Saturday, February 26, 2011

White House Policy Briefing on Jobs

On Friday, February 25th, we attended the White House Policy Briefing on Jobs and the Economic Future in Communities of Color sponsored by Michael Blake in the Office of Public Engagement. The meeting was held at the Eisenhower Building. Speaking were:

1. Don Graves, Jr., Community Development and Housing Policy, Treasury. Mr. Graves discussed the Small Business Lending Fund and noted that 300 banks have applied for funding. Mr Graves is also Executive Director, Presidents's Council on Jobs and Competitiveness, which held it's first meeting on Thursday.

2. Michael Strautmanis, Senior Advisor to Valerie Jarrett.

3. Marie Johns, Deputy Administrator, SBA. Ms. Johns described plans for the Impact Fund: "SBA will commit $1 billion to those funds that invest growth capital in companies located in underserved communities. This includes investing in economically distressed areas, as well as those companies in emerging sectors such as clean energy. SBA will provide up to a 2:1 match to private capital raised by these funds, partnering with private investors to target these 'impact' investments."

4. Labor Secretary Hilda Solis (See photo).

5. Alejandra Castillo, Deputy Director, Minority Business Development Agency.

6. Dan Gordon, Federal Procurement Policy, OMB.

The briefing was informative and well timed. The Office of Engagement announced that they are having a series of meetings around the country (including one on Monday in Philadelphia) to reach out to small businesses, especially small minority businesses. Overall, we like the Administration's forward thinking, forward leaning efforts in this area. Very well done.

Saturday, February 19, 2011

Rolling Stone asks "Why Isn't Wall Street in Jail?"

Rolling Stone Magazine notes:

"Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley — has ever been convicted. Most of these firms were directly involved in elaborate fraud and theft. Lehman Brothers hid billions in loans from its investors. Bank of America lied about billions in bonuses. Goldman Sachs failed to tell clients how it put together the born-to-lose toxic mortgage deals it was selling. What's more, many of these companies had corporate chieftains whose actions cost investors billions — from AIG derivatives chief Joe Cassano, who assured investors they would not lose even 'one dollar' just months before his unit imploded, to the $263 million in compensation that former Lehman chief Dick "The Gorilla" Fuld conveniently failed to disclose. Yet not one of them has faced time behind bars."

A few highlights

JP Morgan

Gary Aguirre..joined the SEC in September 2004. Two days into his career as a financial investigator, he was asked to look into an insider-trading complaint against a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg suddenly started buying up huge quantities of shares in a firm called Heller Financial. A few weeks later, Heller was bought by General Electric — and Samberg pocketed $18 million.

After some digging, Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg's who had just stepped down as president of Morgan Stanley. At the time, Mack had been on Samberg's case to cut him into a deal involving a spinoff of the tech company Lucent — an investment that stood to make Mack a lot of money. A week later, Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank's clients, as it happened, was a firm called Heller Financial. We don't know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings. But we do know that as soon as Mack returned from the trip, on a Friday, he called up his buddy Samberg. The very next morning, Mack was cut into the Lucent deal — a favor that netted him more than $10 million. And as soon as the market reopened after the weekend, Samberg started buying every Heller share in sight, right before it was snapped up by GE.

The deal looked like a classic case of insider trading. But in the summer of 2005, when Aguirre told his boss he planned to interview Mack, things started getting weird. His boss told him the case wasn't likely to fly, explaining that Mack had 'powerful political connections.'


..a Lehman lawyer named Oliver Budde was going through the bank's proxy statements and noticed that it was using a loophole involving Restricted Stock Units to hide tens of millions of dollars of (CEO Dick) Fuld's compensation. Budde told his bosses that Lehman's use of RSUs was dicey at best, but they blew him off. Disturbed by such shady practices, the lawyer quit the firm in 2006.

Then, only a few months after Budde left Lehman, the SEC changed its rules to force companies to disclose exactly how much compensation in RSUs executives had coming to them. But instead of coming clean about eight separate RSUs that Fuld had hidden from investors, Lehman filed a proxy statement that was a masterpiece of cynical lawyering. On one page, a chart indicated that Fuld had been awarded $146 million in RSUs. But two pages later, a note in the fine print essentially stated that the chart did not contain the real number — which, it failed to mention, was actually $263 million more than the chart indicated. (The law firm that helped craft the fine print, Simpson Thacher & Bartlett, would later receive a lucrative federal contract to serve as legal adviser to the TARP bailout.)

Budde decided to come forward. In April 2008, he wrote a detailed memo to the SEC about Lehman's history of hidden stocks. Shortly thereafter, he got a letter back that began, "Dear Sir or Madam." It was an automated e-response."


As chief of AIGFP, the firm's financial products subsidiary, (Joe) Cassano repeatedly made public statements in 2007 claiming that his portfolio of mortgage derivatives would suffer "no dollar of loss" — an almost comically obvious misrepresentation. As in the Lehman case, federal prosecutors not only had plenty of evidence against AIG — they also had an eyewitness to Cassano's actions who was prepared to tell all. As an accountant at AIGFP, Joseph St. Denis had a number of run-ins with Cassano during the summer of 2007. At the time, Cassano had already made nearly $500 billion worth of derivative bets that would ultimately blow up, destroy the world's largest insurance company, and trigger the largest government bailout of a single company in U.S. history. He made many fatal mistakes, but chief among them was engaging in contracts that required AIG to post billions of dollars in collateral if there was any downgrade to its credit rating.

St. Denis didn't know about those clauses in Cassano's contracts, since they had been written before he joined the firm. What he did know was that Cassano freaked out when St. Denis spoke with an accountant at the parent company, which was only just finding out about the time bomb Cassano had set. After St. Denis finished a conference call with the executive, Cassano suddenly burst into the room and began screaming at him for talking to the New York office. What St. Denis represented was transparency — and the last thing Cassano needed was transparency.

Another clue that something was amiss with AIGFP's portfolio came when Goldman Sachs demanded that the firm pay billions in collateral, per the terms of Cassano's deadly contracts. Such "collateral calls" happen all the time on Wall Street, but seldom against a seemingly solvent and friendly business partner like AIG. And when they do happen, they are rarely paid without a fight. So St. Denis was shocked when AIGFP agreed to fork over gobs of money to Goldman Sachs, even while it was still contesting the payments — an indication that something was seriously wrong at AIG. St. Denis had no choice but to resign. He got another job, and thought he was done with AIG. But a few months later, he learned that Cassano had held a conference call with investors in December 2007. During the call, AIGFP failed to disclose that it had posted $2 billion to Goldman Sachs following the collateral calls.AIG's earnings were overstated by $3.6 billion.

A year later, after the crash, St. Denis wrote a letter about his experiences to the House Government Oversight Committee, which was looking into the AIG collapse. He also met with investigators for the government, which was preparing a criminal case against Cassano. But the case never went to court. Last May, the Justice Department confirmed that it would not file charges against executives at AIGFP. Cassano, who has denied any wrongdoing, was reportedly told he was no longer a target. Shortly after that, Cassano strolled into Washington to testify before the Financial Crisis Inquiry Commission."

Final Warning

"So there you have it...You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass. It's not a crime..move on. In fact, let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year.

.these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy. They're attacking the very definition of property — which, after all, depends in part on a legal system that defends everyone's claims of ownership equally. When that definition becomes tenuous or conditional — when the state simply gives up on the notion of justice — this whole American Dream thing recedes even further from reality."

We say again, and for the last time:"Statistical models created by the firm using the Fully Adjusted Return (TM) Methodology have issued new forecasts confirming that system-wide economic and market failure are a growing possibility. Without speedy and meaningful reform, there is a significant and growing risk that our financial system will simply cease functioning."

Friday, February 18, 2011

Another Black Bank Closes

"A long standing bank in North Tulsa is no more. Many say the closing of American State Bank is an end of an era.

Leroy Thomas had a front row seat to a moment that was truly ground breaking. "We were very excited. "It was quite the momentous occasion," Thomas told News Channel 8. He founded American State Bank in 1970. A crowd gathered to witness it's rebirth in it's new home on 38th North Peoria just seven years after it was founded. "It was a source of pride. There was no other institution in the state, financial institution controlled by blacks that in itself was an achievement we thought".

Thomas says he sold his interest in the bank in the 90s, but the bank still operated in the place he built. Until this week, it was still the only remaining black owned financial institution in Tulsa. Now a notice on the front door is directing customers to People's bank.

Edna Brooks worked at American State Bank for 15 years. She retired a few years ago. "They had talked about selling the bank for many years and after a while we just didn't think it was going to happen. I was really shocked that our only bank for the north side, the minority bank was gone," Brooks said. She'd hoped that someone else in the community would come in and to keep the north side location open. "You come so far. We had all of these when they the race riots. We had banks we had stores, everything we needed doctors lawyers, whatever". Now only memories remain. "Very sad. Very sad. An awful lot of work went into that," Thomas said.

There's no official word on what will happen to the current building, but there is some talk the bank could become a church."

Saturday, February 12, 2011

Dodd-Frank Provisions for Minority and Women Business & Professional Opportunities

Learn more about new business and professional opportunities that may become available in 29 federal financial agencies like the nine (9) Federal Reserve Banks, the FDIC, etc. On January 22nd, each of the affected federal financial agencies established new offices devoted to ensuring minorities and women businesses are included in contracting opportunities. Moreover, these offices are still staffing up; therefore, professional opportunities also exist. The Dodd-Frank legislation that became law in the summer of 2010 include these provisions. Attend the Thursday, February 17th Chicago Booth Black Alumni Association's evening program event in Washington, DC to learn more!

Dodd-Frank Provisions for Minority and Women Business & Professional Opportunities
Feb 17, 2011
6:30 PM - 8:30 PM