[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
MINORITIES AND WOMEN IN
FINANCIAL REGULATORY REFORM:
THE NEED FOR INCREASING
PARTICIPATION AND OPPORTUNITIES
FOR QUALIFIED PERSONS AND BUSINESSES
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND
INVESTIGATIONS
AND THE
SUBCOMMITTEE ON
HOUSING AND
COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
MAY 12, 2010
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-135
U.S. GOVERNMENT PRINTING OFFICE
58-045 PDF WASHINGTON : 2010
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES A. WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Oversight and Investigations
DENNIS MOORE, Kansas, Chairman
STEPHEN F. LYNCH, Massachusetts JUDY BIGGERT, Illinois
RON KLEIN, Florida PATRICK T. McHENRY, North Carolina
JACKIE SPEIER, California RON PAUL, Texas
GWEN MOORE, Wisconsin MICHELE BACHMANN, Minnesota
JOHN ADLER, New Jersey CHRISTOPHER LEE, New York
MARY JO KILROY, Ohio ERIK PAULSEN, Minnesota
STEVE DRIEHAUS, Ohio
ALAN GRAYSON, Florida
Subcommittee on Housing and Community Opportunity
MAXINE WATERS, California, Chairwoman
NYDIA M. VELAZQUEZ, New York SHELLEY MOORE CAPITO, West
STEPHEN F. LYNCH, Massachusetts Virginia
EMANUEL CLEAVER, Missouri THADDEUS G. McCOTTER, Michigan
AL GREEN, Texas JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri GARY G. MILLER, California
KEITH ELLISON, Minnesota RANDY NEUGEBAUER, Texas
JOE DONNELLY, Indiana WALTER B. JONES, Jr., North
MICHAEL E. CAPUANO, Massachusetts Carolina
PAUL E. KANJORSKI, Pennsylvania ADAM PUTNAM, Florida
LUIS V. GUTIERREZ, Illinois KENNY MARCHANT, Texas
STEVE DRIEHAUS, Ohio LYNN JENKINS, Kansas
MARY JO KILROY, Ohio CHRISTOPHER LEE, New York
JIM HIMES, Connecticut
DAN MAFFEI, New York
C O N T E N T S
----------
Page
Hearing held on:
May 12, 2010................................................. 1
Appendix:
May 12, 2010................................................. 33
WITNESSES
Wednesday, May 12, 2010
Bethel, Pamela J., Esq., Partner, O'Riordan Bethel Law Firm, LLP,
on behalf of the National Association of Minority- and Women-
Owned Law Firms................................................ 11
Boston, Thomas D., Professor of Economics, Georgia Institute of
Technology..................................................... 12
Brown, Orice Williams, Director, Financial Markets and Community
Investment, Government Accountability Office (GAO)............. 4
Chaparro, Alexander, Chairman, National Association of Hispanic
Real Estate Professionals (NAHREP)............................. 14
Graves, Orim, Executive Director, National Association of
Securities Professionals (NASP)................................ 16
Loumiet, Carlos E., Partner, Hunton & Williams LLP, and Chair,
New America Alliance, on behalf of the U.S. Hispanic Chamber of
Commerce....................................................... 18
Wimbish, Vincent, President and Chief Executive Officer, National
Association of Real Estate Brokers (NAREB)..................... 20
APPENDIX
Prepared statements:
Moore, Hon. Dennis........................................... 34
Bethel, Pamela J............................................. 35
Boston, Thomas D............................................. 40
Brown, Orice Williams........................................ 44
Chaparro, Alexander.......................................... 62
Graves, Orim................................................. 66
Loumiet, Carlos E............................................ 77
Wimbish, Vincent............................................. 82
MINORITIES AND WOMEN IN
FINANCIAL REGULATORY REFORM:
THE NEED FOR INCREASING
PARTICIPATION AND OPPORTUNITIES
FOR QUALIFIED PERSONS AND BUSINESSES
----------
Wednesday, May 12, 2010
U.S. House of Representatives,
Subcommittee on Oversight and
Investigations, and
Subcommittee on Housing and
Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittees met, pursuant to notice, at 2:48 p.m., in
room 2128, Rayburn House Office Building, Hon. Dennis Moore
[chairman of the Subcommittee on Oversight and Investigations]
presiding.
Present from the Subcommittee on Oversight and
Investigations: Representatives Moore of Kansas, Adler; Biggert
and Lee.
Present from the Subcommittee on Housing and Community
Opportunity: Representatives Waters, Cleaver, Green, Clay,
Donnelly; Capito, Biggert, Jenkins, and Lee.
Also present: Representatives Watt and Hinojosa.
Chairman Moore of Kansas. This joint hearing of the
Subcommittee on Oversight and Investigations and the
Subcommittee on Housing and Community Opportunity of the House
Financial Services Committee will come to order.
I apologize for the delay in getting started. They called
votes and we just finished, we are back, and more members, I
hope, will be filtering in as we go along here.
Our hearing this afternoon is entitled, ``Minorities and
Women in Financial Regulatory Reform: The Need for Increasing
Participation and Opportunities for Qualified Persons and
Businesses.'' We will begin this hearing with members' opening
statements up to 10 minutes per side, and then we will hear
testimony from our witnesses. For each witness panel, members
will have up to 5 minutes to question our witnesses.
The Chair advises our witnesses to please keep your opening
statements to 5 minutes to keep things moving so we can get to
members' questions. Also, any unanswered question can always be
followed up in writing for the record.
Without objection, all members' opening statements will be
made a part of the record.
I will recognize myself for 2 minutes for an opening
statement. At some point, I think Chairwoman Maxine Waters will
be over here as well. Mr. Chris Lee is occupying that chair
right now.
As the Senate continues debating financial regulatory
reform and key issues such as increasing consumer and investor
protections and ending ``too-big-to-fail,'' I am pleased our
two subcommittees are focused on something today that is too
important to ignore, and that is the importance of increasing
participation and opportunities for all qualified persons,
including women and minorities.
I want to commend my colleague, Chairwoman Waters, for
asking me to do this joint hearing with her on this important
issue. She has been a vigorous defender of equal protection of
the law and ensuring that all Americans, no matter who they are
or where they are from, have a chance to do great things.
She always contributes her ideas and works hard on every
piece of legislation this committee considers to make certain
everyone has a fair opportunity to participate and no one is
shut out of the process.
For today's hearing, I look forward to hearing from GAO,
which issued an excellent report a few years ago entitled,
``Financial Services Industry, Overall Trends in Management-
Level Diversity and Diversity Initiatives, 1993 to 2004.'' I
look forward to hearing GAO's observations and any update they
can provide on this important report.
One concern I have is that women- and minority-owned
businesses are adversely impacted by the aftermath of the
financial panic we saw in 2008 and the ensuing great recession.
I am also concerned that in the administration of TARP, not
enough focus was paid to who was getting the money. We need to
review this and ensure that no one was shut out of the process
to become a contractor or recipient of TARP funds.
As the Senate debates financial regulatory reform, we need
to make sure that diversity is considered and fully
incorporated into the final bill the President will sign into
law.
Every financial agency, both old and new, must redouble
their efforts to pay more attention to these issues and provide
everyone within their agency a chance to move up and become the
next Federal Reserve Chairman or Secretary of the Treasury. We
owe that to all of our constituents. We owe that to our
children and our grandchildren.
At this time, the Chair will recognize Mr. Lee for 1
minute.
Mr. Lee. Thank you, Mr. Chairman. I am pleased that we are
having this opportunity to hear from Ms. Williams Brown today
about this issue. I think it is important that we understand
the dynamics of what is going on in the financial market and
what impact it is having on the minority community.
I am looking forward to your testimony. With that, I yield
back.
Chairman Moore of Kansas. The Chair will recognize Ms.
Waters for up to 5 minutes for an opening statement.
Chairwoman Waters. Thank you, Chairman Moore, for joining
me for this joint hearing on minorities and women in financial
regulatory reform, the need for increasing participation and
opportunities for qualified persons and businesses.
Last year, the House passed a comprehensive regulatory
reform bill, H.R. 4173, the Wall Street Reform and Consumer
Protection Act of 2009. That bill included an important
provision authored by me and nine other Congressional Black
Caucus members of this committee.
Our amendment would establish offices of minority and women
inclusion at each of the Federal banking agencies to address
the lack of employment and contracting opportunities available
to minorities and women in our financial services agencies.
The case for the amendment was as clear then as it is now.
Minorities and women remain underrepresented in our government
financial services agencies. For example, according to data
from the Office of Personnel Management, Hispanics only account
for 8 percent of employees at the Treasury Department; 4.2
percent of employees at the FDIC; and 4.8 percent of employees
at the Securities and Exchange Commission.
Within the Department of the Treasury, African Americans
and Hispanics have an average pay grade of 8.8 and 8.3, almost
a full grade lower than Whites, who have an average grade of
9.6.
The picture in the private sector is not much better, as
GAO will testify today, minorities and women remain limited in
their participation in the financial services industry. From
2005 through 2008, African Americans and Hispanics only held
6.3 percent and 5 percent of management positions in this
sector.
In addition, minority- and women-owned businesses
frequently find themselves excluded from contracting
opportunities with financial services agencies.
The financial meltdown elicited an historic response from
agencies such as Treasury and the Federal Reserve while
undertaking efforts to shore up our economy. These agencies
entered into contracts, some of which were no bid, with
companies they regularly contract with, in order to assist them
in carrying out these economic recovery programs.
For example, the Federal Reserve selected 4 firms to manage
its $1.2 trillion mortgage-backed securities purchase program
through a closed RFP process.
While I believe our agencies should have the ability to act
quickly in the event of an emergency, I am concerned that
because of the challenges facing minority- and women-owned
businesses, they are less likely to be known entities and are
therefore less likely to have existing relationships with these
agencies. And as these kinds of contracts can often lead to
more contracts, this kind of exclusion can become permanent.
We have raised these concerns with the Administration and
they have taken some steps to address these disparities, for
example, the White House has taken its first steps to address
this problem by issuing an Executive Memorandum to establish an
interagency taskforce to improve contracting to small
businesses.
In addition, the Treasury required all of the fund managers
for its Legacy securities public/private investment program to
partner with minority- and women-owned businesses.
While I commend the Administration for these actions, it
remains vitally important to institutionalize access for
minorities and women through the establishment of offices of
minority and women inclusion.
These offices would ensure that whether it is an emergency
or if it is simply the day-to-day business of the agency, a
senior level person charged with diversity will be in the room
and will be able to inform the agency about the impact of their
decisions on minority- and women-owned businesses.
The offices would also be charged with increasing diversity
within the agency and among its contractors. This is a solution
that is long overdue.
I welcome the testimony of our witnesses on this important
provision, and I thank you, Mr. Chairman, and yield back the
balance of my time.
Chairman Moore of Kansas. Thank you. I am pleased to
introduce our first witness this morning, Ms. Orice Williams
Brown, Director of Financial Markets and Community Investment,
GAO.
Ms. Williams Brown, it is a pleasure to have you before our
subcommittee again. Without objection, your written statement
will be made a part of the record. You are recognized for 5
minutes.
STATEMENT OF ORICE WILLIAMS BROWN, DIRECTOR, FINANCIAL MARKETS
AND COMMUNITY INVESTMENT, GOVERNMENT ACCOUNTABILITY OFFICE
(GAO)
Ms. Williams Brown. Thank you. Mr. Chairman, Madam
Chairwoman, Ranking Member Capito, and members of the
subcommittees, I am pleased to be here today to discuss our
past work on diversity in the financial services sector.
While most of our findings are based on past work, we have
updated several key statistics through 2008. My statement today
will focus on the status of minority and women diversity in the
financial services sector, and efforts the industry has taken
to increase diversity and the challenges it faces.
First, let me highlight a few key statistics. Our past work
revealed that from 1993 through 2004, White women
representation among managers and officers was about one-third
throughout this period. Minorities had increased from 11.1
percent to 15.5 percent.
EEOC's revised data for 2005 through 2008 show that
representation by White women decreased by almost one
percentage point during this period, and minority
representation increased almost two percentage points,
primarily due to increases in Asian and Hispanic representation
among managers and officers.
However, in the past, you may recall that we pointed out
that this broad category of officers and managers, which
includes everyone from CEOs to managers of a small bank branch,
may overstate the representation of women and minorities among
senior managers in the industry.
Recognizing this limitation, EEOC revised its category of
managers and officers by splitting this broad category into two
more narrow categories: one that captures senior level managers
and executives; and another that captures first and mid-level
managers and officers. Using data from the new category of
senior level executives, we found that the old broader category
did in fact overstate the level of women and minority
representation in upper management, specifically in 2008, the
representation of White women among executives and senior level
officials was 27 percent, and 10 percent for minorities. By
minority group, the breakout was: 2.8 percent for African
Americans; 3 percent for Hispanics; and 3.5 percent for Asians.
As noted in our 2006 report, although financial services
firms and trade groups told us they had initiated programs to
increase workforce diversity, these initiatives faced
challenges that may provide some insight into why diversity at
the management level has not changed substantially.
Most said that diversity was an important goal and the top
leadership was committed to recruiting and retaining minority
and women candidates.
A few firms had even started to link managers' compensation
and performance in promoting workforce diversity.
Among the challenges cited were gaining buy-in of employees
such as middle managers who play a key role in implementing
diversity initiatives, and fully leveraging the internal
pipeline of minority and women for management positions.
For example, as mentioned earlier, in 2008, the executive
or senior level officers and managers' category showed that 27
percent were White women and 10 percent were minorities.
However, the first and mid-level managers and professionals'
categories, a possible pipeline for top management talent, was
more diverse, with White women representing 38 percent of first
and mid-level managers and 39 percent of professionals, and
minorities representing 19 percent of first and mid-level
managers and 25 percent of professionals.
In closing, with the implementation of a variety of
diversity initiatives over the past 15 years, diversity at the
management level in the financial services industry has
improved but not changed substantially.
Further, EEOC's new data provide a clear view of diversity
among top management, showing that diversity is lower than the
overall industry management statistics had indicated.
Initiatives to promote management diversity at all levels
within financial services firms face several challenges.
Moreover, the impact of the recent financial crisis on
diversity also warrants ongoing scrutiny.
Without a sustained commitment to overcoming existing
challenges, management diversity in the financial services
industry may continue to remain largely unchanged over time.
Mr. Chairman, Madam Chairwoman, and Ranking Members, this
concludes my oral statement, and I would be happy to answer any
questions that you may have. Thank you.
[The prepared statement of Ms. Williams Brown can be found
on page 44 of the appendix.]
Chairman Moore of Kansas. Thank you for your testimony, Ms.
Williams Brown. I recognize myself for 5 minutes for questions.
Reviewing the two charts on pages six and seven of your
testimony, those lines are very flat. If you compare these
numbers with the demographics in the United States, minorities,
which made up 34 percent of the general population in 2008,
according to the Census Bureau, are underrepresented by roughly
50 percent in the financial industry, making up only 17 percent
of management, but the most recent data ends in 2008, and I am
concerned there is a distinct possibility that women and
minorities, perhaps new to their management positions, bore the
blunt of the layoffs and lost jobs as a result of the financial
crisis.
Is that a possibility, Ms. Williams Brown, and if so, what
are your thoughts about the possible impact on efforts to
improve diversity initiatives?
Ms. Williams Brown. I think really without the data, it is
hard to speculate about what it would show. I think it is
possible it could change based on the new category that EEOC
introduced in 2007. We now have a clearer picture for what
diversity actually looks like at the very top level at
organizations.
I think it is an understandable concern and it is one that
has been raised by others, and that is what impact the
financial crisis has had on diversity. There is a possibility
that the actual statistics could be a lagging indicator of the
impact.
Another area that we have tracked is the pipeline issue,
and that is looking downstream at other positions that could
eventually flow into top management positions, and also
monitoring those statistics to see if there is an impact at
that level. It could actually impact the statistics at upper
management levels in future years.
Chairman Moore of Kansas. Thank you. I appreciate the quick
work that you and your colleagues at GAO did to update these
numbers. You also note in your testimony that the kind of data
available used for your 2006 report has changed and that makes
it difficult to view trends with respect to some of that
information.
It would seem worthwhile to give GAO some time to write a
new report focusing on trends in the industry since the 2006
report with a special focus on the impact of the financial
crisis on women and minorities in the financial industry.
Would that make sense to you, Ms. Williams Brown?
Ms. Williams Brown. I would say yes, it does make sense.
Our only concern would be that when we did this work, we really
did focus on trend analysis versus a particular point in time,
and we were able to update this through the available
statistics which went through the end of 2008.
In several months, EEOC should have available the
statistics for 2009. That will give us an additional data
point, but we also think that a couple of additional years
would be the most informative, but this is something that once
again I think it makes sense to continue to monitor.
Chairman Moore of Kansas. Very good. Chairwoman Waters,
would you be interested in working with me to make this formal
request of GAO for a new report identifying the key issues that
we would like GAO to focus on, and I would welcome other
members who might be interested, too?
Chairwoman Waters. Absolutely. I look forward to that.
Chairman Moore of Kansas. Very good. I have 1\1/2\ minutes
left. I will ask you one more question, if I can, please.
Starting on page 11 of your written testimony, you mention
4 key challenges that may have affected the success of
financial industry workforce diversity initiatives.
If you could only choose one that most troubles you from
the standpoint of being the largest obstacle to improving
diversity, which one would you choose and why?
Ms. Williams Brown. I would go to fully leveraging the
internal pipeline and I think the most recent EEOC statistics
really illustrate the challenge associated with that. If you
look at the upper level positions and the demographic makeup
among those positions, and you look at the pipeline, you
actually see greater diversity at the first and mid-level as
well as the professionals' category compared to the upper level
management, so I think to the extent that organizations have
been challenged in finding a way to leverage that pipeline so
they actually are able to retain their talent and have them
fill those upper level positions, that has been a huge
challenge for the industry.
Chairman Moore of Kansas. Very good. Thank you.
Ms. Williams Brown. You are welcome.
Chairman Moore of Kansas. I will now recognize Ranking
Member Capito for up to 5 minutes for questions.
Mrs. Capito. Thank you, Mr. Chairman, and I want to thank
the witness. In your testimony, you mentioned that diversity in
the financial services industry at the management level did not
really change significantly from 1993 to 2008.
My question is, is the pool of minority candidates limited
or are potential candidates going somewhere else? Have you been
able to identify what the stumbling blocks are of getting more
candidates and more people interested and more people actually
filling these positions? Can you pinpoint some problem areas?
Ms. Williams Brown. When we discussed this issue with
representatives in the industry, a few issues rose to the
surface. One, once again, is the pipeline issue. Part of that
is the external pipeline.
In the financial services sector, many point to the issue
that you often need a Bachelor's degree, and in some cases, a
Master's degree is preferred. You have to look to the pipeline
of available MBAs, for example, and watch trends there.
Many affinity groups as well as organizations have been
taking steps to try to increase the pipeline of available
talent.
We also heard from some of the associations and affinity
groups that we spoke to that organizations tend to continue to
go to the same universities, for example, to attract their
talent, and those universities may not have a diverse pool of
potential talent. Many recommend they broaden their potential
pool of talent when they are actually recruiting.
Mrs. Capito. I guess what we are seeking obviously is
diversity and opportunity for all groups, for every group, for
women, minorities, men, whomever, young, educated folks.
Do you have any experience with actually trying to
legislate that these things move forward or is the best
legislation to create awareness and statistics that maybe back
up the trends?
Do you have a sense of the best way to really shine a light
on this topic? That is a big general question, I understand.
Ms. Williams Brown. I will give it a try. I think shining a
light is a huge part of the process. I also look to certain
recent initiatives. For example, the SEC recently passed a rule
that requires corporations in their proxy statement to disclose
their efforts to address diversity at the corporate board
level, and that disclosure has to be put in the proxy
statement, and it also should address the issue of how any
practices they have in place are going to be measured.
I think one of the things that really comes to light in
terms of diversity, and it is one of the key practices, is tone
at the top. Another is accountability and measurement, and one
of the things that came out in the 2007 SIFMA study of the
industry on diversity, they raised the point that what is
measured gets done.
I think it takes effort at every level, but most of it
really has to happen at the firm level.
Mrs. Capito. Thank you, Mr. Chairman.
Chairman Moore of Kansas. Thank you. Ms. Waters, you are
recognized for 5 minutes for questions.
Chairwoman Waters. Thank you very much. I would like to
thank Ms. Williams Brown for being here today. I am pretty much
familiar with the statistics and your data.
We have known for many, many years that most of the
minorities in these firms are at the entry level and the lower
levels, and this has persisted for many years now.
It is not about whether or not they are moving up the
pipeline. It is about whether or not you have a pipeline and
whether or not you intend to have a pipeline, and whether or
not you are committed to a pipeline. History has taught us this
has not changed, that they are concentrated at the bottom and
basically never make it to the top.
We have come up with what we think can be a solution, and
while that is not your job to do, I would like to explain to
you, as we looked at the Wall Street Recovery bill, and we
looked at the Consumer Protection Financial Agency, and the
oversight committee that was being created, it was glaring.
There were no minorities. There were all Whites, only two
women, and all of your financial services agencies were
identified there, from Treasury to the FDIC to the Fed.
We thought just from looking on the government side that in
order to have these issues raised and have some attention paid
to it, we really have to have people who are committed to it
and who see it in the best interest of those communities to be
involved.
We came up with several things on the government side. We
came up with the offices of minority inclusion, to be created
for each of these financial services agencies, so there is
someone who is sitting at the table who can say ah, friends, do
you not remember that we just had a subprime meltdown where
minority communities were targeted, where they were sold bad
products, where they were talked into no doc loans and ARMs,
that the greatest foreclosure problems are in those
communities.
The very people who had suffered because of the lack of
anybody caring and watching out are the very people who cannot
get hired in government or in the private sector. We came up
with those offices of minority inclusion to put some people at
the table.
We think that whether it is in the private sector or in the
public sector, unless you create something inside these
businesses or government whose attention will be directed
toward solving this problem, it is not going to happen.
You could come here year after year, and I do not know how
long you will be in service or how long you have been there,
but I have been hearing this for many years, the concentration
at the bottom.
The goodwill statements, we believe in diversity, but the
proof of the pudding is not in the eating. We have to take
affirmative steps to do something. That is why we did the
office of minority inclusion that is being resisted by the same
people who resist diversity.
Having said all that, do you agree that this problem is one
where people say they are concerned about it but their actions
have not shown they have taken a lot of steps to do anything
about it?
You talked about a little something that has been done at
the SEC. Do you see any other real efforts that you can
identify that is being put forth to address this diversity
issue?
Ms. Williams Brown. I will say one of the things I did in
preparation for the hearing is I went on to a variety of Web
sites this morning to see what a cross section of institutions
had to say. They all had diversity statements. They had nice
diversity statements.
When I look at that, and I also look at a survey conducted
by Toigo Foundation, I found that many of the folks in the
industry believe that there is not a true commitment to
diversity, and they have begun to see somewhat of a shift since
the financial crisis.
I would say yes, they say they believe in diversity, but
when you look at the statistics, it does raise an obvious
question.
Chairwoman Waters. I would like to thank you. We just have
been fighting this problem and struggling with it for so many
years, until sometimes you want to give up, but you know you
cannot. Whether we are talking about in the financial services
industry or for example, with the new appointment to the
Supreme Court, who says Thurgood Marshall is her idol, and she
had 29 White men at Harvard, not one Black, and a couple of
women.
We know that the spoken words are not matched with real
actions, and we have to come up with ways by which to take
concerted action and effort to do something about this problem.
For those of us who are trying to bring about justice and
equality in this society, we just cannot continue to sit and
hear the information year after year after year about everybody
who believes in diversity but does nothing about it.
We are going to submit your information to the Senators on
the other side as we deal with the office of minority
inclusion. We are going to do everything we can to make it
public. Your observances of having looked at all these Web
sites and seeing the spoken word but not seeing the actual
results of any real action taken, we will try to use that to
help us to open these opportunities up.
I thank you so very much.
Chairman Moore of Kansas. I thank the gentlelady. At this
time, without objection, Representative Watt will be recognized
as a member of the subcommittee for the duration of this
hearing, and sir, if you have questions, you are recognized for
up to 5 minutes.
Mr. Watt. Mr. Chairman, I think I will pass. I missed the
wonderful opportunity to hear Ms. Williams Brown. I will
certainly review carefully her testimony and express my thanks
to her for being here. I will not question her for fear I will
re-tread territory that has already been tread.
Chairman Moore of Kansas. Thank you, sir. At this time, the
Chair will recognize Mr. Green for up to 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the witness for
appearing.
I would like to share a statement that I heard just today
that I think is relevant. It was stated by a member whose name
I shall not mention. It was indicated by this member that if
you are not at the table, you are on the menu. If you are not
at the table, you are on the menu. I have been on the menu most
of my life. It feels good to be at the table, but not everyone
who is at the table is a diner.
We have a constant struggle and a constant battle to accord
equality of opportunities to persons who are capable,
competent, and qualified. It is important to mention this.
Capable, competent, qualified, and when you are talking about
businesspeople, capable, competent, qualified, and who have
money. Capable, competent, qualified with money, and still
cannot do business.
We have to find, as the chairwoman of the Housing
Subcommittee has indicated, a better way to do business. Year
in and year out, reports are not quite enough to make the
difference that we seek.
The office of inclusion, rather the offices, really, of
inclusion, because they will be in a multiplicity of agencies,
they provide the opportunity for us to have a hands-on
experience to a limited extent on a day-to-day basis, so that
we do not have to wait until the end of a year to pick up some
empirical evidence that may be irrelevant by the time that we
acquire it.
I salute you for what you do, and I compliment you for what
you do. My hope is that what you have presented to us by way of
empirical testimony and empirical evidence will provide us the
means by which we can move now to this office of minority
inclusion, or these offices, so that we may have this notion of
inclusiveness, equality of opportunity, for capable, competent,
and qualified people on the agenda on a daily basis.
Final point: My belief is you are eminently correct when
you indicate that the tone and tenor is set by the person at
the top. If the person at the top wants it to happen, it
usually occurs. The person at the top has to be willing to say
there are capable, competent, and qualified people who can do
this, let's not continue to exclude capable, competent, and
qualified people that we do not necessarily know, who may not
look like us.
You have to want it to have it. I think the office of
minority inclusion would provide an additional impetus for us
to do this.
I am so grateful that the chairwoman stood by the concept
and I stand by her and hope that we will continue to see this
move forward in legislation that will be before us shortly in
Congress.
Mr. Chairman, I thank you, and I will yield back the
balance of my time. Ma'am, by the way, no reflection on you, I
think your testimony was outstanding. I just wanted to make a
few comments. Mr. Chairman, I thank you for the time.
Chairman Moore of Kansas. Thank you, Mr. Green. Thank you,
Ms. Williams Brown, for your testimony today. You are now
excused.
I will invite the second panel of witnesses to please take
your seats.
Chairwoman Waters. [presiding] Our second panel consists
of: Ms. Pamela Bethel, a partner of O'Riordan Bethel Law Firm,
on behalf of the National Association of Minority- and Women-
Owned Law Firms; Mr. Thomas Boston, professor of economics,
Georgia Institute of Technology; Mr. Alexander Chaparro,
president, National Association of Hispanic Real Estate
Professionals; Mr. Orim Graves, executive director, National
Association of Securities Professionals; Mr. Carlos Loumiet,
partner, Hunton & Williams LLP, and president, New America
Alliance, on behalf of the U.S. Hispanic Chamber of Commerce;
and Mr. Vincent Wimbish, president and chief executive officer,
National Association of Real Estate Brokers.
Thank you. I welcome you. You will each be recognized for 5
minutes. I will start with Ms. Bethel.
STATEMENT OF PAMELA J. BETHEL, ESQ., PARTNER, O'RIORDAN BETHEL
LAW FIRM, LLP, ON BEHALF OF THE NATIONAL ASSOCIATION OF
MINORITY- AND WOMEN-OWNED LAW FIRMS
Ms. Bethel. Good afternoon. I would like to thank the
Chair. I would like to thank Ms. Capito. And I would like to
thank the other honorable members of this subcommittee for the
opportunity to present the case, the abominable case, of the
exclusion of minority- and women-owned law firms in the
government's business.
My name is Pamela J. Bethel. I am executive partner of the
O'Riordan Bethel Law Firm located here in Washington, primarily
with a national practice in Federal procurement and business
representation.
I am here today representing the National Association of
Minority- and Women-Owned Law Firms, an organization that was
established in 2001, and a national minority law group
established in 2005.
To the member's point, Mr. Green, we are capable,
competent, and qualified. Membership in both organizations
requires that both the firm and the individual lawyers have
obtained the highest peer rating available to lawyers, and that
is a rating published by Martindale-Hubbell, and it is an AV
rating. All firms who are members of the organizations that I
represent have the same rating as any member of any brand name
firm.
The two organizations have joined together to make known
the exclusion of minority- and women-owned law firms by
government agencies and others with respect to the contracting
opportunities related to the financial crisis and the
restoration of our financial systems.
The government's track record regarding use of minority-
and women-owned firms is poor. It is exceedingly poor. Federal
spending increased over $300 billion between the years 2001 and
2008, while the Federal contracts secured by minority- and
women-owned firms have seen shortfall after shortfall.
With the release of the Fiscal Year 2008 data, we find that
the government failed to meet its remarkably low goals in each
category--women and minorities.
As poor as the utilization of minority- and women-owned
firms is in general, in Federal contracting, it is almost
nonexistent when it comes to legal services and other
professional services.
We as a country have only begun to understand that it makes
good business sense to include companies of all stripes in
Federal procurements relating to certain industries, such as
construction, the teaming agreements, the joint ventures, those
are things that have entered into our commonplace business
vocabularies and understanding.
The government has failed miserably in its responsibility
to ensure that the same inclusionary goals and principles are
being incorporated into the government's procurement of legal
and other professional services.
While tens of millions of dollars in legal contracts have
been awarded by the Treasury Department at the top, no
significant dollar amount has gone to minority- or women-owned
law firms. Diverse firms were not even provided an opportunity
to compete for such contracts.
In reading the newspaper reports of name brand firms
receiving contracts worth millions of dollars in the middle of
the night with charges to the government for the services of
individual attorneys ranging from $700 to $1,000 an hour, while
millions of our tax dollars have gone to pay for legal services
for the purposes of assisting the government and getting us out
of this crisis, very few of those dollars have gone to firms
that are anything other than what we used to call in the old
days ``white shoe firms.''
The same firms over and over again are being called upon
for lucrative contracts to provide services that our firms can
ably provide.
I say to you that I also make the case that the cost of
these contracts are astronomical. As I cited, we have all seen
the newspaper articles with the fees of $700 to $1,000 an hour.
Firms in my organizations and other minority- and women-owned
firms can provide competent, qualified services at far lower
prices than the government is now paying.
I respectfully request your vote in support of the bill
passed by the House and now pending with the Senate, which
would establish a series of offices of minority and women
inclusion. Those would be for employment inside the regulatory
agencies as well as the contractors whom they employ.
Thank you very much for this opportunity.
[The prepared statement of Ms. Bethel can be found on page
35 of the appendix.]
Chairwoman Waters. Thank you very much, Ms. Bethel.
Mr. Thomas Boston.
STATEMENT OF THOMAS D. BOSTON, PROFESSOR OF ECONOMICS, GEORGIA
INSTITUTE OF TECHNOLOGY
Mr. Boston. Thank you, Chairwoman Waters, and members of
both subcommittees. I am deeply honored to have been invited to
testify before you regarding something that I think is
extremely important, and that is these offices of minority and
women business inclusion at the financial agencies of the
country.
I, without qualification, strongly support this effort and
I hope it materializes as it is conceptualized. It is endowed
with the appropriate authority to actually have positive
outcomes in regards to the disparities that minorities
encounter.
My name is Thomas Boston and I am testifying both as a
professor of economics at Georgia Tech where I have served on
the faculty since 1985, and I am also a business owner. My
company, EuQuant, specializes in economic and statistical
research, and one area of specialization is particularly a
focus on minority business and community economic development.
If you will allow me, I am going to say what I have written
here, but I want to vary it a bit so that I can get it in
within the amount of time allotted, so I will summarize some of
the comments.
I want to just simply make a point and that is that these
offices of minority and women business inclusion, the concept
behind that, is broader than just the issue of social equity;
it also represents the value added of minority- and women-owned
businesses to society as a whole.
I want to spend a minute just simply talking about that.
First of all, these comments are going to be based on my
examination of the records of all businesses, small businesses,
that are registered with the Central Contractor Registration
system with the Federal Government, over 47,000 that we have
examined.
What we found is that procurement opportunities with the
government actually matter. They matter a great deal. Although
18 percent of all firms in society as a whole are minority-
owned firms, those firms represent 40 percent of all of the
firms that are pursuing government contracts. The reason they
represent 40 percent is because minorities in general feel like
their opportunities to be successful are much greater with the
government contracting than it is in the private sector as a
whole.
Government procurement programs have served as a point of
entry into the marketplace for many minority firms that have
gone on to be successful.
You may be aware that in 2010, there was a study
commissioned by the Minority Business Development Agency that
also indicated all of the various patterns of disparity in
lending to minority-owned firms.
That study showed that minority firms were more likely to
be rejected in their applications for loans. When they received
loans, those loans were more likely to have a lower value, and
also they were more likely to have been awarded at higher
interest rates. These kinds of findings have been backed up by
numerous studies.
Minority firms that are registered with the government
program through CCR, there are about 19,000 of those firms, and
of those firms, there are also firms that are 8(a)'s and SDBs.
There are also firms that are not minority-owned but are not a
part of either one of those programs, and there are about
10,000 of those firms.
When we analyzed those firms against similarly situated
non-minority firms, we found that disparity in revenue was
about $500,000, even after controlling for the fact that they
had similar attributes.
The importance that is made by the SDB and 8(a) program is
that they added $2.8 million to the annual revenue of minority-
owned firms, yet those firms still had $900,000 less revenue
than they would have had had they been treated equally as non-
minority-owned firms are.
We found that the firms that participate in the government
procurement programs, and these are about 15,000 firms, they
add almost $44 billion annually to the economy in terms of the
revenue that they generate, and they employ 287,000 workers.
This was in 2006.
When we looked at the firms that participated in the 8(a)
program and analyzed their economic impact, we found that as a
result of being in the 8(a) program, the economic impact was
$3.7 billion, and they added about 86,000 jobs.
There were also firms that have graduated from the program.
When you add those graduated firms together with the firms that
are in the program, they had an annual economic impact of $5.5
billion and created 124,000 jobs.
Moreover, the jobs that they created tend to be more
heavily concentrated in low-income communities where there is
economic distress, that the income that they generated was
generated through the kinds of ventures that were of higher
value.
I will conclude by saying over and beyond just the social
necessity of creating equality in the marketplace, there is a
compelling economic value for why we should have this program
of minority and women inclusion.
Thank you.
[The prepared statement of Professor Boston can be found on
page 40 of the appendix.]
Chairwoman Waters. Thank you very much.
We will now hear from Mr. Alexander Chaparro.
STATEMENT OF ALEXANDER CHAPARRO, CHAIRMAN, NATIONAL ASSOCIATION
OF HISPANIC REAL ESTATE PROFESSIONALS (NAHREP)
Mr. Chaparro. Chairwoman Waters, Chairman Moore, and
members of the subcommittees, thank you for this opportunity to
testify on this very important subject, the ability of
minority- and women-owned businesses to access government
contracting opportunities in the areas of housing and financial
services.
I am pleased to offer my views as a small business real
estate owner and as the chairman of the National Association of
Hispanic Real Estate Professionals, NAHREP.
NAHREP is a nonprofit trade association with over 18,000
members and 65 local chapters nationwide. Our mission is to
increase sustainable Hispanic homeownership by empowering real
estate professionals who serve the community.
NAHREP members are real estate agents, brokers and mortgage
and settlement service providers, and other housing
professionals.
The Federal Government procurement process is complicated
and labor intensive. Larger companies with substantial
experience and vast resources have an insurmountable advantage
competing for government work. Most minority-owned firms are
small businesses that generally lack the experience and human
capital to successfully navigate through the process.
Hispanic-owned firms have acquired contract work from
financial institutions at an alarmingly low rate. Although it
is difficult to get complete data, NAHREP estimates that
Hispanic-owned firms currently acquire less than 1 percent of
the total supplier contracts from financial institutions.
Considering the mass consolidation of the financial
services industry and the extensive government interventions,
it is extremely important that the Federal Government become
increasingly vigilant to ensure that minority-owned firms
receive a fair share of supplier contracts. Not doing so will
likely lead to even greater disparities in the unemployment
rate between minorities and non-minorities and will be a
setback to the Nation's stabilization efforts.
NAHREP receives many requests for support around the
government contracting process from its members. One member
from Riverside, California, who prefers to remain unnamed, says
that she has been actively pursuing government work for almost
2 years with no success. Her story typifies the experience of
the large majority of minority-owned firms.
This individual has owned and operated a successful
business for more than 10 years. Her company is minority- and
women-owned with an impeccable track record, 30 of her 35
employees are minorities and she is very active in her
community and her industry. In our view, she runs the type of
operation that should be ideal for government work, reputable,
capable, with a strong track record of community investment.
During the past year, she has invested more than $27,000 in
consultants and has dedicated more than 70 percent of her
managerial time preparing proposals and earning certifications.
All of this was done in an effort to better position her
company for success in government contracting space. To date,
she has failed to acquire any government business. She
describes the process as complicated and exhausting and says,
``It is like taking a difficult exam and never being told why
you failed.'' She has recently decided to abandon the pursuit
of government contracts and focus her energy and resources on
other business opportunities.
Other members describe similar experiences but consistently
state that the government contracting process is difficult,
demoralizing, and with a complete lack of transparency.
For all of these reasons, NAHREP stands in full support of
the provisions in H.R. 4173 that would create an office of
minority and women inclusion at each of the major Federal
financial regulatory agencies. This provision is similar to the
one in the Housing and Economic Recovery Act that applied to
the Federal Housing Finance Agency, Fannie Mae, Freddie Mac,
and the Office of Finance of the Federal Home Loan Bank System.
Our members' experience is that HERA law has had a
noticeable and beneficial impact on improving the Federal
contracting opportunities for minorities and women.
In April, our organization submitted a comment letter to
the FHFA in support of its regulation. We are in complete
support of the bill.
On behalf of NAHREP, we thank you for your efforts. We
really appreciate it.
[The prepared statement of Mr. Chaparro can be found on
page 62 of the appendix.]
Chairwoman Waters. You are certainly welcome.
Mr. Graves?
STATEMENT OF ORIM GRAVES, EXECUTIVE DIRECTOR, NATIONAL
ASSOCIATION OF SECURITIES PROFESSIONALS (NASP)
Mr. Graves. Good afternoon, Chairwoman Waters, Ranking
Member Biggert, and Representative Watt. I appreciate the
invitation to appear before you today representing the National
Association of Securities Professionals or NASP.
My name is Orim Graves. My career has spanned more than 2
decades in financial services.
The National Association of Securities Professionals,
representing more than 100 firms, is the premier trade
organization supporting minorities and women in leveling the
playing field in the financial services industry.
Founded in 1985, NASP is based in Washington, D.C., with 10
chapters in major financial centers throughout the United
States. Our members represent the most senior minorities and
women in majority owned investment banking and asset management
firms, as well as the largest minority- and women-owned firms
in the country.
In the past 3 years, unprecedented events have reshaped the
financial services industry. During this economic upheaval, it
has been widely reported that the United States Government
implemented over $12.6 trillion of direct financial
intervention into our economy.
This massive mobilization of taxpayer funds required the
rapid hiring of numerous government contractors by the Treasury
Department, the FDIC, and the Federal Reserve Bank of New York,
to name a few. In the early days of the crisis, lawyers,
accountants, consultants, and asset managers were hired with an
extremely limited RFP process, in some instances, using
expedited contracting or no process at all.
The RFPs that were widely circulated had barriers to
inclusion for minority- and women-owned firms that were
arbitrary and capricious. For example, the initial RFPs for the
Legacy securities and Legacy whole loan programs of the
Treasury Department required minimum assets under management of
$100 million and $25 billion, respectively.
The initial RFP for the public/private investment
partnership or PPIP, likewise, contained a minimum $10 billion
in eligible assets under management, and a demonstrated
capacity to raise at least $500 million.
Despite Section 107(b) of the Emergency Economic
Stabilization Act of 2008, minorities and women and entities
owned by them were not included to the maximum extent
practical. These requirements falsely presupposed that large is
equated with the best or better.
Another example of the lack of access to contracting
opportunities with the Federal Government in financials
services was the $1.2 trillion agency mortgage-backed
securities purchase program undertaken by the Federal Reserve.
In this instance, four firms were selected to manage the
mortgage-backed securities assets in a closed RFP process.
NASP compared minority- and women-owned MBS money managers'
aggregate performance in 1, 3, and 5 years to the larger
majority firms selected. The minority firms performed better
than three of the four firms selected according to third party
independent performance evaluations.
Lastly, the most egregious example of a large contract
awarded without an RFP process is Blackrock's management of the
$165 million Maiden Lane funds on behalf of the Federal Reserve
Bank of New York. The Wall Street Journal reported that
Blackrock earned $71 million in 1 year as their asset
management fee for this assignment. Today, the crisis has
subsided, yet Blackrock is still managing those assets.
Section 116(h) of the Emergency Economic Stabilization Act
of 2008 directs the Comptroller General to report to Congress
the total dollars spent with all contractors, as well as the
amount spent solely with minority- and women-owned firms. To
our knowledge, such a report has never been received by
Congress.
Likewise, Section 1116 of the Housing and Economic Recovery
Act of 2008 requires regular reporting of the dollar amounts
paid to minority- and women-owned firms juxtaposed against
payments made to all firms for contract services.
Despite the prudence of complying with congressional
directives, Fannie Mae, Freddie Mac, and the Federal Home Loan
Banks have similarly not reported their contractual
relationships with minority- and women-owned firms.
I will now turn my remarks to the lack or minimum levels of
participation of minority- and women-owned firms in the area of
asset sales.
The transfer of hundreds of billions of dollars in assets
through the FDIC's receivership and structured asset sales is
an historic opportunity for the Federal Government to encourage
the participation of small, women- and minority-owned
investors.
Inclusive policies for these programs should be adopted by
the FDIC considering its use of debt is backed by the full
faith and credit of the United States.
While the FDIC has changed its bidding instructions to
include a questionnaire asking minorities to voluntarily
describe their race and gender, the language in the form
naturally leads investors to question the FDIC's commitment to
minority investors.
Not only is the form optional, but the FDIC in bold print
announces that minority status ``will not affect the scoring of
the application.''
The FDIC should include clear and affirmative language in
all its communications that the encouragement of minority-owned
investors is a priority for the agency and will be among the
non-price or best value considerations in determining bidder
eligibility.
We fully support Section 4173, the inclusion of minorities
and women diversity, and we fully agree with the support of the
goals and intent of this section.
[The prepared statement of Mr. Graves can be found on page
66 of the appendix.]
Chairwoman Waters. Thank you very much. I am sorry. We have
to move on.
Mr. Carlos Loumiet.
STATEMENT OF CARLOS E. LOUMIET, PARTNER, HUNTON & WILLIAMS LLP,
AND CHAIR, NEW AMERICA ALLIANCE, ON BEHALF OF THE U.S. HISPANIC
CHAMBER OF COMMERCE
Mr. Loumiet. Thank you very much. It is my great honor to
appear before you today to provide testimony on behalf of the
New America Alliance, a national organization of Latino
business leaders focused on the advancement of the American
Latino community for the benefit of the United States as a
whole, which I happen to chair, and also as a representative of
our distinguished sister organization, the United States
Hispanic Chamber of Commerce, which for years has ably
represented millions of Latino businessmen and businesswomen
from across the Nation. On behalf of our organizations and
myself, thank you for the opportunity.
I had the privilege of appearing before the Subcommittee on
Oversight and Investigations just 4 years ago to comment on the
prior GAO report, which frankly was not much more heartening or
much less heartening than the one we heard about today.
I wish that I could say now, 4 years later, anecdotally
that there have been great advances made in these last 4 years
in terms of the role of women and minorities in our Nation's
financial services industry, but I cannot any more than the GAO
could.
I also wish I could tell you that these past 4 years have
witnessed great strides in the manner in which Treasury,
Federal banking agencies, and the GSEs interact with women and
minorities and the importance they attach to bringing about an
industry that even remotely represents the population of our
great country. Unfortunately, with rare exceptions, again, I
cannot.
The Census Bureau is hard at work right now as we testify
gathering information on the demographic makeup of America in
2010. Let me anticipate the results. Some two-thirds of our
Nation's population will be found to consist of women and
minorities. However, anyone who believes that these numbers are
even remotely reflected at the management and particularly
senior levels of our country's financial services industry is
very mistaken.
Let's take banking as an example. That I know of right now,
2 of the 25 largest banks in this country are headed by
minority individuals, neither of them are Latino, and that I
know of, none of them by a woman.
A friend and fellow NAA member serves on his very
distinguished and prominent financial firm's 80-person
management committee. He is the only minority to do so.
The Office of the Comptroller of the Currency's Web site
indicates that as of the end of 2009, there were 7 Latino-owned
national banks in this country out of 1,800 or so altogether,
about one-half of one percent.
Overall, our banking system does somewhat better, slightly
over 200 of the Nation's 8,000 or so FDIC insured banks or
somewhere between 4 and 5 percent, are controlled by women and
minorities. Of course, measured in terms of the deposits of
assets, these small percentages are even smaller.
In terms of asset management, in accordance with data
carefully assembled by one of our members in 2009, in the U.S.
$12.5 trillion tax exempt market, firms owned by women or
minorities managed about $90 billion or less than one percent,
and Latino-owned firms, $21 billion or less than one quarter of
one percent.
Federal pension funds have approximately U.S. $268 billion
in assets. That we know of, none of the 60 or so Latino-owned
asset managers or brokers in our country is involved.
So on and so on. To anyone, as you have heard from other
witnesses today, who believes that women and minorities are for
some reason less capable of success in the financial services
industry, these numbers may not be disturbing. To everyone
else, these numbers at least must be embarrassing if not
troubling. Frankly, I have difficulty thinking of many other
industries where the numbers are as bad.
What can the U.S. Government do? One would naturally think
that the government itself would be particularly mindful of
including qualified persons from all backgrounds but as we have
heard, that is not the case.
I believe that Congress in the last 2 years or so with
Section 107 of the Emergency Economic Stabilization Act of 2008
and with Section 1801 of H.R. 4173 and through the personal
efforts of Members of Congress like Congressman Frank,
Congresswoman Waters, Congressman Xavier Becerra and Senator
Bob Menendez, have made great efforts to prod the Executive
Branch to focus on doing so.
Sadly, however, as we have again heard, these efforts have
often fallen on deaf ears and only rarely have we seen
successes.
I would like to digress a little bit from the rest of my
testimony, which will be provided in writing, to mention that
we have an amendment pending in the Senate to the financial
reform bill which calls for the same provisions that for 20
years have applied to allow the FDIC to work with women- and
minority-owned firms in certain contexts in connection with the
resolution of thrifts to be extended to the banking industry,
because today it is the banks that are failing, not the
thrifts.
Last night, I heard for the first time that this amendment
may actually encounter some opposition in the Senate and even
from the Administration itself. Frankly, we do not understand.
To us, this is a step backwards in our government's commitment
to the advancement of women and minorities in this industry,
and I would hope that the members of this committee would help
us to bring this into law in the final legislation that
emerges.
Thank you.
[The prepared statement of Mr. Loumiet can be found on page
77 of the appendix.]
Chairwoman Waters. Thank you very much.
Mr. Wimbish?
STATEMENT OF VINCENT WIMBISH, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL ASSOCIATION OF REAL ESTATE BROKERS (NAREB)
Mr. Wimbish. Madam Chairwoman, Mr. Chairman, and members of
the Subcommittee on Housing and Community Opportunity and
members of the Subcommittee on Oversight and Investigations,
first, I want to take this opportunity to thank Chairwoman
Waters and Chairman Moore for their leadership in convening
this joint hearing on minorities and women in financial
regulatory reform, the need for increasing participation and
opportunities for qualified persons and businesses.
I come before you today as president and chief executive
officer of the National Association of Real Estate Brokers, the
Nation's oldest minority trade association, formed in 1947, to
ensure democracy in housing.
For more than 6 decades, NAREB has worked not only to
promote sustainable homeownership for all Americans and African
Americans in particular, but also to ensure that business
opportunities are accessible and available for our realtist
members.
For the record, ``realtist'' is the designation given to
every NAREB member. Realtists are predominately African-
American real estate professionals representing the full
spectrum of the real estate industry.
It is important to note that NAREB promotes and abides by
the highest standards of professional integrity. We follow a
strict code of real estate industry ethics. We require
professional certifications and accreditations.
We advocate for public policies that protect and expand
sustainable homeownership, and in keeping with today's
proceedings, NAREB works tirelessly to open and to keep open
the doors of economic opportunities for African Americans and
other multi-cultural real estate professionals.
With this as a backdrop, I want to speak with some level of
detail on NAREB's support for the incorporation of the office
of minority and women inclusion in H.R. 4173, the Wall Street
Reform and Consumer Protection Act, and the reasons we believe
this provision is critical to ensuring economic opportunities
for minority real estate professionals.
As you are aware, minority business development continues
not to reach its full potential, whether due to intentional
legislative omissions, unintended consequences of loose
legislative language, or misinterpretations of rules,
regulations, guidelines or laws.
Minority real estate professionals have virtually been
locked out and shut out of the business opportunities made
available through the Federal Government agencies.
A glaring example is the bundling of contract solicitations
that limit a successful response to large, highly capitalized
general market firms with a performance history of doing
business with Federal agencies dealing with the financial
crisis. Consequently, the solicitation requirements immediately
bar minority- and women-owned businesses from participating in
the bidding process.
This is particularly critical in regard to the recent
legislation affecting reform of the financial services and
investment industries, and while language was put forth by
Chairwoman Waters to make minority inclusion a legislative
imperative, every best effort was not made in the legislation's
final passage and implementation.
Again, much to the dismay of the minority business
community, minority real estate professionals, minority
financial services companies and other professionals were left
outside the door without the benefit of legislatively mandated
recourse.
I am here also to express concern with regard to the
limited contracting opportunities with major financial
institutions. Major banks, lending institutions and GSEs tend
to ignore or overlook minority businesses when awarding
contracts for asset and property management, appraisals,
brokerage, development and commercial leasing business
opportunities.
Again, these contracts are awarded to major conglomerates
and real estate franchises that do not feel the need to include
or to extend subcontracting or joint venture opportunities to
qualified minority businesses, and when subcontracting
opportunities are offered, the price points are so prohibitive
that it is not financially feasible to perform the work
required.
NAREB commends the leadership of these two subcommittees
with the sincere hope that change is in the offing. One
recommendation that I would like to leave with you today is the
consideration of unbundling, breaking up the mega procurements
that prohibit participation by minority businesses.
We specifically recommend reducing the size by 50 percent
of government services and supply contracts awarded for
financial, professional and real estate services.
Further, we recommend that a number of these contracts be
at the $1 million to $5 million price mark, which we believe
will significantly increase the number of minority bidders.
Additionally, these contracts need to cover smaller
geographical areas. By taking these measures in addition to
eliminating the current bonding requirements, minority business
participation will rise.
As I conclude, I again thank Madam Chairwoman and Mr.
Chairman for the opportunity to bring forth the concerns of
minority real estate professionals. The over 60,000 African
Americans in the real estate industry are counting on your
support and your continued vigilance.
Thank you.
[The prepared statement of Mr. Wimbish can be found on page
82 of the appendix.]
Chairwoman Waters. I would like to thank all of our
witnesses on the second panel for coming today and sharing with
us basic information that will help us to try and solve what
appears to be an intractable problem of discrimination and
exclusion.
I would like to further grant myself 5 minutes to ask you a
few questions.
One of the most difficult processes to watch was what took
place following the subprime meltdown here in this country,
where the Treasury Department and the Fed, I suppose, had the
opportunity to contract with minority and women professionals
in the securities industry.
The way they handled that, you started to make some
recommendations, and I think just before I gaveled your 5
minutes were up, you started your recommendations, and I do not
think I remember hearing them.
It was obvious that something wrong was taking place. I see
over 87 contracts, 14 of them fall within the category of
small, women, minority, so we do not know how many were African
American or how many were Latino or Asian for that matter. That
lumped into this 14 all of that.
You mentioned something about perhaps no big contracts or
unusual and extraordinary requirements for how much money you
had to have under your control, etc.
Could you reiterate for us one or two recommendations if we
had to do legislation that would prevent that kind of exclusion
through rules and regulations that are made up by these
regulatory agencies?
For you, Mr. Graves?
Mr. Graves. Thank you, Chairwoman Waters. I would submit to
you that there are two things that we think would get to the
heart of this.
First, tie compensation, bonus pay, and evaluation of the
various agencies and departments to their level of inclusion
for minority- and women-owned firms. We think that will go a
long way to getting their attention and putting some teeth and
commitment behind the need to increase the level of contracting
and exposure with women- and minority-owned firms.
Second, we would offer that agency heads should sign some
form of commitment on an annual basis as they report to
Congress or report to the various authorities that they have
made or are in concert with the law, with the current law if it
passes, the inclusion amendment, so that the heads of these
agencies are on record as committing and actually putting in
place and hiring or contracting with minorities and women who
are in the securities industry.
We think those two things would go a long way.
Chairwoman Waters. Mr. Loumiet, you mentioned something
that has been bothering me for a long time, and that is the
lack of minority involvement in public pension funds. We really
do need to do something legislatively.
Do you have any concrete suggestions or is there something
you could send me on what you think we can do to open up this?
This is so unfair.
Mr. Loumiet. I agree. Congresswoman. I will be delighted to
send you something in writing on behalf of the NAA, and we will
consult with some of our fellow organizations represented here
before doing so.
Chairwoman Waters. Thank you. Mr. Wimbish, many minorities
have talked about unbundling for years, and we have not done
it. We need to do it. This business such as we saw in TARP of
requiring minimum assets under management of $100 billion or
$25 billion, respectively, whether it is in the Treasury
Department or other agencies of government, these kinds of
requirements do nothing but exclude. Certainly, that is too
much.
I see some of your recommendations going to how we could
deal with a smaller amount. I would like to have further
written advice from you on this and some discussion. I think we
need to move aggressively with legislation in that area also.
Finally, let me just say to Mr. Chaparro that I started to
meet with some real estate professionals. I want to meet with
your association, the Association of Hispanic Real Estate
Professionals. We have started to contact the banks and bring
them out to talk about what they are doing. We know what they
are doing.
For example, the REOs are not being listed with minorities.
Number two, when they are listed with minorities and minorities
are making the offers that their clients are giving them to
offer on the properties, they are not taking them even if it is
more than the speculators are getting.
The speculators are speculating on large numbers of
properties, maybe 10, 15, 20, 30, 50, what-have-you. They are
way under market value and they are cutting out the real estate
brokers and the small ones, for example.
Then there is another broker organization that is out there
that calls itself the Association of Real Estate Brokers for
REO properties who have direct connections with these banks and
they have a limited number of people that they will allow into
their association, which eliminates for the most part
minorities.
We have a handle on this. We are going to break this up.
What they are doing is they are squeezing these communities
where real estate professionals have been working for years and
have been responsible for buying and selling, and it is an
important economic engine in our communities that is being cut
out.
I would like to meet with your association and I would like
to bring the bankers in, just as I am doing with consolidated
Realtors in the L.A. area, to talk about how we do this. While
everybody is opposed to any kind of pure affirmative action, we
are looking at zip codes.
It does not make good sense, for example, in South Central
L.A., for the real estate brokers out of Beverly Hills to be
getting the listings and the people who live and work there not
getting them.
We are onto that. We get it. We understand it. As a matter
of fact, some of us understand all of this. We need to have you
on record in terms of your knowledge and your experience about
what has happened in your industries.
With that, my time has expired. I am going to turn to my
colleague on the other side of the aisle, Ms. Biggert, for her
questions.
Mrs. Biggert. Thank you, Madam Chairwoman. I am sorry I
missed the first panel due to being on the Floor.
I think it was Mr. Loumiet talking about how much has not
been accomplished since 2004. As I recall, in the year 2000, I
was a co-sponsor with Representative Velazquez on a bill, the
Equity in Contracting for Women Act of 2000. I would have to
say that not much has happened since then either.
The bill was really to work with the SBA and the SBA was
going to have the regulations. This was really in the Small
Business Committee, but it was to give women more opportunities
to get into the businesses.
The bill went forward but the regulations and everything
were not drafted. It was for creating the women's procurement
program to help women successfully compete for government work.
It boiled down to finally they said there were only four types
of categories and it would limit the women to those four
categories. That was national security and international
affairs' coding, engraving, heat treating and allied
activities, household and institutional furniture and kitchen
cabinet manufacturing, and then other motor vehicle dealers.
I think Representative Velazquez's opinion was that women
were only to be in the kitchen cabinet business or in the
kitchens, I guess.
I was a co-sponsor of it. We are still sitting here.
Maybe my question would be even when we do the bills, we
are not getting that message out. I have to say when I went to
law school, I was told I was taking the place of someone who
belonged there--a man. I went anyway.
I also thought I wanted to get an MBA. I wrote for an
application from the universities. I got back a letter saying
we are sorry, we do not take women into the business school.
You could take a few courses if you wanted to.
Unfortunately, I scrunched that answer up so I cannot use
it to show what has happened since then. I have to say in law,
it is 51 percent or over now are women. It took a long time and
it took a long time in the educational field.
How long is it going to take us in the business world to do
that? If you could just give me one thing that you think would
work to improve this. It might be the bill. I do not know.
Mr. Loumiet?
Mr. Loumiet. Unfortunately, Congresswoman, I do not think
there is a magic bullet. I just think that everybody who cares
about this issue of some day having an industry that at all
levels looks like America just has to keep working. It is going
to take an awful lot of effort to get there.
I will be very honest with you. There are many times when I
deal with the Executive Branch, different agencies of the
Executive Branch, and I wonder, who do they think they
represent? It is not clear to me that they think they represent
all of the country. That is very disheartening, but frankly, we
do not have a choice but to keep moving forward because we all
believe in this cause, as you did when you tried to enact your
legislation. We just have to stay on top of them.
Mrs. Biggert. Ms. Bethel? Not the silver bullet but in a
nutshell, what do you think we should do?
Ms. Bethel. All the problems that my fellow panelists have
cited, in fact, in my written testimony, I talk about the bill
that you co-sponsored with Representative Velazquez, and what
happened with the SBA.
In fact, I think the U.S. Women's Chamber even had to sue
the SBA. That is almost comical when you think about it.
I think, to paraphrase the young lady--I do not think you
heard it from the GAO.
Mrs. Biggert. No. I did miss your testimony, too. I am
sorry.
Ms. Bethel. It has to start at the top. If your boss cares
about it, you care about it. I do not know how much plainer to
put that. Until they care about it, like the general counsels,
when you go and see them, we have always used brand name firms.
Yes, and we can pay them $700 an hour, and all the firms and
the organizations that I represent, being a lawyer, you
understand, we are all AV rated, every firm, every member.
Let's talk about $400 an hour, $500 an hour, versus $1,000
an hour, what some of the firms have gotten. It is just a
constant. The general counsel cares about diversity. The people
who report to the general counsel care about diversity.
If the person in charge of asset management, whatever
title, cares about diversity in asset management, there is
going to be diversity in asset management.
Mrs. Biggert. Thank you. Would anybody else like to
comment? Mr. Boston?
Mr. Boston. Yes. I have just a couple of things that I
would mention very briefly that I think are very important,
particularly since this person is going to be endowed with both
responsibility and the authority to track the performance of
these agencies, so in that regard, and I have looked at
agencies from all levels of government, and here is what
happens.
When that tracking process starts, it is important
beforehand to have some agreed-upon procedures. In other words,
what is being tracked, what information is being captured, how
that information is being measured.
You can come up with different percentages if you have a
different denominator. What we found is when corporations
report their diversity usage, it varies, and it varies because
they are using a different subset. That is the first thing.
Secondly, it is also important, and you just mentioned it,
that there be some way of identifying the supply chain, where
in the supply chain are these firms being used. Some firms, if
they want to achieve a goal, they can achieve a goal by hiring
maintenance firms. There is nothing wrong with that. That may
be completely outside of the scope of their value-added supply
chain. That is important.
How do you define the good faith efforts and how do you
determine whether or not a firm has made good faith efforts,
and finally, second tier contracting. There are some, for
example--I have worked with some businesses in the financial
services industry who say we have a threshold, we do not deal
with minority businesses with less revenue than $10 million.
That excludes most of them. They can deal with them through
second tier subcontracting.
Are there procedures also to capture the use of firms that
a prime financial institution will mandate on a subcontractor
that is passed down to a second tier subcontractor.
Mrs. Biggert. Thank you. I see my time has expired. I yield
back.
Chairwoman Waters. Thank you very much. Mr. Watt?
Mr. Watt. Thank you, Madam Chairwoman. Let me start by
apologizing to the last two witnesses. I had to step out but I
was in the back room multi-tasking, meeting with some people
and listening to your testimony. I appreciate having an
opportunity to hear you.
Mr. Wimbish, we actually had a pretty aggressive initiative
going with Fannie and Freddie before they kind of went south
and got put into conservatorship. We were not ever satisfied
with the amount of minority contracting and hiring and staffing
and what-have-you they were doing, but my impression is they
were doing a heck of a lot better then than they are now.
Is my impression wrong or right?
Mr. Wimbish. Congressman Watt, you are probably correct.
The opportunities at Fannie and Freddie now, they have informed
us they do not make the decisions, that the conservator, FHFA,
the Federal Housing Finance Agency, is making most of those
decisions.
Mr. Watt. Who is the responsible party at FHFA? That is the
Federal Government, is it not?
Mr. Wimbish. Yes.
Mr. Watt. To the extent that they are not doing very well,
it is our own Federal Government we ought to be putting the
pressure on, I take it, is what you are saying.
Mr. Wimbish. Yes.
Mr. Watt. Is anybody tracking minority contracting there?
Who was it who testified? Mr. Graves, I think, testified that
we are due some reports that we are not getting. That is in
your written testimony also, is it not?
We should try to crank up a letter, Madam Chairwoman, to
FHFA saying they are not complying with the law.
Are they exempt from the law because they went into
conservatorship? Mr. Graves?
Mr. Graves. To my knowledge, no, that is not the case. They
are bound to uphold the law.
Mr. Watt. Your observation, Mr. Wimbish, and you, too, Mr.
Graves, I guess, if you have been watching this, is that they
are not doing very well in terms of contracting or staffing or
any of the other criteria that we used to try to hold them
accountable for?
Mr. Graves. That is exactly right. Back in 1992, they
started what was called the Access Program, which allowed
participation for minority- and women-owned firms in a piece of
their debt issuance, if you will, but it was only a small
amount.
To my knowledge, that program still exists. It has not
grown. In 1992 dollars, if you think about it, many of the
firms or many more firms--firms have obviously gotten larger as
the overall economy has, but their efforts are sort of stuck
with respect to that particular program in 1992 levels.
Mr. Watt. I hope we have consensus here to try to generate
a letter to FHFA to try to hold them more accountable on this.
If we do not hold them accountable, nobody else is going to do
that.
Ms. Bethel, my impression is this thing we called in the
law ``the chilling effect'' has been at play fairly
substantially ever since Adarand was decided. A lot of folks
just say, well, you know, we cannot do minority contracting any
more because the courts will not let us do that.
Is my impression there wrong?
Ms. Bethel. You are absolutely correct.
Mr. Watt. Is it your understanding that the Adarand case
has anything to do with the Federal Government?
Ms. Bethel. It has something to do with it. In the
industries that we are talking about, underutilization, you do
not even need to do a study.
Mr. Watt. Do you not have to have a benchmark under
Adarand?
Ms. Bethel. Yes, Adarand at least says--to some extent it
can be read to say that you have to have some demonstrated
reason for engaging in the ``preferential treatment.'' We are
talking about legal services, professional services, asset
management services.
They have never used so. They could not even find the bench
to establish the benchmark. That is my opinion.
To the extent that you use Adarand, let's be clear that the
kinds of things we are talking about, the government has never
used us. We have been here. The government has never used us.
That is not a legal excuse, although I am sure you will get
told that.
Mr. Watt. Madam Chairwoman, my time has expired. I did want
to tell the gentleman whose name I cannot pronounce, from
Hunton & Williams--
Mr. Loumiet. ``Loumiet.''
Mr. Watt. Yes, Mr. Loumiet. Congratulations. You probably
did not know this, but my good friend, Frank Emory, who is one
of your associates, one of your partners down in the Charlotte
office, was just honored by the Chamber of Commerce locally. He
is doing very well.
Mr. Loumiet. He is a terrific person. Thank you for telling
me. I had not heard that.
Mr. Watt. I yield back.
Chairwoman Waters. Thank you very much. Mr. Cleaver?
Mr. Cleaver. Thank you, Madam Chairwoman. Adarand impacts
mainly municipal and county governments. It is not applicable
here. It was not designed for the Federal Government, which I
am glad, because the Federal Government is worse than
municipalities and counties.
Ms. Bethel. Absolutely.
Mr. Cleaver. What I am concerned about is what can we do?
Apparently, legislation does not work. Apparently, meeting with
the heads of all of the regulatory agencies did not work
because we did meet with them on more than one occasion and
heard them all say it is going to be fine, we are going to do
our part, and then obviously, you would not have taken the time
out of your day to be here if they had done their part. They
have not.
Is it a question of qualification?
Ms. Bethel. If I can take that part for what I said, the
firms that we present have the highest rating available to
lawyers, that is the Martindale-Hubbell AV rating. I do not
know how an argument could be made--we are not the only firms
that have that rating. That is the group that I represent.
I do not see how a credible argument can be made that they
are talking about competency. I think Mr. Graves talked about
independent third party measurement or evaluation of the
portfolio management, and how the minority firms excel.
We are not talking about qualification.
Mr. Cleaver. Mr. Graves, is there any explanation beyond
the obvious when we talk about the fact that the minority- and
women-owned broker-dealers who were admitted to the TALF
program were not able to complete a transaction before the
expiration of the program?
Mr. Graves. By the time the minority- and women-owned firms
were actually approved for their TALF certification, it was 1
month after the larger majority-owned firms, and by that time,
all of the clients, the borrowers ultimately, who would have
utilized the structure had gone through a pretty rigorous
review process related to their ability to pay back or borrow
funds from the Federal Reserve to basically purchase those
securities.
The process was already completed by most of the major
clients and therefore, when the minority firms got involved,
they were not able to access the same clients, plus there was a
pretty onerous approval process; the Federal Reserve wanted the
minority firms to back stop or guarantee if their client did
not perform. That was a pretty onerous requirement as well.
Mr. Cleaver. Were any of the regulatory agencies easy to
work with? Is there one that shined brighter than the others?
Were all of them pale?
Mr. Graves. They are all in various forms relatively
difficult. We have had a reasonable relationship with Treasury.
There is one individual in Treasury who gets it, whom we have
been working with actively, and who has gone out of his way to
include us in various discussions and in contracting with our
members to do business. Again, that is it.
Let me just add this point. I have done business as an
investment consultant for one of the top five firms in the
country. I have done business with corporate plans. I have done
business with municipals. I have done business with Taft-
Hartley plans. The Federal Government without question is the
lowest on that list in terms of the ability for minority firms
to do business. It is not even close.
It is a shame in this day and age that we are sitting here
at this point. Everybody else sort of gets it. Granted, we are
not where we need to be with other places, but we are
lightyears ahead of where we are with the Federal Government.
Mr. Cleaver. We are ahead in the NBA. Outside of
basketball, I am trying to figure out what we need to do. Is
there anything that you can recommend for us that would be
helpful to you? Any of you? Mr. Boston?
Mr. Boston. Congressman, I think the position that is
conceptualized within the financial services agencies is the
right way to do it because it gives the authority at the top
and then it also endows that person with monitoring
responsibility.
If there is a way that person then is held to the standards
that the position calls for, I think you begin to have the
elements. What happens, over the period of time when the data
are collected, you have information that you then can make
modifications or make stronger interventions if needed in order
to ensure remedies for minority- and women-owned firms that are
excluded.
That is really what the court says. The court says you
should capture data, you should monitor that data and determine
whether or not there is exclusion before you take an even more
aggressive step.
This program, I think, is set up in such a way that it
really conforms with the case law in this area.
Mr. Cleaver. Thank you, Madam Chairwoman.
Chairwoman Waters. Thank you. Mr. Green?
Mr. Green. Thank you, Madam Chairwoman. I thank the
witnesses as well. I am sorry that I did not get to hear all of
your testimony. I am sure all of you heard me. You probably
have some sense of what I think about what we are doing.
I am concerned about those at the top. I am concerned that
we do not have a system that fairly evaluates those at the top
because the tone and the tenor are set by the people at the
top.
If you never evaluate the top, you never get to the people
who actually make things happen.
If you walk into an office and you see diversity, probably
the person at the top has made diversity an issue, because it
is so easy to just do other things and allow things to just
kind of happen.
My concern is, how do we deal with the people at the top?
You would probably say well, that is your job, Congressman, how
are you going to deal with them? I want to know about your
experiences with the people at the top. We have to at some
point evaluate people at the top.
Ms. Bethel, do you have some comment that you would like to
make? By the way, I am beyond the capable, competent,
qualified, people who say we cannot find anybody. I am beyond
that. We will go on and try to provide empirical evidence of
persons who can do things, and that is a wonderful thing, but
we know there are capable, competent, and qualified people.
We also know there are people who are capable, competent
and qualified with money who would like to make investments. I
have had bankers come to me and complain that they are ready
but they cannot do business.
It says to me we have some leadership problems that have to
be addressed. What I want to do is hear from you. Eventually,
they all sit where you are sitting. It will accord me an
opportunity to ask some of the questions that are important for
us to continue this process of moving in the right direction.
Ms. Bethel. Sadly, the private sector in terms of lawyers
and legal services is doing a better job than the Federal
Government. There are probably 30 to 40, maybe 50 now, major
Fortune 100 companies that signed on to a call to action for
the utilization of minority- and women-owned law firms and
minority partners in majority law firms, and this is starting
at the top.
I do not know what makes one of similar skills, a head of a
government agency, not see both the business and the compelling
reason for doing that.
A comparison between the Government Assistant Secretary or
Secretary and General Counsel with his or her counterpart in
commercial, and I can get you a list of the companies and the
commitment they have made in terms of their utilization for the
next two or three business cycles, that might be a place--
Mr. Green. Has that comparison been codified? Is it there?
Do we have a study?
Ms. Bethel. No. We have not. The call to action is about 2
years old. To my knowledge, there has not been a study. We can
certainly provide the commitments that the companies have made.
I do not know that we have now yet gathered the data to say who
has lived up to that commitment.
Mr. Green. Anyone else? Yes, sir?
Mr. Chaparro. I will tell you, the stakes are high in the
sense that the minority practitioners are vested in the
community, when we were talking about the REOs. The minority
practitioner is living in the community, is vested in the
community, and can help bring first time home buyers in
neighborhoods that need them to be there.
What we feel is the reporting requirements of these
agencies need to be strengthened and possibly even reporting
directly to Congress. It was said in this meeting that when it
is reported, it generally happens. We are eager to see this
bill and we are backing this bill.
Mr. Green. Thank you for backing it. How important is this
aspect of the bill, the office of inclusion? Is it so important
that if it is not in the bill, the bill is incomplete to the
extent that one might say it is flawed and should not go
forward? How important is it?
If the bill comes forward and it is not there, there will
be those who will talk about how we have to do what we have and
there will not be a lot of talk about how we are going to get
these other things included.
How important is it? Anybody. Tell me quickly, if you
would. How important is this to the bill?
Mr. Boston. Congressman, I think it is indispensable to the
integrity, credibility, and validity of the bill.
Mr. Green. Because my time is up, if you agree it is
indispensable, I hate to treat you this way, but would you
kindly extend a hand into the air, just so I can get a quick
reading.
[show of hands]
Mr. Green. Let the record reflect that all assembled have
raised their hands and see this as indispensable to the bill.
Madam Chairwoman, I apologize for going over. I yield back.
Chairwoman Waters. Thank you so much. We have been joined
by Representative Hinojosa. Without objection, he will be
considered a member of the subcommittee for the duration of
this hearing, and I will call on him for 5 minutes of
questioning.
Mr. Hinojosa. Thank you, Madam Chairwoman. My first
question would be to Ms. Bethel. In light of the fact that only
2.4 percent of all minority- and women-owned firms are in the
finance and insurance industries, what type of educational
programs should we offer to empower minority- and women-owned
businesses?
Ms. Bethel. It is a very good question. I think it has to
begin--we have to strengthen and encourage, particularly as it
concerns women. I think it is demonstrated that women do less
well in certain academic areas than their male counterparts,
certainly in high school and grade school. I think that is true
probably in minority communities where if you are trying to get
the basic ABC's, sometimes there is not a lot of educational
opportunities for some of the other endeavors.
I think we have to strengthen it. I think it is some of our
responsibility to go back and make sure that we counsel and
guide and tutor and mentor our young people as to what this
means and what the wave of the future is, and I think it is on
our universities and our colleges. They, too, have to take an
active effort. A lot of times people coming out of minority
communities are not aware of these careers. They have never
seen a stockbroker. They have never seen an asset manager.
It is a societal responsibility, in order to start early
and often, to apprise young people--
Mr. Hinojosa. If I may interrupt, because they only gave me
5 minutes, I agree with you that it is a societal
responsibility. Before I ask the next question, note there has
been a change in what you thought was the case, that men were
doing better. We are graduating more women from high school and
many more women from college in the last 5 years than men.
I want to ask my next question to Mr. Alexander Chaparro,
president of the National Association of Hispanic Real Estate
Professionals. What have been your association's members'
experiences in working with States and local governments with
regard to the neighborhood stabilization program and have your
members obtained any contracts to market the NSP properties?
Mr. Chaparro. That is a great question. It is one that many
of our members have been eager to be involved with because it
directly impacts the communities, and NAREB's strength has been
with our 65 chapters throughout the country within the
communities.
We have had a few, from what I am aware of, we have had one
of our members who has had a meaningful contract. Not enough.
We feel the opportunity is great to revitalize our communities
and we would like to be able to make sure that the minority
practitioner is involved in rebuilding the communities that we
live in.
We have had some members and we are proud of them, but I
think there is more ground for us to tread, and I would be
happy to provide you a report of where we are.
Mr. Hinojosa. Do you think they might be able to do better
if they got technical assistance as they prepare the
applications to be competitive?
Mr. Chaparro. I think it can be helpful, but many of our
members who are applying are very capable. We had talked about
the qualifications. These are top notch individuals who have
been in the field--
Mr. Hinojosa. Would you say the readers of the
applications, since they are competitive, are possibly not
being fair to your members?
Mr. Chaparro. We definitely feel that the process in
multiple layers that we have discussed in this panel are
broken, that need to be addressed. I am proud to be here today
with this distinguished panel because that is what we are
talking about, fixing a process that needs to be fixed because
the people who--
Mr. Hinojosa. We definitely are going to look into it. I
want to ask one more question to Mr. Graves. Given the
unprecedented number of banks that have failed and the
resulting assets now resident within the FDIC, can you please
comment on the lack of minority- and women-owned firms'
participation in those asset sales?
Mr. Graves. Yes. Essentially, what has happened is that the
FDIC's barriers to entry for minority and women investors,
minority and women bankers, are basically too high.
There are a number of programs or initiatives that can be
undertaken to alleviate that, which will not violate what the
FDIC consistently throws up, which is the least cost issue. The
least cost, I believe, is mandated by law, that they cannot
accept a bid that is lower in cost than they could otherwise
get. Obviously, getting the highest price for the bank or the
asset they are trying to sell.
What happens is you have a lot of parameters that are a lot
larger or requirements that are a lot larger that minority and
women investors and banks cannot meet. There are a number of
examples which are in the testimony that we cite where there
has not been a concerted effort to try to include minority- and
women-owned businesses into the mix to be able to be effective
purchasers of FDIC assets.
Mr. Hinojosa. My time has run out. Those are interesting
responses that all three of you gave me. Thank you.
Chairwoman Waters. Thank you very much. Thank you, Mr.
Hinojosa. I would also like to thank our witnesses who have
appeared here today. I know many of you and the consistent
involvement that you have had in trying to bring about justice
and equality in the area of contracting and all the other areas
you have mentioned here today, employment, etc. We appreciate
your work.
The Chair notes that some members may have additional
questions for this panel which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these
witnesses and to place their responses in the record.
We do have some written submissions to be made a part of
the record before we adjourn. The written statements of the
following organizations will be made part of the record of this
hearing: Dr. Derrick Hamilton of The New School, Minority
Business Development Agency, an article entitled ``Disparities
in Capital Access Between Non-Minority and Minority
Businesses,'' Real Estate Executive Council, and also
contracting information from Section 105(a), and report to
Congress.
With that, this hearing is adjourned. Thank you very much.
[Whereupon, at 4:39 p.m., the hearing was adjourned.]
A P P E N D I X
May 12, 2010
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