Warren Ballentine (center), along with Michael Grant, Victor Cook, Kim Saunders, B. Doyle Mitchell & Hilary Shelton

African American financial institutions are banking on you.

Popular syndicated radio talk show host Warren Ballentine recently teamed up with the National Bankers Association, the Washington, D. C.-based consortium of minority-owned financial institutions, to unveil “The People’s Economic Movement,” a program designed to encourage African American individuals and institutions to deposit dollars in Black banks. The initiative’s supporters, among others, include National Urban League President Marc Morial, NAACP head Benjamin Jealous and National Action Network President Rev. Al Sharpton.

Ballentine firmly believes Black institutions and consumers will recover from the Great Recession by pooling resources and strategically leveraging our buying power . “We don’t want to create a minute. We want to create a movement,” Ballentine told me earlier this week. “We’re asking everyone to get involved.” The call to action has been gaining traction as organizations like the Atlanta Association of Black Journalists have decided to transfer funds to local Black institutions.

Says NBA President Michael Grant: “This program will enable Black banks to shore up their capital base, and they will get a chance to invest in communities by lending money to businesses and, in turn, create jobs,” he maintains. “We’re developing a model for economic development.”

This initiative was an outgrowth of a grassroots “Community Reinvestment” campaign Ballentine launched with Kim Saunders, CEO of Durham, North Carolina-based M&F Bank (No. 9 on the BE BANKS list with $312 million in assets) some 14 months ago as a means to attract customers to that institution.  It proved to be a smashing success: After promoting the effort on his Truthfighters radio program, listeners deposited more than $500,000 in less than two months.  By the end of the campaign, M&F garnered over $1 million in deposits. The institution decided to match that sum and launch a $2 million fund to provide loans for area businesses and community members. “You can say that Warren’s initial efforts became a test for us,” says Grant. “When he met with a group of our members’ banks about a broader initiative, they loved the idea.” Ballentine plans to report on the campaign’s progress during the unveiling of the Dr. Martin Luther King Jr. memorial statue in Washington, D.C., on Aug. 28, 2011.

Point blank: We must do everything in our power to preserve our most valued institutions. Since the establishment of the first bank organized and operated by African Americans in 1888—Washington, D. C.’s Capital Savings, which was supported by Black community members with meager resources who proudly made deposits until assets grew to $300,000 in just four years—our institutions have always been a source of financing for entrepreneurs, home buyers and college-bound students during decades when majority institutions refused to even acknowledge our presence. To this day, they represent financial mainstays in Black communities. Now, Black banks need fresh sources of capital, especially at a time when a number are still reeling from heavy loan losses during the economic downturn and must now contend with stringent capital requirements and overzealous bank regulators. Over the past year, five Black banks have been forced to shutter operations.

Click here to continue reading on page 2…

Michael Grant, Joe Briggs, Dr. DeForest Soaries, Jr., Warren Ballentine, Kim Saunders, B. Doyle Mitchell & Hermond Palmer

As part of my weekly segment on Truthfighters Show, Ballentine and I have often talked about how we must embrace collective economics to advance financial and business agendas.  That means we must apply our resources and clout to create commercial partnerships, expand investment pools and engage in selective consumerism. Simply put, do business with each other. A long-time proponent of Black-on-Black capitalism, Ballentine has effectively used his radio program to promote the purchase of subscriptions to Black publications, including Black Enterprise, as well as the development of a fund to help capitalize Black ventures.

Ballentine’s not alone in his activism. Over the past few years, John and Maggie Anderson have been spreading their “buy Black” gospel as founders of The Empowerment Experiment. They were driven, in part, by the fact that dollars of African American consumers left our communities after a mere six hours while bucks in Asian, Jewish, and Latino communities were recycled back into their neighborhoods as long as 29 days in some cases. During 2009, the couple spent the full calendar year committed to only making purchases of products and services from Black-owned companies. In fact, they also switched to a Black-owned financial institution during this period and even tried to transfer student loan debt to an African American creditor. When blackenterprise.com reported on the status of the Andersons several months ago during Christmas holiday season, they were still actively patronizing and researching Black businesses and continue to do so to this day.

Such recent developments have been at the core of BLACK ENTERPRISE‘s mission and reflected in our Wealth For Life principle No. 8: I will support the creation and growth of minority-owned businesses. So if quality Black businesses are to grow and expand, you must play your part. Start by opening an account at your local Black bank.

Find an NBA member bank in your area.

In addition, in the area of social justice, the equality index fell from 57.9% to 56.9%, the health index from 76.6% to75%, education from 78.3% to 78.9%, and civic engagement from 102.2% to 101.8%.

Since the report was first introduced in 2005, the equality index has shown “modest but growing” equality between blacks and whites in the areas of unemployment and the uninsured and incarceration rates. However, there has been an increasing level of inequality in the areas of educational attainment and school enrollment rates. “The black-white index of median household income has remained stubbornly unchanged since the equality index was introduced in 2005,” the report states.

“While some economists have declared that the recession is technically over, we say there is no complete recovery while the unemployment rate in black America stands at more than 15%,” said NUL president and CEO Marc Morial, during remarks delivered at a town hall meeting at Howard University when the report was released.

“We also say there is no complete recovery when the homeownership rate for African Americans has declined by three percentage points,” Morial said, adding that the current foreclosure crisis will deplete more than $300 billion of wealth from communities of color.

NUL has introduced a “battle plan” that includes developing a national public-private jobs initiative to create jobs and train urban workers for broadband, healthcare, manufacturing, infrastructure and clean energy jobs, It also calls for the reauthorization of the Workforce Investment Act, the creation of Green Empowerment Zones, and the expansion of small business lending.

The state of the union is an annual occasion in which a president receives more unsolicited advice than he cares for or, for that matter, could ever use. Republicans want him to propose specific and wide-ranging budget cuts to address the deficit; some hope he will embrace their effort to repeal healthcare reform legislation. Supporters of gun control hope he will point to recent shootings as a reason to enact some reforms. Anti-war activists want to know when the U.S. will permanently leave the Middle East. BlackEnterprise.com asked some African American leaders to also weigh in. Here’s what they had to say:

“The State of the Union will provide the opportunity for President Obama to lay out his plan for getting Americans back to work, and continuing to move this country forward. More specifically, I would like to hear about ways to recapture our industrial base where thousands of jobs could be created. Together we’ve achieved monumental accomplishments, but there is still much work to be done. I am also interested in hearing him expound on opportunities for the most vulnerable Americans. Too often they’re left out of the equation. I’m positive the President will deliver an excellent State of the Union address.”

—Congressional Black Caucus Chairman Emanuel Cleaver, II (D-Missouri)

“I think that he needs to return to many of the themes that he campaigned on: restoring U.S. competitiveness, investing in green technology, investing in education and improving the quality of schools because they’re long-term solutions to the problems that we have. We’ve got massive numbers of unemployed people with no prospect that they’ll be reemployed immediately so something has to be done to address that, particularly for African Americans in urban areas, Hispanics and large sectors of the general population.

It’s not likely that Congress will continue to extend unemployment, yet those people will still be unemployed. So more creative kinds of strategies need to be developed, such as a national service program in exchange for both unemployment compensation and some type of earnings, as well as a focus on retraining and other educational programs that will begin to address the high levels of unemployment that we’re going to encounter for the next five to ten years.

But all of that is moot if there’s not some serious attempt to address the deficit. Obama needs to lay out a blueprint to get the deficit under control. You don’t want brutal and heartless cuts across the board, particularly to housing and other kinds of social programs that are going to severely hurt the middle class or lower-income families because those are the folks that are already hurting. But if he doesn’t lay out a blueprint, that’s what Republicans are going to start targeting.

There has been a lot of recognition that we need to support small businesses if we’re going to grow jobs, but no realistic plan to do that. Simply making money available for loans doesn’t solve the problem because at the same time there are tighter credit requirements and regulations so most small business owners don’t seek loans. These are the themes he needs to return to that got away from him after the campaign.”

—Dr. Thomas D. Boston, Georgia Tech economics professor; CEO, Euquant; and member, BE Board of Economists

“I want to hear that Obama takes the jobs commitment seriously and that he’s going to invest in infrastructure. He’s made a significant commitment to education, his investment in the stimulus package was big, and he has to continue that. But I think there’s an issue of education equity at the state level that only the states can address and I hope he charges them with the responsibility of finding more equitable ways to provide quality education for all. I really hope he deals with a defensive healthcare bill. He’s got to make that a strong centerpiece; people spent too much political capital on that. It is a civil and human rights issue of the first magnitude, as are jobs, so I hope he makes a vigorous defense of healthcare.

I think he’s got to deal with comprehensive immigration reform and I hope he makes that more of a national issue. It’s certainly a civil rights issue, both in terms of the anxieties that many Americans feel about the presence of the undocumented and what that means for the economy, but also for the future of the country.”

—Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights and The Leadership Conference Education Fund

“There needs to be a removal of this uncertainty there has been for a long time in the business world: Where are we going? Are you willing to support businesses? How will you support businesses? How will you create jobs if you don’t support business enterprise?

Historically, jobs have come from small to mid-size businesses. More so than ever before we need that now because as a result of the recession, well-to-do companies have figured out that they don’t need as many people to get the same work done, and in many cases to get more work done. They’ve invested money in either intellectual property or hard assets that work faster. They’re doing more business but not creating any new jobs.

There needs to be some certainty regarding the tax rate on capital gains. If it’s going to stay at 15%, that gives folks a reason to invest in and grow their business, or sell and get out without having to worry about giving it all back. But if there’s that, there’s really no appetite to spend a lot to grow your business too quickly because you don’t expect to get a lot out of it.”

—Tilmon F. Brown, CEO, New Horizons Baking Co.

“Jobs, jobs, jobs, and a focus on high unemployment and urban communities. We’re certainly looking for the president to talk about long- and short-term solutions, such as training and retraining of workers and education. He has to lay out a strong case for an economic recovery that touches all people. State of the union addresses tend to touch on a wide range of issues, but this year we’re very focused. We’re looking for him to give a nod to targeted policies. People are looking to be inspired, which I know the president will do, but really to hear him talk about his commitment to jobs and ideas in areas like transportation infrastructure and green empowerment zones, but also how the disadvantaged can connect with those jobs.”

—Marc Morial, president and CEO, National Urban League

Feel free to share your thoughts on what you would like the President to discuss in his State of the Union Address tonight.

Proponents of career colleges, as they also are known, say that the institutions are a boon to low-income and nontraditional students who might not otherwise be able to pursue higher education opportunities. They are more accessible than traditional universities and colleges, and provide the flexibility that many students need to balance work, family and school.

For the several months, however, for-profits have been under investigative fire for aggressive recruiting practices and high student-loan default rates. Although they enroll approximately 12% of college students, they represent 43% of student loan defaults. Critics have likened them to predatory mortgage lenders, saying that for-profit graduates have little to show for their education investment except enormous debt. Minorities, who are often first-generation college students, are particularly vulnerable.

Following much heated debate, the Education Department is expected implement a “gainful employment” regulation that will go into effect in July. The proposed rule seeks to hold for-profit and postsecondary vocational institutions accountable for ensuring that graduates are adequately prepared for the workplace and not overly burdened with debt. They would be required to provide prospective students with graduation and job placement statistics for each program that qualifies for federal student aid, and provide the department with information about student debt levels and incomes earned after program completion. Programs also will be required to provide five-year enrollment projections; documentation from employers unaffiliated with the institutions that their curriculum is aligned with the industry’s needs; and show that there is a demand for occupations in the programs already offered before new programs can become eligible for such aid.

Milton Anderson, Jr., president of Virginia College in Jackson, Mississippi, says that the gainful employment rule is grossly unfair and will force a disproportionate number of African Americans to forego higher education.

“There are some bad actors in our system, but the majority educates students and gets them out into the workplace where they become gainfully employed taxpayers,” Anderson said.

He also argues that the rule should not be limited to for-profits and should be applied on a case-by-case basis. Rev. Jesse Jackson, Sr., National Urban League president Marc Morial, and some members of the Congressional Black Caucus also say the rule is both drastic and harmful to economically disadvantaged and minority students. The industry has launched a massive lobbying and advertising campaign to fight the rule, and has hired former members of Congress, including William Gray (D-Pennsylvania), who previously served as president and CEO of The College Fund/UNCF.

“Unfortunately, there are a lot of students of color from poor backgrounds who might not be getting the proper guidance from families or other resources to let them know what their options are,” said Kimberly Jones, associate vice president for public policy at the Council for Opportunity and Education. “For-profits are not the only option, especially when you consider that a lot of the learning students are looking for can very easily be gained at a far lesser cost at a local not-for-profit institution, particularly community colleges. We don’t believe that the regulation would close the door of opportunity for African American students.”

Jose Cruz, a vice president for education policy and practice at The Education Trust, said that it is not unreasonable to expect a market-based, for-profit enterprise to provide consumers with the information that they need to make informed choices. “This is an industry that has grown by 236% in the last ten years and has spawned players that have profit levels on the order of a Procter & Gamble,” he said. “Yet as a whole, they fail to graduate four out of every five of their first-time, full-time bachelor degree seeking students.”

According to Cruz, prospective students should ask schools about their overall graduation and job placement rates. “If you’re a student of color or a low income student, it’s important to ask about the graduation rate because some of these institutions do significantly worse with them than their white or more affluent counterparts.” He also suggested that students ask where graduates are being placed because most schools cater to local populations that expect to be able to find jobs in or near their communities.

Find out if the program you’re considering is accredited and whether there is a licensing exam associated with the occupation as well as how the school prepares students for the exam. Cruz recommends that students seek information about exam pass rates. Otherwise, “you might take a $50,000, two-year degree and find out you’re not prepared for the exam or if the program’s not accredited, that you’re not even eligible to take the exam.”   

Students are sometimes surprised to learn that more often than not the credits they earned at a for-profit institution cannot be transferred to traditional, nonprofit schools. Cruz, who previously worked as a vice president of student affairs for a large state university system, said that this is a problem in higher education in general, but for-profit credits are “almost impossible” to transfer.

“Ask how long a typical student similar to you takes to complete the degree or certificate program and how much debt you’ll be expected to incur,” advises Cruz. Because for-profits tend to be much more expensive, most students have to take the maximum amount they can get in federal aid and also take out private loans.

Asking these questions will give prospective students a far greater sense of the actual risk associated with a particular school or program so they can make the right decision, said Cruz, who also recommends shopping around. “If they’re recruiting you, the least you can do is find out if your community college has a similar program or if there’s a nonprofit that’s more affordable.”

• Read more on education:
• Detroit Schools in Danger of Closing. Will our kids have to sacrifice their educations?
• Could an independent school be the right choice for your child?

“Overall, African Americans have lost ground during the Great Recession, and disproportionately so,” said National Urban League President and CEO Marc Morial. “Unemployment has risen significantly and the subprime mortgage crisis has cost many people their homes. In addition, the total picture isn’t necessarily reflected in the statistical report, because the figures tend to lag a year or so.”

The report’s release is being streamed live and can be viewed here.

The report includes a series of essays by Labor Secretary Hilda L. Solis, Education Secretary Arne Duncan, Black Enterprise Board of Economist Bernard E. Anderson, and others that offer solutions to some of the most pressing economic and social concerns (healthcare, housing, unemployment, education, technology, and the green movement).

According to the report, not a lot has changed in the past year in terms of equality, and shows the status of blacks at 71.8% (up from 71.2% in 2009) compared with whites, according to the 2010 Equality Index.

In other categories of the index, except for civic engagement, there were minimal changes. Economics (unchanged from 2009 at 57.4%) and social justice (down to 57.1% from 57.2% last year) are the areas that show the greatest degree of inequality. The equality index for health moved from 76.8% in 2009 to 77% and education from 77% in 2009 to 77.6%). Civic engagement showed the greatest improvement, based on record turnout by African Americans during the 2008 presidential election.

Despite the debate about healthcare reform, 10.8% of whites, 19.1% of blacks and 30.7% of Hispanics are without health insurance, according to the report. In the education sector, for the population over 25, whites are more than one and a half times as likely as blacks and two and a half times likely as Hispanics to hold a bachelor’s degree. Relative to the 2009 Equality Index, ground has been lost on the college enrollment rates for 18-24 year old high school graduates (from 90% to 84%).

The report also includes a new equality index for Hispanics because, as Morial explained, they are a growing part of the population and there have been many requests to include similar information for this group.

Blueprint for Success

The essay “Putting Americans Back to Work,” by Morial, Valerie Rawlston Wilson, Cy Richardson, and Terry Clark, highlights a plan that calls for an interest rate reduction to 1% for loans provided through the Small Business Administration’s Community Express loan program to businesses in areas where the local unemployment rate exceeds the state average. The National Urban League estimates that this would make credit available to an additional 50,000 small businesses nationwide.

The workforce plan also calls for a $5-7 billion investment in youth summer jobs and the development of green empowerment zones in areas where at least 50% of the population is experiencing an unemployment rate that is higher than the state average. “We’re also calling for a direct job creation program where money would be given to cities and communities to hire people. That’s very important, and we recommend a very significant program to put three million people to work,” said Morial.

Summer jobs for teens and young adults are among the organization’s top priorities, he added, because their unemployment rates have climbed almost to 50%. “Many of them need the money to survive. Their parents aren’t working and they need money for clothing, food, and expenses,” Morial said. “It also teaches young people a work ethic that’s a very important part of their education and upbringing.”

The essay “Broadband Matters to All of Us,” by Rey Ramsey, stresses the need for wider adoption of broadband in black communities.

“[Broadband is]s changing our lives, and African Americans lag behind whites when it comes to having a computer at home or access to broadband,” said Morial. “But if you’re disconnected from computers, you’re also disconnected from the information that you need to advance yourself and your family,” such as job applications, mortgage information, and college and scholarship applications.

Morial hopes people will take consider the recommendations included in the report and then urge President Barack Obama and Congress to also consider them.

“We’re working very closely with the Congressional Black Caucus and a wide range of other lawmakers on a variety of measures,” Morial said. “We want people to support our jobs plan because we want Congress to enact it.”

The overall Equality Index is a weighted average of indices calculated for each of the five sub-categories—economics, health, education, social justice and civic engagement, according to the NUL’s methodology.

Related Reading

National Urban League 2009 Report Finds Blacks Continue to Lag

State of Black America: Wealth for Life

Using a social networking platform, I Am Empowered incorporates an interactive Website that allows members to access information, create profiles and share video and other information. Users can also obtain assistance on issues such as homeownership and entrepreneurship. The site also has mobile capabilities and users can download the application at the Apple store and Android Market. A BlackBerry app is also in the works. People can become apart of the community by visiting www.iamempowered.com.

“The whole social mobilization platform is going to be about getting people to connect,” Marc H. Morial, National Urban League president. “The aim is to create the largest digital community of its kind,” he adds.

The NUL said this initiative is a tool to continue its mission of eliminating racial gaps and disparities. As part of the launch, users are urged to sign up and pledge online to commit their time and talents to achieving the four main goals of the I Am Empowered initiative by 2025.

As part of the National Urban League’s centennial celebration, the organization will host an Empowerment reception March 2 in Harlem and its annual conference in Washington D.C., July 28-31. The historic civil rights organization dedicated to economic empowerment for African Americans was founded in 1910. With 100 local affiliates in 36 states, the organization has developed community based programs, public policy research and advocacy. The organization counseled black migrants from the South in the early 1900s, helped train black social workers, and worked in various other ways to bring educational and employment opportunities to blacks.

“I am so proud of the National Urban League’s rich history and what it has done for people over the past 100 years,” said former Urban League president Hugh B. Price. “As we move forward by extending our reach and improving our way of servicing those who need our assistance, I’m excited about what the Urban League can and will do for urban communities throughout the 21st century.”

Morial presents gift to Ambassador Liu Guijin

After departing from Newark, N.J., on a 14-hour flight on January 30, the National Urban League‘s 40-plus member delegation arrived to the bustling, vibrant and modern city of Beijing, China. We are here on a historic cultural and trade mission to begin a dialogue of mutual interests and potential opportunities to bring Chinese investment to African-American communities. Despite a little jet-lag, we immediately began an action-packed schedule of activities.

These activities were highlighted by meetings with Ambassador Liu Guijin, former Chinese Special Envoy on African Affairs. He shared with us an overview of China’s growing engagement and involvement with many African nations, including their efforts to assist the Organization for African Unity (OAU) in building its new headquarters in Addis Ababa, Ethiopia.

The Ambassador stressed the Chinese emphasis on peaceful co-existence and mutual respect for sovereignty and territoriality. We were impressed that Chinese trade with Africa increased from 1 billion to 100 billion in just 10 years.

Act 1-Group CEO Howroyd greets Asst. Minister of Commerce Wang Chao

Our next visit was to China’s Ministry of Commerce where, where we met with Assistant Minister of Commerce Wang Chao. We emphasized the African-American community as an important component in the growing trade relationship between the U. S. and China, and the need for China to channel its investment in the United States into urban communities. We underscored the interest of African-American businesses conducting business in China.

At lunch we were treated to a luncheon at the Diaoyutai State Guesthouse, which is the very same room where the Chinese hosted President Obama for lunch! The elegance of the State Guesthouse, with its 40-foot ceilings, large glass walls and majestic view, underscored the importance and historic nature of our visit.

As we prepare for our second day, we will be meeting with the Ministry of Education and the China Counsel for the Promotion of International Trade. We will also visit the Great Wall of China.

We have on our trip a distinguished group of African-American leaders that include: former Transportation Secretary Rodney Slater, Cincinnati Mayor Mark Mallory, National Newspapers Publishers Association Chairman Danny Bakewell, Los Angeles Urban League President Blair Taylor, Detroit Urban League President N. Charles Anderson and Los Angeles businesswoman Janice Bryant Howroyd, CEO of Act-1 Group, the largest American company owned by a black woman (ranked No. 5 on the BE 100s Industrial/Service list).

We are being hosted in Beijing by Mr. C.C. Tung, a member of the governing board of the China-United States Exchange Foundation and Mr. Donald Tang, chairman of the Asia Society of Southern California.

We’ll update you again from Beijing in a few days.

Marc H. Morial is president and CEO of the National Urban League.

Morial

The U.S. Census Bureau named National Urban League President Marc Morial chairmain of the Census Advisory Committee.

“Marc has extraordinary experience in working with national organizations and advocating on behalf of diverse communities,” said Secretary of Commerce Gary Locke, who tapped Morial for the position Thursday, effective immediately.  “His expertise will help to ensure a complete and accurate count during the 2010 Census.”

Morial’s responsibilities include providing advice on the design and implementation of the Census.

“I am honored by the opportunity to chair the 2010 Census Advisory Committee which is tasked with advising Commerce Secretary Gary Locke,” Morial said.

Morial, has served as the National League’s president since 2003. Prior to his work with the organization, he carried out two terms as mayor of New Orleans from 1994 to 2002. He will still reside over the Urban League will serving out his chairmanship.

President Barack Obama boosted aid to the Census Bureau with the passage of his $787 billion stimulus plan. Under the plan the bureau received $1 billion to ramp up outreach efforts in minority communities and increase staffing at local census offices.

Renita Burns

Indicted Mississippi Mayor Dies Days After Primary Defeat

Melton

Frank Melton, the indicted mayor of Jackson, Mississippi, died early Thursday after suffering cardiac arrest. His death came less than two days after he lost his bid for a second term in office.

City spokeswoman Goldia Revies told reporters Melton died peacefully  with his wife by his side at a local hospital, where he was taken by ambulance from his home Tuesday night. He had a history of serious heart ailments.

Melton had been discovered unconscious in his home just moments after polls closed in the Democratic primary in which he finished third, according to results. He faced opposition from 15 candidates. Wednesday, the Jackson City Council elected its own president, Dr. Leslie B. McLemore, as acting mayor in an emergency session.

The controversial 60-year-old mayor had his share of legal woes. At the time of his death, he and a former bodyguard had faced a trial beginning next week on federal civil rights charges stemming from a vigilante-style raid on a suspected crack house. Melton called his sledgehammer demolition of the property an “administrative mistake.” It would have been the third time in three years he’d face charges stemming from the 2006 incident. A judge declared a mistrial in February after a jury failed to reach a verdict and in 2007, Melton was acquitted on state charges stemming from the same incident.

As reported by The New York Times, Melton was known for his “flashy, hands-on approach” to combating crime, carrying a police badge, guns, a bulletproof jacket, and a large stick while patrolling Jackson’s toughest areas, although he was not a certified policeman.

Before the primary, he won a case against The Jackson Municipal Democratic Executive Committee who voted unanimously to remove him from the Democratic Ballot.

He is survived by his wife, Ellen, and two children. A memorial service is scheduled for Tuesday, May 12, at noon at Thalia Mara Hall in downtown Jackson.  Melton will be buried in his native Texas.

Janell Hazelwood

The Treasury Department has been busy recruiting firms to help execute the Troubled Asset Relief Program that came out of the $700 billion Emergency Economic Stabilization Act of 2008, but some minority- and women-owned business enterprises have complained that the criteria under the requests for proposals excluded minority participation.n

As a result of frozen credit markets, Congress and President George W. Bush rushed to pass the EESA on Oct. 3 after several prominent but over leveraged financial institutions collapsed. The government’s hope is that the EESA will reduce the debt burden of ailing banks by purchasing toxic mortgage-backed securities so all banks will be confident in loaning money to individuals and businesses.

But first, the Treasury had to engage legal, accounting, and asset management firms to do the legwork to buy back debt from faltering banks. Due to the urgency of the situation Congress gave the Treasury permission in the EESA to limit competition for these contracts, a contingency that does not enforce minority participation regulations.

The Treasury set a high standard for procurement eligibility. It required that firms interested in establishing infrastructure services such as accounting must have at least $500 billion in domestic assets under custody; those financial institutions wanting to manage securities must have $100 billion in dollar-denominated fixed income assets under management; and $25 billion in assets under management to provide modifications, restructurings, re-sales, and foreclosure mitigation for residential and commercial loans.

“They could have parceled out the allocations in smaller portions,” says Fred Parks of Toussaint Capital Partners (No. 10 on the B.E. 100s Investment Banks list with $31 million in co-managed issues). “By the sheer management of those numbers it precludes the participation of a number of minority and women-owned enterprises that are in asset management.”

The top black-owned asset manager on the B.E. 100s list, Earnest Partners, manages no more than $22.4 billion and the largest black-owned investment bank Sibert Brandford Shank & Co. LLC has $64 million in co-managed issues.

“Treasury believes that it would not be fiscally prudent to ask a firm that only had experience managing only a few billion to manage $100 billion. It could put the taxpayers at unnecessary risk,” said

Kashkari , a former employee of Goldman Sachs, who leads the Office of Financial Stability, an office created to manage the bailout.

Marc Morial, president of the National Urban League worked with Rep. Maxine Waters (D-CA), Rep. Gregory Meeks (D-NY) and the National Association of Security Professionals, a non-profit association of minority and women professionals in the securities industry, to make sure that the $700 billion bailout would include economic opportunities for minority-owned businesses. Before his group introduced the idea, minority firms had not been considered at all in Congress’ legislation, according to Morial. The law that Congress passed doesn’t contain specifics on how to increase minority participation in the rescue plan.

“We think that these steps violate the spirit of what Congress intended,” says Morial. “This ensures that only the largest firms, some who were in the middle of the subprime crisis, are running the bailout.”

Critics also say that the Treasury set a deadline, which gave potential firms very little time to apply [s4] for these contracts and that the banking community should hold the Treasury accountable to choose a team of contractors that is diverse in content and size for the new Office of Financial Stability and its subordinating authorities.

“We asked vendors to demonstrate their ability and commitment to working with small, veteran, minority and women-owned businesses as sub-contractors. And we are evaluating their submissions in part on their capability to do this,” said Kashkari in testimony at a Senate Committee on Banking, Housing and Urban Affairs hearing Oct. 23.

Kashkari explained that since TARP’s inception, the Treasury has announced guidelines for solicitations with specific opportunities for small businesses. Specifically, the Treasury hired investment adviser EnnisKnupp to identify qualified minority- and women-owned businesses. The firms’ duties also will include developing and maintaining investment policies and guidelines and assisting with the oversight of the portfolio’s multiple asset managers. This oversight will include helping Treasury to determine asset allocations for each manager, evaluating the performance and costs, identifying conflicts of interest and identifying strategic investment and market issues impacting the overall portfolio.

The Treasury plans to issue separate notices to identify smaller, minority- and women-owned financial institutions that do not meet the minimum qualifications in the initial notices and smaller financial institutions will be designated as subcontractors  and/or sub-managers within the portfolio.

In addition to EnnisKnupp, the Treasury also hired the Bank of New York Mellon as lead custodian to implement accounting, auction management and other infrastructure services; Simpson, Thacher and Bartlett as legal adviser for the equity program; and Pricewaterhouse Coopers and Ernst & Young for internal control and accounting services.

“Recruiting the right people is essential to the success of this program and we are moving quickly on several fronts,” said Kashkari. “While the permanent team is being identified for tomorrow, we are tapping the very best, seasoned, financial veterans from across the government to help launch the program today.”