Wednesday, December 31, 2008

Reasons to be hopeful about 2009

Advisor Perspectives Magazine interviewed John Bogle about prospects for 2009. Bogle, 79, "is the Founder of The Vanguard Group, Inc., and President of Vanguard’s Bogle Financial Markets Research Center. He created Vanguard in 1974 and served as Chairman and CEO until 1996 and Senior Chairman until 2000."

A sample:

"Q - What worries you the most about the economy and the markets?

A- My number one concern is the freezing of the credit markets, but I am equally concerned with the slapdash way the Treasury is trying to fix the problem. The troubled asset relief program (TARP) should have been called the toxic asset relief program, but they have yet to buy a single asset. They are injecting capital into banks, but are doing so at a very high price.

Q - Your book discusses the characteristics of good leadership: nurturing the 'soul' of the organization, focusing on values, and 'pressing on, regardless.' Which leadership skills will be most important for President-elect Obama once he takes office?

A - There is not a generalized set of leadership skills. When crew members at Vanguard meet with me, I advise them not to attempt to emulate anyone other than themselves. Be who you are and use your own style. I believe Obama has exactly the right credentials and temperament. He is highly intelligent and an excellent communicator – both in writing and orally. He possesses the integrity, sincerity, hope, and confidence this nation needs. That is why I voted for him."

Suggest you read the whole thing.

Thank us later.

Friday, December 26, 2008

Lending facility for mortgage servicers

We note that, according to a recent article in Black Enterprise Magazine, "Through Urban Trust Bank (a black-owned bank), (Robert) Johnson created a new entity, Homeowners First Bank. Homeowners First is an advanced lending facility or a bank designed specifically to provide temporary, advance funding to mortgage servicers. Mortgage servicers are the middlemen, who may or may not be the same company as the lender, but who retrieve money from borrowers on behalf of lenders."

We feel this effort may be an attempt to profit, as the Washington Post noted, from the "unprecedented wave of foreclosures, charging distressed homeowners for help negotiating better loan terms -- a service provided for free or for a nominal fee by many nonprofits."

We should remember that Mr. Johnson has a history of not living up to promises made to the black community. Since it is irrelevant to the current discussion, we will ignore historical charges against the man, and focus on the bank.

Urban Trust recently abandoned efforts to maintain a banking presence in black neighborhoods of Washington, DC, preferring to concentrate on more profitable suburban Maryland banking markets.

But as we suggested earlier, we believe black and minority neighborhoods would not have been so heavily and negatively impacted by the subprime lending crisis if Urban Trust had moved to head the crisis off at the start, by offering responsible, non-subprime loans in minority communities. At least one black owned bank, Carver Federal, launched a special effort to do so in 2006, 2007 and 2008.

Bottom line: we see this as a likely-to-be-ineffective attempt to profit from troubles in the Black community. We base this statement on our experience in
helping create a refinancing plan for victims of predatory lending in Minneapolis.

Tuesday, December 16, 2008

Minority Banks See Clients Through Tough Times

"Tell Me More, December 16, 2008 · Although the federal government is pouring billions of dollars into the nation's banks, minority-owned financial institutions serving African-American and Latino communities face their own unique challenges, such as higher unemployment rates and less access to credit. Bill Cunningham, of Creative Investment Research and Luis Pastor, of the Latino Community Credit Union, discuss helping their clients through economic crisis.

See: http://www.npr.org/templates/story/story.php?storyId=98325149

Audio for this story will be available at approx. 12:00 p.m. ET today."

Friday, December 12, 2008

Haven Trust Bank of Duluth, Ga. (Asian) Fails

"SAN FRANCISCO (MarketWatch) -- The Federal Deposit Insurance Corporation said late Friday that Haven Trust Bank of Duluth, Ga., was closed by the Georgia Department of Banking and Finance. The failure not only marks the 24th bank failure of the year, but the fifth in the Atlanta area. The FDIC was named receiver, and Branch Banking & Trust of Winston-Salem, N.C. will assume the deposits. As of Dec. 8, Haven Trust had total assets of $572 million and total deposits of $515 million. The FDIC said that BB&T agreed to assume all of the deposits for $112,000 and assume all of the failed bank's assets for about $55 million."

Wednesday, December 10, 2008

Minority Banks Receiving TARP Capital - Update

We have updated our listing of minority banks receiving TARP funding:

11/14/2008
UCBH Holdings, Inc. (Asian)
San Francisco CA
Purchase
Preferred Stock w/Warrants
$298,737,000
Par

11/14/2008
Broadway Financial Corporation (Black)
Los Angeles CA
Purchase
Preferred Stock w/Warrants
$9,000,000 Par

12/5/2008
East West Bancorp (Asian)
Pasadena CA
Purchase
Preferred Stock w/Warrants
$306,546,000 Par

12/5/2008
Cathay General Bancorp (Asian)
Los Angeles CA
Purchase
Preferred Stock w/Warrants
$258,000,000
Par

12/5/2008
Popular, Inc. (Hispanic)
San Juan PR
Purchase
Preferred Stock w/Warrants
$935,000,000
Par

Total to minority banks: $ 1,807,283,000
Total to all banks: $165,306,798,000
Percentage: 1%

Friday, December 5, 2008

Advisory Board Member Howie Hodges mentioned

In an article on the Black Enterprise Magazine blog about the nomination of New Mexico Gov. Bill Richardson as Obama Administration Commerce Secretary, Creative Investment Research, Inc. Advisory Board Member C. Howie Hodges, "who was an assistant director for the department’s Minority Business Development Agency during Clinton’s first administration" noted that,

"Richardson had a very good strategic team and I have no doubt that he will put in place a very capable combination of savvy business people who will also have the political skills to help execute Obama’s mandate to create economic and job growth,' says Hodges, who is currently a senior vice president of One Economy Corp., a global nonprofit that delivers access to technology and content to low- and moderate-income households.

In addition, says Hodges, during the Clinton administration, the agency actively aimed to expand opportunities for minority and women-owned businesses in the private and international trade sectors. Under the leadership of the late Secretary Ron Brown, who died in a plane crash over Croatia, the agency led trade missions to several foreign nations for those businesses and helped them form strategic alliances with such major corporations as Disney, Kodak, and Lockheed Martin.

Because MBDA works with federal agencies across the board, adds Hodges, despite not having a direct appropriation, during the Clinton administration it was able to establish memorandums of understanding with various agencies to form joint ventures with cities and private-sector corporations and explore a variety of international trade opportunities. 'Everybody kind of honed in on what their agency could do to promote these very broad goals. Access to capital wasn’t just at SBA; it was at all of the federal agencies. Access to emerging markets wasn’t just through Commerce, it was also through Energy, which saw tremendous growth in working with minority and women owned businesses,' explains Hodges.

Under Richardson, Hodges believes that minority businesses should seek both increased access to capital, which is always a critical component to success, and access to markets and opportunity. Small business loans, expanded credit, encouraging venture capital companies and minority venture capital companies to invest in minority business will be paramount to the abilities of mid-tier companies’ to build capacity and start-up firms to create new business.

“When you look at job growth and taking our economy from a recession to one that’s growing, a lot of that growth is going to come from new businesses hiring people,” says Hodges.

The important role that green jobs and businesses, environmental sustainability, and energy efficiency will play in rebuilding the nation’s economy is another reason why he thinks Richardson’s past experience at Energy will be an asset in his new role. At the same time, he cautions, it would be unwise to underestimate the importance of technology, another area over which Commerce has oversight.

'Richardson and Obama’s administration need to look at creating a national broadband strategy to help America continue its global competitiveness that will enable it to provide a catalyst for economic growth and job creation,' says Hodges. 'MBDA has been underutilized and a lot will depend on the administration. If it has a priority and focus, the agency will.' "

Wednesday, December 3, 2008

SEC Approves Measures to Strengthen Oversight of Credit Rating Agencies

The SEC today "approved a series of measures to increase transparency and accountability at credit rating agencies, and ensure that firms provide more meaningful ratings and greater disclosure to investors.

The new measures impose additional requirements on credit rating agencies, whose ratings of residential mortgage-backed securities backed by subprime mortgage loans and of collateralized debt obligations linked to subprime loans contributed to the recent turmoil in the credit markets. The SEC also proposed additional measures related to transparency and competition concerning credit rating agencies."

We think these reforms are important first steps, and are mindful of the fact that politics and regulation are the "art of the possible."

As we said in 2005, fradulent practices by credit rating agencies

"threaten the integrity of securities markets. Individuals and market institutions with the power to safeguard the system, including investment analysts and NRSRO’s, have been compromised. Few efficient, effective and just safeguards are in place. Statistical models created by the firm show the probability of system-wide market failure has increased markedly over the past eight years. Investors and the public are at risk."

See http://www.sec.gov/rules/proposed/s70405/wcunningham9442.pdf