The Los Angeles Community Development Bank: The possible pitfalls of public-private partnerships

In response to the 1992 Los Angeles riots, the federal government, city and county officials, commercial banks and community leaders established the n onprofit Los Angeles Community Development Bank (LACDB), This public-privat e partnership was a new development model, designed to spur economic growth in some of Los Angeles' most disadvantaged areas. The LACDB was capitalize d with $435 million from the U.S, Department of Housing and Urban Developme nt and ranks as the federal government's largest inner-city lending initiat ive, By, January 2001, however, the bank had experienced unacceptably high losses and was seeking permission to continue operations, after reducing it s staff by half and closing most of its offices. This article examines M hg this innovative public-private 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.