Online Bank Makes Inner-City Connection

Tuesday, May 10, 2005

WASHINGTON — On Good Hope Road in southeast Washington, a financial services education center run by the nonprofit Operation Hope Inc. opened just down the street from the Good Hope Marketplace.

The Hope Center, as it is called, is Operation Hope’s first on the East Coast and is largely backed by more than $5 million in grants from the $26 billion-asset E-Trade Financial Corp.

Community leaders hope the Hope Center can give an economic boost to the Anacostia neighborhood, long known for its poverty, low homeownership rates, and a dearth of businesses

Arlen Gelbard, the president of the online E-Trade Bank, says the investment is also good business. He says it will help fulfill Community Reinvestment Act obligations and bring in customers in neighborhoods where few have bank accounts.

Operation Hope, based in Los Angeles, bills itself as a "social investment bank" that provides financial literacy counseling in inner cities. It says that through its Hope Centers and in partnership with banks and other lenders it has helped hundreds of low-income men and women buy homes or start businesses.

At the Washington center’s opening last week, John Bryant, Operation Hope’s founder, focused on how residents could capitalize on their location. Anacostia is 15 minutes from downtown Washington and offers prime real estate in a market where home values have skyrocketed in the past five years.

Renters, who occupy more than 60% of the housing units in the mile surrounding the Hope Center, can build wealth if they buy homes rather than letting outside developers get all the property, Mr. Bryant said.

Local dignitaries including former Mayor Marion Barry and Eleanor Holmes Norton, Washington’s lone representative in Congress, agreed that financial education is key to building wealth. With counseling, they said, most residents of the area, who still use check-cashing stores as de facto banks, will consider opening bank accounts and begin to build credit histories.

"E-Trade and Operation Hope are going to help us avoid the exploitation of our community," Ms. Norton said.

M&T Bank Corp. of Buffalo and Countrywide Financial Corp. of Calabasas, Calif., are also partners in the center, but E-Trade is the most visible. Its signs are posted throughout the center, where it has an automated teller machine. Also, residents can use the center’s computers to apply for a loan with E-Trade or open an E-Trade account.

The partnership between E-trade and Operation Hope began in 2001, when the Office of Thrift Supervision hosted a conference in Atlanta at which Mr. Bryant was a luncheon speaker.

Mr. Gelbard attended. He said he was impressed with what Mr. Bryant said about bridging the "digital divide" — the difference in Internet access between the rich and the poor.

The banker said that he checked Operation Hope out, calling around to those who had partnered with it, and that everyone had good things to say about its work. Eventually, E-Trade gave Operation Hope a $2.5 million grant to support Banking on Our Future, the group’s financial literacy program, and another $2.5 million toward the Anacostia Hope Center.

Because E-Trade, as an online bank, does not have branches, meeting CRA requirements can be a challenge. Partnering with nonprofits groups like Operation Hope is the most logical and effective way to invest in communities, Mr. Gelbard said.

"This is one thing that allows us to cover many of the different aspects of CRA," he said.

E-Trade also hopes the partnership will turn some unbanked residents into customers. Through the Hope Center it is offering a range of products aimed at low-income people, including no-minimum checking accounts with no monthly fee and $500-minimum certificates of deposit and money-market accounts with free checks.

Mr. Gelbard said E-trade also offers flexible mortgage products.

"We end up developing, through these types of programs, customers that would not typically become our customers," he said.

He acknowledged that those who would rather deal with a teller than bank by phone or online may to go down the street to the M&T branch — but that is fine with him.

"This is about Operation Hope and our going here to help raise the level of financial literacy in this community," Mr. Gelbard said.

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