Conference Presentation, Panel
Walking the Talk: Investing in the Future of Black Banks, Entrepreneurship, and Opportunity
Milken InstituteEugene Cornelius, Jr, Henry Childs II, Emanuel Friedman, Tracy Gray, Joseph Haskins, Jr., Aron Betru
- Black business owners faced a 41% failure rate from February to April 2020, twice the rate of the general business population.
- The Paycheck Protection Program (PPP) reached only 20% of eligible recipients in high-density Black-owned business areas.
- In 2017, 1% of venture capital-backed companies had Black founders or co-founders despite $84 billion in total VC deals.
- Black entrepreneurs typically start businesses with one-third less capital than white-owned businesses, a disparity that persists for over seven years.
- The recent stimulus bill allocated $9 billion in preferred stock (with a 0.5% to 2% coupon) to minority banks and Community Development Financial Institutions (CDFIs).
- Emmanuel Freeman projects a 10-to-1 leverage effect, suggesting the $9 billion government injection could mobilize $90 billion in community lending.
- Harbor Bank of Maryland is in final negotiations with JPMorgan Chase for a capital infusion, marking a significant shift in private sector engagement with minority banking.
- Tracy Gray's 22 Fund focuses on manufacturing and export capacity to create "clean quality jobs" with an average salary of $94,000.
- 98.7% of all asset managers are white men, creating a barrier where pension funds and CRA capital rarely flow to diverse fund managers.
- Henry Charles asserts that 98% of the world's economic growth occurs outside the US, urging Black entrepreneurs to leverage global markets and export opportunities.
- Tracy Gray notes that traditional due diligence processes create a "catch-22" for diverse managers, as they are denied the track record necessary to secure initial institutional capital.
- Joe Haskett reports that Harbor Bank's private equity subsidiary generated more revenue in 14 years than the bank generated over 39 years.
- Henry Charles challenges the traditional reliance on homeownership for wealth, noting that the top 1% gained $5 trillion in 2020 primarily through equities and corporate shares.
- Aaron Berger estimates that closing the racial wealth gap could unlock $1.6 trillion in economic potential for the US.
- Minority Dependent Institutions (MDIs) show asset returns competitive with non-MDIs, yet scale is limited by a lack of capital access.
- Minority-owned private equity general partnerships (GPs) have demonstrated outperformance relative to peers, yet manage less than 2% of the $69 trillion in US assets.
- The Milken Institute plans to launch a dedicated program on diversity in asset management to facilitate partnerships between large institutions and minority firms.
- 600 billionaires increased their wealth by $1.3 trillion during the pandemic, creating a potential funding source for economic justice initiatives.
- Joe Haskett warns that African American homeowners often buy in non-appreciating neighborhoods or at higher interest rates (up to 400 basis points more), depriving them of wealth accumulation.
- The panel advocates for a shift from "inclusion" to "innovation," creating new economic models rather than integrating into existing systems that exclude Black and Brown entrepreneurs.
- Henry Charles proposes a self-sustaining minority economy built on data, artificial intelligence, and direct financing rather than reliance on traditional external funding.
- Tracy Gray suggests aggregating discretionary capital from pension funds (e.g., $20 million to $100 million per fund) to create a dedicated fund of funds for diverse managers.
- The discussion highlights that 40% of jobs created since the 2009 recession were by women of color, underscoring the job creation potential of targeted capital.
- Aaron Berger emphasizes that market efficiency requires efficient information flow, noting that asymmetrical information prevents capital from reaching opportunities in diverse communities.