ABSTRACT: In response to the 1992 Los Angeles riots, the federal government, city and county officials, commercial banks and community leaders established the nonprofit Los Angeles Community Development Bank (LACDB). This public-private partnership was a new development model, designed to spur economic growth in some of Los Angeles ’ most disadvantaged areas. The LACDB was capitalized with $435 million from the U.S. Department of Housing and Urban Development and ranks as the federal government’s largest inner-city lending initiative. By January 2001, however, the bank had experienced unacceptably high losses and was seeking permission to continue operations, after reducing its staff by half and closing most of its offices. This article examines why this innovative publicprivate economic development partnership confronted such difficulties. Public-private partnerships continue to be an important vehicle for urban economic development. This case study provides a warning of potential pitfalls that can occur from such arrangements. On May 10, 1995, Vice President Al Gore and U.S. Housing and Urban Development Assistant Secretary Andrew Cuomo announced that the federal government was providing the city of Los Angeles with $435 million in grants and loan guarantees for the creation of the Los Angeles Community Development Bank (LACDB). This ten-year effort would be the largest federal commitment ever for such an initiative. The planning process for the LACDB brought together city and county officials with private business and community representatives in a grand public-private partnership that was to be the nation’s most powerful response to th
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