Showing posts with label JPMorgan Chase. Show all posts
Showing posts with label JPMorgan Chase. Show all posts

Thursday, March 25, 2021

Black Banking Startup Raises $40 Million

According to a press release, "Greenwood, the digital banking platform for Black and Latino individuals and business owners, today announced it has closed $40 million of Series A funding from six of the seven largest U.S. banks and the top two payment technology companies: Truist, Bank of America, PNC, JPMorgan Chase, Wells Fargo (Its still time to Clean House at Wells), Mastercard, and Visa."

The investor group also includes the largest Hispanic bank in the US, Banco Popular. (Looks like the crisis has finally forced the realization that, as MLK noted, "we must 'live together as brothers or perish together as fools." )

FIS, TTV Capital, SoftBank Opportunity Fund, Lightspeed Venture Partners and All-Pro NFL running back Alvin Kamara were also listed as investors.

For a startup to receive funding from six of the seven largest firms in its industry is significant. The key question is why and what will they do with this funding?

Greenwood started out of the BankBlack movement, an effort to redress years of neglect and discrimination.

We have observed a remarkable increase in the performance of minority bank stock: these stocks (blue line) have outperformed the S&P 500 (green line).




The S&P 500 Index (green) returned 74.73% over the past year. The Minority Bank portfolio (blue) returned 112.27% over the same time period. 

At the Federal Reserve Bank of Kansas City in 1994, I suggested the Federal Reserve purchase mortgage-backed securities (MBS) originated by Black banks as part of open market operations. The Fed, then under Alan Greenspan, refused, reversing course only in 2008, when large non-minority banks got into trouble.

We still believe the Fed will need to create a Black bank liquidity pool totaling at least $50 billion by conducting repo and reverse repo transactions, purchasing Treasury, MBS securities (and/or SBA PPP loans) from Black banks, asset managers and fintech firms with a record of actually making loans to the Black community.

Greenwood may very well be one of these. We will see.

Monday, October 12, 2020

JPMorgan's $30 billion “commitment”

 

JPMorgan Chase announced a $30 billion “commitment” to address U.S. wealth inequality in Black and Latino communities. The pledge consists of actions, over five years, designed to increase the number of loans, investments, donations and grants the bank makes.

The focus of the effort is housing, where the bank says it will lend an additional $14 billion dollars, finance the construction of 100,000 affordable rental units and issue $12 billion in mortgages. These efforts are meant to be supplemental, that is, the bank says these are loans and investments it would not otherwise make.

Of course, problems with racial inequality in the U.S. have been magnified after the May 25 death of George Floyd, instigated by former members of the Minneapolis, MN police department. The incident sparked weeks of protests across the globe. In addition, the COVID pandemic exposed gaps in health care access. The Black community has experienced far higher Covid-19 mortality than in the overall population.

Banks, which have contributed to income and wealth inequality through unfair, uneconomic and discriminatory practices, are now vying to address society’s racial problem. We note that both Bank of America and Citigroup have each made $1 billion Black Lives Matter (BLM) "pledges." These commitments are designed to lower US income and wealth inequality.

Federal Reserve Bank of Atlanta President Raphael Bostic recently stated that “U.S. banks need to improve financial services to Black Americans, many of whom have avoided financial institutions because of a history of racism.” The statement came less than a week after the CEO of a banking institution the Fed is responsible for regulating, Wells Fargo, blamed the trouble it is having in reaching its diversity goals on the “limited pool of qualified Black talent.”

Our data shows that total corporate BLM pledges now stand at $40 billion. In analysing these pledges, we use three guiding principles: our IMM framework: Innovation, Money, Momentum. The JP Morgan Chase pledge meets one (and a half) of these criteria: it appears to be a sizable dollar amount. It gets half a Money point because banks have made these types of pledges before, and they have failed to help move the needle in terms of Black economic empowerment. It definitely helps continue the BLM Corporate momentum. The pledge fails our first principle, however. It is neither innovative nor impactful.

While we are pleased to see the continuing attention placed on issues of racial discrimination and the resulting income inequality, innovation, in our framework, is a key measure of potential long-term effectiveness.

Only time will tell how truly impactful this new "commitment" will be.

Monday, April 20, 2015

What Poor People Want

Fiscal Forum: “The Political Economy of High Debt” IMF, April
19, 2015. L to R: David Wessel, Maria Luís Albuquerque,
Christine Lagarde, Helen Clark, Joaquim Levy.
I was at the IMF yesterday with a bunch of rich white people (@Lagarde @HelenClarkUNDP  ) when the subject of poor people came up.

Of course, as they do with Black people, rich white people claim to know everything there is to know about the poor. I think their main fear is that poor people will want the same deal that Goldman Sachs got, or the deal JP Morgan got, or the deal the "London Whale" or the LIBOR manipulators got. This fear is borne of a certain selfishness and greed.

It is, also, completely wrong, so I took the time to tell them what I think.

Here is what we want:

1. Water. Not privatized water systems. Access to clean water.
2. Food. Not GMO degraded, just clean food.
3. Shelter. Not subprime loans, but shelter.
4. Peace. Not the opportunity to be shot in the back by a racist cop, or a racist Israeli soldier or a Muslim extremist.

If you think about it, these are the same things that rich white people want.

Wednesday, May 19, 2010

ShoreBank's Rescue Gives Community Lenders Hope

Summary version from The American Banker Newspaper. Wednesday, May 19, 2010. Story by Robert Barba.

Sources said early Tuesday that the struggling $2.3 billion-asset lender had secured $140 million in capital commitments, well exceeding the $125 million it needed to become eligible for a $75 million investment from the Treasury Department.

Though most of the companies on the roster have been solid supporters of community development financial institutions, Goldman Sachs Group Inc. and General Electric Co.'s GE Capital were two newcomers. They also were among the biggest investors in the group, kicking in $25 million and $20 million, respectively.

Another headline investor in ShoreBank is Citigroup Inc., at $20 million. Others include Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., U.S. Bancorp, Morgan Stanley, Northern Trust Corp. and PNC Financial Services Group Inc. Also on board were State Farm, the Ford Foundation and the John D. and Catherine T. MacArthur Foundation.

Though the commitments could signal renewed interest in helping out institutions serving the neediest communities, William Michael Cunningham, a social-investing adviser and the founder of the minority bank fund MBF LP in Washington, said the unit of ShoreBank Corp. is the only struggling bank in the country likely to secure such aid.

"This just shows the power of their brand," Cunningham said Tuesday. "It is so impressive that they were able to get these guys to pony up. For other institutions … it would have been an impossible task."


ShoreBank, which has been described as the darling of President Clinton, has deep political ties, including with the Obama administration. Several sources, however, rebuffed speculation that the investments stemmed from political pressure. For instance, Bank of Montreal's Harris Bank said in an e-mail that it has "long recognized and supported ShoreBank's role in the Chicago community and can confirm that we are also assisting with their recapitalization effort."

Still, Cunningham said implicit political pressure, as well as reputational pressure, was probably exerted.

Whatever the investors' motivations, Cunningham said, without the investment, ShoreBank would not have survived. "If you are ShoreBank, you don't care if it is out of good public relations or if they are angels; they are doing it," he said.

For a year ShoreBank's credit problems have been eating away its capital. At March 31, it had $360 million in nonperforming assets and its total risk-based capital ratio had dwindled to 3.36%, leaving it critically undercapitalized. Rumors had begun to swirl in Chicago that regulators were starting an auction for its assets.

Analysts have said that a $200 million investment would be enough to solve ShoreBank's capital issues and give it room to absorb losses in its credit portfolio.

Copyright, 2010, American Banker Newspaper/Source Media.

Thursday, February 12, 2009

Summary of House Committee on Financial Services Hearing (Tian Weng, Debby Su)

1. Topic: TARP Accountability: Use of Federal Assistance by the First TARP Recipients
2. Date and Time: Feb 11, 2009, 10:00 am – 1:00 pm
3. Place: 2128 and 2172 Rayburn House Office Building
4. Chairman: Mr. Barney Frank, Chairman of the House Financial Services Committee
5. Witness List:
Mr. Lloyd C. Blankfein, Chief Executive Officer and Chairman, Goldman Sachs and Co.
Mr. James Dimon, Chief Executive Officer, JPMorgan Chase and Co.
Mr. Robert P. Kelly, Chairman and Chief Executive Officer, Bank of New York Mellon
Mr. Ken Lewis, Chairman and Chief Executive Officer, Bank of America
Mr. Ronald E. Logue, Chairman and Chief Executive Officer, State Street Corporation
Mr. John J. Mack, Chairman and Chief Executive Officer, Morgan Stanley
Mr. Vikram Pandit, Chief Executive Officer, Citigroup
Mr. John Stumpf, President and Chief Executive Officer, Wells Fargo and Co.

Eight bank CEOs from companies receiving the first TARP funds testified before the House Financial Services Committee. All testified that they distributed fund received in a manner that they thought would increase financial market liquidity, expand credits and lending in either residential or commercial loan markets, and generate enough revenues to allow them to return money to investors and US tax payers. All cited figures to confirm that they were distributing funds to the places they intended to. They denied TARP was used for dividend distributions or employee compensation.

Mr. Pandit, of Citigroup, pledged to cut his salary to $1 a year until the bank returned to profitability and took personal responsibility for the “mistake” of even thinking about buying a new $50 million private jet after getting government financing.

Mr. Lloyd C. Blankfein, Goldman’s chief executive, acknowledged “public anger at our industry.”

Mr. Lewis, CEO of Bank of America, who occasionally grew testy and red-faced at questions about lending, told lawmakers that his bank had “every incentive to lend.”

In the end, they all agreed to greater accountability on how they are spending money from the $700 billion fund.

Lawmakers struck hard on the lending issues, describing situations in which their constituents could not get loans and situations in which the rates for certain types of loans, such as credit card business and car loans, increased after the injection of the government funds intends to solve the liquidity problem. Several asked the bankers why there seemed to be a disconnect between their lending figures and the hundreds of ordinary people who continue to line up for loans. Some criticized bailout recipients like Bank of America and Merrill Lynch, who have continued to lobby--through trade associations--to block consumer protection measures, predatory lending regulations, and the Employee Free Choice Act, a measure that would ensure workers the freedom to form a union for a voice for improved wages, benefits, and working conditions.

Beyond the Troubled Asset Relief Program (TARP), some bailout recipients--who have failed to provide affordable healthcare or a living wage to their employees--are dipping into federal coffers through the backdoor, forcing thousands of employees to seek healthcare through taxpayer funded programs like Medicaid and forcing employees to apply for food stamps.

One lawmaker even suggested that banks paid fees to themselves for receiving TARP funds. Mr. Pandit denied such fee transaction. Another lawmaker pointed to the fact that top management at Bank of America received huge bonuses for the Merrill Lynch merger, when they were, in fact, actually responsible for losses that resulted from or were necessitated by the merger.

Tian Weng, Debby Su
George Washington University
Washington, DC