Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.
In particular, the new rules require disclosures in proxy and information statements about:
The relationship of a company's compensation policies and practices to risk management.
The background and qualifications of directors and nominees.
Legal actions involving a company's executive officers, directors and nominees.
The consideration of diversity in the process by which candidates for director are considered for nomination.
Board leadership structure and the board's role in risk oversight.
"President Obama met with the nation's top bankers yesterday at the White House. The President urged the CEO's to bolster lending to consumers and small businesses to help jumpstart the economy. Largely absent from the meeting were community-based minority banks, which have struggled to stay afloat in recent years. Bill Cunningham, CEO of Creative Investment Research, discusses the historic role of minority lending and..its role in the current economic landscape."
According to the FDIC National Survey of Unbanked and Underbanked Households, released on December 2, 2009, 21.7% of Black households, 19.3% of Hispanic households and 15.6% of Native American households are underbanked.."at least 25.6 percent of U.S. households, close to 30 million households with about 60 million adults, are unbanked or underbanked," a very large potential market.
Competition is supposed to fill a market need, in this case defined as an underserved customer, so not only are these statistics surprising, but they raise questions about the justification for and very existence of an underserved market. They also raise questions concerning the efficiency of the FDIC's Advisory Committee on Economic Inclusion. "Freakonomics" style economic analysis will quickly be offered to explain this gap, but will miss the true reason behind the statistics. While we applaud the release of the data, it clearly shows the Committee is ineffective, to say the least.
"Liberty Bank (No. 5 on the BE 100s bank list with $373 million in assets) has assumed all of the $13.5 million retail deposits of Home Federal Savings Bank and has purchased approximately $14.9 million of its assets.
Home Federal, which was founded in May 1947, was 'critically undercapitalized and in an unsafe and unsound condition to transact business,' according to the OTS. Its two branches and eight employees reopened under the Liberty Bank and Trust Company banner on Monday.
Liberty Bank was founded in 1972 and has expanded into seven metropolitan areas and six states while offering banking services and mortgage lending. 'The expansion of our banking network to Detroit is a significant benchmark in our development. We want to broaden our reach and provide our services to a larger audience,' said Alden J. McDonald Jr., Liberty Bank and Trust Company’s president and CEO, in a news release. 'This acquisition is another s…
On Friday, November 6, 2009, state and federal regulators closed several minority banks, reducing the total number of minority owned banks in the US to 236 from 239.
According to Marketwatch.com, "The failed institutions included (Asian-owned) United Commercial Bank of San Francisco, the main subsidiary of UCBH Holdings. The bank had $11.2 billion in total assets and was the seventh largest failure during the 2008-2009 crisis. The FDIC was appointed receiver and sold the failed bank's deposits and $10.2 billion of its assets to East West Bank of Pasadena, Calif., which also has operations in China and is a subsidiary of East West Bancorp.
The Office of Thrift Supervision shut down (Black-owned) Home Federal Savings Bank of Detroit and appointed the FDIC receiver. The FDIC arranged for Liberty Bank and Trust of New Orleans to assume the failed thrift's deposits and its $14.9 million in total assets.
The Missouri Division of Finance took over (Black-owned) Gateway Bank of St.…
According to The Hill, "Now we learn that while many kids, hospitals and pregnant women cannot get enough of the swine flu vaccine, the major banks and Wall Street firms were given a private allocation. At best, this is a ridiculous distribution strategy; at worst, these firms gave some vaccines not to high-risk people but to high-profit traders and senior managers."
And you were wondering where your $700 billion went. Pitchforks, anyone?
According to the Responsible Investor and SEC websites, in a major policy reversal, "the Securities and Exchange Commission (SEC) (will) allow shareholder resolutions (concerning) companies’ environmental and social risks.. Similar resolutions had previously been blocked under policies dating back to the Bush administration. The move was unveiled in new guidance by the SEC’s Division of Corporation Finance under new director Meredith Cross. As a result, companies will no longer be able to automatically exclude resolutions seeking information on the risks of environmental, human rights and other social issues." Shareholder resolutions are now sure to include executive compensation, community development, diversity, gender, SRI, ESG and CSR issues.
According to the New York Times, "A Swiss investment company plans to raise awareness about the shortage of women on corporate boards around the world, and generate returns for its investors in the process.
Naissance Capital, based in Zurich, is to start the Women’s Leadership Fund in January, which will invest exclusively in companies whose boards include women, or take minority stakes in companies that do not 'understand the need for greater female representation' and use it as leverage to push through changes.
R. James Breiding, a co-founder of Naissance Capital and a former director of Rothschild Corporate Finance, said the fund was created after several studies showed a correlation between the number of female directors and a company’s performance.
'We feel companies that select and recruit people on merit should do better,' Mr. Breiding said. 'Having greater diversity and independence of opinions helps.'
The fund’s board includes Kim Campbell, the former…
On Sept 10th, the US Senate Committee on Banking, Housing, and Urban Affairs held a hearing on Oversight of the SEC’s Failure to Identify the Bernard L. Madoff Ponzi Scheme and How to Improve SEC Performance.
Testifying were H. David Kotz, Esq. - Inspector General SEC, Harry Markopolos- Chartered Financial Analyst and Certified Fraud Examiner, Robert Khuzami, Esq - Division of Enforcement SEC, John Walsh, Esq - Office of Compliance Inspections and Examinations SEC
Madoff's alleged Ponzi scheme is the biggest fraud held by a person in the US history. By definition, a Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. Although investors…
According to the New York Times, "The Federal Insurance Deposit Corporation imposed(new rules governing investments by) private equity firms seeking to buy failed institutions, although they eased more onerous proposals in hopes of luring them to the table." The new rules are designed to address concerns that "private equity buyers might engage in aggressive practices that could put its deposit insurance fund at risk."
"The rules..require private equity-controlled banks to pour enough capital into a failed bank so that it has a cushion of at least 10 percent of its assets for three years. The F.D.I.C. dropped a requirement that private equity firms supply additional capital in the event of a severe downturn, required private equity firms not sell an acquired bank for at least three years, imposed restrictions barring the acquired bank from lending to companies affiliated with the private equity buyer, and exempted private equity firms from complying with the h…
According to the Chicago Sun Times, "Exchange-traded funds that leverage their holdings could lead to outsized losses, the Securities and Exchange Commission said. It said brokers and financial advisers should warn people away from them unless they plan to hold them for just a day. The problem with leveraged ETFs comes down to the magic and mystery of compounded returns. If you leave your money in a leveraged ETF over time, your return can differ drastically from the fund's stated goal, especially in volatile markets. "
"Illinois filed a lawsuit on Friday against Wells Fargo & Co. accusing it of discriminating against black and Latino homeowners by employing racially biased lending practices.
San Francisco-based Wells Fargo & Co. allegedly sold high-cost subprime mortgage loans to minorities while white borrowers with similar incomes received lower-cost loans, according to the lawsuit, filed in Cook County Circuit Court by Illinois Attorney General Lisa Madigan.
'As a result of its discriminatory and illegal mortgage-lending practices, Wells Fargo transformed our cities' predominantly African-American and Latino neighborhoods into ground zero for subprime lending,' Madigan said."
On Aug 5th, the US Senate Committee on Banking, Housing, and Urban Affairs held a hearing on Proposals to enhance the Regulation of Credit Rating Agencies.
Testifying were Michael S. Barr-U.S. Department of the Treasury, Professor John C. Coffee, Jr.-Columbia University Law School, Dr. Lawrence J. White-New York University ,Mr. Stephen W. Joynt-Fitch Ratings, Mr. James Gellert-Rapid Ratings, Mr. Mark Froeba-PF2 Securities Evaluations, Inc.
In credit markets, borrowers often know more than lenders. While lenders may buy a portion of debt issued, borrowers often issue debt to many borrowers. Thus, rating agencies are traditionally assumed to address this information asymmetry. They help lenders evaluate the credit worthiness of borro…
"With public sentiment running so hard against the banking industry these days the story of Dwelling House Savings and Loan Association, a $13.4 million minority-controlled mutual in Pittsburgh, is nothing short of amazing.
Community leaders have rallied around the thrift for the past few months after cyber thieves took more than $3 million through fraudulent automated clearing house transactions, leaving the thrift with a $1 million capital hole.
Residents campaigned to boost the thrift's deposits, and it ultimately received pledges of cash injections from four local foundations and the $5.6 billion-asset Dollar Bank of Pittsburgh, just in time for a June 30 deadline that regulators imposed for getting the thrift adequately capitalized."
As was noted in the article, "Observers said the outpouring of support for the bank was primarily because of its age. 'It goes to show their importance to the community that…
According to MarketWatch.com, "The U.S. government made a 23% return supporting Goldman Sachs during the global financial crisis, the investment bank said Wednesday as it unwound one of the last taxpayer-funded investments it received last year." This is incorrect. If you include the $13 Billion that Goldman received through AIG (to make Goldman whole on Credit Default Swap transactions) we lost around 53%.
Mr. Bernanke’s early responses to the Wall Street Journal (wsj) were cited by Barney Frank (D., Mass.), the Committee’s chairman as his opening statement. Mr. Bernanke’s quotes on the WSJ also became some of the lawmakers concerns.
Expansion of GAO audit According to the WSJ’s article “Bernanke Heads to Congress Battling Calls to Tame the Fed”, Mr. Bernanke strongly opposed the proposal to audit the Fed, calling it "self-defeating and dangerous." He said that the risk is that if investors see the Fed facing new political oversight, they will doubt its ability to take unpopular steps to fi…
On January 17, 2008, the Chairman of the Federal Reserve Board, Mr. Bernanke, testified that "A recession is probably not on the horizon, but quick passage of an economic-stimulus package plus aggressive action by the Federal Reserve are the appropriate prescription for the ailing economy.."
What we got wrong.
We note that on June 18, 1998, in a letter to Betsy White, Senior Vice President at the NY Fed, we said:
"Finally, it is our continuing belief that the Federal Reserve Board should be designated a 'Superregulator,' with broad responsibility for overseeing the activities of banks, thrifts, pension funds, insurance companies, mutual fund companies, brokerage firms and investment banks. We note our belief that financial institution convergence, driven by recent advancements in financial and computer technology, requires the creation of such a 'Super-regulator.' "
We, and others, no longer believe the Federal Reserv…
On July 16th , the Full committee of the House Financial Services Committee held a hearing on community and consumer advocates’ perspectives on the Obama administration’s financial regulatory reform proposals. Testifying were Joseph L. Flatley- Massachusetts Housing Investment Corporation, Oliver Ireland- Morrison & Foerster LLP, Edmund Mierzwinski-U.S. Public Interest Research Group, Janet Murguia, National Council of La Raza, Travis Plunkett-Consumer Federation of America, John Taylor- National Community Reinvestment Coalition, and Nancy Zirkin- Leadership Conference on Civil Rights.
In his opening statement, Chairman Barney Frank replied to yesterday’s arguments on the “plain vanilla” mortgages. There were concerns that “plain vanilla” mortgage product would have the impact of reducing consumer choice and hurt financial innovations. He explained that the innovations are important. But, innovations should be in the context of regulations. He claimed that although excessive regula…
On July 15th , the Full committee of the House Financial Services Committee held a hearing on the banking industry perspectives on the Obama administration’s financial regulatory reform proposals. Testifying were Steve Bartlett-Financial Services Roundtable, John A. Courson- Mortgage Bankers Association, Chris Stinebert- American Financial Services Association, Steven I. Zeisel- Consumer Bankers Association, Professor Todd J. Zywicki- George Mason University, Denise M. Leonard- National Association of Mortgage Brokers, Edward L. Yingling- American Bankers Association, R. Michael S. Menzies- Independent Community Bankers of America.
In his opening statement, Chairman Barney Frank explained that there are lots of opinions and complaints with regard to the Obama administration’s financial regulatory reform proposals. He believes that these opinions and complaints are important during the establishment of this new regulation. He anticipated today’s discussion from the banking industry pers…
At 10:00 a.m. on Friday, July 10, 2009, in 1100 Longworth House Office Building, the Full Committee of the House Agriculture Committee and the House Financial Services Committee conducted a hearing titled "A Review of the Administration’s Proposal to Regulate the Over-the-Counter Derivatives Market." Timothy F. Geithner, Secretary, U.S. Department of the Treasury, was the only witness.
The hearing began with a consideration of the risk to taxpayers from the over the counter derivatives market. According to Wikipedia,
"Over-the-counter (OTC) derivatives are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds. According to the Bank fo…
According to the Washington Post, "Sen. Daniel K. Inouye's staff contacted federal regulators last fall to ask about the bailout application of an ailing Hawaii bank that he had helped to establish and where he has invested the bulk of his personal wealth."
While we have seen this before, I think the Senator's case differs significantly from the OneUnited case. Black-owned OneUnited "sought aid as community 'beacon'", had few inner city loans, and still "got $12 million from the US bank bailout fund."
The cases are different because:
"Regulators in October (2008) concluded in a cease-and-desist order that OneUnited.. had poor standards for qualifying and documenting loans, and gave top executives excessive pay and perks. Two of the perks regulators targeted were a $6.4 million beachfront Santa Monica mansion (1% of OneUnited's assets) that management used while in California and a Porsche SUV driven on company business in Boston.&qu…
According to the FDIC, "On Friday, June 26, 2009, Mirae Bank (Asian), Los Angeles, CA was closed by the California Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. All deposit accounts have been transferred to Wilshire State Bank, Los Angeles, CA ("assuming institution") and will be available immediately. On Monday, June 29, 2009, the former Mirae Bank locations will reopen as branches of Wilshire State Bank."
"One of the nation's largest banks allegedly set up a special sales office to steer risky subprime loans to residents in Prince George's County, Baltimore city and other predominantly black communities..Wells Fargo Bank employees allege in a lawsuit. According to the sworn statements by two former loan officers filed June 1 in U.S. District Court of Maryland as part of a lawsuit being pursued by the City of Baltimore against Wells Fargo alleging discriminatory and predatory lending, bank employees targeted black neighborhoods and churches for the escalating-interest mortgages, which some in the office called 'ghetto loans.'
Many customers with sufficient income, credit and savings to qualify for fixed, lower-interest mortgages were still urged to take subprime loans..because the higher rates meant bigger profits for the bank: 'If a loan officer referred a borrower who should have qualified for a prime loan to a subprime loan, th…
On June 18th, the Subcommittee on Select Revenue Measures of the House Committee on Ways and Means held a hearing on the New Markets Tax Credit Program (NMTC). Testifying were Donna J. Gambrell - CDFI Fund, Michael Brostek - GAO, Ron Phillips - CEI, Blondel A. Pinnock - Carver Bank, Joseph Haskins, Jr. – Harbor Bank, William Michael Cunningham – CIR, and James R. Klein - Ohio Community Development Finance Fund.
In his opening statement, Chairman Richard E. Neal (D-MA) explained that the Subcommittee on Select Revenue Measures is beginning its hearing process with the Subcommittee on Domestic Monetary Policy and Technology of the Financial Services Committee on issues involving the New Markets Tax Credit program. He pointed to a recent GAO report showing that minority-owned or controlled entities are less successful than non-minority owned or controlled entities in the NMTC application process. He emphasized the importance of the New Markets Tax Credit program as a way to encourage …
Two of our favorite conferences are back: "Opal Financial Group’s annual Family Office/Private Wealth Management Forum will return to the Hyatt Regency in beautiful Newport, Rhode Island in 2009. The family office conference will explore the challenges and opportunities associated with investing in emerging markets, alternative investments, distressed real estate, direct energy and numerous other asset types." At the same time and place, Opal sponsors the:
"Public Funds Summit East. Opal Financial Group’s annual public funds conference will address issues that are most critical to the investment success of senior public pension fund officers and trustees. The Summit will cover how surplus returns should affect employee benefit plans, the processes for selection and evaluation of investment managers, legal concerns with fund investment and management policies as well as the benefits and pitfalls of a wide variety of investment strategies." F…
We expect to testify soon before the Committee on Ways and Means of the US House concerning the NEW MARKETS TAX CREDIT PROGRAM and why "Minority Entities Are Less Successful in Obtaining Awards Than Non-Minority Entities." According to a report issued by the Government Accountability Office (GAO),
"From 2005 through 2008, minority-owned CDEs were successful with about 9 percent of the NMTC applications that they submitted to the CDFI Fund and received about $354 million of the $8.7 billion for which they applied, or about 4 percent. By comparison, non-minority CDEs were successful with about 27 percent of their applications and received $13.2 billion of the $89.7 billion for which they applied, or about 15 percent."
We expect that the hearing will be held mid-June, and will note the date and location in a blog post.
"If you are looking to expand and diversify your asset allocation by investing in emerging managers as well as women and minority owned investment managers, the emerging managers conference will provide the unique opportunity to access a diversified group of up-and-coming performance-oriented managers and manager of managers. The conference will explore the benefits and opportunities offered by investing in emerging managers as well as new strategies for implementing an emerging managers program. If you are an emerging manager, you will learn the procedures used by institutions to launch and maintain successful emerging manager programs. This event will showcase a variety of emerging mangers as well as minority-owned manager funds and other high potential smaller investment firms, and it will offer participants invaluable networking opportunities."
June 7-9, 2009. Chicago Marriott Downtown Magnificent Mile, Chicago, IL.
NEW YORK -- The financial turmoil that has weakened or destroyed some of Wall Street's most prominent companies is presenting an opportunity for some lesser-known firms, especially those owned by women and minorities.
One company that is benefiting is Williams Capital Group LP, an African-American-owned broker-dealer and asset manager in New York. Earlier this week, Goldman Sachs Group Inc. said it will invest $1 billion in a money-market fund managed by Williams Capital, more than doubling the amount of funds the firm has under management and pushing it over a critical size threshold that could help it attract additional institutional investors.
Last month, Williams Capital was named as part of a team assembled by Invesco Ltd. that applied to participate in the Treasury Department's Public-Private Investment Program, or PPIP, an effort to relieve banks of toxic assets. Invesco, and its affiliate WL Ross & Co., which is controlled by money manager Wilbur Ro…