[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






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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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