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Showing posts from 2019

Secretary of the Treasury "misplaces"​ $1.5 Trillion in $100 bills....

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In an interview on Fox Business News, the current Secretary of the Treasury, former Goldman Sachs partner Steven Mnuchen, indicated that $1.5 trillion worth of $100 bills recently "disappeared." In explaining how this money vanished, Mnuchen said: "Literally, a lot of these $100 bills are sitting in bank vaults all over the world."

This explanation is beside the point and impossible to verify, of course, making it highly unlikely to be true.

Mnuchin, you will recall, came to Washington with a firmly established reputation for unethical behaviour. In 2009, he took "over California’s IndyMac bank, shut down amid the 2008 foreclosure crisis by the Federal Deposit Insurance Corporation (FDIC). Bought for $13.9 billion (but only $1.3 billion in actual cash), Mnuchin turned it into a genuine foreclosure machine" and became known as the Foreclosure King. His bank "carried out more than 36,000 foreclosures, tossing former homeowners (including active duty m…

Why the US Should Nationalize LIBRA

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Mark Zuckerberg’s October 23rd testimony before Congress on LIBRA, Facebook's’ proposed digital currency, has garnered much attention. I attended the hearing (I'm in the blue tie in the picture below) and thought both legislators and Zuckerberg missed the real solution to the problem.
























To understand why, let’s start with what’s really going on. Facebook created Libra in response to competitive pressure. Imagine a social networking platform with the four functions of money (store of value, means of payment, unit of account and a means of social control) imbedded. A social media platform with this functionality has the potential to significantly reduce Facebook’s reach, if not immediately, then ten years down the road. 

For more, see: Why the US Should Nationalize LIBRA https://link.medium.com/hUhQ43wFt1

How to Finance a Black Women-owned Business in 2020

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Maggie Lena Walker was the first female bank president of any race to charter a bank in 1902. Black women have continued down this path of entrepreneurship. According to one report, "the number of businesses created by black women in the United States alone is up more than 460% over the last 20 years, making them the fastest growing group of entrepreneurs in the nation."

Of course, we've known this for some time. We launched MinorityFinance.com in 1998 and noted that 65% of the inquiries from the site came from Black women. The key issue then, and now, is money: "according to the Diane Project, black female founders are only able to raise an average of $36,000 in venture funding, while start-ups owned mostly by white males have received on average $1.3 million."

We provide data-based advice and instruction, based on our years of experience, to help you over this hurdle. Our webinar provides information on the current state of Black women businesses. We provide…

Fully Adjusted Return Economic Forecast for 2020

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We are pleased to present our 2020 economic forecast incorporating social factors (Fully Adjusted Return). Tickets can be obtained at: https://econforecast2020.eventbrite.com

We have a track record of issuing unusually accurate economic forecasts:

In October 1998, in a petition to the Federal Reserve and the US Court of Appeals for the District of Columbia Circuit (Case Number 98-1459), Mr. Cunningham forecast the financial crisis that occured ten years later. (See: https://www.creativeinvest.com/OppositionToCitigroupTravelersMerger.pdf )

On June 15, 2000, we testified before the House Financial Services Committee and warned that ethical issues at Fannie Mae and Freddie Mac would led to their failure.

On December 22, 2003, our economic forecasting models signaled the probability of system-wide economic and market failure. See page 6: http://www.sec.gov/rules/proposed/s71903/wmccir122203.pdf

As we noted on Oct. 5, 2006, forecasting the development of cryptocurrencies: "competitiv…

Let’s break down investing by Katherine Wiles Sep 26, 2019 (Investing 101)

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(The article below was published on Marketplace. We have edited the piece to reflect our comments.)

"Buy low, sell high.” We’ve all heard the adage before. But investing in the stock market can be a big step. It can be confusing — even daunting — and the terms can make it feel like inside baseball. So here are some basics to know about investing in the stock market before jumping in feet first.

You don’t need a lot of money to invest in the stock market. While you should make sure your finances are healthy before investing, William Michael Cunningham, an investment adviser and CEO of Creative Investment Research, said directly purchasing stock from a company can be done with as little as $25 by buying a fractional share. (For more, https://www.moneycrashers.com/buy-stocks-without-broker/).

..Investing in funds, as opposed to individual stocks, is a good way for beginners to get started.

A mutual fund is a collection of investments in one portfolio account. The mutual fund takes i…

The FedNow℠ Service: The Fed's Blockchain?

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The Federal Reserve Board announced that the Federal Reserve Banks will develop a new round-the-clock real-time payment and settlement service, called the FedNow℠ Service, to support faster payments in the United States.

This is a direct response to the threat posed by digital currencies and blockchain. According to one Fed official, "Last summer, the U.S. Treasury recommended that 'the Federal Reserve move quickly to facilitate a faster retail payments system, such as through the development of a real-time settlement service, that would also allow for more efficient and ubiquitous access to innovative payment capabilities.'” Sounds like blockchain to us, thus, we expect this new system to be blockchain enabled. (For more on blockchain, see: What is Bitcoin? How does it relate to blockchain? Henry Zhang, Creative Investment Research Impact Investing Intern. University of Toronto.  Online at: https://creativeinvest.com/crypto/bitcoinfaq.html)

As we noted in our paper &quo…

The Future of Money, Governance, & the Law. September 14 to September 15, 2019

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Let Us Put Our Money Together: The Founding of America’s First Black Banks

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We note with interest the publication of yet another book on Black Banks written by non-Black people. The most recent entrant, "Let Us Put Our Money Together: The Founding of America’s First Black Banks" was written by the Federal Reserve Bank of Kansas City.

What makes this book especially interesting is the lack of support that the Federal Reserve Bank of Kansas City has shown Black banks over the years.

In an article in Black Enterprise, we stated:

"it’s interesting that the Fed would write a book on black banks given their responsibility under federal law from over two decades ago to save minority banks in the face of the current decline...Congress enacted the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) under Section 308," which called "for preserving the number of minority depository institutions and offering technical help to prevent insolvency of institutions. The law also was geared to promote and encourage the cre…

Why Shareholder Value Never Actually Mattered. William Michael Cunningham, Creative Investment Research

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The Business Round Table (BRT), a group of the largest corporations in America, declared recently that "profits for shareholder are no longer the only purpose of a corporation." This profits-first strategy, known as “shareholder wealth maximization,” has been the guiding philosophy for much of American business since 1619.

It was always the wrong goal. Some, mainly those excluded from fully participating in the economy, knew this to be the case. Martin Luther King, in a sermon given on November 4, 1956, warned that "material means have outdistanced spiritual ends, that mentality has outdistanced morality, and that civilization has outdistanced culture." More specifically, King, in a September 1, 1958 essay, wrote that “We are prone to judge success by the index of our salaries or the size of our automobiles, rather than by the quality of our service and relationship to humanity.”

Even Robert F. Kennedy, the wealthy scion of an influential family, declared, at the …

The 1619 Project and the Inverted Yield Curve. William Michael Cunningham, Creative Investment Research

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An inverted yield curve reflects a situation in which interest rates on long term bonds are lower than those on short term bonds (bills). Supposedly, this is one of the surest signs that a recession is looming, since, normally, interest rates are higher on long term bonds than they are on short term bonds.

The standard explanation for the normal yield curve relies on something called "liquidity preference", which states that "an investor demands a higher interest rate or premium on securities with long-term maturities that carry greater risk because, all other factors being equal, investors prefer cash or other highly liquid holdings."

On Sunday, August 18th, the New York Times published the print edition of the 1619 Project. The Project documents the 400th anniversary of the arrival of the first forced labor brought from Africa to the then-Virginia colony. The paper notes that "in colonial times, when land was not worth much and banks didn’t exist, most lend…

The Economic Impact of the Racial Wealth Gap, Racial Bias in Small Business Lending and Racial Bias in Investment Management

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Suddenly, it looks like Black people have a lot of friends....several articles have just been published that may point to a revision in management's attitudes about how racial bias has affected Black People:

Racial divide exposed in lending to the smallest of small businesses 
Sole proprietors who are African-American or Hispanic are less likely than their white counterparts to have their funding needs met and are more likely to be discouraged from applying for credit, according to a new report by the Federal Reserve Bank of New York.
https://www.americanbanker.com/news/racial-divide-exposed-in-lending-to-the-smallest-of-small-businesses

Study Reveals (Asset) Allocator Bias Against Black Fund Managers:
When evaluating top-performing managers, institutional investors favored teams led by white men, according to new research from Illumen Capital and Stanford SPARQ.
https://www.institutionalinvestor.com/article/b1gpxh3rph9y69/Study-Reveals-Allocator-Bias-Against-Black-Fund-Managers

The e…

The Internet Governance Forum by Sachin Meier, Impact Investing Intern, Georgetown University.

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Last Thursday, the Internet Governance Forum was held at the Center for Strategic and International Studies. Sponsors included Facebook, Amazon, Comcast, the Charles Koch Institute, and ICANN (the Internet Corporation for Assigned Names and Numbers). The conference covered many topics – from blockchain, AI, and 5G to monopoly power and antitrust, privacy, and consumer protection.

Commissioner Christine Wilson of the Federal Trade Commission discussed the myriad problems surrounding Facebook and its "reckless" behavior with respect to user privacy, data collection and targeting. She took a strong stance on the need to directly regulate Facebook and “put a speed bump in front of Mr. Zuckerberg”. She was keen on controlling Zuckerberg’s power within his own company by dictating the composition of Facebook's Board of Directors and regulating other executive powers Zuckerberg holds within the company. She also suggested a more general, industry-wide reform of social media co…

The Responsible Business Summit West: October 9-10, 2019

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The Responsible Business Summit West will challenge 250+ CEOs, sustainability leaders, Investors, Government representatives and NGOs to show how they’re going to leverage new technologies and investments to deliver the blueprint for the future economy – over two days you will learn how to move from dialogue to action on the key opportunities that lie ahead. Grasping the chance presented whilst simultaneously responding to investor demand to be more transparent on ESG related risks is no straightforward task. Keynote speakers include:

oAssistant Secretary-General, UN Environment oPresident & CEO, Oxfam America oPresident & General Counsel, DSM North America oPresident, CDP North America oPresident & CEO, Fairtrade USA oExecutive Vice President and Group President, Sempra Energy oChief Environment Officer, Microsoft oChief Sustainability Officer, Hewlett Packard Enterprise oChief Sustainability Officer, FedEx oChief Sustainability Officer, MetLife oChief Sustainability Officer, Master…

Second IRS Hearing on Qualified Opportunity Funds. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

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On July 9, the IRS held the second hearing on Qualified Opportunity Funds following the second tranche of proposed guidance on Opportunity Zones issued on April 17. The first hearing in February followed the initial regulation issued on October 19. The panelists of Internal Revenue Service and Department of the Treasury employees asked speakers to discuss problems and examples of possible solutions that can help them clarify the regulation.

The panel emphasized that they are governed by the language within Opportunity Zone legislation. They are not legislatures themselves. They stressed that their job is to work within the guidelines of the laws congress passes.  The 19 speakers each discussed what they thought would help improve the legislation.

The initial hearing covered an array of issues and clarifications for the Treasury Department to address. During this second hearing, speakers had a narrower list of issues to address, largely technical and tax related.  This is expected to …

Libra Hearings on Capitol Hill. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

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On June 18, Facebook released it’s white paper on the new digital currency, Libra.The news led David Marcus, Chief Executive Officer of Calibra, to appear before the House Financial Services committee on July 17 - a day after appearing before the Senate Banking Committee.
House Financial Services Committee members questioned whether Facebook would have overwhelming control overthe Libra Association’s 27 other members and if they were to be trusted with 2.7 billion users’ financial data, given past privacy violations.
Facebook’s trustworthiness has been in question since the 2016 Cambridge Analytica data scandal.Most recently, charges brought in March by the Department of Housing and Development concerning Facebook's alleged violations the Fair Housing Act have not helped the firm gain favor with the public.
Last month, Facebook was removed from the S&P ESG 500 index because of privacy concerns and a lack of transparency as to why certain user information is collected and shared…

Financial Services Subcommittee Hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.”

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Last week the House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing on “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social, and Governance Disclosures.”

Several pieces of legislation, or bills, have been proposed, (but not filed yet) in the US House of Representatives regarding Environmental, Social and Governance (ESG) reporting by large corporations.

●HR ___: ESG Disclosure Simplification Act of 2019 (Rep. Vargas)
●HR ___: Shareholder Protection Act of 2019
●HR ___: Corporate Human Rights Risk Assessment, Prevention, and Mitigation Act of 2019
●HR ___: To require issuers required to file an annual or quarterly report under the Securities Exchange Act of 1934 to disclose the total amount of corporate tax such issuer paid in the period covered by the report, and for other purposes
●HR ___: Climate Risk Disclosure Act of 2019 (Rep. Casten)

The US Securities and Exchan…

Semiannual Monetary Policy Report Hearing

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Last week, Chairman of the Federal Reserve, Jerome H. Powell appeared before the House of Representatives Committee on Financial Services to present the Semiannual Monetary Policy Report. Chairman Powell opened his remarks by stating that “the economy performed reasonably well over the first half of 2019 and the current expansion is now in its 11th year.” Inflation has run below the FOMC 2% objective, trade tensions and concerns about global growth have weighed on economic activity."
The Current Economic Situation
Labor Market: job gains remain healthy, with the unemployment rate falling to 3.7% in June. Employers are increasingly willing to hire and train workers with fewer skills.Unemployment for African Americans and Hispanics remain well above the rates of whites and Asians. Urban employment rates are higher than those in rural communities. Labour force participation by those in their prime working years is lower in the US than in comparable nations.
GDP: GDP increased to last…

Why the Fed is wrong about Libra

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The Federal Reserve Act (FRA) requires the Chairman of the Federal Reserve System to testify before the House Financial Services Committee and the Senate Banking Committee twice a year, in February and July, on how the Board handles monetary policy and its observations on economic developments.

In keeping with that requirement, the current Chairman of the Federal Reserve, Jerome Powell, testified before the House on July 10th. He indicated as follows:

Economic activity increased at a solid pace in the first part of 2019. The labor market has continued to strengthen: unemployment fell from 3.9% (Dec) to 3.6% (May), wage gains remained moderate. Inflation has been running below the Federal Open Market Committee’s (FOMC) longer- run objective of 2 percent. In June, the FOMC judged that current and prospective economic conditions called for maintaining the target range for the federal funds rate at 2 1⁄4 to 2 1⁄2 percent. Inflation: Consumer Price Index = 1.5 (May).Economic Growth: 1st qt…

Senate Budget Committee briefing on “The Reasons Opportunity Zones Won’t Work". Willem Sheetz, Impact Investing Analyst, University of Wisconsin (Madison)

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The 2017 Tax Cuts and Jobs Act (TCJA) provided new tax incentives for investments made through qualified Opportunity Funds in targeted communities around the United States. These tax advantaged investment areas, known as Opportunity Zones (OZs), were authorized to promote economic development in 8700 disadvantaged communities, selected by state governors and certified by the United States Treasury Department. The rationale behind OZs is simple: giving tax breaks to investors will spur economic growth in impoverished communities. However, it is important to consider the context in which this program was created. The TCJA was passed by a Republican House, Senate, and President. OZs are not a new idea and they have been tried and tested by conservatives for decades, as in Margaret Thatcher’s “enterprise zones.” Versions of OZs were then adopted in the United States at the state level, ultimately culminating in the 2017 TCJA. However, as uplifting as the OZ program seems on its face, it …

Why Regulating Facebook's Libra is a Waste of Time

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Facebook’s recently announced cryptocurrency pilot, Libra, claims it will “transform the global economy.”

The company hopes that anyone would be able to send Libra through platforms like Facebook messenger and WhatsApp to act as an intermediary for transferring traditional currencies. The ultimate goal is to have this currency accepted as a (general) form of payment. And other financial services will be built on top of its blockchain-based network, called the Libra Blockchain, a “proof of authority" permissioned blockchain system.

See: https://www.americanbanker.com/opinion/regulating-libras-a-waste-of-time

Diverse Asset/Money Managers. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

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The House Financial Services Committee Subcommittee on Diversity and Inclusion held a hearing on Tuesday June 25, 2019 to explore the challenges minority- and women- owned (MWO) firms face competing in the asset management industry.
According to Bella Research Group’s Diverse Asset Management Project Firm Assessment, MWO firms account for approximately 8.6% of all asset management firms but only manage 1.1% of all assets under management, $785 billion out of $71.4 trillion, and are underrepresented as managers in every asset class but over-represented in the top quartile of fund performance.
False assumptions harm opportunities for MWO firms. Bella’s concluded that compared to peers who manage similar asset classes, 25% of women-owned and 28% of minority-owned asset management firms fall in the top quartile on average for fund performance.
Studies have shown that minority and women-led investment firms invest in more diverse entrepreneurs and businesses, enriching  communitiesand cr…

Diversity in the Boardroom. Tisa Forrest, Johns Hopkins University, Impact Investing Analyst

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On June 20 the House Financial Services Committee held a hearing on diversity in America’s boardrooms.

The witness list consisted of Ms. Chelsa Gurkin, Acting Director of the Education, Workforce and Income Security team of the U.S. Government Accountability Office, Mr. Luke Visconti, Founder and Chairman of DiversityInc, Mr. Ron Lumbra, Managing Partner of Heidrick and Struggles, Ms. Linda Akutagawa, Chair of the Alliance for Board Diversity, the Former Ambassador to Argentina, Vilma Martinez, and Dr. Stephanie Creary, an Assistant Professor of Management at the Wharton School of Business of the University of Pennsylvania.

The hearing examined options for diversifying the gender, racial and ethnic composition of corporate and federal boards. Each witness presented testimony on how to address the issue of diversity on corporate boards and identify the conditions that lead to meaningful diversity so that more companies can follow the lead of firms that have been successful.

Deloitt…

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