Monday, March 30, 2020

Economic Impact of the COVID19 Crisis. Comments by Jalil Boulahssas, Impact Investing Intern, University of Richmond


As the United States and the world continue to see a rise in COVID-19 cases, evidence of a considerable economic downturn continues to stack up.

It seems, at the moment, that aggressive social distancing measures and the resulting business slowdown are the best ways to protect the economy and to save countless lives.

Goldman Sachs economists have predicted that second-quarter GDP will drop 24% with a 3.8% contraction for the full year 2020. The bank has also stated that they expect unemployment to reach as high as 9%. In a more extreme prediction, the president of the St. Louis Fed, James Bullard, has warned that unemployment could reach as high as 30% and GDP could drop as much as 50% in the coming quarter.

While economic policy put into place so far focuses on stimulus and direct spending, there should be a heightened focus on the most vulnerable demographics in times of crisis. Despite the fact that everyone, other than essential workers, have been instructed to remain home, there are many who have outright lost their positions and sources of income.

Business closures are resulting in layoffs, as business owners and managers adjust to reducing output and to significantly less revenue. Minority group members and hourly wage workers have been most highly affected.

In a uniquely difficult time like this one, it is not all Americans who need a $1,200 check from the federal government but, for those who really need it, this amount is unlikely to be sufficient.

As economic indicators begin to show the effects of COVID-19 and predictions continue to change, more aggressive action should be taken by all levels of government to soften the effect of this crisis.

Thursday, March 26, 2020

Nationalize the Banks



According to the Financial Times, megabank Wells Fargo & Co “has asked the U.S. Federal Reserve to remove an asset cap introduced during its accounts scandal in order to allow it to support businesses and customers hit by the coronavirus economic fallout..”

The growth cap was imposed after the bank “acknowledged that it improperly foreclosed on 545 distressed homeowners after they asked for help with their mortgages, created 3.5 million fake accounts, charged 570,000 customers for auto insurance they did not need, and illegally repossessed vehicles from hundreds of service members.” Former bank employees state that Wells "targeted black churches” and neighborhoods by offering escalating-interest mortgages, which some loan officers called “ghetto loans.”

This week, the bank demanded that call center workers come to the office despite coronavirus, but agreed to pay "all of its domestic full-time employees who make less than $100,000 a year.. a pre-tax payment of $600 and part-time employees.. a $300 bonus."

Wells suggested the Fed remove the $1.95 trillion asset cap, “which has curbed its growth and profitability since it was imposed in 2018..” In 2019, Wells Fargo reported net income of $19.5 billion.

This request must be viewed in the context of the current COVID crisis and banking industry profits. JPMorgan Chase, the country’s largest bank, reported record profits of $36.4 billion in 2019, the highest annual earnings any U.S. bank has ever reported. Citigroup announced its best results since the 2008 financial crisis, reporting $19.4 billion in profits for 2019.

Wells Fargo’s request exposes the greed and lack of public concern that is the cause of the bad banking behavior we have seen in recent years. These are simply greedy, unpatriotic institutions whose behavior now, in the midst of this crisis, borders on the psychopathic. (A Former Wells Fargo CEO wants people to go back to work and 'see what happens.' He said 'Some may even die, I don't know.' This lack of empathy is the textbook definition of a psychopath.)

The country is in the beginning stage of the most serious social and economic crisis it has ever faced. To ensure the country does not fall into depression, the federal government will need to make deposits directly into roughly 300 million banking accounts. It will have to send direct payments via new fintech platforms, like Venmo and PayPal, to reach the broadest number of citizens. Credit unions and check cashing firms will also have to be included, quickly, while avoiding double counting, and making sure that only eligible US citizens receive money.

Mortgage and loan terms will also have to be revised. We know financial institutions can do this, since it’s what they did in the years leading up to the financial crisis, when loan terms were revised in favor of the banks, in many cases without letting borrowers know. (In 2001, we helped create one of the first wide scale home mortgage loan modification projects in the United States. The project helped families victimized by predatory lending practices. See: https://www.creativeinvest.com/PropertyFlipping.pdf ) Now, the task is to reset loan terms in favor of borrowers. It is uncertain that banks can do this in a fair, unbiased manner. This is why nationalization is needed.

While privately-owned banks place “short-term profits for their shareholders as their highest priority” they are required to “maintain stability and public confidence in the nation's financial system.” Megabanks must be part of the solution, but, if a bank is primarily worried about profitability before the public interest in THIS environment, they will only make things worse.

The solution is to have the government, via the Fed, in the public interest, take over the banks.

Saturday, March 21, 2020

Impact Investing Forum Update


Impact Investing Forum
 

Opal Group is proud to present our 5th annual Impact Investing Forum. Impact investing is an approach that seeks to create positive social and environmental impact alongside a financial return. Today, we see an increase in companies proving that mission-driven and communication based strategy, can attract value based workforce, investor base, and like-minded consumer. Over the next four decades, it is estimated that over $41+ trillion will transfer from baby boomers to Millennials. As we move to the next generation of investors, we are going to find companies aligning their beliefs, operation, and communication strategies with that of the Millennials. We invite you to come join us and meet top influencers, experienced investors, money managers, and service providers that are leading the charge in this ever growing space. Themes of defining impact investing, portfolio construction, asset class opportunities, and the role of the investor are just a few of the stimulating topics to be covered at this event.

 
 
Sponsorship and Exhibiting Opportunities are available!
If you are interested in sponsoring, speaking or exhibiting at this event, please call 212.532.9898 or email info@opalgroup.net
 

Reference code: IIF2015C
www.opalgroup.net/trk/iif2015c.html

 
Registration Pricing
 

*Subject to Opal Group’s verification and approval. Only individuals who are solely investing on their own behalf can be verified for a complimentary pass. Solution Providers or Fund Providers to 3rd parties will not be able to receive complimentary access. As investment portfolios/strategies are constantly changing, we reserve the right to re-verify past delegates for future complimentary passes.
**Those who are raising capital for a fund/project from investors or providing any service to the impact investment community including providing financing, brokerage, insurance, custody and administration, accounting, legal and other professional services are among those not eligible for complimentary investor passes.

 
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Wednesday, March 18, 2020

Can monetary policy really benefit minority groups in the U.S.? Chenyue Zhu, Impact Investing Intern, Georgetown University


Facing the global challenge of the COVID-19 pandemic and the declining stock market, the Federal Reserve made a bold move to reduce the fed funds rate to zero, trying to boost the economy as a whole.

However, it is uncertain whether minority groups will benefit from this policy. According to a report by the Fed, significant gaps exist between races and ethnicities in terms of interest rate on mortgages, and these differences vary geographically by State.

The government usually makes up those gaps through mortgage lending programs designed specifically for the disadvantaged. However, the country shows no sign of putting forward any targeted monetary policy corresponding to the changing interest rate.

Thus, people suspect that the current monetary policy will leave minority groups behind. In fact, according to Brookings Institution, Black businesses have long been undervalued, and their potential has yet to be developed.

To reverse the declining market economy, the U.S. government should keep an eye on the situation of marginalized groups.

Only when everyone is at the table can the economy can achieve healthy and sustainable growth in the long term.

Tuesday, March 3, 2020

Growth in ESG Funds. Comments by Jalil Boulahssas, Impact Investing Intern, University of Richmond


According to the Deloitte Center for Financial Services, there has been a significant increase in environmental, social, and governance (ESG) investments since 2017.

This follows a clear trend as the public and the global media have begun to focus on sustainability. As a result of this movement, it is predicted that client-driven ESG investments will reach half of all professionally managed investments by the year 2025. While the dollar amount of ESG investments are highest in Europe, the data shows increased American interest in this investment type that will drive future growth.

According to the Deloitte Center report, the share of ESG investments in the United States has grown from 11% of assets in 2011 to 26% of assets in 2018. One factor driving the growth of ESG mandated funds is client demand from both retail and institutional investors.

In response to this unprecedented growth, government agencies and investment institutions are working to establish consistent definitions, regulations, and growth measurements for the asset category. Consistent measurements and data in this category are key to tracking and evaluating environmentally and socially friendly investments.

The rise of this investment style will benefit environmentally-friendly businesses as well as investment managers as ESG funds, mostly actively managed. As ESG investment funds move forward to their fourth straight year of record inflows, there is no sign of slowing down.