Track Record

Our History and Track Record

The pages at right provide detailed information on our efforts to support the public interest. While we were not always successful in doing so, our efforts cannot be denied. We continue to look out for the public interest.

White House Conference on Corporate Citizenship

We attended the White House Conference on Corporate Citizenship in 1996 at Georgtown University. There, we asked President William Clinton about Fannie Mae.


MR. CUNNINGHAM: Hi, my name is Bill Cunningham, from Creative Investment Research. One thing I wanted to talk about today, a little bit, were the financial markets. I mean, we see a lot of corporate citizens blaming the financial markets for lopping off 40,000 people of their work force. They say that Wall Street make me do it: I really didn't want to do it. How do you re-engineer the financial markets to be a little more humanistic? Or is that possible? I mean, you have some experience and expertise on the panel, it seems, people who really have had to deal with the financial markets. Is it possible to create new financial instruments, for example, that take into account certain social goals?

We, for example, at Creative Investment Research, on the local level, suggested to a local corporate citizen, Fannie Mae, that they issue bonds to rehabilitate the D.C. public schools as a way of meeting their local obligations instead of paying local taxes. I mean, that's the type of financial instrument innovation and expertise that we'd like to see developed in the capital markets.

If you have any comments, I'd like to hear them. Thank you.

THE PRESIDENT: Would anyone like to take a crack at that, what he said about the --(laughter.) Gerry?

MR. GREENWALD: I'd like to come back to an earlier point and link this question to it because I do think there's a disconnect at the moment. I think a statement has been made that there is clear evidence, there is clear evidence that caring for employees, broadly speaking, avoiding harsh layoffs that create a shock through those who remain and become disloyal, that there is clear evidence that if you do the right thing, that you become a more profitable company.

Now let's pause for a minute. I do not believe today that Wall Street analysts or institutional investors believe that, because if they did, they would not reward instant massive layoffs which is done today. That's the disconnect. And it seems to me our challenge is to demonstrate that it's a fact, that if we can do so, Wall Street will respond.

Q. Instant massive layoffs means that management has failed.

THE PRESIDENT: Let me just follow up on both of those comments. Look -- and let's talk about this -- people make mistakes. The President even makes a mistake now and then. (Laughter) People make mistakes. And sometimes -- and the world changes sometimes. Sometimes a decision that was good this year looks pretty bad next year because things that you couldn't foresee change.

Now, if that happens and you're running a really big company, and, let's say, two out of six divisions of it no longer make sense for you to be running and you want to have a no-layoff policy. And maybe you shouldn't have gotten into all these things that you got into when it looked like a profitable thing, at least from a financial transaction point of view to do. How do you get the time from the markets and from your board to make the transition? Maybe if you had three years you could figure out something for all these people and then you wouldn't have to lay them off. I mean, I think that's the thing that plagues me, you know. I think over the long run the markets make pretty good judgments. I don't think you can stay very strong in the market over the long run if you're not producing a quality product or service that somebody wants to buy.

But I think, what has happened is, as these markets have become more global and our ability to move money around just like this -- and the people who are moving it make money based on quarterly returns and also based on how many transactions are churned, it really forces people who are in a tight -- in the near-term at least, to make decisions that seem draconian. I mean, at least that's what it seems to me. And is there a fix for that? I mean, is there something that can be done about that, even if it's no more than -- to go back to the question the gentleman asked -- even if it's no more than changing the attitude of the people that are making those judgments? Because my perception is that some of these managers are under extreme market pressure in a dimension for short-term results that was not the case even a few years ago.

That's my perception. And I would like -- anybody else want to comment on that? This is a tough issue.

Q I think that's true, Mr. President. And also there are other factors. at work, too, that in this day of increased corporate governance today -- boards, I think, are looking for more of that, not only the financial markets, but there are higher levels of expectations with boards of directs. I'm not sure it's all bad. Is it good or bad?

THE PRESIDENT: Well, I think the point they were making is, if you could be more reluctant to have layoffs because you knew that these folks could be made productive if you had time to do it, are you robbed of the time to do it if you're market-dependent on a quarterly basis? I think thats-- to go back to our friend, again, from Lincoln Electric, if you stick with your mission and you stick with your mission over decades, and then you broaden your production line or you broaden your services, sort of flowing naturally out of your mission, this might not have ever happened to you. But if, in the last 15 years, you have got into expansions that were basically adopting unrelated or tenuously related enterprises, then you are liable to get caught on one of these whipsaws. And I think that's some of what we have seen here in some of the most highly publicized ones.

Sidney, what were you going to say?

Q Just a quick comment, Mr. President. I can remember when it would have been impossible to assemble a group of chief executive officers such as you have on the stage today to talk about the material we have been talking about today. It was regarded as kooky 15 years ago There is hope in the financial markets. I am not here to shill for Wall Street, but yesterday I visited with Robert Doran, who is the chief executive officer of Wellington Management company in Boston. They have $120 billion under management, and he told me that they invested in our company because they think we are a model and they see value in what we're talking about here today. I think there are many people in the financial community who are coming up behind this crowd, thinking very well of the same point of view.

THE PRESIDENT: If I might just make one other point, then I want. to call on the lady over here in the corner; then we have to adjourn. Earlier today -- maybe it was this morning at breakfast, someone said, the enemy is us. And some of our representatives of the unions here were laughing about it because, of course, the employees pension funds are among the biggest investors in the stock markets. And if they invest in mutual funds, let's say, their money managers are trying to get the highest return they can for the pension, and perversely, they could be undermining the employment stability of the very people whose retirement they're trying to protect. At least that is arguable. But if you want the people who are representing you -- this is something, it seems to me, that would be really a worthwhile discussion and maybe we could put one together for corporate executives and the union folks and the people in the middle, the people that are supposed to make these investment decisions that you asked about, sir. You see, you gave us a topic for a whole other day. (Laughter.)

But, I mean, I think, these markets, on balance, have served us all very well over time. And so we have to be reluctant to mess them up. But on the~ other hand, when the incentives get a little out of whack, we have to -- we ought to look at it. And I think -- anyway, I'll pursue it and I'll follow up with you all.

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If you have any questions about the White House Conference on Corporate Citizenship, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.

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Global Research Analyst Settlement Fairness Hearing

Global Research Analyst Settlement Fairness Hearing. April 11, 2005. Before Judge William H. Pauley. In the U.S. District Court for the District of New York.

Creative Investment Research was the only investment advisor to testify at this hearing. We believe other private sector institutions and companies ostensibly responsible for protecting investors, NRSRO's like Moody's, Standard and Poor's, may have been compromised and/or fearful of retaliation, and, therefore, unable to offer honest and unbiased advice to the Court.

THE COURT: Now, one other investor requested permission to speak, Mr. William Cunningham. Mr. Cunningham, good morning to you, sir.

MR. CUNNINGHAM: Good morning, your Honor. I appreciate the opportunity to address the Court on this matter. I am William Michael Cunningham of Creative Investment Research. We are a social investment adviser and a community development entity certified by the Department of Treasury.

In my letter dated February 3rd, 2005, I noted three points that I wanted to make at this hearing. One was the use of on-line penalty redistribution tools, second concerned the publication and notice schedule, and third concerned the ability of mutual and pension fund investors to determine damages caused to them and to request specific remuneration.

Let me talk about the use of on-line penalty redistribution tools first.

It is our belief that the experience that the federal government has with respect to bank lending might be appropriate to look at in this case. There is a database called the Home Mortgage Disclosure Act database. It's a collection of loan applications that each and every bank in the country take in. And the database is maintained by an institution called the FFEIC, Federal Financial Institutions Examination Council, that makes the data available to analysts and to the public. So if you wanted to see how many loans Bank of America had taken in, how many loan applications Bank of America had taken in in Harlem, you could do so as a way of reviewing their social performance. And that database, by the way, contains something like 17 million records so it's a very extensive database compiled on an annual basis. So the federal government has good experience in dealing with massive sets of information and making them available to the public.

The other point that we would like to make is that computing power and data storage are inexpensive so it's certainly cheap to make these types of large data sets available to the public.

We suggest that the Court mandate that the settling firms strip away personal information concerning transactions that are relevant here and post the information on a Web site. This would allow the public to look at transactions made by the settling firm, within the relevant time periods in the relevant securities, without revealing the personal information attached to those transactions. It's exactly analogous to what the federal government does with respect to the Home Mortgage Disclosure Act data. They strip out any personal information concerning the people who are making loan applications. They retain information on property location by census tract and also on the ethnic makeup of the people who are requesting financing. The latter, by the way, is voluntary, so if you don't want to report your ethnicity, consumers have the option to redact that information.

We think this approach would be appropriate in this case so that the public would be allowed to see the exact nature of the damage caused to them and to the investing public as a whole.

One thing I would note about the settlement itself is our belief that the penalties should have been income based. I know that's a settled point, but our suggestion would have been that the settling firms be stripped of all income for a 12-month period as a way of ensuring that they would not engage in these egregious actions again. What you do is let the firms run themselves for a 12-month period, you take a look back at how much money they made, and you take all of that money out of the firm as the penalty for the actions they engaged in.

We believe that these firms are critical to the future of democratic capitalism and that fraud is very, very damaging and that it risks -- basically what happens is, as you get these types of egregious actions and fraud, you risk wrecking the system in its entirety, and that's a risk that we don't believe should be borne by the public. It's a risk that we don't think is appropriate.

With respect to the use of the publication notice schedule, we note that media outlets of specific relevance to minorities and women were not on the schedule. We would suggest that some of these entities be added. Institutions like Black Enterprise, Asian Business Magazine, Hispanic Business Magazine, and Working Women Magazine might be appropriate venues to publish the schedule and the notice to reach to a broader audience.

One thing I will also say is that I note that there don't appear to be a whole lot of people of color involved in this process. We think that's problematic. We think that, to the extent that you have people of color involved, both from the standpoint of looking at the penalties and from the standpoint of crafting solutions, that you will get these types of suggestions, a broadening of the publication schedule.

One final point I would make is that we do think the notice should be published at least five times. We don't believe that the current publication schedule is frequent enough to really get the word out to individuals who have been damaged. We would certainly like to see the schedule frequency increased.

As I mentioned, we also have an issue with respect to mutual and pension fund investors. We understand from speaking with Professor McGovern, certainly mutual and pension fund investors are eligible to be remunerated, but they have to depend upon their fiduciary, the pension fund or the mutual fund, to actually request compensation based on the damage that those funds suffered.

We would note, as we did in our letter, that there are some problems with respect to fiduciary duty. The SEC itself has fined several mutual funds for breach of fiduciary duty.

So as an individual investor, I am not sure that I can always depend upon a mutual fund to look out for my interest given the track record that we have seen with respect certain of these institutions not looking out for the interests of individual investors.

Therefore, we believe that there should be a tool in place that would allow an individual mutual fund investor to look through the fiduciary, to see what damage was caused to their particular mutual fund and kind of funnel their view down to their own holdings to be able to determine the dollar amount that their mutual fund should be requesting on their behalf. We don't think that all mutual funds will necessarily do that.

Part of the issue is that the mutual funds are dependent upon the settling firms. The way that we think about it is the mutual funds are like car companies, basically producing financial returns. They are buying raw materials, securities, from the settling firms. What we have seen is that the settling firms have polluted the supply network, and that's what is at issue here. They basically violated their fiduciary duty and made it more difficult for mutual funds to produce in a fair way what they are charged with producing, which is, again, financial returns. So we are not sure that we can trust anybody in that chain.

We understand the difficulty that the Court has with respect to these issues, and we respect the efforts and the mechanism that you put into place so far. What we would suggest, however, is sunshine. Simply allowing individual mutual fund and pension fund investors to look through their fiduciaries is one way to ensure that they are going to be compensated for the damage that was caused to their holdings. The way that we feel you can do that is by posting the transaction database, stripped of any personal information, on-line and allowing individuals to input their mutual funds and the holding period and have the system look through the commission -- in essence, what you're doing is putting the commission database of the settling firms on-line.

We believe that's the appropriate approach. As a former institutional broker, I can tell you that the one database we made sure we had accurate was the database that determined our compensation. So certainly looking at commissions paid to brokers is the way to get a feel for the individual transactions.

We believe that an individual should be able to go to a Web site, input their mutual fund and the holding period dates, and have a database that looks into that mutual fund and determine whether or not any of the offending securities were held during the relevant time period.

And you can even input your dollar amount. Let's say you had $10,000 in the Fidelity Magellan fund. At the end of the process, you'd come out with a number that would let you know the impact that the settling firms had, the negative impact that the settling firms had on the financial returns that were produced by a particular mutual fund.

We certainly feel that's something that's doable. We think it's relatively straightforward to do. Again, computing power is cheap, data storage is cheap. It's just a question of making sure that you have the relevant data in place.

On that point, let me finally state that we certainly think, given their track record, that the settling firms have every incentive to not provide the Court appropriate or timely information with respect to the damages caused. We would urge the Court to put into place very severe penalties should you find that you have not been given accurate data that the administrator needs to determine damage caused to individuals. There should be very severe penalties in place if any of the settling firms do not provide accurate information on a timely basis.

Let me also state that as we looked at the schedule itself, I am not sure that a nine-month distribution plan is appropriate. We certainly feel that -- this was the third principle of the distribution plan. We certainly feel that a 12month distribution time period or an 18-month distribution time period might be warranted in this case. Investors are going to have a hard time determining the damages caused to them. That's, again, why we suggest these informational tools be developed to help ease the time costs that investors will have to spend to determine damages. And we just think it's going to take a while for people to recognize they have been hurt and to request compensation. We certainly think that nine months might be too short of a time period to allow investors to recoup damages.

I believe that covers my comments. As the court is aware, we did submit a ten-page letter that outlined our comments in detail. We would be happy to provide any additional information that the Court thinks is appropriate or would like to see with respect to this case.

Again, I want to thank the Court for its indulgence and for inviting me here this morning.

THE COURT: Thank you, Mr. Cunningham.

(NOTE: On April 22, 2005, the Court extended the publication schedule and ordered that the notice schedule include publications directed at women and minorities. See: Court Order Extending Publication of the Notice.

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If you have any questions about the Global Research Analyst Settlement Fairness Hearing, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.

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Testimony on Fannie Mae and Freddie Mac Before the US Congress


Thank you, Mr. Chairman, Representative Kanjorski, Members of the Subcommittee, for giving me the opportunity to testify on the supervision and regulation of government sponsored enterprises, or GSE's. Your bill, H.R. 3703, the Housing Finance Regulatory Improvement Act, comes at a critical time. The bill proposes a new regulatory structure for three government-sponsored enterprises (GSE's). Given the importance of this legislation, I am honored to have an opportunity to comment. It is appropriate to note, however, that my comments represent my own views and do not in any way represent the views of my employer, the Board of Pensions of the Evangelical Lutheran Church in America. Nor do my views represent opinions from the GSE's themselves or Wall Street. I come before this Committee as an unbiased, independent investment analyst.

I will divide my remarks into four parts: first, a general discussion on social investing; second, a description of the GSEs' role in social investing; and third, background information on my activities in both social investing and the secondary mortgage markets, and finally, my concerns with how the GSE's are currently fulfilling their public purpose mission. I'll end with my view on certain aspects of the Baker bill.

Social Investing

"Social investing" describes a style of investing combining a desire to maximize financial return with an attempt to maximize social good. Many believe social investing began with the Religious Society of Friends, better known as the Quakers. In 1758, the Quaker Philadelphia Yearly Meeting prohibited members from participating in the business of buying or selling humans. Religious institutions have been at the forefront of social investing since.

In general, social investors favor:

  • Environmentally responsible corporate practices;
  • Corporate practices that support workforce diversity;
  • Corporate practices that increase product safety and quality.

According to a study Environmentally responsible corporate practices . released by the Social Investment Forum (SIF), a nonprofit professional association dedicated to promoting socially responsible investing, more than $2 trillion (US) is now invested in a socially responsible manner in the U.S. Social investments now account for about 13 percent of the estimated $16.3 trillion under professional management in the U.S.

Social Investing Strategies

Social investors use three basic strategies to maximize financial return and attempt to maximize social good. These strategies are outlined below.

SCREENING excludes certain securities from portfolios based on social and/or environmental criteria. For example, many socially responsible investors screen out tobacco company investments. Recently, CalSTRS (California State Teachers' Retirement System) announced the removal of more than $237 million in tobacco holdings from its investment, portfolio after 6 months of financial analysis and deliberations. This is an example of a social screen at work.

SHAREHOLDER ACTIVISM. Shareholder Activism efforts attempt to positively influence corporate behavior. These efforts include initiating conversations with corporate management, or dialoging, on issues of concern, and submitting and voting proxy resolutions. These activities are undertaken with the belief that social investors, working cooperatively, can steer management on a course that will improve financial performance over time and enhance the well being of the stockholders, customers, employees, vendors, and communities.

POSITIVE INVESTING involves making investments in activities and companies believed to have a high and positive social impact. Positive investing activities tend to target underserved communities. These efforts support activities designed to provide mortgage and small business credit to minority and low-income communities. It is in this area that Fannie and Freddie are most active.

According to their web sites:

"Freddie Mac is a stockholder-owned corporation chartered by Congress to increase the supply of money that mortgage lenders, such as commercial banks, mortgage bankers, savings institutions and credit unions, can make available to homebuyers and multifamily investors."


"Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America. We do not lend money directly to home buyers. Instead, we work with lenders to make sure they don't run out of mortgage funds, so more people can achieve the dream of homeownership. Fannie Mae is the country's third largest corporation, in terms of assets, and the nation's largest provider of funds for home mortgages."

Clearly, these are positive investing activities. Carried out consistently and correctly, these activities have a high social impact.

Background: Socially responsible investing and the secondary mortgage markets.

Let me now speak about my efforts in both socially responsible investing and the secondary mortgage markets.

In a 1996 article in the Washington Post, I commented that "It seems their (Freddie and Fannie's) primary mission has been completed and completed successfully. Now its time to look for a different mission, which could include finding mortgage money for low income parts of the District and housing the homeless." Others have echoed this sentiment. FRB Chairman Greenspan noted, in a letter to the Chairman dated 5/19/2000, "(The GSE's) were each chartered with the purpose of smoothing out regional imbalances in mortgage supply and integrating regional mortgage markets into the national capital markets. Much to their credit, they succeeded in accomplishing this goal many years ago. It is time to assign a new mission to the GSE's. I have outlined some suggestions below.

As many who have come before this committee have noted, domestic housing finance markets are broad and well functioning. In looking for a new mission, I suggest the GSE's focus on investment opportunities in housing markets populated by minorities and women. These markets have been the beneficiaries of an unprecedented increase in financial market activity and asset values. Devoting even a small percentage of GSE mortgage financing activity to markets populated by persons of low to moderate income, minorities and women will help even the distribution of income and wealth, contribute to domestic political and economic stability, and earn a competitive return. It is my belief that investors, women, and minorities are all well served by these efforts. Further, I believe it is possible to create investments and portfolios that perform well financially and that address social concerns. I have uncovered many investment opportunities of this type. Let me describe one such investment opportunity.

I currently work for the Board of Pensions of the Evangelical Lutheran Church in America. There, I manage Social Purpose Investing and Customer Education efforts. The Board of Pensions was one of the first socially responsible investors of significant size in the United States.

Prior to joining the Board of Pensions of the ELCA in 1999, I served as CEO of Creative Investment Research, an independent investment research and management firm I founded in 1989. The firm specialized in socially responsible investing. My background in finance and investing led me to develop several socially responsible community investment products over the past 10 years. One of these was a set of mortgage-backed securities originated by financial institutions owned by minorities and women and serving areas of high social need. As noted in the American Banker Newspaper , I was the first investment advisor to create a mortgage-backed security composed entirely of loans from minority and women owned financial institutions. Working with G.E. Capital , I identified minority owned lenders willing to participate in the program, arranged G.E. Capital's participation as aggregator of the loans originated by these minority owned financial institutions, and worked to place the pools with a socially responsible institutional pension fund as an investment advisor.

Several times, I approached Fannie Mae and Freddie Mac to further develop these types of products. Unfortunately, at the time neither agency was interested or very helpful.

Social Investing Concerns: GSE's

Given their public purpose and mission, social investors have long believed Fannie and Freddie to be both positive investors and good corporate citizens. In the main and for the most part, they are. But, I have been troubled by certain aspects of GSE corporate behavior over the years. I am most deeply concerned with a recently issued report on GSE home mortgage lending to minorities. The report, issued by the U.S. Department of Housing and Urban Development, showed "the share of GSE mortgages going to minorities trailed the national average of 15.3 percent. Fannie Mae lent only 14 percent and Freddie Mac lent only 12.2 percent to minorities.

The disparity is even more pronounced in mortgages to black Americans. While the total market for mortgages to blacks is 5 percent, Fannie Mae only lent 3.2 percent and Freddie Mac lent only 3.0."

Both Freddie and Fannie dispute these numbers. I expect the debate concerning GSE performance in this area to be a lively one. However one views the statistics, I think we can all agree that much remains to be done in this sector of the home mortgage market. By reducing the flow of mortgages to minorities, GSE's have ignored profitable domestic lending opportunities. This behavior reduces GSE income and stifles the flow of mortgage credit. This, I think we all agree, is contrary to their public mission and is, in general, a bad thing.

We have seen other financial institutions repeat this behavior. On October 22, 1998, Freddie Mac Board member and economist Henry Kaufman, speaking of the Russian financial crisis, noted in the Washington Post that:

"All the problems pervading Wall Street just can't be blamed on outside forces..Institutions have incorrectly assessed risk. If they had done their due diligence, a lot of this (the Russian financial crisis) mess would not have happened."

Likewise, all of the uncertainty Freddie and Fannie now face cannot be blamed on outside forces, like Congress or HUD, or incorrectly interpreted statistics. The GSE's have incorrectly assessed home mortgage loan risk in minority markets. We agree with Federal Reserve Board Chairman Alan Greenspan when he said:

"The history of financial involvement in increasing home ownership is one of taking risks - of designing new financial instruments and financial products to make financial resources available so that more people can realize the goal of home ownership. Taking prudent risks in lending so that others may attain an objective is the essential role of a financial intermediary..."

It is certainly appropriate for Congress to review both GSE financial performance and their public mission performance. We suggest Congress refocus Fannie and Freddie efforts. We would like to see the GSE's become much more active in the affordable housing area. Needs in this area are great. According to HUD,

The housing affordability crisis facing very-low-income renters continues to worsen as 5.4 million renter households, a record high, are experiencing worst case needs for housing assistance.

The number of working families with worst case housing needs has increased sharply since 1991.

The stock of rental units that are affordable to extremely low-income renters has continued to shrink, with even sharper decreases in units that are both affordable and available to these renters.

Worst case needs have become more concentrated among families with extremely low incomes.

Worst case needs have increased most quickly in minority households, particularly among working families with children.

Very-low-income families remain most likely to face worst case problems when they live in the suburbs.

Other Concerns

Other events have caused concern. On September 3, 1998, the Equal Employment Opportunity Commission concluded there was widespread discrimination against black employees at Freddie Mac. Acting on a complaint filed by Tony Morgan, a person of color once employed in a professional capacity on Capital Hill and Freddie Mac's former director of corporate relations, the EEOC said the Congressionally chartered, publicly held company created a ``hostile work environment.'' This "hostile environment" may have impacted Freddie's ability and desire to make loans to African Americans. One way this is likely to manifest itself is in the evaluation of risk. The perceived riskiness of loans to African Americans is likely to be overstated.

In addition, I have been discouraged by certain comments made by executives at both Freddie and Fannie when questioned by members of Congress. It is critically important that management at these agencies understand Congress has a legitimate role in reviewing their activities, both from the standpoint of financial safety and soundness and with respect to the public mission the organizations were chartered to carry out.

I note that the Chairman has been examining GSE activities since at least 1996. Only recently I have seen a change in GSE attitude.

H.R. 3703

Mr. Chairman, I would now like to turn to your legislative proposal.

Promoting Private Market Discipline

I support repealing the GSEs' conditional line of credit with the Treasury. I agree with Treasury Under Secretary Gary Gensler when he stated, in testimony on March 22, 2000 before this Committee, that: "Repeal of the line of credit would be consistent with the congressional requirement that all GSE securities carry a disclaimer that they are not obligations of the U.S. government."

Increasing Transparency

I support provisions in the bill that increase transparency. I also support provisions in the bill that require the GSE's to receive an annual credit rating from nationally recognized statistical rating organizations. Such an examination would significantly improve transparency by providing an independent and objective opinion concerning the GSE's financial condition.

I also suggest that the GSE's be subject to a through "Social Audit." A Social Audit is an examination of the performance of an enterprise relative to certain social objectives. The GSE's are currently subject to a limited social audit: Central city and minority lending goals have been established and progress in meeting those goals is reviewed each year. Reports on GSE performance in meeting certain lending goals are then made public. I am suggesting, however, that the GSE's be subject to a more detailed and rigorous social audit covering all aspects of their operations.

For the GSE's the major benefits of a social audit are:

Improved accountability with respect to social and community investment activities.

Increased social efficiency and effectiveness.

Ability to effectively monitor and steer social performance.

Social achievements reported in an unbiased manner.

Promoting Market Competition

I support provisions in the Bill to preserve market competition.

Structural issues

I support the creation of a fully independent GSE regulator. I further suggest this regulator not part of the executive branch. As an alternative, the Chairman may wish to consider designating the Federal Reserve Board the primary GSE financial institution regulator.

I believe the Fed will, one day, need to oversee the activities of banks, thrifts, pension funds, insurance companies, mutual fund companies, brokerage firms and investment banks. Recent advancements in financial and computer technology require the creation of such a strong central bank.

I strongly suggest that the Executive Branch's role be limited. Recent incidents have reinforced my fear that political interference may limit Executive branch regulatory effectiveness and objectivity. I refer the committee to one recent incident:

"A top federal bank regulator, responding to concerns over possible political interference in bank examinations, has ordered his staff to quit fielding a list of friendly bankers to support a controversial fair lending law.

John D. Hawke Jr., acting Comptroller of the Currency, told his staff in a memo issued Friday that bank examinations must be 'kept completely free from even the appearance of being influenced by political considerations.' The comptroller, an arm of the Treasury Department, regulates 2,600 national banks."

We have observed this type of inappropriate behavior before, preceding the S&L Crisis of the 1980's, and more recently, with the Community Development Financial Institution program, a financial institution program administered by Treasury. According to the House Banking Committee:

"$37 Million Clinton Inner-City Loan Fund in Disarray and subject to Political Cronyism. 1 in 3 Grants To First Lady's Favorite.

A $37 million Clinton Administration campaign centerpiece designed to overcome perceived inequities in bank lending to poor and inner-city clients appears to be in disarray, is without adequate standards for making grants, and has at least the appearance of conflicts of interest that 'raises questions concerning the fairness of the system,' a senior House Banking Committee member said today."

In this case, critical federal assistance and funding was determined to have been distributed, in part, based on political ties and not on efficiency, market requirements, performance or need. Given this, I believe making an executive branch agency the chief GSE institution regulator may have quite negative consequences. The Federal Reserve System, an independent body, is not subject to and has not been shown to engage in this type of politically biased regulatory interference.


In an interdependent financial world, with capital and information flows often determining the short term fate of nations, it is entirely appropriate for this committee to review the proper role and function of the GSE's. Given the speed with which capital market destabilization can occur, as shown during the Long Term Capital Management (LTCM) incident, a strong, unbiased, and politically independent GSE regulator can be an essential tool assisting Congress with its GSE oversight responsibilities.

This Committee has done the country a great service by focusing on the impact GSE's have on the long term stability of the U.S. financial system. I applaud the Committee for doing so in a balanced, thoughtful manner..

We developed the first targeted Mortgage-backed Security investment CRA securitization, an MBS pool backed by loans from minority financial institutions. We designed the investment in 1992. Click here to see a letter from two of our clients for this product.

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Testimony on the New Markets Tax Credit Program Before the US Congress

Hearing Of The Select Revenue Measures Subcommittee Of The House Ways And Means Committee - The New Markets Tax Credit Program

Click here for the full hearing record.

By: Richard Neal Ron Paul Mel Watt Pat Tiberi

Date: June 18, 2009. Location: Washington, DC. Chaired By: Rep. Richard Neal

Rep. Richard Neal: Mr. Cunningham.

MR. CUNNINGHAM: Thank you, Chairman Neal, Chairman Watt, Ranking Member Tiberi. I really appreciate your inviting me here.

I'm going to make this very quick. Before I get started, I'd like to introduce a member of my staff, Marie Cunningham Brown. She's also my mother. She worked for 30 years on Capitol Hill. In her last posting, she was an assistant to Congressman Claude Pepper. If I say anything intelligent, you have her to thank. If I say anything stupid, and I will, you can blame me.

Now, one of the things I want to point out is that the misallocation of economic resources kills people. Not two days ago, a homeless woman not 1.14 miles away from where we sit today was waiting for shelter at a homeless shelter close to -- close to here and she died, basically because the economic resources weren't available to help her out. These are the kinds of people that the New Market Tax Credit program was designed to assist.

In our 2008 application, we created a financial instrument designed to help and address the problem of homelessness. That application was not funded. So that's part of the problem that we have with the -- with the program. We just think that, again, the misallocation of economic resources based on racial prejudice is wrong. It kills people, markets, firms and economies. And we pointed this out in numerous comments to the Securities and Exchange Commission and to other bodies.

Now, with respect to kind of what our problem is with the program, we've applied in virtually every round of the New Market Tax Credit program. I actually gave a speech in 1994 in San Francisco, California, where I called for the creation of new market-type vehicles to get venture capital into under-served communities. So we take great pride and credit in being one of the intellectual forefathers of this program, you know, but we just have not had a lot of success in accessing those resources for a number of reasons.

Now, we concur with the statistical findings of the GAO report. That's included in Appendix A in our testimony -- a statistical analysis that was conducted by two interns that work for us.

You know, I do want to point our 2004 New Market Tax Credit application in particular, because we partnered with the city of Minneapolis to apply for $120 million in New Market Tax Credits. We had a letter of commitment from Piper Jaffray -- letter of commitment and a partnership with a city, and we were not funded. So, obviously, from our perspective, there is a problem with this program.

In our last application, we partnered with an African American individual with a net worth of $150 million, who basically supported our application to create a $50 million pool of New Market Tax Credits that we were going to allocate to minority-owned banks.

In the review of our application, the reviewer said, "We're not sure that minority-owned banks either want or can use New Market Tax Credits." They turned around and then they gave two minority-owned banks New Market Tax Credits when we had applied to do exactly the same thing a year earlier. Again, from our perspective, there is a problem with this program.

Now, what we suggest you do is we suggest you look at the transaction record for New Market Tax Credit allocation. When I say "the transaction record," what I mean is we suggest you look at the commissions paid to investment banks, consultants, lawyers and accountants. Basically, we want to outline -- we want to put some sunlight on this allocation process and determine who is benefiting up front from these New Market Tax Credit allocations.

According to the data that we have, if you -- because the spreads are so large and because this is one of the most generous federal government programs in the federal government community development inventory, the fees that we've seen go to some of the investment banks can get as high as 10 percent of the allocation. So 10 percent of the allocation goes to an investment bank before a dollar goes to the community to repay that investment bank for bringing investors into the -- into the pool. We think that's unfair. We think that's unfortunate.

In Appendix C of our testimony, we've outlined further suggestions for enhancing this program. Basically, we suggest that you increase the New Market Tax Credit for equity investment in low- income businesses located in some of the more distressed areas of the country. That's the core of our recommendation.

Again, I understand the time pressure you're under. I appreciate your inviting me here to testify today. I'm available to answer any questions that you have.

Thank you.

REP. NEAL: Thank you, Mr. Cunningham. We have two minutes on the floor, Mr. Klein, if you want to give this a quick go, accept your testimony part verbally and part written testimony, if we could.

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If you have any questions about the New Markets Tax Credit Program, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.

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Amicus Curiae in SEC v. Citigroup @ US District Court for the Southern District of New York (SDNY)

We are the only firm to have filed at both the lower and at the Appeals Court level in this case concerning corporate financial malfeasance in the years leading up to the financial crisis Our track record of accurately predicting that Citigroup would fail, combined with our independence, allows us to advocate on behalf of the Public Interest in a way that no other "public interest" law firm or advocacy group can.

This case concerns the rejection, by a Federal Judge, of a settlement agreed to by the United States Securities & Exchange Commission (SEC) and Citigroup Global Markets Inc. (Citigroup), the latter accused of securities fraud.

As a friend to the Court, we provided an independent, objective and unbiased view in support of broad public interests. Our education and experience have uniquely positioned us to provide objective, independent research and opinions concerning the issues central to the case.

Our brief noted the following:

  • The negative impact of the fraud was $5.5 billion dollars.
  • The SEC settled the case for $285 million.
  • The fact that the penalty is too small is evidence that the SEC has been captured by the financial services industry.
  • We call for the creation of a special Financial Institution Court of Law.
  • We conclude by noting that: When industry participants, despite continual Agency enforcement actions, act repeatedly and with impunity in a manner that damages the industry, the country and the global economy, a Court must step in to protect the public.

"Appellate courts ordinarily defer to the agency's expertise and the voluntary agreement of the parties in proposing the settlement" but these are extraordinary times.

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Amicus Curiae in US v. Standard and Poors @ US District Court for the Southern District of California (CASDC)

On December 9, 2013, William Michael Cunningham filed, and the Court accepted, a "Friend of the Court" brief in the United States District Court, Central District of California.

The Court recognized Mr. Cunningham as an interested party in a case concerning an action that the U.S. Department of Justice, acting on behalf of the United States of America (Plaintiff), brought against McGraw-Hill Companies, Inc., and Standard & Poors Financial Services LLC, et. al., (Defendants).

As a friend of the Court, Mr. Cunningham provides independent, objective and unbiased views in support of broad public interests. His education and experience have uniquely positioned him to provide objective, independent opinions concerning the issues central to the case.

Our "Friend of the Court" brief references statements by Pope Francis. It notes that "ideologies which defend the absolute autonomy of the marketplace and financial speculation..reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules." (Pope Francis, Apostolic Exhortation Evangelii Gaudium. 24 November 2013.

The Brief concludes by noting that "the Plaintiff's incompetence and the Defendant's greed cost the nation $19.2 trillion, increased the speed with which China will overtake the U.S. in GDP terms, and set the stage for the eventual replacement of the US dollar as global reserve currency."

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Amicus Curiae in Galvin v. SEC @ US District Court of Appeals for the DC Circuit

On June 17, 2015, the United States Court of Appeals for the District of Columbia Circuit recognized William Michael Cunningham as an interested party in an action (15-1149) that State securities regulators in Montana and Massachusetts brought against the U.S. Securities and Exchange Commission (SEC).

The Court ordered that Mr. Cunningham be allowed to participate in the case as a "Friend of the Court" or Amicus Curiae.

In comments to the SEC on Title IV submitted on March 27, 2015, Mr. Cunningham stated: "State Regulators who have been bypassed are sure to object to the diminution of their authority..This means further delays in (the) ability to actually use the law." See:

Mr. Cunningham's understanding of capital markets is based on firsthand knowledge obtained in a number of positions at a diverse set of major financial institutions. On November 16, 1995, he launched one of the first investment advisor websites. On June 7, 2007, Mr. Cunningham proposed the creation of an early example of crowdfunding to the Government of the District of Columbia.

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If you have any questions about Galvin v. SEC, contact us at (202) 455-0430. Contact us to schedule an initial consultation at a time that is convenient for you.

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Our experience includes handling the following types of Law:

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If you have any questions about annulments or other law issues, contact us at (800) 123-4567. Contact us to schedule an initial consultation at the location office location at a time that is convenient for you. We will assess your case and let you know if valid grounds for an annulment exist.

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William Cunningham is a dynamic individual who has a deep understanding of the Capital Markets and is able to integrate the human component into investment policies and practices.

David Carrington

Board Member at St. Simon's Shelter

Bill Cunningham is one of the original SRI investment advisers. He is an expert in the field of socially responsible investing.

Don Wiss

President of BondCalc (Debt and Actuarial Pricing Programmer)

I strongly recommend others interested in launching a crowdfunding campaign to schedule a one-on-one appointment or to invite Bill to speak to their group about crowdfunding!!

Dr. Jonathan A. Jenkins, DBA, CSSBB, MSQA

Social Entrepreneur