Monday, December 23, 2019

Secretary of the Treasury "misplaces"​ $1.5 Trillion in $100 bills....

In an interview on Fox Business News, the current Secretary of the Treasury, former Goldman Sachs partner Steven Mnuchen, indicated that $1.5 trillion worth of $100 bills recently "disappeared." In explaining how this money vanished, Mnuchen said: "Literally, a lot of these $100 bills are sitting in bank vaults all over the world."

This explanation is beside the point and impossible to verify, of course, making it highly unlikely to be true.

Mnuchin, you will recall, came to Washington with a firmly established reputation for unethical behaviour. In 2009, he took "over California’s IndyMac bank, shut down amid the 2008 foreclosure crisis by the Federal Deposit Insurance Corporation (FDIC). Bought for $13.9 billion (but only $1.3 billion in actual cash), Mnuchin turned it into a genuine foreclosure machine" and became known as the Foreclosure King. His bank "carried out more than 36,000 foreclosures, tossing former homeowners (including active duty military servicemen and women) onto the street without hesitation or pity by any means necessary. According to a memo obtained by investigative reporter David Dayen, OneWest, the new name for Indybank, rushed delinquent homeowners out of their homes by violating notice and waiting period statutes, illegally backdated key documents, and effectively gamed foreclosure auctions."

The bank was also cited for "reportedly foreclosing on a 90-year-old woman, Ossie Lofton, who owed the bank 30 cents but sent a check for 3 cents."

The theft would be the biggest in US history, and would go a long way toward explaining the fierce loyalty we have seen on the right, since a cache of $1.5 trillion in $100 bills would be enough to pay every republican member $50 million. It is also consistent with the general level of executive branch criminal behavior recently observed.

It turns out a foreign country may no longer be funding this fraudulently elected administration.

You are.

Friday, November 8, 2019

Why the US Should Nationalize LIBRA

Mark Zuckerberg’s October 23rd testimony before Congress on LIBRA, Facebook's’ proposed digital currency, has garnered much attention. I attended the hearing (I'm in the blue tie in the picture below) and thought both legislators and Zuckerberg missed the real solution to the problem.

To understand why, let’s start with what’s really going on. Facebook created Libra in response to competitive pressure. Imagine a social networking platform with the four functions of money (store of value, means of payment, unit of account and a means of social control) imbedded. A social media platform with this functionality has the potential to significantly reduce Facebook’s reach, if not immediately, then ten years down the road. 

For more, see: Why the US Should Nationalize LIBRA

Monday, October 14, 2019

How to Finance a Black Women-owned Business in 2020

Maggie Lena Walker was the first female bank president of any race to charter a bank in 1902. Black women have continued down this path of entrepreneurship. According to one report, "the number of businesses created by black women in the United States alone is up more than 460% over the last 20 years, making them the fastest growing group of entrepreneurs in the nation."

Of course, we've known this for some time. We launched in 1998 and noted that 65% of the inquiries from the site came from Black women. The key issue then, and now, is money: "according to the Diane Project, black female founders are only able to raise an average of $36,000 in venture funding, while start-ups owned mostly by white males have received on average $1.3 million."

We provide data-based advice and instruction, based on our years of experience, to help you over this hurdle. Our webinar provides information on the current state of Black women businesses. We provide actionable information you can use to get financing for your business.

RSVP at:

The feedback from the our 2018 webinar, held on July 18th, August 10th and August 24th, was uniformly positive. (For a Black Enterprise article on that webinar, see: ) Eighty five percent (85%) of our customer satisfaction survey respondents found the webinar useful. Seventy one percent (71%) rated the webinar excellent.



• Business Planning
• Your business credit history: Dun and Bradstreet
• Data and Resources for Black women businesses
• The best non profit, local/state/federal resources
• Steps in the business financing process
• Protecting your ideas: intellectual property rights
• What type of financing products and sources/investors/lenders are best for your business: banks, credit unions, factors, hard money lenders, crowdfunding, credit cards, venture capital, digital currency, ICOs.
• Why you should seek out venture capital these days. Which ones to go to. How you should approach them.


Saturday, October 12, 2019

Fully Adjusted Return Economic Forecast for 2020

We are pleased to present our 2020 economic forecast incorporating social factors (Fully Adjusted Return). Tickets can be obtained at:

We have a track record of issuing unusually accurate economic forecasts:

In October 1998, in a petition to the Federal Reserve and the US Court of Appeals for the District of Columbia Circuit (Case Number 98-1459), Mr. Cunningham forecast the financial crisis that occured ten years later. (See: )

On June 15, 2000, we testified before the House Financial Services Committee and warned that ethical issues at Fannie Mae and Freddie Mac would led to their failure.

On December 22, 2003, our economic forecasting models signaled the probability of system-wide economic and market failure. See page 6:

As we noted on Oct. 5, 2006, forecasting the development of cryptocurrencies: "competitive advantage with respect to capital access is available to any country with significant economic potential and a modest telecommunications infrastructure."

A review of our Texas Black Economic Forecasts can be found at:

We discuss economic indicators for 2020 in light of critical risk factors.

1. International instability.
2. Domestic social and cultural instability.
3. US Policy: We describe the unintended consequences from the impeachment effort in the House.
4. Technology and large financial institutions.
5. Environmental factors/issues.
6. Libra, Bitcoin and digital currencies.
7. Investment Market Forecast.

Since these risks are not evenly distributed. we detail which business sectors and geographies will be safer (and thus more profitable) than others. We also discuss where to look for positive factors in certain American political institutions and commercial entities. Finally, we discuss timing and synchronicity.

(Our June 11, 2016 Fully Adjusted Return Election Forecast, which correctly predicted Donald Trump's win, can be found at:
Everybody has an opinion. We have a track record.

Thursday, September 26, 2019

Let’s break down investing by Katherine Wiles Sep 26, 2019 (Investing 101)

(The article below was published on Marketplace. We have edited the piece to reflect our comments.)

"Buy low, sell high.” We’ve all heard the adage before. But investing in the stock market can be a big step. It can be confusing — even daunting — and the terms can make it feel like inside baseball. So here are some basics to know about investing in the stock market before jumping in feet first.

You don’t need a lot of money to invest in the stock market. While you should make sure your finances are healthy before investing, William Michael Cunningham, an investment adviser and CEO of Creative Investment Research, said directly purchasing stock from a company can be done with as little as $25 by buying a fractional share. (For more,

..Investing in funds, as opposed to individual stocks, is a good way for beginners to get started.

A mutual fund is a collection of investments in one portfolio account. The mutual fund takes investors’ money and places it in different types of securities. There are different types of mutual funds. A stock fund is a mutual fund that invests primarily in corporate stock. Index funds invest in company stocks that match those in a particular stock index, like the S&P 500.

Money market funds invest in short-term debt and usually provide a modest return. A bond fund invests in bonds and typically aims to produce greater returns than a money market fund.

Mutual funds have a few advantages over individual stock for new investors. First, they tend to be more liquid.

“You should be able to come in and out of those funds easier than you can come into and out of an individual stock or an individual bond,” Cunningham said.

They are also thought to be more secure because they are inherently diverse investments. Diversification is the idea that you’re not putting all your eggs into one basket.

“If you invest in one company, then your investment is wholly dependent on the performance of that single entity,” Cunningham said.

If you are going to buy stock in an individual company, Cunningham said to invest in what you know. For example, if you fly a lot and know about the types of planes that are being ordered, it might be good to invest in that company. It’s important to be familiar with the company and its goals, and reading its prospectus is a good way to do that.

It’s important to think long term when investing in the stock market. A common pitfall, Cunninham said, is chasing returns, which is switching investments based solely on earning the highest return.

“The reason why this is so bad is — in addition to not being diversified — you’re going to pay these fees that the brokers charge, and you’re going to pay them repeatedly,” he said. “Your gains are going to the brokers as opposed to going into your pocket.”

Let’s break down the numbers

Dividends are company earnings that are given back to the shareholders. They are classified as qualified or nonqualified, depending on how they are taxed. Nonqualified dividends are typically taxed as income. Qualified dividends are ones that meet certain criteria, including owning them for a length of time known as a holding period. Qualified dividends are taxed at the capital gains rate, which is typically lower than income tax. Cunningham noted that these laws can change frequently, so be sure to check with your tax adviser.

It’s important to be prudent when investing in the stock market, especially when you’re starting out. Saving money in the bank typically yields less profit than investments, but it’s also more secure.

Important terms

Beta - Measures the relationship between the stock price and movement in the whole stock market; basically, a measure of volatility.

Bear market - When share prices decline on the stock market for a sustained time.

Bull market - When share prices rise on the stock market for a sustained time.

Blue chip - Large, industry-leading companies that are financially sound.

Bonds - A loan to a company, country or local government that pays a stated interest rate.

Capital appreciation/capital gain - How much an investment has increased in value.

Diversification - The strategy of having a mix of different types of investments to reduce the risk of any one holding.

Dividends - Payments made to shareholders from company earnings.

Earnings per share - A company’s profit divided by the number of common outstanding shares; an indicator of a company’s profitability.

Liquidity - How fast or easily securities can be converted into cash.

Margin - The money borrowed from a broker to buy an investment.

Money market fund - By law, funds that can only invest in certain “high-quality, short-term investments issued by U.S. corporations, and federal, state and local governments.”

Mutual fund - When a company pools investors and invests their money in securities like stocks, bonds or short-term debt.

Net asset value - The total value of a fund or company’s assets minus the total value of its liabilities.

Penny stocks - Stocks traded at under $5, typically traded over the counter and not on a stock exchange.

Portfolio - The collection of securities that a mutual fund is invested in.

Prospectus - A legal document required by the Securities and Exchange Commission that provides details of an investment.

Risk appetite - How much risk you’re willing to take in order to achieve a goal — in this case, making money.

Securities and Exchange Commission - A government body that was created to protect investors and maintain fair markets.

Volume - The number of shares traded over a certain period of time, typically measured over the course of a day.

Tuesday, September 24, 2019

The FedNow℠ Service: The Fed's Blockchain?

The Federal Reserve Board announced that the Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the FedNow℠ Service, to support faster payments in the United States.

This is a direct response to the threat posed by digital currencies and blockchain. According to one Fed official, "Last summer, the U.S. Treasury recommended that 'the Federal Reserve move quickly to facilitate a faster retail payments system, such as through the development of a real-time settlement service, that would also allow for more efficient and ubiquitous access to innovative payment capabilities.'” Sounds like blockchain to us, thus, we expect this new system to be blockchain enabled. (For more on blockchain, see: What is Bitcoin? How does it relate to blockchain? Henry Zhang, Creative Investment Research Impact Investing Intern. University of Toronto.  Online at:

As we noted in our paper "Blockchain, Cryptocurrency and the Future of Monetary Policy," distributed to select members of the House Financial Services Committee, it is critical to understand that bitcoin was created in direct response to the failure of global regulators to protect the public in the years leading up to the financial crisis of 2007/2008. Thus, the ethical and monetary functionality of cryptocurrency is superior to that of paper money. Eventually, cryptocurrency is going to dominate.

One of the reasons for this dominance is the speed with which transactions can be completed on a blockchain, especially one enhanced by quantum computing technologies.

As we also noted in our paper,

"The main economic attributes of a technically effective currency rests on three functions: as a unit of account, a store of value and as a medium of exchange. A unit of account is a common measure for the value for goods and services, the store of value is the way in which we store wealth in order to transfer purchasing power from the present to the future, and the medium of exchange function dictates which item is accepted for the payment of goods and services.  In recent history, these functions have been fulfilled by fiat currencies backed by central banks across both developed and developing nations. Through monetary policy manipulation, the key attraction of these currencies – price stability and widespread acceptance – is implemented through a central banking system, enjoying a great deal of trust globally.

But there is a fourth function of money: as a means of social control. The centralized monopoly over the functions of money held by sovereign governments and central banks has generated great income and wealth imbalances. Concerns about a lack of central bank performance with respect to financial inclusion, income inequality, economic system stability and the tendency of central banks to intermediate on behalf of large financial institutions supported the creation of cryptocurrency" 

Friday, August 30, 2019

Let Us Put Our Money Together: The Founding of America’s First Black Banks

We note with interest the publication of yet another book on Black Banks written by non-Black people. The most recent entrant, "Let Us Put Our Money Together: The Founding of America’s First Black Banks" was written by the Federal Reserve Bank of Kansas City.

What makes this book especially interesting is the lack of support that the Federal Reserve Bank of Kansas City has shown Black banks over the years.

In an article in Black Enterprise, we stated:

"it’s interesting that the Fed would write a book on black banks given their responsibility under federal law from over two decades ago to save minority banks in the face of the current decline...Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) under Section 308," which called "for preserving the number of minority depository institutions and offering technical help to prevent insolvency of institutions. The law also was geared to promote and encourage the creation of new minority depository institutions.

An objective review of recent performance based on 308’s standards would lead to the conclusion that the Fed has failed to preserve the number of black-owned depository institutions.”
There are other Federal laws, like Dodd-Frank Section 342, which created "an Office of Minority and Women Inclusion (OMWI) at the 12 regional Federal Reserve Banks, the Consumer Financial Protection Bureau (CFPB), the Federal Reserve Board of Governors (FBG), the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Department of the Treasury Department Offices (collectively, the Agencies), as well as all entities that contract with or are regulated by an Agency,  “responsible for all Agency matters relating to diversity in management, employment and business activities.”  This includes working with Black banks.

We continue to work, even in the face of banking regulator failure and hostility:
  • In 2018, we worked on Federal legislation to help Black banks, HR 41. 
  • In 2006, 2007 and 2008, we created a fund to provide capital to women and minority owned banks. We sought approval as a bank holding company for this fund. A staff member at the Federal Reserve, the agency responsible for approving bank holding company applications, told us that unless he worked with a specific lawyer at a specific law firm, the application would be denied. Mr. Cunningham declined to work with the law firm. The application was denied. This is the justification for the statement to Black Enterprise that “Banking regulators have a policy of keeping black banks small and of keeping new black entrants out,”
As long as this is the case, we expect the number of Black banks to keep falling, as we predicted in 2011.

Tuesday, August 20, 2019

Why Shareholder Value Never Actually Mattered. William Michael Cunningham, Creative Investment Research

The Business Round Table (BRT), a group of the largest corporations in America, declared recently that "profits for shareholder are no longer the only purpose of a corporation." This profits-first strategy, known as “shareholder wealth maximization,” has been the guiding philosophy for much of American business since 1619.

It was always the wrong goal. Some, mainly those excluded from fully participating in the economy, knew this to be the case. Martin Luther King, in a sermon given on November 4, 1956, warned that "material means have outdistanced spiritual ends, that mentality has outdistanced morality, and that civilization has outdistanced culture." More specifically, King, in a September 1, 1958 essay, wrote that “We are prone to judge success by the index of our salaries or the size of our automobiles, rather than by the quality of our service and relationship to humanity.”

Even Robert F. Kennedy, the wealthy scion of an influential family, declared, at the University of Kansas on March 18, 1968, that for:

"too long, we..have surrendered personal excellence and community values in the mere accumulation of material things...Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them.  It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts..the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play.  It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile."

As shown, Kennedy's comments had their origin in the Black Community.

Both men knew "maximizing only shareholder value" was never a reasonable goal. It was an excuse, and, by 1968, a response to increasing ethnic and gender diversity. It was an effort to keep "the other" out. It worked: "income inequality in the United States increased significantly since the 1970s."

More rational corporate goals, like "delivering value to customers, investing in employees, dealing fairly and honestly with suppliers, supporting communities and protecting the environment" may now become the focus of the competing, sometimes conflicting ambitions that corporate management will pursue. This requires maximizing social and financial return. We have shown, over 30 years, that it can be done. It is not, however, easy.

Given the extreme social volatility the US has experienced in the years following the financial crisis of 2008, (a crisis created, in part, by current BRT members), income inequality, and the hatred and instability it generates, will soon reach the point where they threaten the entire US economic system.

We can only hope BRT's change of heart is genuine, and that it is not too little, too late.

Time will tell.

Monday, August 19, 2019

The 1619 Project and the Inverted Yield Curve. William Michael Cunningham, Creative Investment Research

An inverted yield curve reflects a situation in which interest rates on long term bonds are lower than those on short term bonds (bills). Supposedly, this is one of the surest signs that a recession is looming, since, normally, interest rates are higher on long term bonds than they are on short term bonds.

The standard explanation for the normal yield curve relies on something called "liquidity preference", which states that "an investor demands a higher interest rate or premium on securities with long-term maturities that carry greater risk because, all other factors being equal, investors prefer cash or other highly liquid holdings."

On Sunday, August 18th, the New York Times published the print edition of the 1619 Project. The Project documents the 400th anniversary of the arrival of the first forced labor brought from Africa to the then-Virginia colony. The paper notes that "in colonial times, when land was not worth much and banks didn’t exist, most lending was based on human property." Thomas Jefferson "mortgaged 150 of his" Black workers, who were being held without freedom of choice or action, to a Dutch firm to build Monticello. "In the early 1700s, (Black workers) were the dominant collateral in South Carolina," and, according to one historian, ‘‘the extension of mortgages to human property helped fuel the development of American (and global) capitalism.’’ Thus, the bond market in America started and grew with the "intentional exploitation of black people."

Wall Street itself was, literally, built by Black workers, again, held without freedom of choice or action. They "put in place much of the local infrastructure, including Broad Way and the Bowery roads, Governors Island, and the first municipal buildings and churches." On the investment side, "New Yorkers invested heavily in the growth of Southern plantations, catching the wave of the first cotton boom. Southern planters, who wanted to buy more land and Black people, borrowed funds from New York bankers and protected the value of bought (humans) with policies from New York insurance companies."

Much has been written recently concerning the inverted yield curve and the possibility of a recession: "The Federal Reserve Bank of Cleveland found that (an invested yield curve) has reliably predicted a recession would occur about a year out. The Fed only said there's around a 35% chance of a recession."

This is, of course, incorrect, coming as it does from the same people who missed the 2008 crisis: There is a 100% likelihood of a recession. How and when it will occur are the only questions.

Our Fully Adjusted Return Model points to social, ethical (as in the 1619 Report) and technological factors as the dominant recession risk indicators over this part of the economic cycle. 

Wednesday, August 14, 2019

The Economic Impact of the Racial Wealth Gap, Racial Bias in Small Business Lending and Racial Bias in Investment Management

Suddenly, it looks like Black people have a lot of friends....several articles have just been published that may point to a revision in management's attitudes about how racial bias has affected Black People:

Racial divide exposed in lending to the smallest of small businesses 
Sole proprietors who are African-American or Hispanic are less likely than their white counterparts to have their funding needs met and are more likely to be discouraged from applying for credit, according to a new report by the Federal Reserve Bank of New York.

Study Reveals (Asset) Allocator Bias Against Black Fund Managers:
When evaluating top-performing managers, institutional investors favored teams led by white men, according to new research from Illumen Capital and Stanford SPARQ.

The economic impact of closing the racial wealth gap
The persistent racial wealth gap in the United States is a burden on black Americans as well as the overall economy. New research quantifies the impact of closing the gap and identifies key sources of this socioeconomic inequity.

That's a lot of progress in a very short time. We, however, are cautiously optimistic.

This may simply be the calm before the storm. 

Thursday, August 1, 2019

The Internet Governance Forum by Sachin Meier, Impact Investing Intern, Georgetown University.

Last Thursday, the Internet Governance Forum was held at the Center for Strategic and International Studies. Sponsors included Facebook, Amazon, Comcast, the Charles Koch Institute, and ICANN (the Internet Corporation for Assigned Names and Numbers). The conference covered many topics – from blockchain, AI, and 5G to monopoly power and antitrust, privacy, and consumer protection.

Commissioner Christine Wilson of the Federal Trade Commission discussed the myriad problems surrounding Facebook and its "reckless" behavior with respect to user privacy, data collection and targeting. She took a strong stance on the need to directly regulate Facebook and “put a speed bump in front of Mr. Zuckerberg”. She was keen on controlling Zuckerberg’s power within his own company by dictating the composition of Facebook's Board of Directors and regulating other executive powers Zuckerberg holds within the company. She also suggested a more general, industry-wide reform of social media company consumer protection regulations.

Another panel discussed issues rising from new technologies, like Deepfakes and corporate surveillance, which have adversely affected consumers and about which the current laws provide little guidance. Very few of the most important questions were answered, in part because no one currently has the answers. One of the panelists left with the hope that either newer technology, social norms, or governmental regulation will control the malicious use of technology and allow us to find a stable equilibrium for society.

After a break, a panel of lawyers and regulators convened to discuss antitrust regulation and the future of Big Tech. This panel was generally in favor of using antitrust legislation as leverage in order to coerce compliance with rules and to encourage companies not to push their luck with extralegal actions. They discussed targeting Google, Amazon, Facebook, and Apple. The panel noted that, as network effects and economies of scale are the driving force behind these monopolies, breaking them up would not solve the problem, merely destroy a relatively efficient market.

Another issue concerned “the right to be forgotten”. This concept has been seized upon in Europe but remains unacceptable in America. A few panelists pitched the idea.

Despite the pressing nature of many of these issues, and the proclaimed necessity of legislation to fix the problems, many of the speakers and panelists agreed that other, better-publicized issues would continue to have Congressional attention. It is up to the private sector, state and local governments, and society to find solutions to the risks increasingly powerful technology presents.

(Edited by William Michael Cunningham).

Wednesday, July 31, 2019

The Responsible Business Summit West: October 9-10, 2019

The Responsible Business Summit West will challenge 250+ CEOs, sustainability leaders, Investors, Government representatives and NGOs to show how they’re going to leverage new technologies and investments to deliver the blueprint for the future economy – over two days you will learn how to move from dialogue to action on the key opportunities that lie ahead. Grasping the chance presented whilst simultaneously responding to investor demand to be more transparent on ESG related risks is no straightforward task. Keynote speakers include:

o    Assistant Secretary-General, UN Environment
o   President & CEO, Oxfam America
o   President & General Counsel, DSM North America
o   President, CDP North America
o   President & CEO, Fairtrade USA
o   Executive Vice President and Group President, Sempra Energy
o   Chief Environment Officer, Microsoft
o   Chief Sustainability Officer, Hewlett Packard Enterprise
o   Chief Sustainability Officer, FedEx
o   Chief Sustainability Officer, MetLife
o   Chief Sustainability Officer, Mastercard
o   Chief Operating Officer, Partnership on AI
o   State Controller, State of California

Location: San Diego [Hilton Mission Valley is the hotel – full address: 901 Camino del Rio S, San Diego, CA 92108, USA]
Dates: October 9-10
Contact: Ed Long
Contact email:
Contact phone: +44 207 375 7188
Contact address: 7-9 Fashion Street, London E1 6PX

Sunday, July 28, 2019

Second IRS Hearing on Qualified Opportunity Funds. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

On July 9, the IRS held the second hearing on Qualified Opportunity Funds following the second tranche of proposed guidance on Opportunity Zones issued on April 17. The first hearing in February followed the initial regulation issued on October 19. The panelists of Internal Revenue Service and Department of the Treasury employees asked speakers to discuss problems and examples of possible solutions that can help them clarify the regulation.

The panel emphasized that they are governed by the language within Opportunity Zone legislation. They are not legislatures themselves. They stressed that their job is to work within the guidelines of the laws congress passes.  The 19 speakers each discussed what they thought would help improve the legislation.

The initial hearing covered an array of issues and clarifications for the Treasury Department to address. During this second hearing, speakers had a narrower list of issues to address, largely technical and tax related.  This is expected to be the last hearing on Opportunity Zones. Final regulations are expected to be issued later this year.

The following speakers touched on social issues not clarified by the second tranche of guidance.
William Michael Cunningham (Creative Investment Research) expressed concern that the program will divert economic resources and needed tax revenue from black and brown communities. He suggested that legislators who had a part in selecting the Opportunities Zones (OZ) be specifically prohibited from benefiting financially from the OZ program.  He suggested using Ethereum blockchain to report on OZ social impact. Also, he suggests that the tax credit be calibrated to the social impact of the business.

Mary Scott Hardwick (Opportunity Finance Network) was excited about the potential additional capital flows into disinvested communities but expressed reservations that the proper regulations have not been written to do so. She expressed support from Opportunity Finance Network for the Beech Centers OZ framework. In addition to anti-abuse provisions, there needs to be clarification on vacant land improvement.  Hardwick requests a ban on sin business that extends to subsidiaries and clarification on the reasonable cause that allows a fund to fail the 90% asset test. She also expressed support for the EIG Coalition’s recommendation for improving regulations for operating businesses.

Fran Seegull (U.S. Impact Investing Alliance) underscored the importance of data collection and publicly reporting transaction data on Qualified Opportunity Funds in a way other than through a tax form but likely a web portal for real time collection. She recommended that treasury provide greater clarity on abuse prevention. The IRS commissioner should maintain authority to recharacterize abusive investments.  Seegull asked that clear abuse actions be defined such as land banking.
Most speakers express optimism for the program. Some have hopes that the tax incentives for investors will reduce poverty, increase employment and spur growth in historically underdeveloped communities. Others criticized the program finding it unlikely work as optimist hope. Instead, it will lead to gentrification and the displacement of current residents. 

Monday, July 22, 2019

Libra Hearings on Capitol Hill. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

On June 18, Facebook released it’s white paper on the new digital currency, Libra.  The news led David Marcus, Chief Executive Officer of Calibra, to appear before the House Financial Services committee on July 17 - a day after appearing before the Senate Banking Committee.

House Financial Services Committee members questioned whether Facebook would have overwhelming control over  the Libra Association’s 27 other members and if they were to be trusted with 2.7 billion users’ financial data, given past privacy violations. 

Facebook’s trustworthiness has been in question since the 2016 Cambridge Analytica data scandal.  Most recently, charges brought in March by the Department of Housing and Development concerning Facebook's alleged violations the Fair Housing Act have not helped the firm gain favor with the public.

Last month, Facebook was removed from the S&P ESG 500 index because of privacy concerns and a lack of transparency as to why certain user information is collected and shared.  These issues earned the company a 22 and 6 in social and governance sub scores, respectively, against an 82 environmental sub score - this last score being easy for a technology company to achieve. 

Marcus pointed out that the social media platform is just one of 28 current Libra Association members - they hope to grow to 100 members - and lists Mercy Corp and Women’s World Banking as groups capable of combating any use of the digital currency for human rights violations.

Michigan representative Rashida Tlaib pointed out that Marc Andreesen, co-founder of Andreesen Horowitz, sits on the board of Facebook; Mark Zuckerburg, CEO of Facebook, sits on the board of Breakthrough Initiatives; Peter Thiel, co-founder of PayPal, sits on the board of Facebook; Ben Horotwitz, co-founder of Andressen Horowtiz, sits on the board of Lyft; David Marcus, the witness, sits on the board of Coinbase. All are founding members of the Libra Association.

These close  relationships do nothing to soothe fears that a nexus of power exists within the Facebook network, controlled by a few individuals. Of course, this also does little to address the problem of diversity in the tech industry. 

As pointed out at an earlier Diversity and Inclusion subcommittee hearing (subcommittee of the Financial Services Committee), a lack of diversity tends to occur when non minorities in positions of power look to fill leadership rolls with those they already know. People tend to associate with those who look like themselves. Predominately white and male organizations inviting other predominantly white and male organizations to have a seat at the table does nothing to bring diverse thoughts and perspectives into new innovations.

As stated in the Libra white paper and subsequent press release, a social driver for Libra has been that it will provide easier access to those who have historically been excluded from using financial institutions.  Marcus cited the example of a young woman sending money from the US  to her loved ones in another country without the wait and fees that might apply to other methods of money transfer. Harping on the 1.7 billion unbanked and underbanked individuals in the world, he returned to the social service that Calibra might bring to a broken system.

Ohio’s Joyce Beatty (pictured with the author at left) pointed out that it “wasn't very unique” to mention 1.7 billion globally who lack access to a bank account without details on how those unbanked would have access to Libra. Many of Marcus’ responses to the lack of clarity that still exists left the burden of clarifying exactly how on this would work on regulators.

Pressley asked how Libra would serve the unbanked, who lacked a bank account to purchase Libra digitally,
 but admitted that “the reason we are here is because the Federal Reserve has failed” to provide a safe and secure system to access and move money.

Facebook’s altruistic intentions aside, the question of how they planned to benefit from Libra was posed. Marcus described two ways Facebook will make money from the new digital currency:
  1. Libra will aid 90 million businesses in transacting with one another. More consumers on the platform will drive small businesses to expand, and as they expand, they will purchase more advertisements with Facebook.
  2. As trust in Libra is earned, services will be offered in partnership with banks at lower cost that will add revenue.
“What would it mean for the world if everyone everywhere could be part of the global economy with access to the same financial opportunities?” Mercy Corps website expressed an optimistic vision of the private, public and social sectors working together to solve the existing problems of inequality.  Many other questions  were left  unanwered after the exhaustive hearings, with more hearings to come.  Questions concerning currency manipulation and social engineering still need to be addressed.

For now, the social benefits of Libra are difficult to verify. Time will tell if Libra leads to a more equitable financial system.

Monday, July 15, 2019

Financial Services Subcommittee Hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.”

Last week the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.”

Several pieces of legislation, or bills, have been proposed, (but not filed yet) in the US House of Representatives regarding Environmental, Social and Governance (ESG) reporting by large corporations.

HR ___: ESG Disclosure Simplification Act of 2019 (Rep. Vargas)
HR ___: Shareholder Protection Act of 2019
HR ___: Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019
HR ___: To require issuers required to file an annual or quarterly report under the Securities Exchange Act of 1934 to disclose the total amount of corporate tax such issuer paid in the period covered by the report, and for other purposes
HR ___: Climate Risk Disclosure Act of 2019 (Rep. Casten)

The US Securities and Exchange Commission (SEC) has broad rule-making authority to require the disclosure of specific information that it determines to be in the public interest or for the protection of investors. Investors overwhelmingly support greater ESG disclosures to evaluate reputational risks as well as financial performance. Over 2,300 institutional investors worldwide, representing over $80 trillion in assets, are signatories to the UN-sponsored Principles for Responsible Investment which formally commits them to incorporate ESG factors into their investment decisions.

Investors need ESG information to hold managers accountable, enhance the accuracy of stock prices, and ensure a more efficient allocation of capital.

Some of the testimony at the hearing included the following:

Subcommittee Chair Rep. Maloney:
ESG disclosures include environmental issues (climate change), social issues (human rights), and governance issues (political spending by public companies).
Considerable evidence shows that companies with better ESG also perform better financially.
Many companies disclose some ESG info which lacks detail and a standardized format.
Rep. Maloney called for SEC to establish standards for ESG Disclosure to apply to all public companies.
Rep. Juan Vargas:
“Investors increasingly view ESG Disclosures as crucial tools and material information for evaluating a company's financial performance. Research has shown that companies that account for ESG factors tend to perform better with more stable returns.”

From an outline written by Willem Sheetz, Impact Investing Analyst, University of Wisconsin (Madison).

Sunday, July 14, 2019

Semiannual Monetary Policy Report Hearing

Last week, Chairman of the Federal Reserve, Jerome H. Powell appeared before the House of Representatives Committee on Financial Services to present the Semiannual Monetary Policy Report. Chairman Powell opened his remarks by stating that “the economy performed reasonably well over the first half of 2019 and the current expansion is now in its 11th year.” Inflation has run below the FOMC 2% objective, trade tensions and concerns about global growth have weighed on economic activity."

The Current Economic Situation

Labor Market: job gains remain healthy, with the unemployment rate falling to 3.7% in June. Employers are increasingly willing to hire and train workers with fewer skills.  Unemployment for African Americans and Hispanics remain well above the rates of whites and Asians. Urban employment rates are higher than those in rural communities. Labour force participation by those in their prime working years is lower in the US than in comparable nations.

GDP: GDP increased to last year’s pace at a rate of 3.1% in the first quarter of 2019, largely due to net exports and inventories. Growth in consumer spending was weak, but recovered and is now at a solid pace. Growth in business investment has slowed, possibly reflecting trade tensions and slower global economic growth. Housing investment and manufacturing output declined in the first and second quarter.

Inflation: Inflation has run below the FOMC 2% objective. Overall consumer price inflation declined to 1.5% in May. PCE inflation (excludes food and energy prices) decreased to 1.6% in May


Powell stated that the Federal Reserve’s outlook “is for economic growth to remain solid, labour markets to stay strong, and inflation to move back up over time to the Committee’s 2 per cent objective.”

Uncertainties in recent months, relate to slowing economic momentum in foreign economies, unresolved government policy issues (trade development, federal debt ceiling, and Brexit), and the risk that weak inflation poses, will be monitored and may affect the Federal Reserve’s outlook.
As mentioned above, labour force participation by those in their prime working years and the rural-urban labour market disparity are concerns. Powell noted that the lack of upward mobility for lower-income families as an issue. He stated that finding ways to boost productivity growth should be a national priority, since this leads to rising wages and, ultimately, a higher living standard.

Monetary Policy

The Federal Open Market Committee (FOMC) target range for the federal funds rate was 2.25-2.5 per cent during the first half of the year. Powell remarked that the Committee has decided to enact a strategy of patience to determine future adjustments.

At May’s meeting, progress made in trade negotiations with China were encouraging factors leading to the Committee not adjusting their policy rate. In the time since, trade tensions have reemerged, creating uncertainty. Slowing global economic growth indicators raise added concerns that trade weakness will continue to affect the US economy and possibly help spark further declines in business confidence.

Powel reiterated the Committee's June meeting statement: increased uncertainties concerning the economic outlook.


The Federal Reserve began purchasing securities in 2007 when the financial crisis began.  Since then, total system assets increased from $870 billion in August 2007 to $4.5 trillion by January 2015.  In October 2017 the FOMC balance sheet normalization program began and has since lead to a decrease in total assets to $3.8 trillion in July 2019. 

Beginning in May 2019, the Committee’s intentions were to reduce holdings of Treasury securities by reducing the cap on monthly redemptions from $30 billion to $15 billion, ending in September 2019. Beginning in October 2019, up to $20 billion per month in Mortgage Backed Security principal payments will be reinvested in Treasury securities. Limited MBS sales might also be an option in the long run to reduce holdings.


After Powell’s hearing, Chicago Federal Reserve Bank President, Charles Evans indicated that the Fed should cut rates by half a per cent before the end of the year in an effort to increase stubbornly low inflation rates. 

Both Republican and Democratic committee members seemed pleased with the Chairman’s monetary policies.  He received praise from both sides on keeping the agency independent amid pressure from the White House.

Research provided by Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

Thursday, July 11, 2019

Why the Fed is wrong about Libra

The Federal Reserve Act (FRA) requires the Chairman of the Federal Reserve System to testify before the House Financial Services Committee and the Senate Banking Committee twice a year, in February and July, on how the Board handles monetary policy and its observations on economic developments.

In keeping with that requirement, the current Chairman of the Federal Reserve, Jerome Powell, testified before the House on July 10th. He indicated as follows:

  • Economic activity increased at a solid pace in the first part of 2019. The labor market has continued to strengthen: unemployment fell from 3.9% (Dec) to 3.6% (May), wage gains remained moderate. 
  • Inflation has been running below the Federal Open Market Committee’s (FOMC) longer- run objective of 2 percent. 
  • In June, the FOMC judged that current and prospective economic conditions called for maintaining the target range for the federal funds rate at 2 1⁄4 to 2 1⁄2 percent. 
  • Inflation: Consumer Price Index = 1.5 (May).
  • Economic Growth: 1st qtr Gross Domestic Product, the total of all goods and services produced over the quarter, increased at an annual rate of 3.2%.
  • Financial Conditions: Treasury yields down, loans remain widely available to most homes. 
  • Financial Stability: Borrowing by businesses outpaces GDP, risks in the financial system remain low relative to pre-financial crisis, banks hold large quantities of assets. 

Chairman Powell discussed Libra, Facebook's proposed digital currency and feels the currency poses special challenges to the Fed’s dual mandate of low inflation and maximum employment. We think the Fed is attempting to diminish Libra in particular and crypto markets in general by tying their objections to the Fed's social mission (maximum employment) and placing Libra in the category of having negative social return. We know this is likely false.

House Financial Services Committee Chairwoman Maxine Waters maintained that the bank regulatory system lacks the capacity to control Libra (she is correct), and reiterated her call for a moratorium on Libra's development (she is incorrect - see:  Regulating Libra’s a waste of time. House Financial Services Committee Ranking Member McHenry used the hearing to, once again, state that Libra poses a risk to financial stability,

While Chairman Powell: indicated he thought Libra posed risks due to the possibility of broad adoption and of money laundering, he stated that Facebook's proposed currency offers financial inclusion benefits.

Mr. Powell also indicated that the Fed's control over money supply and demand allows it (the Fed)  to appropriately respond to major economic disturbances. This is not what happened in the years leading up to the last financial crisis, and is not likely to be true now, in the months leading up to the next crisis.

The Chairman is correct in saying that if a cryptocurrency becomes widely used and viable, this would adversely affect the Fed's conduct of monetary policy. As another form of currency becomes used widely for payments, a central bank loses its absolute monopoly on controlling inflation and inflation targeting through manipulating cash in the system. There are, however, other ways to control monetary aggregates and inflation. Thus, there are other tactics the Fed could use to maintain control over monetary policy. (We discuss these in our paper, Monetary Policy under Cryptocurrency.)

(Research provided by Willem Sheetz, Impact Investing Analyst, University of Wisconsin (Madison))

Tuesday, July 9, 2019

Senate Budget Committee briefing on “The Reasons Opportunity Zones Won’t Work". Willem Sheetz, Impact Investing Analyst, University of Wisconsin (Madison)

The 2017 Tax Cuts and Jobs Act (TCJA) provided new tax incentives for investments made through qualified Opportunity Funds in targeted communities around the United States. These tax advantaged investment areas, known as Opportunity Zones (OZs), were authorized to promote economic development in 8700 disadvantaged communities, selected by state governors and certified by the United States Treasury Department. The rationale behind OZs is simple: giving tax breaks to investors will spur economic growth in impoverished communities. However, it is important to consider the context in which this program was created. The TCJA was passed by a Republican House, Senate, and President. OZs are not a new idea and they have been tried and tested by conservatives for decades, as in Margaret Thatcher’s “enterprise zones.” Versions of OZs were then adopted in the United States at the state level, ultimately culminating in the 2017 TCJA. However, as uplifting as the OZ program seems on its face, it is just another tax break for the wealthiest Americans that has caused real estate prices in disadvantaged communities to skyrocket and has left our most vulnerable citizens worse off.

On June 18, 2019, the Senate Budget Committee hosted a briefing by the Financial Services Innovation Coalition (FSIC) on “The Reasons Opportunity Zones Won’t Work and What to do About Them.” Sen. Sanders (I-VT), Ranking Member of the Senate Budget Committee, was the sponsor of the event.

Kevin Kimble, Founder and Board Chair at the Financial Services Innovation Coalition, moderated the event. Panelists included Dr. Charles Steele Jr. (President of the Southern Christian Leadership Coalition), William Michael Cunningham (CEO of Creative Investment Research), Clairborne Booker (Founder of Quadrivium Partners LLC), Joe Milam (Founder of AngelSpan Inc.), and LaJuanna Russell (President of Business Management Associates).

Mr. Kimble opened the briefing by highlighting the main problems OZs present. He asserted that, at the end of the day, OZs never get to people in need. Additionally, he demonstrated the lack of accountability and inclusion in OZs. Mr. Kimble also highlighted the fact, reiterated by many other panelists, that OZs must be comprised of smaller investments to bring true benefits to poor communities. Mr. Kimble pushed for a bill to require OZ Funds to be comprised of 40% of investments under $200,000, be diverse, and include a board of community members.

The first panelist to speak was Dr. Charles Steele, Jr. Dr. Steele, (head of Martin Luther King’s Southern Christian Leadership Coalition) dove into an  examination of society through a macro lens.

He eloquently stated that there are three evils in society: racism, poverty, and militarism. Through this lens, Dr. Steele expanded his analysis to the recent Poor People’s Campaign and discussed how OZs may be just another effort that has failed to address poverty meaningfully.

Joe Milam of AngelSpan was next to speak. In contrast to Dr. Steele’s broad and sweeping discussion, Mr. Milam engaged in a policy-heavy discussion. He asserted that even though there are clear issues with OZs, there are still existing fiscal policies that could make up for the program’s shortfall. Among these polices, Mr. Milam mentioned Qualified Small Business Treatment and specific sections of the US Code (1202, 1204, and 1245) that pertained to these issues.

The discussion then shifted to Claiborne Booker of Quadrivium. Mr. Booker affirmed the problems generated by an extreme concentration of wealth. Mr. Booker compared the OZ program to the New Market Tax Credit program and concluded that, with the current focus of OZs on large scale investments, benefits will be realized by those with large quantities of capital at the expense of the 8700 targeted communities across the country.

This sentiment was echoed by many panelists throughout the briefing. Large scale investments, especially in OZs, do little to help the communities in which they are deployed. Moreover, OZs scaled to large investments allow those with vast capital gains to increase their wealth, exacerbates inequality, and siphon profits from very communities the OZ program was purported to help.

This point was clearly demonstrated by the next panelist,  LaJuanna Russell of Business Management Associates. Ms. Russell started her analysis of OZs with a deeply moving personal story. She discussed the myth most people have about OZs: that they were created to help people in disadvantaged communities realize the American Dream. On its face, a tool of upward mobility, Ms. Russell quickly dispelled this myth when she described how she was unable to secure the OZ funding she needed to make ends meet upon the illness of a family member. After her story, Ms. Russell asserted that to pursue the American Dream one needs education just as much as they need access to capital.

The last panelist to speak at the briefing was William Michael Cunningham of Creative Investment Research. Mr. Cunningham has been a tireless advocate of disadvantaged communities in our nation’s capital and has been on the forefront of providing council to minority- and women-owned businesses and banks. Mr. Cunningham first highlighted the major issues in OZs, including how they are a potential $6 trillion tax break for a disproportionate amount of white, wealthy individuals and businesses and how they have done more to hurt the communities they were designed to help.

Mr. Cunningham provided a detailed analysis of how initial investments under the OZ program are sold as fair and positive economic growth without attention to consequences of the program’s current structure. However, instead of uplifting impoverished communities, OZs have been implemented as if minority populations will stay put despite skyrocketing real estate prices. Mr. Cunningham provided examples of how this process has occurred on the micro level both in Washington, D.C. and Ferguson, MO. To address the current flaws in OZs, Mr. Cunningham proposed capping capital gains to participate in the program, requiring OZ recipients to crowdfund from community members so they can share in the growth, and reporting social impact of OZ investments using the ethereum block chain technology. Since the 2017 TCJA, Creative Investment Research has offered guidance and classes on how minority- and women-owned businesses can best utilize the OZ program to their advantage. Although the OZ program has many flaws, it is one of the only existing source of funds for struggling communities and therefore must be utilized to one day realize a truly just economy.

Wednesday, July 3, 2019

Why Regulating Facebook's Libra is a Waste of Time

Facebook’s recently announced cryptocurrency pilot, Libra, claims it will “transform the global economy.”

The company hopes that anyone would be able to send Libra through platforms like Facebook messenger and WhatsApp to act as an intermediary for transferring traditional currencies. The ultimate goal is to have this currency accepted as a (general) form of payment. And other financial services will be built on top of its blockchain-based network, called the Libra Blockchain, a “proof of authority" permissioned blockchain system.


Tuesday, July 2, 2019

Diverse Asset/Money Managers. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

The House Financial Services Committee Subcommittee on Diversity and Inclusion held a hearing on Tuesday June 25, 2019 to explore the challenges minority- and women- owned (MWO) firms face competing in the asset management industry.

According to Bella Research Group’s Diverse Asset Management Project Firm Assessment, MWO firms account for approximately 8.6% of all asset management firms but only manage 1.1% of all assets under management, $785 billion out of $71.4 trillion, and are underrepresented as managers in every asset class but over-represented in the top quartile of fund performance.

False assumptions harm opportunities for MWO firms. Bella’s concluded that compared to peers who manage similar asset classes, 25% of women-owned and 28% of minority-owned asset management firms fall in the top quartile on average for fund performance.

Studies have shown that minority and women-led investment firms invest in more diverse entrepreneurs and businesses, enriching  communitiesand creating more jobs, without sacrificing the returns pension funds need to meet their funding obligations.

Meredith Jones, Investment researcher and Author, stated that the lack of women and minorities in the asset management and investment industries is making everyone, from Wall Street to Main Street, poorer.

Access to diverse asset management talent can provide diversification within portfolios and help mitigate volatile market behavior. At least one study found that having more women on Wall Street could reduce market volatility due to the introduction of differentiated investing behavior.

The lack of funding outside of traditional money centers as well as the near exclusion of diverse founders represents a tremendous lost opportunity for investment, economic expansion and job creation in diverse and underserved communities.

Minority and women-led funds continue to be marginalized because of restrictions as to the types of investments that can be made. In order to achieve a level playing field Congress can create opportunity.

Witness John Rogers, Chairman, CEO & Chief Investment Officer of Ariel Investments stated some believe barriers exist and solutions do too for MWO firms.  There is a tendency to work with people you know and with whom you are comfortable Due to implicit or unconscious bias, many do not think of black leaders as successful money managers. He proposed congressional legislation requiring banks and other entities to consider diverse-owned firms when aiming to fill new investment mandates.

 Many banks, corporations and non-profits have embraced well-intentioned supplier diversity programs emphasizing construction, catering, janitorial services, and other fields.  This could be addressed by measuring all spending by category, including asset management and other professional services, and replacing the term ‘supplier diversity’ with ‘business diversity.’ Mr. Rogers also suggested meaningful transparency as a way to make measurable progress.

Brenda Chia, Founding Board Member & Co-Chair of Association of Asian American Investment Managers (AAAIM) suggested Congress mandate that funds under federal management be subject to regular and periodic open competition. Congress could also recommend federal agencies ensure that qualified minority and women-led funds are considered as part of the RFP evaluation process.

Per Illinois Pension Code, an aspirational goal of no less than 20% of investment advisors shall be minorities, women and persons with disabilities. Angela Miller-May, Chief Investment Officer of the Chicago Teachers’ Pension Fund encouraged Congress to adopt a similar language.

As Ms. Miller-May put it “as an underfunded pension fund, we simply cannot afford to forego investing with diverse managers that represent a pool of keenly talented and innovative asset managers.”

Sunday, June 23, 2019

Diversity in the Boardroom. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

On June 20 the House Financial Services Committee held a hearing on diversity in America’s boardrooms.

The witness list consisted of Ms. Chelsa Gurkin, Acting Director of the Education, Workforce and Income Security team of the U.S. Government Accountability Office, Mr. Luke Visconti, Founder and Chairman of DiversityInc, Mr. Ron Lumbra, Managing Partner of Heidrick and Struggles, Ms. Linda Akutagawa, Chair of the Alliance for Board Diversity, the Former Ambassador to Argentina, Vilma Martinez, and Dr. Stephanie Creary, an Assistant Professor of Management at the Wharton School of Business of the University of Pennsylvania.

The hearing examined options for diversifying the gender, racial and ethnic composition of corporate and federal boards. Each witness presented testimony on how to address the issue of diversity on corporate boards and identify the conditions that lead to meaningful diversity so that more companies can follow the lead of firms that have been successful.

Deloitte’s 2017 board diversity survey found that 90 percent of participants agree that increasing board diversity will improve their companies’ ability to innovate as well as their overall business performance, but half of the surveyed organizations lack a process for recruiting candidates with diverse skills sets or new perspectives. Organizations don’t prioritize diversity in their recruiting practices. To Improve this, they need an intentional and defined commitment to increase diversity. Visconti points out that an executive diversity committee (EDC), chaired by the CEO that meets monthly appears in 86.7% of the Top 10 companies ranked by DiversityInc.

The Alliance for Board Diversity reported that among Fortune 500 companies, 80.7% of new board directors in 2017 were white men. A limited pool of candidates considered results in a revolving door of minority or women chosen for board positions. Looking at those with only CEO experience limits an already scarce pool of minority candidates and overlooks other qualified candidates. Board members can be sought out in other departments like accounting or human resources and can be found in academia or retired military. There is a preference for experienced directors, but organizations need to do better jobs of casting a wider net to bring on first time directors and mentoring them.

Low turnover in board seats each year can to blamed for a lack of new talent. But boards can expand the number of directors. This would allow them to seek out new talent and allow more experienced directors time to mentor newer ones. As Lumbra stated, the best run boards are looking carefully at their constituencies and bringing on new contemporary directors.

Dr. Stephany Creary presented her research findings that diversity doesn’t guarantee performance. The type of diversity matters. Social diversity along with gender, race, age, ethnicity and professional experience are important for increasing the diversity of perspective representation in the boardrooms. Diversity matters less when members perspectives are not valued. Boards need a culture that evaluates different voices, welcomes conversations about diversity, and bring on members to utilize their specific skillset. This is easier to achieve when board avoid filling seats with those already in their social networks and have a process of assessing what skills and expertise needs to be filled, and looks at experience, age, ethnicity, and gender to fill it.

Witnesses agreed that disclosure is vital and called for regulation to ensure fair and equitable representation on boards. Mandates are newer and less common in the US but are common elsewhere and can yield measurable results when implemented properly.

On January 1, California law said that all locally headquartered publicly traded companies must have at least one female director by 2020. Norway, Spain, France, and Iceland all have laws requiring that women comprise at least 40% of boards at publicly listed companies.

On October 1, 2018 institutional investors petitioned the SEC for a rulemaking on environmental, social, and governance (ESG) disclosure. The petition called for a comprehensive framework requiring issuers to disclose identified ESG factor – including diversity - of public companies. Stating that the quality of voluntary disclosure from companies in insufficient to meet the needs of investors.