14th Annual Economic Summit Roundup

picture-8-193x109We celebrated our 14th Annual Greenlining Economic Development Summit in Los Angeles. Once again we brought together the leading community advocates, corporate leaders and government officials in the country to discuss “win-win” opportunities and solutions on issues related to minority economic empowerment.

Fulfilling The Promise: April 21, 2007

KEYNOTE SPEAKERS:

Sheila Bair, Chairwoman FDIC Introduced by George Dean

Janet Yellen, President Federal Reserve Bank of San Francisco Introduced by Cynthia Amador

Charles Prince, Chairman & CEO Citigroup, Inc.

Richard K. Davis, President & Chief Executive Officer U.S. Bancorp Continue reading “14th Annual Economic Summit Roundup”

Guidance for Fed: What Would Alan Do?

Former Federal Reserve Board Chairman Alan Greenspan helped dampen a potentially massive financial confidence crisis in 1998. His most daring act is one the Fed should emulate during this foreclosure crisis.

Mr. Greenspan, with the assistance of the Federal Reserve Bank of New York, called an emergency meeting of the major financial players to create a $3.8 billion bailout of Long-Term Capital Management, a hedge fund that was about to go under.

Current Fed Chairman Ben Bernanke could do the same to help stem the homeownership crisis and the precipitously declining value of homes that threatens repayment, even by those who made substantial down payments.

The first step would be to call in all the major investment banks (such as Goldman Sachs, Merrill Lynch, and Bear Stearns), foreign banks (such as BNP Paribas and UBS) and our major regulated financial institutions (such as Citigroup, JPMorgan Chase, and Wells Fargo).

At this meeting the Federal Reserve should seek an initial $10 billion national loss-mitigation fund that could be administered by either the 12 Federal Reserve banks or a consortium of financial institutions that have a stake in resolving the foreclosure crisis.

According to data from CNNMoney.com, the average homeowner’s loss-mitigation cost would be $16,000. If the fund covered even half of this cost, over 1.25 million homeowners could be protected and moved, for example, into lower-cost, long-term, fixed-rate mortgages.

Some estimate that the potential number of foreclosures at 2.2 million. Some of those subject to foreclosure, however, probably should not be helped, especially those who purchased as speculators.

To maximize the protection for the 70% of Americans who live paycheck to paycheck, we would propose that the priority be given to those who have been hit hardest – people in low-income communities – and that eligibility be restricted to those who are at 120% or below the median income.

Another factor that may make the fund successful are the estimates by Fannie Mae that up to 50% of subprime borrowers were eligible or could be made eligible for prime-rate mortgages. In particular, this would be the case if alternative credit scoring methods were put in place that included monthly utility and rental payments.

If properly and expeditiously created, this could almost immediately stem declining home prices and eliminate the glut on the housing market.

What Mr. Greenspan accomplished in 1998 with Long-Term Capital Management may be far easier this time around. This is because the other regulators, in particular Federal Deposit Insurance Corp. Chairwoman Sheila Bair and Comptroller of the Currency John Dugan, have already called for innovative leadership and action. These regulators are already being supported in various ways by House Financial Services Committee Chairman Barney Frank, Senate Banking Committee Chairman Christopher Dodd, and three prominent Democratic presidential candidates: Hillary Clinton, Barack Obama, and John Edwards.

Paradoxically, the total lack of understanding as to the depth and impact of the subprime crisis on our entire financial industry could well add support for this privately financed bailout of the nonspeculator victims of runaway credit policies. Goldman Sachs CEO Lloyd Blankfein made the frank admission that “the only thing we know is that everything will happen.”

Further, Goldman has just raised $3 billion to bail out its own hedge fund, and Bear Stearns recently acknowledged that two of its subprime hedge funds are essentially worthless.

This week, Merrill Lynch downgraded shares of Bear Stearns, Citigroup, and Lehman Brothers to “neutral,” from “buy,” and lowered estimates for the firms’ earnings, due to their credit and mortgage market troubles.

Given the understandable reluctance of the new Fed chairman to assert his influence over the market, it might be well if the presidential candidates, Rep. Frank, and Sen. Dodd began discussing this solution. Of course, it wouldn’t hurt if a few prestigious financial institutions stepped to the plate, as they did during the Long-Term Capital Management crisis.

Perhaps even Henry “the Hammer” Paulson, our Treasury secretary and the former chairman of Goldman Sachs, might play a role in moving the Federal Reserve along.

Mr. Gnaizda is the policy director of the Greenlining Institute in Berkeley, Calif. Mr. Lizarraga is the chairman of the U.S. Hispanic Chamber of Commerce in Washington.

Excessive Executive Compensation and the Decline of Median Family Income

Greenlining Institute has taken a lead role among nonprofits representing the 70% of Americans who live from paycheck to paycheck in raising questions about excessive executive compensation. Each year, CEO compensation increases by 10% or more while median family income has declined over the last five years by 5.9%.

Two years ago, Greenlining Institute reached an agreement with PG&E that required the highest level in the nation of corporate transparency for executive compensation. All PG&E officer compensation, whether received or deferred, had to be reported in a simple verified form and had to include not just the top 5 officers required by the U.S. Securities and Exchange Commission, but all officers.

Recently, the California Public Utilities Commission ordered So Cal Edison, at Greenlining’s request, to follow the PG&E model and, in addition, be the first corporation in the nation to fully report major severance and retirement packages, which often amount to millions of dollars in unreported income.

Presently, the CPUC has, partly at the request of Greenlining, taken the national lead in investigating the impact of excessive executive compensation on ratepayers. Going far beyond SEC requirements, Greenlining has raised the following in the investigation:

  1. All officer compensation must be reported in a simple fashion.
  2. Officer compensation must be made available to ratepayers on an annual basis and in merger proceedings to enable the public to be fully informed.
  3. To highlight the size of CEO compensation, the CEO must also set forth the median salary of non-mangement workers at his/her company and must report the dollar amount of corporate philanthropy to the poor.

The Wall Street Journal and Fortune Magazine report that CEO compensation is often 400 times that of the average workers salary. The CEO’s salary at Edison was approximately 350 times the median wage of non-management at Edison and the compensation of the CEO of Sempra was almost 400 times greater. This occurred despite both being monopolies whose profits are subsidized by ordinary people (ratepayers).

Based on Greenlining’s examination of hundreds of CEO packages, it appears that in almost every case, the compensation to the CEO and his top four officers substantially exceeds the dollar amount of philanthropy made by the corporation to low-income communities.

Perhaps it’s time for the nonprofit world to rise up and urge that cash philanthropy to the poor should always substantially exceed the aggregate compensation of a company’s top five officers. This might not stop excessive executive compensation, but at least low-income communities will benefit from this. Our estimate is that this alone would triple the amount of corporate philanthropy to nonprofits serving the poor.

Are Foundations Doing Enough for Society?

Source: The Chronicle of Philanthropy | Written by: George Dean and Nativo Lopez
Now that California’s Assembly has passed legislation designed to shed light on the diversity practices of the state’s grant makers and the measure is pending in the State Senate, it is time to ask Congress to take similar action and to look more closely at just what Americans are getting from the massive subsidies they provide to the nation’s foundations. Continue reading “Are Foundations Doing Enough for Society?”

Viewpoint: Winning Main Street Hearts and Minds

American Banker | Friday, October 24, 2008
By Robert Gnaizda and Jorge Corralejo

Last week the secretary of the Treasury and the chairman of the Federal Reserve Board decided to save the American banking industry from its follies by partially nationalizing the banks through an infusion of $250 billion of taxpayer funds. Continue reading “Viewpoint: Winning Main Street Hearts and Minds”

Philanthropy’s Race Problem

By Orson Aguilar
http://www.colorlines.com

A new compromise from foundations might be cause for some optimism.

The everyday challenges faced by the people in many neighborhoods seem far removed from the American Dream these days: the lack of good housing and jobs, poor health, immigration raids, the foreclosure crisis, failing schools and all-too-common homicides. Continue reading “Philanthropy’s Race Problem”

Fostering Homeownership — the Right Way

American Banker
By Orson Aguilar and Faith Bautista

As the presidential inauguration draws near, it is increasingly clear that bailouts and government guarantees are unlikely to be successful unless government assistance is focused on the 10 million or more American homeowners who are in trouble and the millions of jobs than can be created directly and indirectly through homeownership. Continue reading “Fostering Homeownership — the Right Way”

Viewpoint: New Financial Values for Bankers and Consumers

American Banker  |  Wednesday, May 27, 2009

By Orson Aguilar and J. Alfred Smith Jr.

A major transformation in banking is revolutionizing America’s approach to financial literacy.

Some financial institutions, to their credit, such as Citigroup, have expended hundreds of millions of dollars each over the last generation in promoting traditional approaches to financial literacy. Continue reading “Viewpoint: New Financial Values for Bankers and Consumers”

Foreclosure Prevention Efforts Must be Grassroots-Not Trickle Down

By Len Canty and Orson Aguilar | OW Contributors

With reports that only 9% of eligible loans being modified, families across the country are beginning to lose hope that President Obama’s Home Affordable Modification Program (HAMP) will help them remain in their homes.

Continue reading “Foreclosure Prevention Efforts Must be Grassroots-Not Trickle Down”

New York Fed Board Move Tone-Deaf on Public Service

American Banker
By Orson Aguilar – Executive Director, The Greenlining Institute

Correction: An earlier version of this story misstated the total amount of combined Tarp funds received by Citigroup, Bank of America, JPMorgan Chase and Goldman Sachs. It is $105 billion.

It’s sad, but not much has changed since corporate greed and malfeasance nearly caused our economy to collapse. The Federal Reserve Bank of New York, assigned the job of protecting banking customers, recently named two CEOs, including Jeffrey Kindler of Pfizer, to fill their public interest positions. One must wonder why the Fed could not find qualified directors, with proven track records of public advocacy, to serve the public good. Pfizer, a so-called leader in serving the public good, was recently fined a record $2.3 billion by the Justice Department for fraudulent marketing of drugs. Among the many allegations, Pfizer paid kickbacks to health-care providers to induce them to prescribe drugs for uses not approved by the Food and Drug Administration.

Continue reading “New York Fed Board Move Tone-Deaf on Public Service”