Model of Opportunity : L.A. Antipoverty Groups Find New Ways to Thrive

A lot of government programs for poor communities begun in the lifetime of the Rev. Martin Luther King Jr. are being cut back now. But organizations born in that time go on and, indeed, are finding new ways to grow here in Southern California.

Watts Health Foundation has bought a majority stake in Family Savings Bank with the aim of tapping and supporting economic opportunities in South-Central Los Angeles and other neighborhoods.

Both organizations reflect the economic potential in such neighborhoods. And they reflect also how publicly supported pump priming, if handled well, can generate economic development.

Watts Health, founded in 1967, runs United Health Plan, an HMO with clients in Los Angeles, Orange and San Bernardino counties, as well as a clinic in Watts. It has a $200-million-a-year budget.

Family Savings, founded in 1948, rescued and rebuilt since 1990, makes $40 million a year in mortgage loans in the area usually defined as South-Central.

There are more good businesses and jobs than many people believe in South-Central and similar neighborhoods, says a new study by Cal State Los Angeles economists. County government statistics show that South-Central has more manufacturing jobs than almost any other section of Los Angeles County. Yes, these are typically low-wage jobs in garment, furniture and food-processing industries. And, characteristic of poor areas, there are comparatively few jobs in services.

The neighborhoods remain underserved by banks, retail stores, physicians and clinics, explains Wayne-Kent Bradshaw, president of Family Savings. “Many companies say that for the effort we have to put in, we can make more money in another place.”

But that’s not really true. Bradshaw and Clyde Oden, president of Watts Health, know that South-Central has a large and growing population at 830,000 and that a third of families own their homes.

Yes, there is crime. It sometimes affects apartment complexes on which Family Savings holds mortgages.

But the problem should not be overstated, says Bradshaw, whose bank holds $240 million in mortgages. “Our loan-loss ratios are no higher than those of banks in other areas; our delinquency ratio--late payments--is only slightly higher.”

The idea behind Watts Health Foundation’s purchase of a 65% block of Family Savings stock--which had been held by an interim lender--is that a large, well-financed organization can extend financial and medical services, make more mortgage and small-business loans and become a partner for those wishing to invest in this sizable market.

It can also reinvest deposits and earnings in the South-Central community--which is not the pattern for most bank revenue collected in poor neighborhoods.

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In the need for services lies opportunity. Like all poor neighborhoods, South-Central is thick with check-cashing shops, which charge poor people $2 to $3 per check, while banks can cash checks for 15 cents.

The problem is not poverty so much as ignorance and fear. Bradshaw explains to customers that they are not just poor African Americans or Latinos or Asian Americans, but part of the great financial world called Wall Street. “Half the mortgages I make I send to Fannie Mae [the government’s Federal National Mortgage Co.], which bundles them with other mortgages to make investment certificates for pension funds and insurance companies--made up of the little guy’s pension and premium payments--to invest in,” he says.

And almost half of Family Savings’ mortgage loans are at 3% down payment, thanks to special programs supported by public agencies and private companies. That doesn’t make it a bad business. The helping hands that made possible 3% down payments were responsible for $18 million in mortgage loans last year--and hundreds of new homeowners.

“We used to understand such multipliers in programs like the GI Bill,” says Oden, an optometrist, a holder of a master’s in business administration and an ordained minister.

Watts Health Foundation was set up in 1967 by a $2-million Organization for Economic Opportunity (War on Poverty) grant to provide medical services in an area devastated by the 1965 Watts riots.

Today it is a modern clinic that sees 600 patients a day, bringing prenatal and pediatric care to the community. It has mobile units that spread child health care and X-ray examinations throughout Los Angeles, and it runs senior-care and drug rehab programs.

Four-fifths of its financing comes from the HMO, which has 90,000 clients, and 20% comes from federal and state government programs--which are declining, says Oden.

To offset the decline, Oden plans to increase private business through the link with Family Savings. He’s borrowing a leaf from another foundation set up by the War on Poverty--Telacu in East Los Angeles, which long ago established Community Thrift & Loan to make mortgage loans in poor neighborhoods.

Oden in turn sees the Watts-Family organization becoming a model for other poor neighborhoods, “from the San Fernando Valley to Oakland.”

King didn’t say much directly about business. He saw African Americans wielding economic leverage mainly as consumers or employees because, he wrote, “Negro business is so small that it can scarcely be measured.”

But King did write in a 1967 essay that for the community, “the value of Negro business should not be underestimated. Despite formidable obstacles, it has developed a corps of men of competence and organizational discipline. They are a strength among the weak though they are weak among the mighty.” And getting stronger today than in his time, even with weakened government programs.

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Myth Buster

Dispelling the myth that the area does not have a strong business base, figures show that South-Central Los Angeles has the second-largest number of jobs in the county. A look at the top 10 areas for employment:

San Gabriel Valley: 418,454

South-Central: 363,642

Burbank/Glendale/Pasadena: 320,008

Southeast (Downey/Bellflower area): 288,118

West Los Angeles: 271,752

West San Fernando Valley: 252,169

South Bay: 244,906

East San Fernando Valley: 211,862

Mid-City/Hollywood: 185,188

Downtown Los Angeles: 174,652

Sources: “County Business Patterns,” U.S. Bureau of the Census; Jack Kyser, Economic Development Corp. of Los Angeles County