators have already “sucked” Fair Haven “dry. They’re gone,” Alvarado said. “Now we need people who will be here for 20 years.”

“Solid investors” from the area, Reyes added.

Fine Print Revelation

Dodd and other Congressional and White House leaders promised earlier this month that their $700 billion bailout of large financial institutions would lead banks to start lending money again to small businesses like those in Fair Haven. In fact, that was the single most emphasized rationale for the bailout bill.

Now comes the revelation — made here in this Saturday New York Times article by Joseph Nocera — that the Treasury Department and the institutions participating in the bailout have no intention of using the billions to lend money to people. Instead, they plan to use the money to enable big banks to acquire other banks. A tax break inserted into the bailout bill by Treasury Secretary Henry Paulson makes acquiring other banks with the money especially advantageous.

Nocera wrote his article after eavesdropping in on a private conference call between JP Morgan Chase CEO Jamie Diamond and some of his employees. In the call Diamond revealed he has no intention of using any of JP Morgan Chase’s $25 billion piece of the bailout on loans; he’ll be using it for acquisitions.

In the article, Dodd is quoted as being outraged at the revelation: “All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation…

“If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.”

Dodd was less outraged when asked to speak further about the revelations before his Fair Haven tour Monday afternoon. But he did vow to take action.

“I didn’t see the article,” he said. “But I’m familiar with the issue well enough. [The bailout billions] should primarily be for lending purposes…

“We talked about this other day. [U.S. Sen.] Chuck Schumer didn’t have a bad idea… The idea of if you don’t want to say what they must do, say what they can’t do. That might be a better way of approaching it.”

Dodd noted that Congress agreed to release only a portion of the $700 billion bill in its initial stage; Secretary Paulson has carte blance on how to spend that money. Dodd vowed Monday that Congress will keep a closer eye on how the remaining money is spent — in the hope of making sure some of it trickles down to places like Grand Avenue and small business people like (pictured) barber Burgos.