by Jeffrey McKinney December 23, 2008. Black Enterprise Magazine.
Three African American executives are trying to raise $50 million to create a black-owned bank holding company with some help from the federal government. The entity, MBF LP, would be designed to make capital investments in and own parts of new and existing black-owned U.S. banks, said William Michael Cunningham, senior investment adviser at Creative Investment Research Inc., a Washington D.C. firm specializing in minority banking. Cunningham, MBF general partner, said the company would be an equity fund based in Washington. The company has applied for bank holding company status and is seeking capital from the U.S. Department of the Treasury’s Troubled Asset Relief Program (TARP).
Joe Gladue an equity analyst
specializing in banking at B. Riley & Co. L.L.C. in Philadelphia, had mixed
reaction about MBF. He said the company could be helpful in providing capital
to black-owned banks because it’s harder for those institutions to raise
capital than their larger rivals, particularly in the current economic
environment. But Gladue also said MBF could have a hard time getting
cooperation from black-owned banks because those banks typically are closely
held and very independent minded.
Cunningham said the Federal Reserve,
which would be MBF’s regulator, does not have a requirement on how much capital
has to be raised to form the holding company. MBF submitted its
application earlier this month. He said MBF would encourage participating banks
to offer home mortgages, small business loans, and several other new types of
financial products and loans it developed. He said MBF would make its money by
receiving a dividend from the banks it invest in.
“We may factor in social returns as
part of our approach, but our goal will be to clearly maximize returns.
Cunningham said. He also said he doesn’t know of any other bank holding
companies now similar to the proposed company in the banking industry. Cunningham
said another factor behind the formation of the holding company is to pump
capital into black-owned banks that might not get an investment from the
Treasury as part of the $700 billion rescue package.
To date, Cunningham said he knows of
only one black-owned bank, Los Angeles’ Broadway Financial Corp., to get
funding. Broadway Federal last month received $9 million from the Treasury as
part of its effort to bail out U.S. bank’s impacted by the financial crisis. TARP
was initially implemented.