[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





                  DIVERSITY IN THE FINANCIAL SERVICES
                     INDUSTRY AND ACCESS TO CAPITAL
                     FOR MINORITY-OWNED BUSINESSES:
                      CHALLENGES AND OPPORTUNITIES

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 15, 2004

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 108-101


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
DOUG BEREUTER, Nebraska              PAUL E. KANJORSKI, Pennsylvania
RICHARD H. BAKER, Louisiana          MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, Jr., North          MICHAEL E. CAPUANO, Massachusetts
    Carolina                         HAROLD E. FORD, Jr., Tennessee
DOUG OSE, California                 RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               KEN LUCAS, Kentucky
MARK GREEN, Wisconsin                JOSEPH CROWLEY, New York
PATRICK J. TOOMEY, Pennsylvania      WM. LACY CLAY, Missouri
CHRISTOPHER SHAYS, Connecticut       STEVE ISRAEL, New York
JOHN B. SHADEGG, Arizona             MIKE ROSS, Arkansas
VITO FOSSELLA, New York              CAROLYN McCARTHY, New York
GARY G. MILLER, California           JOE BACA, California
MELISSA A. HART, Pennsylvania        JIM MATHESON, Utah
SHELLEY MOORE CAPITO, West Virginia  STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio              BRAD MILLER, North Carolina
MARK R. KENNEDY, Minnesota           RAHM EMANUEL, Illinois
TOM FEENEY, Florida                  DAVID SCOTT, Georgia
JEB HENSARLING, Texas                ARTUR DAVIS, Alabama
SCOTT GARRETT, New Jersey            CHRIS BELL, Texas
TIM MURPHY, Pennsylvania              
GINNY BROWN-WAITE, Florida           BERNARD SANDERS, Vermont
J. GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona

                 Robert U. Foster, III, Staff Director
              Subcommittee on Oversight and Investigations

                     SUE W. KELLY, New York, Chair

RON PAUL, Texas, Vice Chairman       LUIS V. GUTIERREZ, Illinois
STEVEN C. LaTOURETTE, Ohio           JAY INSLEE, Washington
MARK GREEN, Wisconsin                DENNIS MOORE, Kansas
JOHN B. SHADEGG, Arizona             JOSEPH CROWLEY, New York
VITO FOSSELLA, New York              CAROLYN B. MALONEY, New York
JEB HENSARLING, Texas                JIM MATHESON, Utah
SCOTT GARRETT, New Jersey            STEPHEN F. LYNCH, Massachusetts
TIM MURPHY, Pennsylvania             ARTUR DAVIS, Alabama
GINNY BROWN-WAITE, Florida           CHRIS BELL, Texas
J. GRESHAM BARRETT, South Carolina


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    July 15, 2004................................................     1
Appendix:
    July 15, 2004................................................    39

                               WITNESSES
                        Thursday, July 15, 2004

Fernandez Haar, Ana Maria, Chair, New America Alliance...........    10
Hammond, Theresa A., Associate Professor of Accounting, Boston 
  College........................................................    12
Hanley, Joanne, President, Women in Housing and Finance, Inc.....    18
Kennedy, Michael D., Manager of Diversity Program and Financial 
  Services Sector Executive, Korn/Ferry International............    14
Lackritz, Marc, President, Securities Industry Association.......    16
Padron, Hon. Lorenzo, Commissioner, Office of Banks and Real 
  Estate, State of Illinois......................................    19

                                APPENDIX

Prepared statements:
    Kelly, Hon. Sue W............................................    40
    Watt, Hon. Melvin L..........................................    42
    Fernandez Haar, Ana Maria....................................    43
    Hammond, Theresa A...........................................    53
    Hanley, Joanne...............................................    63
    Kennedy, Michael D...........................................    71
    Lackritz, Marc...............................................    75
    Padron, Hon. Lorenzo.........................................    82

              Additional Material Submitted for the Record

Baca, Hon. Joe:
    American Latinos in Financial Services-Phase I White Paper, 
      New American Alliance......................................    87
Kennedy, Michael D.:
    Best Practices for Diversity: Corporate & Candidate 
      Perspectives...............................................   135

 
                  DIVERSITY IN THE FINANCIAL SERVICES
                     INDUSTRY AND ACCESS TO CAPITAL
                     FOR MINORITY-OWNED BUSINESSES:
                      CHALLENGES AND OPPORTUNITIES

                              ----------                              


                        Thursday, July 15, 2004

             U.S. House of Representatives,
      Subcommittee on Oversight and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:08 a.m., in 
Room 2128, Rayburn House Office Building, Hon. Sue Kelly 
[chairwoman of the subcommittee] presiding.
    Present: Representatives Kelly, Hensarling, Garrett, Brown-
Waite, Gutierrez, Inslee, Davis and Frank (ex officio). Also 
present were Representatives Baca, Bell, Gonzalez, Napolitano, 
Scott and Waters.
    Chairwoman Kelly. [Presiding.] This hearing of the 
Subcommittee on Oversight and Investigations will come to 
order.
    This morning, the Subcommittee on Oversight and 
Investigations will examine the state of diversity in financial 
services, including access to capital for all businesses and 
communities. These issues are critically important to achieving 
full growth in our financial services sector and our overall 
economy.
    A simple snapshot of our country's current employment 
composition displays some disparities among certain 
populations, particularly with regard to women and minorities. 
As a society, it is our responsibility to encourage the 
diversity in financial services that reflects the makeup of our 
country. It is also our responsibility to ensure that a lack of 
diversity does not translate in to a lack of confidence in any 
individual's ability to succeed at all levels of the financial 
industry.
    Today, we will investigate these issues and discuss ways to 
improve efforts to achieve a more diverse financial sector and 
to improve access to capital.
    Over the past few decades, the visibility and involvement 
of women and minorities in social, economic and political 
circles has continued to increase. An important part of 
increasing opportunities for all individuals begins at an early 
age. This means ensuring that every child has access to a first 
class education and the opportunity to succeed.
    A key component of this education includes financial 
literacy for individuals at all ages. However, a strong 
education alone will not help improve access to all sectors, 
which is evident by the fact that the financial sector 
continues to lag behind other industries in representation. We 
must have a continued commitment from the public and private 
sectors in order to break down some barriers that still exist.
    While there are still considerable strides that need to be 
taken to increase opportunities for all individuals, the 
financial services industry appears to be moving in the right 
direction. Currently, there is promising representation in the 
lower and middle management ranks; however, senior management 
ranks continue to pose challenges. There are also signals that 
senior management is starting to become more aware and active 
in expanding opportunities to all qualified candidates, 
regardless of their race or sex.
    Some companies continue to be more successful at promoting 
diversity in their workplace than others. In fact, some major 
corporations today have diversity programs, which encourage and 
recruit qualified individuals in under represented populations. 
And many firms are also utilizing employee networks and formal 
mentoring programs to facilitate a more diversified workforce 
and to help all employees achieve their full performance and 
career potential. Since it is the tone at the top of a company 
that sets a good example for opportunity at all ranks, we must 
continue to challenge our Nation's business leaders to 
encourage these efforts.
    Better representation in financial services should also 
improve access to capital for all individuals. Earlier this 
year, the Minority Business Development Agency of the 
Department of Commerce released a report entitled, ``Expanding 
Financing Opportunities for Minority Businesses.'' This 
important study found that minority-owned businesses present an 
historic and dynamic growth opportunity for the U.S. economy.
    The study also highlights the fact that, while minority-
owned businesses are growing, they exist primarily in non-asset 
based industries rather than in capital intensive sectors. The 
subcommittee is very interested in the report's conclusion that 
the lack of access to financing impedes participation in 
certain sectors and that successful growth will require 
bringing minority entrepreneurial efforts into the economic 
mainstream.
    We would like to hear more from our witnesses on how to 
improve access to capital and encourage this transition. I 
thank the witnesses for being here today, and I look forward to 
hearing your views on these issues.
    With that, I turn to Mr. Gutierrez.
    [The prepared statement of Hon. Sue W. Kelly can be found 
on page 40 in the appendix.]
    Mr. Gutierrez. Good morning and thank you very much, 
Chairwoman Kelly, for calling this hearing, which Ranking 
Member Barney Frank and I spoke to you earlier this spring 
about calling, and I really want to thank you for this.
    It is important that we attempt to understand why there 
remains a lack of diversity in the upper ranks of the financial 
services industry and explore options to alleviate this 
problem. I represent a very diverse congressional district in 
Illinois. The 4th District is mostly in the city of Chicago but 
encompasses part of the north side and parts of the south side, 
parts of Cicero, some very low-income neighborhoods, some 
working class and some somewhat prosperous neighborhoods.
    Ethnically and racially, my district looks very much like a 
microcosm of America, and I don't see any reason why board 
rooms should not. All too often, we are exposed to executives 
in the financial services industries who are exclusively white 
and male. Sometimes it seems as though they all wear the same 
identical suits from Brooks Brothers.
    However, today, we have before us a very different panel, 
not just in terms of their race, color, ethnicity or gender, 
but different in the sense of their recognition and belief that 
the board rooms of America's financial sector should reflect 
the strength and diversity of the American people. And each of 
the witnesses hear today has demonstrated a commitment to that 
cause.
    My colleague and friend, chairman of the Congressional 
Hispanic Caucus, Ciro Rodriguez, from San Antonio once said 
growing up he never met a stockbroker. I know that sounds 
incredible to us on the Financial Services Committee where we 
probably talk to several of them every week, but as a young 
Latino, his neighbors and relatives were not accountants or 
bankers or stockbrokers, they were mechanics and teachers and 
cab drivers.
    And there is nothing wrong with these honorable positions; 
I was a cab driver myself for four years. But my point is young 
people tend to strive for what they see as available goals. If 
no one they know is a banker or an accountant, it is less 
likely they will seek that out for themselves.
    Today's witnesses will doubtless address the issue of 
reaching out to these young people who might otherwise be 
unaware of opportunities for success in the financial services 
industry. They will also provide valuable insight regarding 
recruiting, mentoring and retaining minority talent within the 
industry. And they will share personal stories of success and 
disappointment. I am looking forward to learning from their 
experiences and helping to implement their suggestions.
    At a proper time, I would like to introduce Commissioner 
Padron from my one State of Illinois. With that, I yield back 
the balance of my time, and I thank the gentlelady for calling 
this hearing.
    Chairwoman Kelly. I thank you, Mr. Gutierrez. You talk 
about having driven a cab. My first job was as a newspaper 
girl, and I picked berries in the fields and things like that. 
And the reason you do jobs like that when you are young is 
because you have hope that you can save a little money and get 
ahead. And that is what this hearing is all about.
    I am going to do a little bit of bookkeeping here. Without 
objection, all members' opening statements will be made part of 
the record, and without objection, the gentleman from Texas, 
Mr. Gonzalez, the gentleman from Alabama, Mr. Scott, the 
gentleman from California, Mr. Baca, the gentleman from Texas, 
Mr. Hinojosa may participate in today's hearing. They may give 
opening statements and question witnesses under the five-minute 
rule. So ordered.
    With that, I turn to Mr. Hensarling.
    We are honored to have our ranking chairman, Mr. Frank.
    Mr. Frank. Thank you, Madam Chair. I appreciate very much 
your calling this hearing. As the Subcommittee's ranking 
member, Mr. Gutierrez mentioned, this was a subject that was 
important to us, and I just want to say that I am very pleased 
as the ranking member of the full committee. As you know, the 
chairman and I have been able to, I think, work very 
cooperatively and put differences in one place and work 
together, and this particular subcommittee, yourself and the 
gentleman from Illinois have been doing the same thing on a 
number of issues, like preemption and this, and I am very 
appreciative of that.
    I also want to acknowledge that part of the impetus for 
this hearing on my part came from a visit to me from one of our 
witnesses. Professor Hammond, who teaches in my part of the 
country, approached me, wrote to me some time ago and pointed 
out this serious problem with regard to African-American 
representation in the accounting industry. We followed up. Ms. 
Jeffers on my staff talked with her, and I am very pleased that 
those conversations helped lead to this hearing.
    The impetus also, of course, came from people in the New 
America Alliance and the Hispanic members of our committee, but 
I think this is a good sign that people aren't entirely wasting 
their time when they bring things to our attention. I am glad 
to be able to do that. And I am particularly pleased that we 
are having this hearing.
    The financial services industry obviously has an 
extraordinary impact on the country. More and more of what we 
do in the country is part of the financial services industry. 
As we evolve, we know that manufacturing is less of a job 
source.
    The financial services industry is a major part of our 
economy in two ways. First of all, of course, it performs this 
extraordinary mediating function. It helps the rest of the 
economy work.
    But it is also a significant source of employment, and it 
is also--I guess I should have said three things--it is not 
only a significant source of employment, it is a significant 
source of wealth accumulation. People in the financial services 
industry get a chance not just to receive good salaries, but it 
is a very important way to build equity, and it is a very 
important way for them to help others build equity.
    So having full representation of the various minority 
communities in the financial services industry is really 
absolutely essential if we are going to have the America we say 
we want to have and that I think we want to have. That is, 
unless we have good representation within our financial 
services industry of all of America, there will be segments of 
America that don't get the chance to be fully a part of this 
society that we want them to be. So I am very grateful.
    And to the people in the private sector--and you say we 
obviously also have an obligation to talk about this in the 
public sector. We don't neglect that, we don't neglect our 
responsibility on our own committee, and it is one I take 
seriously to the extent that I have been able to select staff. 
And what we know is this: People who argue that we are in favor 
of some kind of tradeoff between diversity and quality are 
simply flatly wrong. That needs to be refuted.
    We are not talking about making exceptions to the talent 
pool to accommodate minorities. We are talking about 
recognizing the fact that all of us, all of us have grown up 
with prejudices, all of us have grown up with a kind of 
tendency to prefer our own, even in ways that we are not fully 
conscious of. And what we are asking for is a conscious effort 
to recognize those facts.
    No one denies that we have racism in the country, had 
bigotry, and we are making great progress, but you don't go 
from one point to another without passing through a phase in 
which you consciously counteract that.
    That is what this is about, and I am very grateful to you, 
Madam Chair, and to the witnesses for their help in this, and I 
am delighted to see that our committee is able to be so well 
representative of these particular groups.
    Chairwoman Kelly. Thank you very much, Mr. Frank.
    We have been joined by the gentlelady from California, Ms. 
Napolitano, and without objection, she may also participate in 
today's hearing, give a five-minute opening statement and 
question witnesses under the five-minute rule. We welcome you.
    We go now to Mr. Garrett.
    Mr. Garrett has no opening statement, so we will move on to 
Mr. Scott.
    Mr. Scott. Thank you very much, Madam Chair lady Kelly. I 
certainly want to thank you and Ranking Member Gutierrez and 
also our ranking member of our full Financial Services 
Committee, the gentleman from Massachusetts, Mr. Barney Frank, 
and the entire leadership of the Financial Services Committee 
for hosting this very important and very timely hearing. And 
thank you again, Ms. Kelly, for allowing me to speak and 
participate at this Oversight and Investigation Subcommittee 
hearing today.
    The hearing's topic of diversity in the financial services 
industry is of particular interest to me for several reasons. 
The most important being the need to open access to capital to 
minority communities. Access to capital is important.
    For the district that I represent around metro Atlanta 
where many financial firms are based, including SunTrust and 
Equifax. Wachovia and Sun SouthTrust, as we know, is just going 
through a merger procedure, and they will become the third 
largest financial institution in this country. And they are 
going to base their headquarters, their southern headquarters 
in Atlanta. And Bank of America, of course, has a strong 
presence in our city and in our region.
    So most certainly, as the only member of Congress serving 
on the Financial Services Committee from Georgia and Georgia 
being certainly at the center of the financial services 
industry in this country, I am vitally interested in diversity 
in this area.
    A recent article in the Wall Street Journal reported that 
minorities hold 12 percent of directorships in Standard and 
Poor's 500 country--up from 9 percent in 1999. That is very 
good to show that we are making progress, but not enough 
progress. While we must recognize the positive movement of 
these numbers, we can clearly see that much more is needed to 
diversify Wall Street.
    Main Street is catching up much faster. For example, 
Atlanta was named the top city for African-Americans for 2004 
by Black Enterprise. Atlanta earned that top ranking because of 
its entrepreneurial opportunities, its earning potential and 
its diverse cultural offerings and its rich history of 
committed black and white political and civic leadership doing 
its job.
    And with that in mind, it is so good to have Michael 
Kennedy here, one of my constituents from Atlanta, Georgia, who 
is the manager of Diversity Program and financial services 
sector executive for Korn/Ferry International in Atlanta. And I 
want to give you a warm welcome and good to have you here 
before the committee.
    I am an MBA graduate from the Wharton School of Finance. I 
am an entrepreneur, I own my own business. So I know firsthand 
what it means to struggle to build a business and the 
importance of diversity in the marketplace and the importance 
of access to capital. From the recent corporate scandals, we 
have learned that the more homogeneous a corporate board is or 
the more homogeneous its top executive ranks are, then the more 
likely the members of that firm will move in lockstep.
    With so much discussion about the need for independent 
directors and diversity in top management, we should push for 
minority directors to join more corporate boards and executive 
ranks. Minority purchasing power in 2004, including African-
Americans and Hispanics, is nearly 21 percent. The only way 
that financial institutions will find more future growth is by 
paying more attention to these trends. The marketing and 
earnings growth is growing from Asian, Hispanic, African-
American and immigrant communities, and diversity in the top 
levels of management and its boards is critical to the future 
success of all of our financial service industries.
    To tell you the truth, I was quite frankly disturbed last 
month by a story that I read in the Hill newspaper on June 23, 
which described the challenges faced by many talented minority 
lobbyists right here on Capitol Hill. And I recommend for those 
of you who have not read that story in the Hill to please read 
it. It will give you pause and give you reason to realize that 
while we have made some progress, there is much more progress 
we need to make.
    Several of the lobbyists quoted are friends of mine who I 
highly respect. I understand that the majority leader has a K 
Street project which he is working to get more lobbyists hired, 
Republicans and hopefully Democrats. What would impress me is 
if there was a similar project with these high-profile lobbying 
firms which would hire more minorities and with their full 
value, for their full capabilities, who will serve both 
Republicans and Democrats.
    Madam Chairwoman, I thank you for this opportunity. I do 
look forward to this distinguished panel, and thank you for 
having me here and presenting me with the opportunity. I look 
forward to asking questions from this panel's testimony. Thank 
you very much.
    Chairwoman Kelly. You are very welcome.
    Mr. Baca?
    Mr. Baca. Thank you very much, Madam Chairman and Ranking 
Member Gutierrez. I want to thank both of you for holding this 
important hearing on diversity in financial service 
institutions and access to capital for minority-owned business.
    As you may know, I am Chair of the Congressional Hispanic 
Corporate Responsibility, and part of our goal is to make sure 
that when we look at diversity it is reflective of our 
community. When we look at the total population of the United 
States, we have 44 million Hispanics in the United States. We 
have approximately 16 percent, and by the year 2050 we will 
represent one in 4 Hispanics in the United States. We currently 
represent about 800 and some billion dollars purchasing power 
right now, and by the year 2010, purchasing power will reach $1 
trillion.
    What does this mean? I also want to thank faces like the 
American Alliance, Maria, for being here and talking about 
access, because what we want to talk about is access to 
capital. When we look at it, there is the ability for people to 
have the ability to borrow money on fair and equal basis, not 
discriminatory towards minorities, whether you are Hispanic or 
black or Asian or Indian, but the opportunity to advance. This 
is a time where we are seeing a lot of our growth, but yet it 
is a time when we are actually cutting back funding for small 
businesses and opportunities for capital investment in that 
area.
    As Chair of Corporate Responsibility, it is our 
responsibility to make sure that it is reflective of our 
community, because some of us would like to make sure that when 
we walk into a room that we see people that look like us. And 
that is on our board of directors, and we look at executive 
managerial positions, we look at purchasing power, loaning as 
well and media and philanthropy as well.
    As Chair of Corporate Responsibility, hopefully we can hold 
a lot of the companies accountable and that they start making 
the right moves for the right reasons, because it is healthy 
for our country and it is healthy for us. If we move in that 
direction, I believe we will have more responsibility to make 
sure that the face of corporate America looks like the faces of 
America.
    Unfortunately, Hispanics and some blacks are severely 
underrepresented on corporate boards. Hispanics hold less than 
2 percent of the Fortune 1000 board seats. We hold less than 3 
percent of executive positions in the financial services 
industry. This is just not acceptable. We expect corporate 
America to be a good citizen when it comes to their hiring 
practices, their business practices and their outreach to our 
community, not only in looking at our dollars, but also looking 
at hiring individuals that can be reflective in making our 
country a lot better.
    I hope that we will learn a lot today, and this is a first 
step in the struggle for better representation of financial 
service industries. I look forward to hearing from the 
panelists in finding out how to improve access to capital, what 
is it that we need to do, how do we do it, what are some of the 
changes that need to be done to assure us that we can be at the 
table as well as anyone else and have a fair level of playing 
field for all Americans, for all minorities who have been 
underrepresented in this area for generations and generations.
    Thank you very much, Madam Chair.
    Chairwoman Kelly. Thank you, Mr. Baca?
    Members are reminded of the five-minute rule, and I would 
respectfully respect that you keep your remarks within the five 
minutes simply because we have a long panel, and these people 
have come a long way. We need to hear what they have to say.
    Mr. Bell, do you have an opening statement?
    Ms. Napolitano?
    Mrs. Napolitano. Thank you, Madam Chairman. I will be very 
short and very brief. I am thankful for the opportunity to be 
here and glad that we have a hearing on such an important issue 
that deals with all minorities, women especially and 
minorities. We have been in small business thrusting for 
increasing funding to the women-owned SBDCs, to be able to do 
all the things that we have been fighting for years and 
continue to fight.
    And when I see in your survey where it is a disagreement in 
the effectiveness of corporations achieving diversity goals, we 
begin to say, ``Why?'' People are there, and I know in some of 
my personal wanderings as a minority, sometimes they look at us 
and say, ``Well, we can't find qualified minorities,'' which is 
a lot of you know what.
    I am looking forward to this, and I hope that together all 
minorities working together and others who believe in what we 
are trying to do and the effectiveness for the benefit of this 
country that we will move forward.
    Thank you, Madam Chair.
    Chairwoman Kelly. Thank you. We will turn now to our first 
panel.
    Our first witness is Ms. Ana Maria Fernandez Haar, chair of 
the Board of the New America Alliance and founder and CEO of 
the IAC Group, a full service, multicultural marketing and 
advertising firm. We welcome you.
    Ms. Fernandez Haar, lectures on the subjects of 
transcultural marketing, global branding, market entry 
strategies in the United States and Latin America. She also 
serves on many foundation and community boards and has received 
significant professional recognition for her work.
    Our next witness is associate professor of accounting at 
Boston College, Ms. Theresa A. Hammond. Professor Hammond is 
the chairperson of the Accounting Department at the Wallace E. 
Carol School of Management at Boston College. She is also a 
member of the National Association of Black Accountants and a 
co-founder of the African-American Accounting Doctoral Students 
Association.
    Next is Mr. Michael D. Kennedy, the managing director in 
the Atlanta office of Korn/Ferry International, a global 
executive search firm. Mr. Kennedy leads the company's 
diversity specialty team in the financial services area. Prior 
to joining Korn/Ferry, Mr. Kennedy headed a venture capital 
consulting firm and held the position of vice president in the 
Corporate Finance Group at GE Capital Corporation.
    We also have Mr. Marc Lackritz, president of the Securities 
Industry Association. Mr. Lackritz has appeared before the 
committee many times during his 14-year tenure at the SIA. We 
welcome you, sir. Again, he serves on a number of boards and 
advisory groups, including the Financial Accounting Standards 
Advisory Council, the American Council on Capital Formation, 
the Foundation for Investor Education.
    And our next witness is Ms. Joanne Hanley, the president of 
Women in Housing and Finance, Incorporated. Ms. Hanley is also 
the associate director for Congressional Affairs at the Office 
of Federal Housing Enterprise Oversight, the OFHEO. In her role 
at Women in Housing and Finance, she works to promote women in 
the fields of financial services and housing through the 
professional enrichment and leadership enhancement.
    Our final witness this morning will be introduced by our 
ranking chairman, Mr. Gutierrez.
    Mr. Gutierrez. Thank you very much, Chairwoman.
    Well, members of the committee, I am pleased to introduce 
the Honorable D. Lorenzo Padron who has served as commissioner 
of the Illinois Office of Banks and Real Estate since May of 
2003. I have known the commissioner for many years, and I am 
pleased that he is able to be here today to share his personal 
experience with the subcommittee.
    Mr. Padron's a well-known Chicago banker, civic leader and 
entrepreneur. Mr. Padron came to the U.S. from Colombia, South 
America in 1968 to attend the University of Illinois in Chicago 
where he earned a bachelor's degree in business management, and 
he also attended the University of Chicago Graduate School of 
Business.
    Commissioner Padron entered the banking industry in 1977 at 
the First National Bank of Chicago and worked in the Commercial 
and International Banking Department. He became assistant vice 
president in the Commercial Loan Department at Banco Popular 
and then a senior vice president of Lending at Metropolitan 
Bank and Trust where he also served as a member of the bank's 
board of directors.
    Commissioner Padron is a founding member of the Latin 
American Chamber of Commerce where he served as chairman of the 
board for the past nine years, the largest Hispanic trade 
association in the Midwest and one of the largest minority 
consulting firms.
    He is also owned his own business. Commissioner Padron is 
the first Hispanic to lead the Illinois agency responsible for 
regulating and supervising State-chartered banks.
    I will conclude by saying that although the commissioner is 
not here representing the Conference of State Bank Supervisors, 
I am pleased to report they have considerable diversity in 
their ranks at the top level. There are currently 6 African-
American commissioners on the 50 States, 8 female 
commissioners, 3 Hispanic commissioners and considerable 
diversity at the deputy level.
    It is an excellent start, and I would hope that steps in 
the right direction by State would be followed by the Federal 
Government in this and other matters. And I look forward to 
hearing from the commissioner.
    Chairwoman Kelly. Thank you, Mr. Gutierrez.
    We welcome you, Mr. Padron. I know you had a hard time 
getting here, so we are delighted you were able to make it.
    Without objection, all of the written statements and 
statements of everyone on the panel will be made part of the 
record. You will each be recognized for a five-minute summary 
of your testimony. The lights on the boxes at the ends of the 
table will indicate--a green light means that you have five 
minutes, a yellow light means please summarize because the red 
light will come on, and that means that is time to stop. If you 
haven't summarized prior to then, please do so quickly and end 
your testimony.
    And we begin with you, Ms. Haar. Welcome.

   STATEMENT OF ANA MARIA FERNANDEZ HAAR, CHAIR, NEW AMERICA 
                            ALLIANCE

    Ms. Haar. Thank you. Good morning. U.S. House Committee on 
Financial Services Chairman Michael Oxley, Ranking Member 
Barney Frank, Subcommittee Chairwoman Sue Kelly, Subcommittee 
Ranking Member Luis Gutierrez and members of the committee, on 
behalf of the New America Alliance, I thank you and commend 
your leadership on the opportunity to appear before you today 
to discuss Latinos in the financial services industry and 
access to capital.
    Latinos currently exceed 44 million people in the United 
States--15 percent of the total, the largest minority in the 
country, the majority of the Western Hemisphere. Current 
purchasing power exceeds $700 billion, projected, as mentioned, 
to reach a trillion by 2010.
    Indicators reveal increased participation of Latinos in all 
facets of American entrepreneurial activity and in the economy, 
except that they are very absent from leadership roles and 
executives roles on corporate boards, and in the finance 
industry they continue to lag. There are only 166 Fortune 1000 
companies that include Latinos on their boards, and, 
furthermore, out of 10,314 positions, Latinos occupy only 202 
seats--1.97 percent.
    Collectively, the 73 Fortune 100 companies classified as 
commercial banks, securities firms and savings institutions, 
have 936 director seats, 793 executive positions. American 
Latinos occupy 28 of these board seats, 2.9 percent, and of the 
total of 793 executive positions, they occupy 20--2.5 percent.
    In anticipation of this hearing, we conducted an informal 
survey of six major Wall Street investment banking firms to 
determine the level of Latino participation at executive level, 
managing director or partner. At not one of these firms did the 
American Latino participation represent more than 1 percent, 
and these are the same Wall Street firms that earn millions of 
dollars, annually managing and handling the pension funds and 
retirement savings of tens of millions of American Latinos.
    In the institutional investment arena, Latino majority-
owned companies continue to struggle to find adequate access to 
public and private pension funds in minority procurement 
programs, and major corporations have not typically included 
financial services. The New America Alliance inspired a 
hearing, and I must tell you that the State of Illinois, and 
Chicago in particular, has been exceptional in this area.
    In October of 2003, the NAA published a white paper on 
American Latinos in financial services. These are the 
highlights. We looked at management consulting, asset 
management, private equity, brokerage segment as follows: One 
Latino owned an investment management consulting firm in the 
entire country. Those are the gatekeepers. In the asset 
management field, less than one-half of one-percent, $28.8 
billion of the $7.2 trillion in U.S. institutional tax-exempt 
assets is managed by American Latinos.
    Latino and private equity firms have aggregate capital 
available for investment of less than $500 million, translating 
to control of less than 0.2 percent of the private equity funds 
overall. The $1.1 trillion public pension fund arena in the top 
6 America-Latino states total brokerage fees are roughly $1.5 
billion for the management of assets. Latino participation is 
0.005 percent at $7.5 million.
    The challenges and barriers that limit the size and 
competitive advantage of Latino financial services identified 
in the white paper are: Limited access to decision makers; 
misperception that Latinos do not have the ability to invest 
and manage funds, and we have data contrary to that assumption; 
companies lack capital for expansion as they face their 
financing barriers; small company size in terms of asset under 
management limiting companies' ability to secure contracts; and 
a small number of new American Latinos entering the industry.
    The four financial services sectors shared one common 
conclusion: Public hearings such as this one at the local, 
State and congressional levels, we believe, will place the 
national attention on the subject.
    Venture Capital Kauffman Foundation report found that 
minority enterprise venture capital investment if profitable 
with an internal rate of return median of 9.5 percent and a 
mean of 23.9 versus 20 percent return indicated for the 
comparable benchmark for the market as a whole. The Milken 
Institute indicates that less than 4 percent of small business 
investment company private equity funds were invested in 
minority deals, and focusing on minority investment, firms have 
less than 3 percent of all venture capital funds under 
management.
    Reliable data is part of our significant problem. We 
respectfully suggest that the Congressional Budget Office look 
into the possibility of additional research.
    I would like to provide some recommendations, as Sarbanes-
Oxley reform provided historic opportunities to incorporate 
diversity on corporate boards. Corporate leaders need to guide 
board appointments and hiring initiatives. Elected and 
appointed officials can promote corporate diversity through 
public statements and simply starting a meeting by asking one 
simple question of your corporate callers: What are you doing 
in diversity? What does your board look like? What does your 
management look like?
    We appreciate the opportunity. We also suggest that 
expansion of the current Community Reinvestment Act to include 
insurance companies as well as private sector pension funds. 
They have made a significant difference.
    We appreciate this opportunity. We at the New America 
Alliance are committed to increasing access to capital markets 
and financing for Latino businesses. We stand ready to 
collaborate with the U.S. House Committee on Financial 
Services, other government leaders, corporate America and 
minority community leaders in advancing our common goals of 
prosperity for all in this country. Thank you for this 
opportunity.
    [The prepared statement of Ana Maria Fernandez Haar can be 
found on page 43 in the appendix.]
    Chairwoman Kelly. Thank you very much.
    We would like to hear from you now, Dr. Hammond.

     STATEMENT OF THERESA HAMMOND, ASSOCIATE PROFESSOR OF 
                   ACCOUNTING, BOSTON COLLEGE

    Ms. Hammond. Chair Kelly, Ranking Member Gutierrez, 
Chairman Oxley, and Ranking Member Frank, thank you for the 
opportunity to address the committee on the critical matter of 
the dearth of African-Americans in the Certified Public 
Accountancy profession.
    I am going to talk about four major points. One is the 
importance of the CPA profession; the second is that African-
Americans are vastly underrepresented in the CPA profession; 
the third is the role that the experience requirement has 
played historically in excluding African-Americans from the 
profession; and the fourth is the lack of transparency in 
providing information on how many African-Americans there are 
at the various firms.
    Before the Enron debacle of a couple years ago, very few 
people paid any attention whatsoever to the CPA profession, but 
now I think people understand that public accountants are 
supposed to represent the public. As Mr. Frank said earlier, 
how can the public accountancy profession represent the public 
when 12 percent of the public is African-American but fewer 
than 1 percent of CPAs are African-American? Ninety-eight point 
seven percent of partners in the major CPA firms are white.
    In addition to not representing the public, also this is 
denying African-Americans well-paying jobs and also access to 
capital. Most black-owned firms work closely with African-
American businesses and help them develop access to capital and 
manage their capital effectively. So the lack of African-
American CPAs has a widespread effect on the economy.
    As I said earlier, fewer than 1 percent of CPAs are 
African-American, only one in 1,000 partners in the major firms 
are African-American, and this is despite the fact that in the 
past 20 years 6 to 8 percent of accounting graduates have been 
African-American. There are plenty of accounting graduates who 
are black, and yet there are very few black accountants in the 
firms.
    This contrasts poorly with the number of doctors who are 
black, which is 4.2 percent, and 2.7 percent of lawyers. Both 
of those professions require significant additional education 
above CPAs, and yet they both have much higher percentages of 
African-Americans than do CPAs.
    I wrote a book on the history of African-American CPAs, 
because I was trying to understand why this underrepresentation 
was so severe, and I interviewed 40 of the first 100 CPAs in 
the country. It reminds me of Mr. Gutierrez saying that one of 
his friends had never met a stockbroker. Well, until the late 
1960s no major white CPA firm would hire an African-American. 
Therefore, young African-Americans today are less likely to 
have an aunt or an uncle or grandparent or parents who are 
CPAs. And it has an effect on mentoring as well as on role 
modeling for young people today.
    Two of the people I interviewed were Bernadine Gines and 
Tab Tillman. In 1947, Bernadine Gines graduated from NYU with 
an MBA, an exceptional accomplishment for any woman, and 
especially for an African-American woman. Still she lived in 
Harlem and she sent out job applications to every CPA firm she 
had heard of, and she didn't get any interviews.
    Subsequently, she moved to Queens, and now that her 
neighborhood didn't betray her race, she got many, many 
interviews. But when she would show up for interviews, people 
would say, ``I am sorry, we cannot hire African-Americans.'' In 
fact, the first interview she applied to, on the first 
interview she went on, the interviewer said, ``I can't possibly 
hire you, but could you please help me find a maid?''
    This woman went on to become the first African-American 
female CPA in the State of New York because a small Jewish-
owned firm hired her, and she celebrates her 50th anniversary 
as a CPA this year.
    Tab Tillman similarly moved from the South, he had been 
born in North Carolina, and moved to Los Angeles in the hope of 
getting more opportunity. He really wanted to become a CPA. He 
became the first black MBA graduate of Syracuse University in 
1949 and still he couldn't get job interviews once people found 
out that he was African-American. He applied to every single 
CPA firm in the city of Los Angeles and finally found a small, 
again, Jewish-owned, firm to hire him.
    He worked there for one year and in the time that he was 
working there the managing partner of the firm was away serving 
in the Korean War. When that managing partner came back to Los 
Angeles, to his firm, and found Tab working there, he fired him 
immediately because he said it wouldn't look good to have 
African-Americans work in the office.
    To become a CPA, you have to work for a CPA. Both Tab 
Tillman and Bernadine Gines were denied that opportunity for, 
in Tab's case decades after he first attempted to become a CPA.
    Fortunately, the conditions changed in the late 1960s. The 
National Association of Black Accountants was formed in 1969, 
and the AICPA began tracking data. That is the American 
Institute of the Certified Public Accountants. They began 
tracking data that showed that there was a big increase in the 
number of black CPAs. However, that number only increased from 
1976 to 1981. During the 1980s, the number of African-Americans 
hired by the firms declined precipitously, and beginning in 
1990, the AICPA discontinued the survey.
    As Ms. Fernandez Haar pointed out, having this kind of 
information is critically important to understanding the 
diversity of the profession. And so we call for more--I would 
like to see Congress and the SEC call for more transparency on 
the part of the firms. Just as you said when you interview or 
when you speak with firms you should ask how many African-
Americans or Latinos they have on their board of directors, it 
would be important to stress the importance of the diversity of 
the CPA profession as well, and ask them how many partners they 
have who are African-American and Latino.
    The National Association----
    Chairwoman Kelly. Ms. Hammond, if you could summarize your 
testimony, please.
    Ms. Hammond. Sure. The National Association of Black 
Accountants is currently embarking on a project to try to get 
firm-specific data so that we can track this better, but this 
is a significant first step just to have this hearing and to 
raise awareness and attention to this issue. So I thank you.
    [The prepared statement of Theresa A. Hammond can be found 
on page 53 in the appendix.]
    Chairwoman Kelly. Thank you very much for your testimony.
    Let me explain what has just happened here, because it is 
rather interesting. When I went to Iraq, I met in Mosul with a 
group of women who were anxious to be part of the new 
democratic Iraq. One of the women that we met with is following 
Mrs. Brown-Waite today. They have come here. As a result of our 
meeting, four of the women that we met with have been elected 
as women participants. They are members of the city council of 
Iraq. For the first time, there are women on the city council 
in Iraq, and we are very----
    [Applause.]
    Chairwoman Kelly. Would you stand up? The woman with her is 
the interpreter.
    [Applause.]
    Chairwoman Kelly. We turn now to you, Mr. Kennedy.

 STATEMENT OF MICHAEL D. KENNEDY, MANAGER OF DIVERSITY PROGRAM 
      AND FINANCIAL SERVICES SECTOR EXECUTIVE, KORN/FERRY 
                         INTERNATIONAL

    Mr. Kennedy. Chairwoman Kelly, Congressman Gutierrez, 
Ranking Member Frank, Congressman Scott, distinguished members 
of the Subcommittee on Oversight and Investigations, good 
morning. I have been invited today to discuss the status of 
diversity in the financial services industry. As Chairwoman 
Kelly has already indicated, I am a member of the financial 
services as well as the diversity practice at Korn/Ferry 
International based out of the Atlanta office.
    Our diversity practice was started in 1998 to assist our 
clients in addressing their diversity recruiting needs. Today, 
I come before you to share with you from a recruiter's 
perspective what I see in the financial services world.
    The story in financial services today is really a story of 
good news and not so good news. First and foremost, there has 
been considerable progress in the industry over the past 10 
years. One of the major changes that we have seen has just been 
in the attitude. Historically, diversity was something that was 
just the right thing to do for corporate America, and many 
firms viewed it from an altruistic viewpoint. Today that view 
has changed. Senior management is looking at diversity from a 
business imperative and recognize the ability to see the bottom 
line benefiting from diversity.
    Corporate diversity initiatives have become very 
significant as well. As you indicated in your opening 
statement, most major financial services firms today have 
developed extensive corporate diversity programs. In many 
cases, chief diversity officers have been appointed who report 
directly into the CEO's position. What this shows is that there 
is more or less of a commitment to financial services diversity 
by senior management.
    Recruiting has been fairly substantial over the last 10 
years in terms of identifying talented people of color and 
women and bringing them into the financial services industry. 
However, recently, corporations have decided that they need to 
focus more on the retention side. What is driving that is in 
the recent economic downturn we have seen a disproportionate 
number of talented women and people of color displaced from the 
workforce in middle management ranks.
    As a result, this puts more pressure on corporations, 
financial services firms, to develop career development tracks 
for their employees to allow them to be promoted up through 
their organization. So although there is positive momentum in 
the financial services segment, there is still a great deal of 
work that needs to be done and significant challenges 
confronting the industry.
    Women and people of color are not represented on a 
consistent basis throughout the financial services industry. 
For example, in looking at the asset management sector, what we 
see from a recruiting perspective is that there are still very 
few women and people of color in roles such as equity analysts 
and portfolio managers. And we also see that there tends to be 
more representation in the government and the municipal 
security segments as opposed to corporate, high-yield and other 
areas. In those latter areas, the compensation packages tend to 
be higher.
    In looking at investment banking as another example, again, 
women and people of color tend to be in either the municipal 
finance or the public finance or similar kinds of areas and are 
underrepresented in mergers and acquisition, corporate finance, 
areas that again tend to have higher compensation attached to 
them.
    Another example is private equity and venture capital, 
which is what we are here to discuss today. What we see is that 
minorities and women tend to be employed in minority-focused 
and female-focused private equity funds or are working with 
funds that are affiliated with banks, foundations or 
endowments. In looking at the private partnership structure, 
which is the vast bulk of the private equity community, we see 
scant representation of minorities and women.
    Korn/Ferry recently developed a study that gauged the 
effectiveness of corporate diversity initiatives. You have a 
copy of it, and it is entitled, ``Best Practices for 
Diversity.'' In this study, we surveyed senior executives, 
corporate diversity heads and senior minority executives, and 
as you can imagine, there was a wide variance in discrepancies 
among the effectiveness with senior executives believing that 
these programs are very effective, where minority executives 
believe that these programs are not as successful as they 
should be.
    One other example and trend in looking at the industry 
today is that most of the corporate diversity initiatives are 
in the larger global financial services firms. When you look at 
the regional firms, smaller financial services firms, what you 
typically see is that there is not as much diversity. It is 
being driven by the human resources area.
    So with that said, the good news is that the industry has 
made some considerable progress, but the not so good news is 
that the financial services industry still has a long way to go 
before diversity is embraced consistently throughout.
    [The prepared statement of Michael D. Kennedy can be found 
on page 71 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Kennedy.
    Mr. Lackritz?

  STATEMENT OF MARC LACKRITZ, PRESIDENT, SECURITIES INDUSTRY 
                          ASSOCIATION

    Mr. Lackritz. Thank you, Madam Chairwoman. Madam Chair and 
Ranking Member Gutierrez and members of the subcommittee, I am 
Marc Lackritz, president of the Securities Industry 
Association, and I appreciate very much the opportunity to 
testify today about SIA's and our member firms' efforts to 
encourage diversity within the securities industry and the U.S. 
capital markets. We commend the subcommittee for recognizing 
how important this topic is to the future of our economy, our 
markets, our industry and our investors.
    SIA and the securities industry are fully committed to 
creating a non-discriminatory workplace and an industry where 
anyone and everyone can succeed on his or her merits. I am 
proud of the progress our firms have made over the last decade 
to develop diversity initiatives in the workplace and to 
improve their marketing to diverse customers. While our efforts 
are clearly beginning to pay off, we recognize that more work 
needs to be done.
    The face of America is changing rapidly. By the middle of 
this century, about half of all Americans will be minorities. 
African-Americans, Asian-Americans, Hispanic-Americans and 
women are some of the groups that will make the market 
increasingly diverse. These changing demographic trends deliver 
a clear message: Securities firms must establish and support 
diversity programs in the workplace and in the marketplace if 
they are to succeed.
    About 10 years ago, SIA formed a Diversity Committee of 
senior-level executives to increase industry understanding of 
the strong business case for building programs to develop 
multicultural workforces and client bases. The committee's 
objective is to help shape an industry that is open to 
everyone, where employees are limited only by their own 
potential, clients' unique needs are actively served, and 
shareholders receive value for their investment.
    After first producing a business case for diversity and 
then creating a resource guide for identifying, recruiting, 
training and retaining a diverse workforce, the committee 
undertook a benchmarking survey tracking industry employment of 
minorities and women over time. The survey's purpose was to 
help our industry keep tabs on our progress over time in 
achieving an increasingly diverse workforce and customer base.
    Importantly, our industry experienced one of its most 
significant recessions ever during the time period the survey 
covers. Given the difficult market conditions and severe cost-
cutting measures that our firms undertook, our results are even 
more remarkable. For example, the percentage of women and 
minorities in key securities industry management positions is 
increasing, especially in large firms, which have all had 
diversity initiatives in place since at least 2001.
    All of the large firms have diversity training included in 
their employee orientation programs, as compared with 89 
percent in 2001. And 92 percent of all our large firms 
responding had formal mentoring programs in place, up from 78 
percent in 2001. I might add that many of our large firms also 
have plans to add and expand their diversity efforts worldwide.
    Similarly, all our mid-size firms have a diversity 
initiative as well, and many of them are engaged in as wide a 
range of diversity activities as the large firms. Four out of 
five mid-sized firms have a management-level person dedicated 
to diversity, and the percentage of mid-size firms 
incorporating diversity training, employee networks and formal 
mentoring programs more than doubled from 2001 to 2003. Almost 
all of our large member firms are dedicated to helping minority 
kids receive scholarships, summer internships and other 
opportunities for advancement.
    Although our survey does not catalogue every initiative, we 
know that they are extensive and pervasive. The many positive 
changes that have occurred are a tribute to the efforts started 
more than a decade ago, and yet some of the trends indicated, 
and we have heard already this morning, show that we still need 
to make further inroads and improvements. We are firmly 
committed to ensuring that equal opportunity is a hallmark for 
all our firms' employment.
    As we gain experience with diversity programs, we found 
that there are several elements in common that contribute to a 
firm's success. They include support, interest and active 
engagement from senior management; encouragement of a corporate 
culture that emphasizes diversity and provides training and 
education to employees to be sensitive and supportive of this 
goal; networking to identify, recruit, hire and retain women 
and people of color; and innovative programs that reach out to 
communities to hire people and provide support, including 
mentoring throughout a new employee's first few years.
    Finally, targeting recruiting efforts and partnerships with 
established organizations that support women and minorities. 
Programs involving both mentoring and networking of new women 
or minority employees have been very successful in attracting, 
training and retaining more women and minority employees.
    We have also made a lot of progress on the educational 
front with the development of a comprehensive web site, 
quarterly teleconference calls for human resources and 
diversity managers, inclusion of diversity in the core 
curriculum of our professional education programs and 
partnerships with organizations to support minorities and 
women.
    As I noted earlier, but I want to reemphasize in 
conclusion, SIA and our member firms are fully committed to 
creating a non-discriminatory workplace where all employees can 
succeed on their merits. We have come far, but we still have a 
way to go. We welcome your subcommittee's support and input on 
how we can further improve our diversity efforts. Thank you 
very much.
    [The prepared statement of Marc Lackritz can be found on 
page 75 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Lackritz.
    Ms. Hanley?

  STATEMENT OF JOANNE HANLEY, PRESIDENT, WOMEN IN HOUSING AND 
                         FINANCE, INC.

    Ms. Hanley. Thank you Chairwoman Kelly, Ranking Member 
Gutierrez and members of the subcommittee. I am Joanne Hanley, 
president of Women in Housing and Finance. We appreciate the 
opportunity to talk about this important topic today. I note 
for the record that I am testifying today solely in my capacity 
as president of Women in Housing and Finance.
    Women in Housing and Finance is an example of an 
organization that was created because of a lack of diversity in 
the industry, principally, the lack of women. In 1979, the 
``old boy network'' simply closed women out of important 
meetings. Therefore, a small nucleus of women in the housing 
field recognized the need for women to join forces, to share 
policy views as well as tips for boosting each other's career 
success.
    This group was so small that they were able to meet for 
lunch around one table in a restaurant in Chinatown. They soon 
attracted women from financial services as well as housing and 
rapidly grew to almost 100 members.
    We then struggled with 2 decisions: Whether to grow beyond 
100 members and whether to include men. Both of these questions 
were answered in the affirmative, as Women in Housing and 
Finance elected to increase its strength by becoming more 
diverse. In the 25 years since those first lunches, we have 
grown to an organization of over 700 women and men, 
representing 260 organizations in both the public and private 
sectors. Current members include heads of financial regulatory 
agencies and the president of a major financial services trade 
association.
    The organization has grown to be regarded as a premier 
forum for national policy leaders to address key policy issues. 
We carry out our mission by offering substantive educational 
programs on the current issues facing housing and financial 
services, usually around the lunch hour to address our busy 
schedules.
    As Women in Housing and Finance celebrates our 25th 
anniversary this year, let me talk about two of our relatively 
new initiatives. Beginning in 2002, our Professional 
Development Committee created a leadership training program 
based on two principles: women learn differently, and women 
lead differently. We offer a range of programs designed to 
prepare our members for advancement into executive-level 
positions. Further details about our leadership programs are 
provided in my written statement.
    Secondly, our members have proactively contributed to the 
Washington community, to our related entity, the Women in 
Housing and Finance Foundation. A centerpiece of these efforts 
is financial literacy programs that the foundation offers to 
low-income women and their families in the D.C. metropolitan 
area.
    In addition to funding these activities, our members have 
actually taught some of the financial literacy classes. The 
foundation has also provided grants to 14 local groups, 
including Northwest Church Family Network, Hannah's House and 
the Women's Center.
    With the success of both Women in Housing and Finance as an 
organization and of its members in their respective careers, 
the question remains as to whether there is still a place for 
an organization that focuses on the success of women in the 
fields of housing and finance. Our leadership met earlier this 
year in a series of strategic planning sessions and debated 
this issue. The result was a reaffirmation of the focus on 
women's success as a key element of our organization.
    In summary, it is significant to note that the organization 
represents a solution designed by women, for women, based on 
our evolving needs. Some common themes emerge from a review of 
our 25 past years. Our members want the same access to policy 
makers as other groups have. Moreover, we don't just want to 
network with the policy makers, we want to create career paths 
that enable us to become those policy makers.
    We saw the benefit in expanding our membership ranks to 
include men. We simply found that having a diverse membership 
furthered our individual goals of advancing in our profession. 
Currently, one-third of our membership is men, and one-third of 
our board is men.
    Our members are willing to put in extra effort to acquire 
the skills needed in these executive-level positions, and hence 
our emphasis on leadership training. Finally, we want to use 
our personal and financial resources to give back to the 
community, especially to women needing assistance with housing 
and finance issues.
    Much progress has been made; however, women continue to 
perceive the need for continued education and skill-building to 
ensure their inclusion at the highest levels in the industry.
    [The prepared statement of Joanne Hanley can be found on 
page 63 in the appendix.]
    Chairwoman Kelly. Ms. Hanley, could you please summarize?
    Ms. Hanley. Yes. This is why our mission statement 
emphasizes that Women in Housing and Finance promotes women 
through professional enrichment and leadership enhancement. 
Thank you.
    Chairwoman Kelly. Thank you.
    Mr. Padron?
    Mr. Padron. Good morning, Chairwoman Kelly----
    Chairwoman Kelly. Mr. Padron, push the button in the front.
    Mr. Padron. Sorry.
    Chairwoman Kelly. Yes. Thank you.

STATEMENT OF HON. LORENZO PADRON, COMMISSIONER, OFFICE OF BANKS 
               AND REAL ESTATE, STATE OF ILLINOIS

    Mr. Padron. Good morning, Chairman Kelly, Congressman Luis 
Gutierrez and members of the committee. I am Lorenzo Padron, 
commissioner of the Illinois Office of Bank and Real Estate. I 
am here today as a witness at this hearing to present the 
committee a report on key experiences as an Hispanic 
professional banker who has spent 25 years in the banking 
industry. I would also like to present my personal perspective 
on the progress made by the banking industry in its efforts to 
promote racial, ethnic and gender diversity in senior 
management and board membership. We commend you on this very 
important hearing.
    I established my banking career as a management trainee in 
1977 at the First National Bank of Chicago. Before my 
appointment by Governor Blagojevich, I was the senior vice 
president and board member of Metropolitan Bank and Trust in 
Chicago. During my early years of employment at First Chicago, 
it became evident to me that I was just one of two Hispanics in 
the domestic lending area of the bank, and all the senior 
management positions were held by a single group--white males.
    The 1982 outcome of the class action suit filed against 
Harris Bank by its female employees charged in discrimination 
in promotion and compensation woke up the First National Bank 
of Chicago's senior management. Management initiated an 
internal analysis of its labor force, developed affirmative 
action goals and plans and an education and sensitivity 
training program for its senior officers and managers. It also 
initiated a public relations strategy directed to enhance the 
bank's image in the marketplace.
    As a result of these diversity initiatives, a few minority 
males were promoted, but the bulk of the beneficiaries of these 
efforts were white females. To this day, the bank lacks 
Hispanics in amongst its senior management in its lending area, 
in its board of directors and in other positions of leadership.
    A comprehensive review of Chicago's banking industry 
reveals that the employment of Hispanic senior lenders by the 
five largest financial institutions have increased 
significantly during the past five years as compared to any 
other period in Illinois history. In fact, two of Chicago's 
largest banks have formed teams of lending officers dedicated 
almost exclusively to servicing the growing Hispanic business 
market. However, senior Hispanic officers in leading management 
positions, CEOs and senior executives, and board directorships 
are absent from these large Illinois banks.
    The major gains in leading management positions for 
Hispanics employed by the top tier banks are in the areas of 
operations, business development and diversity recruitment 
rather than management, policy making and activities central to 
the banks' profitability, which have changed over time.
    While the banking industry consolidation and competition 
from out-of-State banks have depleted the group of large banks 
headquartered in Illinois, so have these trends reduced the 
opportunities for minority participation in executive 
management in Illinois at these large banks, now based in other 
States. Non-Illinois large banks with significant operations in 
Illinois present the same characteristics as the Illinois-based 
large banks, except for Banco Popular whose CEO and a 
significant number of the leading management positions are held 
by Hispanics.
    A somewhat different picture is observed in the community 
banking segment. These are banks with total assets between $500 
million and $2 billion, where Hispanic senior lending officers 
occupy some leading management positions. Even in this sector 
there are no CEOs or Presidents, but there are approximately 12 
Hispanic board members in the top 6 banks.
    One of the variables explaining the absence of Hispanics in 
leading management positions in the banking industry in 
Illinois relates to demographics. It was only during the past 2 
decades that the Hispanic population in Illinois has 
experienced significant growth, which is reflected in an 
increasing number of junior level managers and officers in the 
banking industry.
    An analysis of minority-owned banks in Illinois, in the 
Illinois banking industry, shows that the group of banks owned 
by Hispanics and African-Americans remain in the category of 
endangered species. Increased competition from a greater number 
of out-of-State banks entering the Illinois market and the 
consolidation of the banking industry reduced the number of 
local Hispanic-owned financial institutions from three to one. 
Banco Popular with assets in Illinois exceeding $3.5 billion is 
considered an out-of-State bank.
    There were three locally owned African-American financial 
institutions operating in Chicago, in Illinois at the beginning 
of this year. One of these three was sold in the first quarter 
of 2004 due to poor performance, one is currently in 
negotiations to be sold, and the third has been struggling to 
survive. The eight locally owned Asian-American banks operating 
in the State have been able to maintain their market share in 
spite of serious performance challenges. The stability of these 
banks has been supported by the strong loyalty of their core 
customer base.
    In summary, the restrictive nature of Illinois banking laws 
produced a banking system that was unprepared to compete with 
banks operating in States with unrestricted bank branching, 
leading to the acquisition of the largest Chicago banks by out-
of-State banks. The liberalization of the Illinois banking laws 
significantly reduced the number of banks operating in the 
State, and the consolidation of the banking industry is 
expected to further reduce the number of banks, including 
minority-owned financial institutions in Illinois.
    The progress made by the banking industry in Illinois in 
its efforts to promote racial, ethnic and gender diversity in 
senior management and on Boards of Directors have been 
disappointingly slow.
    Last week, headlines on Morgan Stanley's settlement 
agreement on Monday, and yesterday headlines on First American 
Bank in Chicago on its settlement agreement is really a sad 
reminder to us all that there is yet a great deal of work to do 
in this area.
    Today's editorial page of Chicago Sun Times has an article 
under the heading, ``Time for the Wall Street to Get Bullish on 
Diversity.'' The article states that in terms of equality it 
has been a bear market, and Wall Street must come up with a 
better deal. The article starts with a quote from a former 
employee of Merrill Lynch quoted in the New York Times that 
reads, ``They have a specific view of what a successful banker 
or manager will look, and it is not usually women, blacks or 
Hispanics.
    I am prepared to answer any questions you may have. Thank 
you.
    [The prepared statement of Hon. Lorenzo Padron can be found 
on page 82 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Padron.
    Some of our panelists have noted that a lack of access to 
capital financing is the primary barrier to the growth of 
minority-owned enterprises outside of traditional service-
oriented endeavors. What do you think can be done to improve 
access to capital to all individuals? And I am throwing this 
out to the entire panel. I would like your answers quickly, 
because I only have five minutes like everybody else to ask 
this question. So, please.
    Ms. Haar. Your greatest resources are in the pension funds 
and the pension plans and their gatekeepers. Asking who the 
gatekeepers are, when minorities may participate, who the board 
members are, who the investment committee decision makers are, 
because some of these funds, even those earmarked for 
minorities, are not getting funds that then are the engine for 
business. So just asking the question who is making the 
investment decision and how many minority funds you have 
invested. The return on investment, by the way, is excellent.
    Chairwoman Kelly. Thank you. I am just going to skip down, 
Mr. Lackritz?
    Mr. Lackritz. Thank you, Madam Chair. I think that most 
entrepreneurs go through a series of--they go through a cycle 
where they get financing initially from their own savings and 
those of friends. They then get bigger and get bank financing. 
They get maybe a little bigger and get venture capital 
financing. And if they are very successful, they might get in 
the public capital markets. I think at every step along the way 
we need to pay attention to who is making those decisions and 
make a conscious effort to really expand those programs.
    Chairwoman Kelly. Mr. Kennedy, do you have something you 
want to say on that?
    Mr. Kennedy. Yes, Madam Chairperson.
    Chairwoman Kelly. Please push that button so we can hear 
you.
    Mr. Kennedy. Can you hear me now?
    Chairwoman Kelly. Yes.
    Mr. Kennedy. Yes. What I was going to contribute is that I 
think we need to take a look at overhauling or at least 
revising some of the guidelines for the SBA, particularly 
pertaining to the small business investment company programs, 
because I am aware that historically that has been an avenue 
where minority funds have been started to get some equity 
capital out into the community. But I think more needs to be 
done there with that program, and I think it needs to be 
overhauled.
    Chairwoman Kelly. Thank you. You and I should talk. I sit 
on the Small Business Committee as well, and we are trying to 
do something about that.
    Ms. Hanley?
    Ms. Hanley. I agree with----
    Chairwoman Kelly. I am sorry, Ms. Hammond?
    Ms. Hammond. I am sorry. I agree with Mr. Kennedy. It is a 
big issue among black CPAs who work closely with small black-
owned businesses as the SBA program has experienced such severe 
cutbacks that it is very difficult to qualify for this type of 
financing. When this financing was more available in the late 
70s and the 1980s, black businesses were growing much more 
quickly. Now they are shrinking, and this is an important area 
to be addressed.
    Chairwoman Kelly. I think we may need to talk more about 
that.
    Ms. Hanley?
    Ms. Hanley. I don't really think I have anything to add. I 
think we have probably touched on all the themes. We, as an 
organization, would be looking to do what we could do via our 
foundation as well.
    Chairwoman Kelly. Thank you.
    Mr. Padron?
    Mr. Padron. Well, one of the problems that really limits 
our ability of capital to minority companies is the fact of 
employment of minority and women officers has been absent to 
the banking industry. And, consequently, either because of 
cultural conditioning or because of lack of interest, the 
capacity or the inclination of non-minority and women loan 
officers really limits their interest in this market.
    I personally can tell you that I have spent a considerable 
amount of time lending to a great number of minority companies 
in Illinois, and the few minority and African-American and 
women loan officers in the lending area actually with authority 
to lend capital is where the deficit is. We have representation 
in operations, in diversity recruitment and so on and so forth, 
but in the critical area of lending, that is where we need to 
emphasize that is where the decision making is done.
    Chairwoman Kelly. Thank you very much. Thank you.
    The recent harassment scandals on Wall Street have been 
very publicized and Mr. Padron talked about that. There is 
still a lot of progress that needs to be made. In an article in 
the New York Times recently, one worker said, ``There are a lot 
of women I know who have left the Street with $4, $5, $6 
million in their pockets who say, 'I am never going to reach 
the top, so I will go do something else.'"
    As a matter of fact, a woman in my hometown started 
something called, ``85 Broads,'' because 85 Broads is the 
address of Goldman Sachs, and at that point--this is quite a 
number of years ago--the women could only reach a certain 
level. That corporate environment has now changed, but this is 
a brain drain. It is a brain drain when we don't use everyone 
in America who wants to be in on this and has something to 
give. Very clearly, these are successful women, but they are 
limited in terms of their advancement.
    I want to know what you all think--and let's just start 
down here with Mr. Padron--what do you think it is going to 
take to break through these barriers?
    Mr. Padron. It is a real challenge to break through these 
barriers. Some people like in my capacity when I was at First 
National Bank of Chicago, I realized, and the rest of the 
minorities and women in the Commercial Loan Department 
realized, that the glass ceiling was just too thick to break, 
and some of us decided to go into the International Banking 
Department where promotion and the rate of promotions were 
faster. And from there I moved to Banco Popular where I knew 
that there was a great deal of sensitivity to promotion and 
compensation.
    I think that it is a serious challenge. I think that we 
need to continue to regulate with stricter interpretation of 
the laws, and also I think that we need to review the 
legislation to see what additional areas we need to tighten up.
    Chairwoman Kelly. Let's go on down the line.
    Ms. Hanley. I think this is a perfect question for our 
organization. It is why we continue to exist. We have 
internally debated as an organization, with an increase of men 
in our membership, the need for women's organizations. We 
absolutely believe the barriers continue to exist, and we are 
looking to enhance our professional development training, get 
more women on corporate boards with the appropriate training 
and get them to break through the upper ranks.
    Chairwoman Kelly. Thank you.
    Mr. Lackritz, I know that you at SIA have really tried to 
encourage these firms to move forward and become more diverse, 
and I am very happy to hear that. I would like to know--and I 
know that on Wall Street the woman that I spoke of is back on 
Wall Street, so that I know that the corporate climate there 
has changed a great deal. Are there specific things that you 
have actually worked--specific companies you have actually 
worked with to try to put in place some more sensitivity? Have 
you run courses or anything?
    Mr. Lackritz. Yes, Madam Chair. Our committee basically 
exists not so much to work with companies but to share the best 
practices of what other firms are doing. And so it is a great 
information-sharing network that has evolved.
    What we have also done is we have established a leadership 
within the association for the most innovative programs that 
firms are doing in this area, and the first two winners, number 
one, was Edward Jones a couple years ago, and then last year 
was Quick and Riley, and they have very unique programs that 
are both replicative and have been very successful.
    In the case of Quick and Riley, for example, they had, I 
think it was called, a Financial Consultant Advisory Program 
where they went out specifically to minority areas and went 
after specific underrepresented groups and then provided 
specific training programs for them and have really focused on 
the retention.
    The firms that are most successful have mentoring programs 
in place so that women and minorities have mentors within the 
firms as they start up, and they also create networking groups 
within the firms of these new employees so that they can get 
some reinforcement. And I think that combination--it is making 
a difference.
    I also think the role model of women in the industry makes 
a difference. I can tell you my cousin, Mickey Siebert, had a 
big challenge to break through the glass ceiling back in 1954, 
1953 when she became the first woman to own a seat on the New 
York Stock Exchange. Since then we have had other path-breaking 
women, such as, for example, Sallie Krawcheck is now the CEO of 
Smith Barney; Alicia Shallot is the CEO of Bernstein, she sits 
on our board; Ellyn McColgan is the head of the brokerage, 
Fidelity, she also sits on our board. And I think those kinds 
of role models will help to replicate that success as well.
    Chairwoman Kelly. Thank you. I am out of time. If we have 
enough time, I am going to ask this question again at the end 
and ask the three of you to address that as an answer.
    But in the meantime, I am turning to Mr. Gutierrez.
    Mr. Gutierrez. Thank you very much. Well, first of all, I 
would like to welcome you all again for being here, and I would 
like to acknowledge the presence in the audience of a woman 
pioneer, Marita Perez who heads Porta Lesa Asset Management and 
who knows in her own right how difficult it is and she is an 
asset manager. But it is hard to get the big corporations to 
give Latinas or Latinos or African-Americans the right to 
manage. But she manages very well, and I am happy she is here. 
She has taught me a lot about the difficulties that minorities 
encounter.
    And I have a question. I would like to ask starting with 
Mr. Padron. What was the most important ingredient in your 
success?
    Mr. Padron. I think that the realization that I had to work 
twice as hard as the rest of the individuals in my group to 
make it. Also the attitude that this was not fair, the attitude 
that I had to overcome this issue, this problem and the 
recognition that I had to be in a capacity to fight and to 
advocate to change the laws.
    Mr. Gutierrez. Thank you.
    Mr. Kennedy, a simple question but you have a wealth of 
experience. How have you been so successful? What single thing?
    Mr. Kennedy. I would have to go back to education, and I 
was fortunate to have grown up in a family with professional 
parents. So as a result, they always emphasized the importance 
of education, and I have been blessed to have been able to 
attend one of the better boarding schools, colleges and 
graduate schools here in the United States, which provided me 
with the confidence to be able to go out and really do some 
things that I have wanted to do. So I think ultimately it gets 
back to education.
    Mr. Gutierrez. Dr. Hammond?
    Ms. Hammond. I think the key for all the African-Americans 
whom I interviewed for my book and also the African-Americans 
in the profession today, is mostly African-Americans helping 
African-Americans. As Mr. Padron said earlier and implied 
earlier, the programs that have been developed to increase 
diversity have actually mostly benefited white women in public 
accounting as well as in a lot of other industries. A lot of 
times firms talk about diversity and they say, ``Well, 37 
percent of our firm is diverse,'' and it turns out that 36 
percent of that is white women and 1 percent is people of 
color.
    And so there has been a real lack--subsequent to the push 
for African-American inclusion that occurred in the late 1960s, 
early 1970s--there has been really a lack of attention to that 
issue. So what has happened is the National Association of 
Black Accountants and African-American-owned firms have filled 
those gaps.
    In 1965, there were 100 CPAs in the country; 27 of them 
were in Illinois. And the main reason for that was because of 
Mary Washington, who you may know, has a CPA firm, Washington, 
Pittman and McKeever, in Chicago. She trained African-American 
CPAs who came from all over the country to come and work with 
her because they needed to work for a CPA to get a CPA, and no 
white firms would hire them.
    Subsequent to that, the National Association of Black 
Accountants--and I have some colleagues from NABA behind me 
here, including the president of NABA--the National Association 
of Black Accountants took that leadership from the 70s through 
the 80s and 90s and has conventions and organizes opportunities 
to make it easy for the firms to recruit African-Americans, for 
African-American professionals to meet each other and be 
supportive, for African-Americans to meet the few black 
partners there are in these firms. That has really been where 
the leadership has come. And that is wonderful, but it is not 
enough.
    Mr. Gutierrez. Ms. Fernandez?
    Ms. Haar. Thank you. Twenty-five years ago, I retired as 
the vice president of Corporate Lending and Corporate Finance 
in a bank called Flagship Banks, now SunTrust. Having been 
through the executive training program, first Latino of any 
gender in charge of the Credit Department, first corporate 
lender, I want to answer that question. No one gives the 
opportunity unless there is a benefit, but it has to come from 
the top. And these diversity programs that have been cited 
here, sometimes the diversity officer is the diversity. That is 
it. That is the program. It is not on the money-making end of 
the business, it is not in line to be promoted.
    If I can tell you what happened is that I found a chairman 
who wanted to do it as an experiment. It wasn't even social 
consciousness, he just said, ``I want to see if you can do it. 
You say you can do it. We will see.'' And handicapped by not 
having had the level of education, the MBA, I did have to 
acknowledge working twice as hard, but I said I am going to 
make it my business to make it work and not do the traditional 
route.
    All these minority diversity programs, Madam Chairman, with 
all due respect, are put in areas, Human Resources, where they 
can trot them out, staff positions. The decision makers where 
the money flows are not people of color and are not usually 
women in commercial lending, because it makes us too 
uncomfortable. I left to start my own business because it got 
to be uncomfortable. I said I am not going to--as much as I 
want to fight this battle for other women, I am going to do 
something that is my way.
    So we need you to ask those questions and have those 
changes made at the top. Otherwise we are going to hear about 
great programs that keep making more and more diversity 
personnel type executives. Thank you.
    Mr. Gutierrez. You know, I thank all of you for those 
answers, and I just want to answer quickly if I were asked that 
question, you know what was the most significant thing for me? 
I grew up in a very Puerto Rican neighborhood of Chicago, so my 
parents, all their friends were Puerto Rican, the family event. 
Over at the factory, they spoke Spanish among one another. I 
didn't have a Latino teacher, I never saw a Latino police 
officer, I never a Latino--I mean I saw Latino cab drivers and 
dishwashers and factory workers, like my mom and dad.
    And then what helped me, I think, to be successful is that 
my parents went back to Puerto Rico, and we went to this little 
town, and when I got there the doctor was Puerto Rican, the 
architect, the mayor, the senator. I turned around and I said--
the principal of the schools, all the school teachers. And all 
of a sudden--and I had great parents, but I never saw that I 
could be all of these things.
    And so it was very lucky and fortunate for me to see people 
in all those positions, because it said to me, ``Look, you can 
do all of these things.'' Had I stayed in Chicago--and I just 
want to say to all the members of the committee, many young 
African-American, Latino youngsters it is all they see. They 
don't see it. They grow up with such a thirst and they don't 
see anything else other than the crime and the poverty that 
surrounds them each and every day.
    And so you all are important--Mr. Kennedy, Ms. Fernandez, 
Lorenzo--all of you are very, very important, because you are 
all role models for the young people, and I thank you all for 
your wonderful testimony.
    Chairwoman Kelly. I thank you.
    We have been called for a series of votes, so we are going 
to take a--oh, I am sorry, do we have enough time--can we pick 
up Mr. Hensarling? Okay.
    Mr. Hensarling, if you can make this just roll, we will do 
that.
    Mr. Hensarling. Thank you, Madam Chair, and I will attempt 
to be brief. One, I applaud holding this hearing in the first 
place, because I have observed it is very difficult in America 
to have an intelligent conversation about race relations and 
hiring practices. Given the history of racial prejudice in our 
Nation, it is an important topic that we take up.
    Perhaps contrary to some members of the panel, I, myself, 
do not have interest in diversity as a goal in and of itself. I 
have a great interest in diversity as a means towards a goal, 
and that goal is to move us to a freer, more colorblind 
society. So where I see diversity and it represents an absence 
of racial prejudice, I tend to celebrate it. Where I see the 
existence of diversity and I believe it represents the triumph 
of color consciousness over equality of opportunity, I tend to 
be critical of it.
    I believe that a properly structured diversity program can 
be very good in helping those who suffer from a legacy of 
prejudice to reach greater heights of opportunity, but I also 
know that there is a very thin and gray line between diversity, 
color consciousness and de facto quotas.
    So I guess my first question is, Mr. Lackritz, can you tell 
me, in your opinion, what does a properly structured diversity 
program look like in the securities industry?
    Mr. Lackritz. Well, I wanted to give you a very thoughtful 
response, so I will try to be brief. The reality is that there 
are lots of different ways at this, and we have got a number of 
different programs that are finding success. I think the most 
important qualities are engagement of top management, and I can 
tell you that in our large firms now diversity and openness and 
equality of opportunity have become one of the top two or three 
goals of almost every CEO of all of our large firms. So you 
need top-down engagement by the CEO.
    You need a commitment culturally within the firm to both 
recruit and try to track new types of employees, whether they 
are women or people of color and an active aggressive effort to 
go out and get that. You need to have a mentoring program 
internally in the firm to help people succeed, as all of us 
have been mentored along the way by older people, and you need 
to have a method for the new employees to network among one 
another and get to know one another a bit to give each other 
support in a new environment where they may find it unusual or 
new. I think all of those components add up to a good program.
    I also think that the main reason for engaging this is 
because you are going to be more successful from a business 
standpoint, and that is the reason to go after it. But that is 
why you do this and a way to reach customers in new ways.
    Our market, like every market, is evolving very 
dramatically. You can just look at the different ways people 
buy securities. It is dramatically different from the way it 
was 10 years ago. Look at the number of people that are buying 
securities, that has changed. So you need to have flexibility, 
but I think that is the main focus. Sorry for the long answer.
    Mr. Hensarling. No, no, no. It is an important question. 
Speaking of questions, instead of asking five questions, I 
think I will ask two questions.
    The second question I had is I have heard a number of 
statistics relating to the discrepancy between an ethnic 
population, or a racial population, in America and their 
representation in the upper management at various financial 
services industries. I am curious if there are any studies that 
the panelists might be aware of as what the disparities look 
like, assuming you can hold constant certain variables like 
income and education and two-parented families and such.
    So I know that, unfortunately, racial prejudice is alive 
and well in the USA, but I wonder how much of that relates to 
what might be viewed as an earlier pattern of prejudice with 
unequal educational opportunities, perhaps unequal family 
environments and other variables.
    Maybe we can just go left to right, and if somebody's aware 
of the study, if you could just educate me or cite that study 
for me, I would be appreciative.
    Ms. Haar?
    Ms. Haar. Thank you. There is not such a study that I am 
aware of given the Hispanic--one of the recommendations that we 
made was perhaps that we could look at such information. 
However, we do know from an anecdotal basis, just looking at 
the top Hispanic 500 firms, that it does not seem to be 
compatible that directors are not available simply because we 
already have people who have succeeded, who have achieved and 
who actually sit on their own boards. So just from observation, 
it would not be logical.
    Mr. Hensarling. Ms. Hammond, are you aware of any such 
study?
    Ms. Hammond. Well, from my own research, it is obvious that 
for the past 20 years 6 to 8 percent of accounting graduates, 
that is people who graduate with degrees in accounting, have 
been African-American. And despite the fact that it only takes 
about five years after graduation, typically, to become a CPA, 
still less than 1 percent of CPAs are African-American. That is 
a huge disparity controlled for graduation rates in college.
    There is a study specifically about minority group members. 
There was a study in 1990 of all the students who had gotten 
offers from major public accounting firms. So they first found 
the students who had gotten offers, and then they went back to 
their GPAs and how many offers they got, and they found that 
the white males had the lowest GPAs and the highest number of 
job offers. And the minority women had the opposite.
    Mr. Hensarling. Thank you. Unfortunately, my time has 
expired.
    Chairwoman Kelly. Ms. Hammond, I have to stop--I am sorry, 
I have to stop this. We have less than three minutes to make it 
to the floor to vote. We are going to take a recess. I would 
hope that we will be able to get back here by about ten after, 
quarter after 12. We have three votes and we have to get there 
now. Thank you.
    [Recess.]
    Chairwoman Kelly. [Presiding.] Thank you very much. Sorry 
we had the break but these things happen.
    Now I am going to call on Mr. Davis.
    Mr. Davis. Thank you, Madam Chairwoman. Let me welcome you 
all back. One of the reasons that I think you have a sense of 
this, after listening to comments from other members and the 
comments from yourselves earlier this morning, is that there 
are, I guess, two sets of concerns.
    One of them is related to the absence of personnel, the 
absence of a larger presence and boards of directorate, that 
kind of thing, and the concern, as I would define it, is that 
we aren't making the most of the talent pool that we have in 
this country, that we have a talent pool that is dryer and 
shallower than it should be. And a lot of the other members 
have talked pretty eloquently about that.
    The second set of concerns is that the absence of African-
Americans or Latinos has had the effect of keeping a certain 
viewpoint or a certain perspective out of the board room, if 
you will.
    Let me follow up, if I can, on the second set of concerns. 
While I know that it is not quite the scope of the panel, I 
want to talk for a minute about the CRA issue. I am not up to 
date on the national statistics, but I think we would all agree 
that for whatever reason there has been a lag in compliance 
with CRA and that we simply have not gotten what we wanted to 
out of CRA when it was passed. And I would surmise that that is 
one of the consequences of not having more minorities on board.
    Do all of you agree with that, by the way, that the absence 
of minorities and minority representation in the hierarchy of 
banks has some spillover in CRA compliance? Is there agreement 
on that? Okay. All right. As we say in the courtroom, let the 
record reflect that all your heads are nodding.
    What can this panel do--we haven't had a hearing on CRA 
this year. Hopefully we will have one in the next month or next 
session. What guidance would you give us as policy makers about 
two things. What can we do to make CRA more than just a 
promissory note, because right now it strikes me that it is a 
promissory note, and it is not a whole lot more binding or more 
powerful than that? What can we do to make CRA more powerful? 
And, second--well, let me get your answer on that, first of 
all, from any combination of you all.
    Ms. Haar. I think it is really important to say that 
although it might have flaws in not living up to its total 
potential, that it has been extraordinary. I think that in this 
particular case doing a better job than what we have, but when 
you look at it, from 1997 to 2001, $1.5 trillion in loans 
investment and service to minority and low-moderate income 
communities went through CRA agreement. That is a lot of 
progress.
    I would venture to say that tightening the compliance and 
perhaps expanding it to the areas that the chairwoman had 
already commented on earlier will perhaps be the best people, 
are not management, for example, are not so willing to change 
unless it is mandated in a way that becomes really measurable.
    Mr. Davis. Any other perspectives on that?
    Mr. Kennedy. Yes. I have one perspective. I would suggest 
that it would be beneficial to expand or at least change CRA to 
an extent to incorporate incentives for private equity funds to 
be raised for minority firms, women-focused investment firms. I 
know that has been one of the aspects of it over the past 
years, but my sense is that I have seen qualified minorities 
and women who have tried to raise private equity or venture 
capital funds go to banks, and since it is included as part of 
CRA, CRA has not been allocated to get those equity funds 
raised. So I think if there is a way we could do a better job 
sort of utilizing CRA to get some funding out in the equity 
capital side, it will help small and female-owned businesses 
down the road.
    Mr. Davis. Let me ask a related question. My understanding 
of CRA is that banks receive a rating. They receive a rating 
for whether they have an outstanding record. Is that right, the 
banks receive a rating on the CRA performance? What are the 
criteria? What are the categories or the delineations? That is 
just an informational question from any one of you.
    Mr. Kennedy. I am not sure.
    Mr. Davis. Okay. Well----
    Mr. Kennedy. They do see ratings, but I am not sure how it 
is structured.
    Mr. Davis. All right. Right now what happens if a bank does 
not get an outstanding rating? Does anything happen?
    Mr. Padron. Well, one area which I think we have been 
lacking in enforcement of CRA, First American Bank of Chicago 
just announced yesterday in the Chicago newspapers that they 
have been found in non-compliance with the serious violation of 
CRA. I think that there have been a diversion in attention to 
CRA in the last couple of years, and I think that the issue 
comes to light mostly whenever a bank is in the process of 
acquiring another bank. And all of a sudden you see that they 
are starting to pay attention to it.
    I have, as Congressman Gutierrez indicated, spent a great 
deal of time throughout my professional life working on a pro 
bono basis in the area of economic development and access to 
capita, and you see that my personal experience is that most of 
these banks, large banks, when you approach them to initiate or 
to join in special programs to facilitate access to capital to 
minority-and women-owned businesses, the attraction for them is 
just not there. But only at times when they are being bought or 
they are buying another institution, then they come around and 
invite you to participate in whatever programs they have.
    So it is becoming an issue of enforcement, it is becoming 
an issue of having, as you indicated, the individuals from 
minority groups represented at a higher level of management, at 
the executive level of management or at the board level where 
they can influence these positions.
    Mr. Davis. Madam Chairwoman, if I can just steal an 
additional 30 seconds just to make my point. What you have 
touched on is something I do think is fundamentally important, 
and it is something that I hope that this panel will examine. 
There is no question that CRA has been a positive event. It has 
expanded community development work on the part of our 
financial institutions.
    But it is also very clear to me that exactly what this 
gentleman said is so, that if a bank chooses not to do its 
obligations under CRA, essentially the only thing that we do 
right now is to say, ``Oh, that is bad that they don't do 
more.'' And I think something that we need to look at is what 
can be done to incentivize compliance? On the flip side of it, 
what are the sticks if you don't get more proactively engaged 
in this area?
    And the final point that I would make is I do believe that 
a poor CRA rate has something to do with the absence of 
minority executives in prominent positions in the hierarchy. 
Thank you.
    Thank you, Madam Chairwoman.
    Chairwoman Kelly. Thank you very much.
    Mr. Baca?
    Mr. Baca. Thank you, Madam Chair. I appreciate the comments 
that were made by each of the panelists earlier when they were 
describing the need for minorities in diversity and having 
access. And we looked at access in terms of financing. We saw 
that yet there is a need for additional access, but at the same 
time it seems like we are cutting back the funding, and yet we 
have growth in minority, which also presents a problem in 
assuring that they do have.
    And when we looked at and discussed the lack of diversity 
in each of the areas, not only from Hispanics, black CPAs or 
women in certain areas and then talked about the double 
standards that are applied there in terms of the numbers and 
statistics that are used, but as you look at and you talk about 
education as being one, you can have education and I believe 
that we do have educated Hispanics, we have educated, blacks, 
we have educated women.
    And one of the things I was hoping that I would hear from 
you is that there needs to be sensitivity and there has to be a 
change, because without sensitivity and attitudes and 
behaviors, then you can draft a plan, any kind of a structure 
within any corporate America, but if that change and that 
sensitivity and that attitude and behavior isn't there, that is 
going to be hard to implement any kind of a plan that you have 
because you have the educational structure.
    I want you to address that perspective, any one of the 
panelists, in terms of the need for the change in sensitivity, 
attitude and behavior in order to make sure that we do have 
people that have the ability to be not only on our corporate 
board but our executive board as well as to look at lending 
because, Kennedy, you talked about guidelines that needed to be 
done. Well, that is part of it too as well when you change 
those kind of guidelines. Can any of you then just sort of like 
touch base on it?
    Ms. Hammond. I agree completely in the public accounting 
industry. I think that given the overwhelming white male 
dominance of the profession for so long, that even if the firms 
say that they would like to try to hire more African-Americans, 
they can't retain most African-Americans or Latinos who come to 
work for the firms.
    And the main reason for that is the culture of the firms 
themselves. And the firms don't recognize the fact that they 
don't adapt to the culture of the people who--they are not 
making any adaptation whatsoever to anything but a white male 
culture. So they don't recognize that they are hanging out or 
taking staff members out golfing who are only other white 
males. They don't recognize that African-Americans may not know 
what certain terminology means because they don't have any 
familiarity with that from their family background.
    And I think that one of the things that--besides the 
diversity training, I think that if there is such a white 
dominance in the management of these firms, that just an 
awareness of the experiences of others makes a huge difference. 
A lot of white people don't even know that only 30 years ago 
the same firms that they are working for refused to hire 
African-Americans, and so I think just an increase in awareness 
will help change the culture, just to know more about the 
backgrounds of other people instead of assuming that everyone 
has the same background as they do.
    Mr. Baca. Any one of you? Marc? Kennedy?
    Mr. Kennedy. Yes. I would like to piggyback on what Dr. 
Hammond had to say. Earlier, I talked a lot about the corporate 
diversity programs that many of the major financial services 
firms have initiated, and I think when you really look at the 
more successful programs, those are at institutions where you 
have a CEO who is passionately committed to making diversity 
happen throughout his or her organization.
    Mr. Baca. He is leading by example.
    Mr. Kennedy. Leading by example. And my sense is, at least 
from the recruiting work that I do in large financial services 
firms, that number is a very, very small number of CEOs who are 
passionately committed to making that happen. When you look at 
the business objectives every year for most of the major 
financial services----
    Mr. Baca. So what I am hearing is he is got to change his 
attitude.
    Mr. Kennedy. Well, you are going to have to change the 
attitude of a lot of other CEOs and leaders in the financial 
services world to make sure that they are more sensitive before 
they can then drive diversity down through their organization.
    Mr. Baca. Marc?
    Mr. Lackritz. Yes. Thank you, Congressman. I guess I would 
just note that it is changing. Only yesterday the new 
management team at CS First Boston that just came into place, 
the new CEO sent out a memorandum to his entire staff saying 
that the objectives going forward for the firm were, first, to 
become a world class investment bank; secondly, to produce a 
talented, ethnically diverse workforce; and I forget what the 
third one was. But that objective coming from the new CEO of a 
major investment banking firm sets the tone and I think really 
places the importance upon driving that through the whole 
organization.
    I can also tell you that all of our large firms have 
diversity sensitivity training as part of their employee 
orientation programs. That was not true 3 years ago, and it 
certainly wasn't true 10 or 15 years ago.
    Mr. Baca. Right. But then the problem is the implementation 
process. You can have the training, but if you don't implement 
it, then it becomes difficult. And I think all of us have 
procedures, guidelines but the implementation process. Because 
there are qualified individuals. I am always tired of hearing 
people say that we don't have enough qualified individuals to 
be on the board of directors, we don't have enough CEOs, 
minorities or women to become the CEOs. But we do have them.
    Mr. Lackritz. I think the point you are making is right. I 
think that procedures and processes and institutions are fine, 
but people do make the difference, and leadership really does 
matter.
    Mr. Baca. Ms. Fernandez, were you going to----
    Ms. Haar. Congressman Baca, thank you, members of the 
committee. I would like to make a point about the focus. We 
talk about diversity, and we talk about what is right, but 
there is a business reason here. We have for the first time in 
months where we will reduce our trade deficit. The president 
has trade promotion authority. We have before us by 2005 the 
discussion of free trade area of the Americas.
    What we are talking about here is part of the United States 
maintaining some sort of global competitiveness. If we are 
going to continue as the leading economy in the world, we have 
to become more globally competitive in these markets, and part 
of that is dealing with our own resources. Our minority 
communities here are our linkages to the rest of the Western 
Hemisphere and in terms of FTAA and, in essence, to the rest of 
the world.
    I think it is an extraordinary resource, and we sometimes 
have to look at it also as this is good business. You need to 
do this because this is good business. It makes you a better 
company and part of a global competitiveness initiative too.
    Mr. Baca. Thank you. Ms. Fernandez, could you please 
describe the relationship between----
    Chairwoman Kelly. Mr. Baca? Mr. Baca? I am sorry, you are 
already two and a half minutes over your time. I will come back 
to you in a minute, but Mr. Scott has been waiting.
    Mr. Scott?
    Mr. Scott. Thank you very much, Ms. Kelly. First question 
to whoever may want to take this: What percentage of chief 
diversity officers in these firms report directly to the CEO?
    Mr. Lackritz. I don't have an exact percentage for you. I 
know in some firms they do, and in other firms they report to 
the head of Human Resources who reports to the CEO. It varies. 
I can try and get a more specific number.
    Mr. Scott. I mean could we, just generally, from you all's 
experience, would you say half of them, 10 percent of them, 20 
percent, most of them?
    Ms. Haar. Very few.
    Mr. Scott. Very few. Good. That is----
    Mr. Kennedy. I would probably estimate 20 to 25 percent, 
maybe one in 4, of the larger financial services firms.
    Mr. Scott. And don't you think therein lies a part of the 
problem for the inaction in much of the things that you have 
said is the fact of that, and that that would be one 
recommendation and finding that we could come out of this 
hearing, that we find an inadequacy and so the record would 
reflect that this committee could be in the position of making 
that recommendation.
    Certainly, as a member of this Financial Services 
Committee, I would certainly want to go on record as one of the 
areas in which we can improve in and should work towards is the 
fact that for diversity to be taken seriously, it has got to 
come from the top. And the person in charge of diversity should 
report directly to the CEO.
    Now, with that in mind, Mr. Kennedy, without necessarily 
putting you on the spot, I would like to know do you report to 
the CEO at Korn/Ferry?
    Mr. Kennedy. Well, indirectly, I do. Obviously, we are a 
publicly traded company now. We went public in 1998. But prior 
to that we were a private partnership. So the way that we are 
structured, I report into a regional managing director who then 
in turn reports into the CEO of Korn/Ferry.
    Mr. Scott. All right.
    Mr. Kennedy. But I am not head of our diversity practice. I 
am just one of the members of our diversity practice, but I 
tend to have a specialty within financial services.
    Mr. Scott. Well, hopefully, after this hearing it gets to 
report back to C-SPAN and they might make that promotion for 
you.
    [Laughter.]
    I hope that positive comes out of this.
    Now, Mr. Kennedy, you mentioned in your testimony you 
referred to scam representations, if I remember correctly, of 
minorities and women. Would you share with us what you mean by 
scam representations in diversity and describe one of those for 
us?
    Mr. Kennedy. Yes. What I meant was scant, S-C-A-N-T.
    Mr. Scott. Oh, scant.
    Mr. Kennedy. Yes, scant.
    Mr. Scott. Okay.
    Mr. Kennedy. Very little representation of minorities and 
women. And I think the point I was making there it gets to the 
private equity venture capital segment. When you look at the 
numbers of people of color and women who are in private 
partnership, private equity funds, there is scant 
representation. And the implications for that then are that 
since the majority of private equity funds are in this private 
partnership structure, then you have a whole group of people 
who, by and large, have been excluded from participating in the 
venture capital arena, at least most of the mid-size and larger 
funds.
    Mr. Scott. Okay. This question: I would think a purpose, a 
part of our purpose as the Financial Services Committee in this 
hearing is to receive input from you. And a part of that is to 
determine what, if anything, we in Congress can do or act upon. 
And with that in mind, I would like to give you all, those of 
you who may wish to ponder this question, the opportunity of 
sharing with this committee what do you think we in Congress 
can do to improve the picture of diversity in corporate 
America, in the financial services industry particularly, and 
access to capital? And not only what we can do through our 
bully pulpit, through persuasion but also through specific 
legislation and through Federal agencies.
    Ms. Haar. Congressman Scott, you made an excellent point 
about reporting to the CEO. Although I am not an expert in 
Sarbanes-Oxley, it is my understanding that the CEO now has to 
sign off on the financials as part of that. If an expansion of 
that included that he would have to sign off on his diversity 
mission, that would be an extraordinary thing. If it is a wish 
list, an expansion of CRA to include the pension funds and 
other areas, insurance companies in the financial services 
industry, that would be extraordinary.
    And perhaps research--what would be the arm of the Congress 
that funds the research?
    Chairwoman Kelly. That would be somebody like GAO.
    Mr. Scott. General Accounting Office.
    Chairwoman Kelly. The General Accounting Office. There are 
several places for us to go to get research like that.
    Ms. Haar. Part of the reason that we are not moving forward 
is that everyone has proprietary data and it is not really 
being shared. So none of us are really getting a picture of how 
bad it is. We know in the areas that we look at, but if you 
actually investigated and looked at the total picture in the 
country, it would be incredible.
    Chairwoman Kelly. If the gentleman will yield for a moment.
    Mr. Scott. Yes, go ahead.
    Chairwoman Kelly. That is probably a fairly good idea. What 
if we asked GAO to put together this information and report 
back to us?
    Mr. Scott. I think that would be excellent.
    Chairwoman Kelly. Okay. Then so moved.
    Ms. Fernandez Haar, you have actually accomplished what you 
wanted here, I hope.
    Ms. Haar. Thank you very much.
    Chairwoman Kelly. Thank you.
    Ms. Hammond. I would like to include the CPA firms in that 
and not just the financial services industry.
    Chairwoman Kelly. So moved.
    Ms. Hammond. Historically, the CPA firms have only 
responded to pressure from two different groups: Their clients 
or the SEC through Congress. And because they are supposed to 
be accountable to the public, Congress, I think, plays an 
important role in encouraging them to share this kind of 
information so that we can track and see who is doing well and 
who isn't and how we can do better.
    Mr. Scott. Thank you.
    Mr. Kennedy?
    Mr. Kennedy. And I actually have a couple of thoughts as 
well. First, as we may have talked about earlier, I think it 
would be beneficial to take another look at the SBA and the 
SBIC Program, specifically to revamp aspects of that to make it 
more attractive to place equity capital into minority and 
women-only businesses, and I think that would be one way.
    The other thing would be to take a look at the public 
pension fund industry, and we didn't talk about it in my bio, 
but I am actually chairman of the board of the State of 
Georgia's Employees' Retirement Pension Fund. We have about $14 
billion in assets under management, and partly what we do is 
that we actually work with some minority-owned asset management 
firms that do an outstanding job for us to help them grow.
    So when I go to many of the national conferences of various 
public funds, there are very few people of color represented on 
boards there. We had the only African-American executive 
director running a public pension fund in the country in 
Georgia who just left a couple months ago.
    So I think that would be one area that I would ask you to 
take another look at, because you are talking trillions and 
trillions of dollars, and, certainly, there must be a way to 
get some of the assets from the public pension fund into 
minority-owned and women-owned asset management firms, but it 
has to be done the right way. So it can't just be a handout, it 
has got to be done the right way.
    Mr. Scott. Okay. Does anyone else want----
    Chairwoman Kelly. If the gentleman will yield.
    Mr. Kennedy, we have just added that to our list.
    Mr. Lackritz. I don't have any specific legislative 
suggestions. I think your bully pulpit, your shining a 
spotlight on the issue continues to push us as a group, as an 
industry to continue to do better. I don't think now we need 
that push, but I think it is important to keep the spotlight 
on. I think sunshine is the best disinfectant, and I think from 
the standpoint of transparency, it has remarkable effects. So I 
really commend the chair and the subcommittee for holding this 
hearing.
    Mr. Scott. Thank you.
    Chairwoman Kelly. Mr. Scott, thank you.
    Mr. Scott. Thank you.
    Chairwoman Kelly. Mr. Baca, let us go back with you. With 
the indulgence, I am going to ask the panel first, you have 
been here with us for some time. This constitutes a second 
round of questioning, so I want to make that very clear. If you 
have to catch a plane, if there are other things that you need 
to do right at this moment, if you could indulge us so that Mr. 
Baca could finish this with his final question, I would be very 
grateful. Is that acceptable to you? Let it be seen as they are 
all shaking their heads. Thank you.
    Mr. Baca, please.
    Mr. Baca. Thank you very much, Madam Chair. Just a couple 
of questions.
    One, Ms. Fernandez, could you please describe the 
relationship between the lack of Hispanic leadership on 
corporate boards and executive management teams and the flow of 
capital into the Hispanic community throughout the United 
States?
    Ms. Haar. Yes. In terms of corporate America, one of the 
things that happens is that the initiatives have already 
improved at the consumer level, so they are more than willing 
to advertise that industry has grown $3 billion and Spanish 
advertising, this is just corporate, to deliver the consumer 
business to the bottom line.
    In the absence of senior executives or members of the 
board, the relationship does not grow to the next level, which 
is wealth creation. That means that, for example, in 
procurement, we have made progress, we can sell office 
supplies, but the financial services of the private funds and 
other high-end services, including accountants fees, for 
example, are not available.
    The minority communities are not taken into account when 
investments are going to be made into new distribution centers 
or plans. So the entire wealth creation machinery does not work 
in a fair and equitable way.
    Mr. Baca. What specific recommendations do you propose to 
members of this committee to enact to ensure economic 
empowerment to the Hispanic community, and what should be the 
consequences of hearing focused on and what legislative steps 
can we take?
    Ms. Haar. The one thing I want to do is express our extreme 
appreciation because the gentleman was right, your shining 
light on it, in and of itself, puts everyone on notice that it 
is an issue that is important and it is not going to go away. 
That is number one.
    The other areas that we talked about, getting credible 
numbers, because the excuse oftentimes is we don't have the 
numbers, prove it. That is why we as an industry could not even 
grow in the media until there was media measurement. And coming 
from Congress, I think it is the most important thing. The 
minority community has only been recognized really, really as 
of the last census, and that is because it was the official 
U.S. government numbers, credible numbers saying how many of us 
and how diverse we were. So that is critical.
    CRA, I think, has incredible potential, as we have 
mentioned earlier. And, for sure, the pension fund--we at the 
New America Alliance have a pension fund initiative. We have 
gone into State pension funds training the legislators, asking 
them and teaching them to ask the questions that we shared with 
you today: What is the composition of your board, what does 
your Investment Committee look like, how many investments have 
you made to minority companies? Those three questions, 
Congressman Baca and members of the committee, will be 
critical.
    Mr. Baca. Thank you. One other question. In your white 
paper released last year, you reviewed that the asset 
management industry you identified fewer than 20 Latino asset 
managers in your survey. Only one Latino firm was identified in 
the top 100 asset managers. You have also suggested that public 
funds should be given specific guidelines that should 
facilitate the inclusion of Latino firms and asset teams. Which 
pension funds have a model out there that other funds can 
emulate?
    Ms. Haar. That is a difficult question, because in absolute 
numbers we can see that Calperse, for example, has done more 
than anyone, as an example, but yet the percentage is dismal in 
its comparison. The white paper has it in great detail, those 
four areas that we studied, but I do believe that training 
other legislators with the State fund or taking examples from 
you that could be applied under perhaps more of an umbrella 
guideline will be really critical.
    Now, we have legal counsel and experts from an organization 
here who have a more specific focus than I do, and I am sure 
that they would be available to answer any questions.
    Chairwoman Kelly. Thank you very much.
    Thank you, Mr. Baca.
    Mr. Baca. Madam Chair, can I have unanimous consent to put 
the white paper on record?
    Chairwoman Kelly. By all means. So moved.
    Mr. Baca. Thank you.
    [The following information can be found on page 87 in the 
appendix.]
    Chairwoman Kelly. Thank you very much. The chair notes that 
some members may have additional questions for this panel, and 
they may wish to submit those in writing. So without objection, 
the hearing record will remain open for 30 days for members to 
submit written questions to these witnesses and place their 
responses in the record.
    I want to thank this panel, the witnesses today. You have 
indulged us longer than we expected, and for that we are very 
grateful. Thank you so much for your appearance today.
    This hearing is adjourned.
    [Whereupon, at 12:49 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                             July 15, 2004


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