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DIVERSITY: THE GAO PERSPECTIVE

HEARING

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JULY 12, 2006

Printed for the use of the Committee on Financial Services

Serial No. 109–107

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

CAMPBELL, JOHN, California 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

SUE W. KELLY, New York, Chair

RON PAUL, Texas, Vice Chairman 

EDWARD R. ROYCE, California 

STEVEN C. LATOURETTE, Ohio 

MARK R. KENNEDY, Minnesota 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

LUIS V. GUTIERREZ, Illinois 

DENNIS MOORE, Kansas 

CAROLYN B. MALONEY, New York 

STEPHEN F. LYNCH, Massachusetts 

ARTUR DAVIS, Alabama 

EMANUEL CLEAVER, Missouri 

DAVID SCOTT, Georgia 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

July 12, 2006 ..................................................................................................... 1

Appendix: 

July 12, 2006 ..................................................................................................... 27

WITNESSES 

WEDNESDAY, JULY 12, 2006

Fernandez, Manuel J., National Managing Partner, Campus Recruiting, 

KPMG, LLP .......................................................................................................... 11

Lackritz, Marc E., President, Securities Industry Association ............................ 5

Loumiet, Carlos E., co-Chair, Capital Advocacy Committee, New America 

Alliance ................................................................................................................. 9

Williams, Orice M., Director, Financial Markets and Community Investment, 

U.S. Government Accountability Office .............................................................. 4

Wilson, Donna Sims, member, Board of Directors and Chair, National Legislative Committee, National Association of Securities Professionals ................ 7

APPENDIX 

Prepared statements: 

Baca, Hon. Joe .................................................................................................. 28

Fernandez, Manuel J. ...................................................................................... 30

Lackritz, Marc E. .............................................................................................. 39

Loumiet, Carlos E. ............................................................................................ 47

Williams, Orice M. ............................................................................................ 53

GAO Report on Diversity ................................................................................. 72

Wilson, Donna Sims ......................................................................................... 119

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Statement of the Independent Insurance Agents & Brokers of America .... 136

Baca, Hon. Joe: 

Responses to questions submitted to GAO ..................................................... 141

(1)

DIVERSITY: THE GAO PERSPECTIVE 

Wednesday, July 12, 2006

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:30 p.m., in room 

2128, Rayburn House Office Building, Hon. Sue W. Kelly [chairwoman of the subcommittee] presiding. 

Present: Representatives Kelly, Kennedy, Gutierrez, Cleaver, 

Scott, Moore of Kansas, and Frank. 

Also present: Representatives Waters and Meeks. 

Chairwoman KELLY. The Subcommittee on Oversight and Investigations will come to order. With unanimous consent, we are going 

to try to truncate the initial process a bit. Because we started late, 

we will try to make up for a little bit of that so people who are here 

who need to make planes can do that. So without objection, all of 

the members’ opening statements will be made part of the record, 

and we will dispense with the opening statements today. Also, 

without objection, the witnesses’ written statements will be made 

part of the record, but we will come back to them for their oral testimony. 

Today’s hearing is on diversity: the GAO perspective. It follows 

up on a hearing conducted by the subcommittee in 2004 that 

looked at the progress women and ethnic minorities were making 

in employment at our largest financial services corporations. That 

hearing exposed the progress that has been made in recent years 

but it also left some questions as to what the true metrics of the 

situation were. At the conclusion of that hearing, Chairman Oxley, 

Mr. Frank, Mr. Gutierrez, Mr. Scott, and myself asked the GAO to 

conduct an empirical study of minorities in the financial services 

industry and the progress that they were making. Today, we unveil 

that report. And without objection, with unanimous consent that 

report will become part of the record. So moved. 

Chairwoman KELLY. The findings of the report show that the intentions and results in diversity programs are no longer tracking 

each other. There is no question that every company in the financial services industry is committed to providing opportunity for all 

employees, and to seeking out and training promising diverse candidates at both entry level and mid-career stages. The industry is 

to be commended for its commitment to diversity. Unfortunately, 

the report also showed that the overall level of diversity within the 

industry has barely changed. Minority employment at mid- and 

2

senior levels has only slightly improved and there is no evidence 

that programs to improve diversity, as opposed to demographic 

changes, are responsible for any of this increase. Today’s hearing 

will go into these figures in more thorough detail through a discussion with the GAO author of the report. We will also hear from representatives of the financial services industry to find out where 

programs are working that can help add results to our shared commitment to workplace diversity and opportunity for all Americans. 

I am now going to yield. You have a 1-minute opening statement, 

Mr. Scott, if you would like to make it. And, Mr. Cleaver, you also 

have 1 minute. We have been called for a vote so if you could make 

your statements and then perhaps we could get started quickly before we all have to go to the Floor for a vote. It is actually three 

votes, and so it will be a bit of time when we are up on the Floor. 

Mr. Scott? 

Mr. SCOTT. Thank you very much, Madam Chairwoman. And I 

want to just thank our participants for coming. This is an extraordinarily important issue—diversity in the workplace, particularly 

in our financial services industry. It is very critical as we strive to 

ensure that minorities, African Americans and others, have an 

ample opportunity to be in key decisionmaking positions as we look 

at key issues of building wealth, financial literacy, holding on to 

what we have, and making sure that we bring promise to the realization that, in fact, our strength in this country is our strength in 

diversity. And so I am looking forward to the testimony, and thank 

you, Madam Chairwoman. 

Chairwoman KELLY. Thank you. Mr. Cleaver? 

Mr. CLEAVER. Thank you, Madam Chairwoman. I think many of 

you perhaps saw the Monday edition of The Washington Post 

where they did their annual review of regional salaries of CEO’s. 

And they did color photographs to make it even clearer that minorities and women are still challenged to break through the glass 

ceiling. In some instances, this is a cement ceiling and then steel 

on top. And so I am very interested in your responses to what kind 

of movement you are able to experience. And I regret—I was looking forward to this all week, I don’t know, maybe I can call some 

of you at home tonight and pick your brain. 

Chairwoman KELLY. Thank you, Mr. Cleaver. I am going to introduce this panel. Our first witness is Orice Williams of the Government Accountability Office. Ms. Williams has over 15 years experience at GAO and is currently the Director in GAO’s Financial 

Markets and Community Investments Team. Ms. Williams received 

an MBA with a concentration in finance from Virginia Tech and a 

B.S. degree in business and finance from Virginia Commonwealth 

University. And we have Mr. Marc Lackritz, who is the president 

of the Securities Industry Association. He was elected in 1992 after 

serving as executive vice president and head of the Washington office since 1990. Mr. Lackritz received his law degree from Harvard, 

a master’s degree in economics while on a Rhodes Scholarship at 

Oxford University, and a bachelor’s degree in public policy from 

Princeton University. We have Donna Sims Wilson, who is an executive vice president and head of equities sales and trading at M.R. 

Beal & Company. Ms. Wilson received her bachelor of arts degree 

in political science from Yale University. We also have Mr. CarVerDate 0ct 09 2002 13:16 Jan 23, 2007 Jkt 031536 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\DOCS\31536.TXT HFIN PsN: TERRIE
3

los—please tell me how to pronounce your name, sir? Please turn 

the microphone on so I can hear that. That is it, push the bottom. 

Mr. LOUMIET. Loumiet, Madam Chairwoman. 

Chairwoman KELLY. Loumiet? Thank you, now we all know. Mr. 

Loumiet has been actively involved in domestic and international 

banking fields for more than 28 years. Over that period of time, he 

has witnessed, and been involved in, virtually all of the major 

events which have marked the banking industry. And, finally, we 

have Manuel Fernandez, who serves as the national managing 

partner, Campus Recruiting, for KPMG. He holds a bachelor’s of 

science in accounting from Fairleigh Dickenson University and is 

a member of the board of trustees of the Colorado Symphony. 

We welcome you all. This hearing is going to be interrupted. As 

you can see from the lights, we have been called for a vote. There 

will be three votes and so I am going to start—perhaps we should 

just do the break right now and then come back so we can have 

all of you speak at once and that way we can have continuity. So 

I am going to recess this hearing for approximately—I would think 

the three votes would take at least 20 to 25 minutes before we get 

back here. Sorry to do this but it is a necessity, and I appreciate 

your patience with this. So we are going to recess the hearing, and 

we will meet back here in a few minutes. Thank you. 

[Brief recess] 

Chairwoman KELLY. This committee will resume. We will have 

an opening statement from the ranking member. 

Mr. GUTIERREZ. Thank you. I am really looking forward to this 

hearing. From my perspective, minority hiring in financial services 

is not just a matter of diversity in the workplace. If we expect to 

compete and thrive in the global economy, we have to utilize the 

valuable resource of talented minority financial professionals we 

have in America. The recently released GAO report on this topic 

demonstrates that the minority community remains an untapped 

asset for the financial sector. On our second panel today, we will 

hear from some very talented minority financial services professionals. These professionals are role models in their community. 

And there really is no substitute for role models. When I was growing up, I didn’t know any Latino accountants, stockbrokers, or investment bankers. Now, I am married to one. We have come a long 

way but we have a lot further to go. One of our witnesses today, 

in his written testimony, made the comment that we don’t want to 

look back 12 years from now and find ourselves in the same situation. I agree. That is why I am issuing a challenge today to the witnesses on our second panel. You represent some of the most powerful companies and organizations in the financial services industry. 

I want to challenge you to get together and draft a pledge to be 

signed by representatives of all the sectors of the financial services 

industry that over the next decade you will work to double the percentages of minority-holding management level positions in the industry. This committee can request studies and Congress can pass 

bill after bill, but the government does not have all of the answers. 

This is an issue of untapped potential and the industry needs to 

wake up and realize this before it affects our ability to compete in 

the very diverse global market. If you can do this, if you can get 

4

your industry together to sign such a pledge, I know the members 

of this committee will give you all our support. 

Thank you, once again, for all of your hard work. 

Madam Chairwoman, I ask unanimous consent—on this side we 

have several members of the Full Committee who are not members 

of this subcommittee, but would like to participate. Therefore, I ask 

unanimous consent that Representatives Waters, Meeks, Lee, and 

Baca be allowed to give opening statements and ask questions in 

today’s hearings. In addition, we have a former member of the Financial Services Committee, who has been active on this issue, and 

would like to participate in today’s proceed. I ask unanimous consent that Congressman Gonzalez be permitted to ask questions of 

our witnesses. Finally, the Independent Insurance Agents and Brokers of America have submitted a written statement. I ask unanimous consent that the statement be admitted into the record. 

Chairwoman KELLY. So moved. The panel having already been 

introduced, let’s begin with you, Ms. Williams. 

STATEMENT OF ORICE M. WILLIAMS, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. WILLIAMS. Madam Chairwoman, Ranking Member Gutierrez, 

and members of the subcommittee, I am pleased to be here this 

afternoon to discuss GAO’s report on diversity in the financial services industry. In particular, I would like to focus on two areas: 

First, trends in management level diversity and diversity initiatives; and, second, the ability of minority- and women-owned businesses to gain access to capital. In summary, our analysis of 

EEOC’s data on workforce demographics reveal that between 1993 

and 2004, overall management level representation by minorities 

and women in the financial services industry has not changed substantially. However, the change has varied somewhat by racial and 

ethnic group. 

Briefly, let me draw your attention to the color graphic provided 

with my written statement. The blue line represents overall minorities at the management level, which increased from about 11 

percent in 1993 to 15.5 percent in 2004. The four color coded lines 

below show the changes for the four racial and ethnic groups we 

studied: African Americans, Asian Americans, Hispanic Americans, 

and American Indians. The gray line—which has remained relatively constant at slightly more than one third over this period—

represents white women. We also found that certain sectors, such 

as depository institutions and insurance within this industry, are 

more diverse at the management level than others. 

In addition to analyzing the trends, we also collected information 

about diversity initiatives and programs from dozens of firms and 

trade associations. We found that many had programs or initiatives 

to increase workforce diversity and that they faced a variety of 

challenges. We heard from several firms that diversity initiatives 

cannot be treated as programs. Instead, they have to be viewed as 

long-term commitments that may start at the top but must permeate the entire organization. We found that many firms had programs that focus on attracting, recruiting, and retaining a diverse 

workforce. This included offering scholarships and internships to 

5

students to attract them to the financial services industry, recruiting from a diverse pipeline, and fostering a working environment 

of inclusion that allows all employees to thrive. We found that 

some firms are trying to develop performance measures to gauge 

the effectiveness of their diversity efforts, which can be challenging. Some common measures identified were tracking employee 

satisfaction survey results and representation of women and minorities in key positions. These measures become more important 

as some companies are beginning to hold senior managers accountable for fostering a more diverse workforce, including linking managers’ compensation to their performance with promoting diversity. 

However, we found that financial institutions face a variety of 

challenges that may provide insights into the statistics I mentioned 

earlier. In particular, we heard that maintaining the critical mass 

of minority employees needed to establish a visible presence, effective networks, and mentors for minority and women candidates has 

been an ongoing challenge. 

Another involved building a pipeline of diverse talent. Specifically, the financial services industry requires that many senior officials possess certain skills and credentials and the possible pool of 

candidates may be constrained by this requirement. For example, 

of accredited business schools, less than 25 percent of MBA students and about 16 percent of graduates, one potential talent pool 

for the industry, are minorities. In the accounting arena, about 8 

percent of CPA’s are minorities. 

Now, I would briefly like to turn my attention to the ability of 

minority and women business owners to gain access to capital. Research reports and our discussions with financial services firms 

and relevant trade groups suggest that minority- and womenowned businesses appear to have difficulty obtaining access to capital for several reasons. The reasons cited include a concentration 

in service-oriented businesses, lack of assets to pledge as collateral, 

or because of a lack of a proven track record of creditworthiness. 

However, other studies suggest that discrimination may be a factor 

but such analysis is complicated by limited data availability. We 

did find some commercial banks have developed strategies to market existing products to this rapidly growing segment of the market. However, opportunities to access equity capital are generally 

limited. 

This concludes my oral statement, and I would be happy to answer any questions at this time. Thank you. 

[The prepared statement of Ms. Williams can be found on page 

53 of the appendix.] 

Chairwoman KELLY. Thank you, Ms. Williams. 

Mr. Marc Lackritz. 

STATEMENT OF MARC E. LACKRITZ, PRESIDENT, SECURITIES 

INDUSTRY ASSOCIATION 

Mr. LACKRITZ. Thank you, Madam Chairwoman, and members of 

the subcommittee. I am Marc Lackritz, president of the Securities 

Industry Association, and I appreciate the opportunity to testify on 

SIA’s and our member firms’ commitment to diversity and inclusion within the securities industry and the U.S. capital markets. 

We commend the subcommittee for requesting that the GAO study 

6

this important issue, and we are pleased to report that several of 

our members cooperated with GAO in preparing the report. By 

willingly sharing their diversity best practices and programs, our 

firms provided an important perspective on the breadth and depth 

of diversity activities in the securities industry. We believe this 

topic is critical to the future of our economy, our markets, our industry, and our investors. 

Over a decade ago, our association formed a board level diversity 

committee, comprised of senior level executives to increase industry 

understanding and development of the strong business case for 

building programs to develop multi-cultural workforces and client 

bases. Indeed, I am pleased to be on this panel with Donna Sims 

Wilson of M.R. Beal & Company because the founder of her firm, 

Bernard Beal, did an outstanding job as our first co-chair of our diversity committee in 1996 and 1997. 

Beginning almost 3 years ago, SIA’s chairman increased our emphasis on diversity by making the expansion of our industry’s efforts a top strategic priority for our association. Our aspiration is 

to ensure that the securities industry looks like America and is an 

inclusive, multi-cultural place to work. I am proud of the progress 

our firms have made to develop diversity initiatives in the workplace and improve their marketing and outreach to diverse customers. Our efforts are beginning to pay off as the number and variety of diversity programs in place among our member firms has 

risen dramatically. I am confident we will soon begin to see even 

more positive results reflected in statistics. 

As you may remember from our testimony before the subcommittee 2 years ago, we conduct an annual—or semi-annual—excuse me, bi-annual industry-wide survey and study to help our 

firms meet the challenges and maximize the opportunities of an increasingly diverse workplace and customer base. One of the important things we have learned is that instead of emphasizing an end 

goal, the focus should be on the trend lines of progress and rates 

of change toward that goal. While we have achieved some encouraging results, we also know that we must make further inroads 

and improvements. Some of the positive trends include an increase 

of women in our workforce, a steady increase in the representation 

of people of color employed in the industry, and a growing percentage of retail brokers being women and people of color. Nearly onefourth of senior level positions and over one-third of all middle 

level positions, plus analysts and associates, are held by people of 

color. These data are a positive sign of more inclusive advancement 

and promotion policies. An upward trend of nearly half the firms 

surveyed offering firm-wide career development focused mentoring 

programs targeted toward women, people of color, and other diverse populations. 

And, finally, nearly all respondents have flexible work policies 

and programs in place. And this is a positive sign that employers 

throughout our industry are utilizing flexibility to retain valued 

employees and enhance their performance. 

Our diversity committee began offering an annual leadership 

award in 2002 to encourage and recognize innovation in the policies and programs firms use to attract and retain minority employees. This award honors our member firms’ commitment to building 

7

strong diversity initiatives and is a showcase for the depth and variety of diversity programs within the securities industry. 

In our reviews of member firms’ diversity programs, we have 

found several common elements that contribute to a firm’s success. 

Active engagement from senior management, for example, is a crucial element to the success of a firm’s efforts. Other critical components are training, mentoring, networking, diversity councils, and 

tracking programs. Our diversity committee continues to make significant progress on the educational front, with our first annual diversity/human resources conference, a comprehensive Web site, 

teleconferences, roundtables, and inclusion of diversity in the core 

curriculum of our professional education programs. 

SIA and our member firms are committed to creating a diverse 

and inclusive workplace where all employees can succeed on their 

merits. We understand the importance of hiring, training, and retaining a diverse workforce to best meet our clients’ needs. Although we have made significant progress, we know we must do 

more in the years ahead. 

We welcome your subcommittee’s input on how we may further 

improve our diversity programs, and we look forward, Madam 

Chairwoman, to working with you and the subcommittee to achieve 

that important goal. 

[The prepared statement of Mr. Lackritz can be found on page 

39 of the appendix.] 

Chairwoman KELLY. Thank you, Mr. Lackritz. 

Ms. Wilson. 

STATEMENT OF DONNA SIMS WILSON, MEMBER, BOARD OF DIRECTORS AND CHAIR, NATIONAL LEGISLATIVE COMMITTEE, 

NATIONAL ASSOCIATION OF SECURITIES PROFESSIONALS 

Ms. WILSON. Good afternoon, Chairwoman Kelly, Ranking Member Gutierrez, and members of the subcommittee. I would also like 

to thank Chairman Oxley, Ranking Member Frank, and subcommittee member Scott, who signed the letter that made these 

hearings possible and who requested the GAO report. 

I am Donna Sims Wilson, chair of the legislative committee of 

the National Association of Securities Professionals or NASP. I am 

also an executive vice president and head of equities sales and 

trading at M.R. Beal & Company, a minority-owned investment 

banking firm. I appreciate the opportunity to testify on behalf of 

NASP and our members. We commend the subcommittee for recognizing how important this topic is to the future of our economy, our 

markets, and our industry. 

Over the past 21 years, NASP has put in place model diversity 

initiatives to advance diversity within financial services industry. 

I will cite two examples. The Wall Street Finance and Scholastic 

Training Program, or Fast Track, was launched in 1996 and identifies high school students with an interest in our industry. In 10 

years, Fast Track has become a national model and has had more 

than 800 graduates. Our annual mentor luncheon encourages minority and women undergraduate and MBA students to pursue careers in our industry. In addition, we maintain a career center on 

our Web site, which serves as a clearinghouse and job bank. This 

8

Web site is free to the public and can be assessed at our Web address. 

The GAO report findings regarding diversity at the management 

level are not surprising. While there have been some positive 

changes, the industry overall is still viewed as severely lacking and 

imbalanced when it comes to diversity. We believe that the best 

way to impact the diversity metrics is to do business with minorities and women wherever they are found, either within majorityowned firms or minority-owned firms. There must be both external 

and internal economic incentives to positively impact workforce diversity. 

The path to senior management and corporate board membership 

in majority firm institutions is job success. Minorities and women 

must have clients from whom they generate significant revenue. In 

minority- and women-owned firms, the same concept applies; the 

growth and viability of these institutions is dependent upon clients 

with whom they can do business. 

The Federal Government is a significant client within our industry and needs to lead by example by being diverse with its own resources. For example, there are substantial Federal pools of retirement money, such as the Federal Retirement Thrift, the PBGC, 

and the National Railroad Trust, among others. To date, no minority-owned firms manage assets for any of these agencies nor do minority-owned broker-dealers execute their trades. The evaluation 

process to hire service providers should include a diversity component with weight. All things being equal, like performance and 

fees, this additional evaluation mechanism could incentivize firms 

to improve their diversity profile. 

In the municipal finance arena, the Department of Defense is encouraging public/private partnerships to improve the quality of 

military housing. The Federal Government should evaluate all underwriters and other financial services providers with the same 

weighted diversity component. Three examples of government programs that have been successful include the former RTC, Fannie 

Mae’s Access Program, and Freddie Mac’s Golden Opportunities 

Program. 

The GAO report found that while many firms have initiated programs to increase workforce diversity, NASP also believes these 

businesses still face challenges. One, preconceived notions and prejudices about the effectiveness of minority and women professionals; 

two, the tendency to mentor and promote individuals from the 

same ethnic background regardless of merit; and, three, most emphasis on recruitment, not as much on retention and promotion of 

minority managers. 

Some of our recommendations to improve diversity include: 

Linking diversity components at the mid- and senior management levels to compensation; 

Targeting recruiting efforts for mid-level and senior-level management with well known organizations that support women and 

minorities, such as New America Alliance to my left; and 

Supporting the passage of the resolution and then legislation introduced by Congressman Meeks and co-sponsored by 81 members 

to increase the diversity of our industry. 

9

As it relates to improving access to capital, we recommend allowing the SBA to make loans to small investment banking firms. We 

suggest that Congress assemble a national commission to study collectively practical solutions to access to capital for minority- and 

women-owned firms. Much of the groundwork to support such a 

recommendation has been completed and can be found in my written testimony. 

In conclusion, NASP is grateful for the opportunity to add our 

voice to the discussion. We stand ready to partner with the committee, other trade associations and firms to further our stated goal 

of ensuring that people of color and women are included in all aspects and at all levels of our industry. We believe that significant 

progress can be made on these crucial issues but only when there 

are clear, defined external and internal economic incentives, direct 

accountability, and enforcement. 

[The prepared statement of Ms. Wilson can be found on page 119 

of the appendix.] 

Chairwoman KELLY. Thank you very much. 

Mr. Loumiet. 

STATEMENT OF CARLOS E. LOUMIET, CO-CHAIR, CAPITAL 

ADVOCACY COMMITTEE, NEW AMERICA ALLIANCE 

Mr. LOUMIET. Madam Chairwoman, Ranking Minority Member 

Gutierrez, and members of the subcommittee, on behalf of the New 

America Alliance, an organization of American Latino business 

leaders focused on the advancement of the American Latino community for the benefit of the United States as a whole, I wish to 

thank you for the opportunity to appear before you today. 

Two years ago this spring, the New America Alliance suggested 

that this subcommittee, which has oversight jurisdiction over most 

of the entities comprising the U.S. financial services sector, hold 

hearings on the issue of diversity in the financial services industry. 

To your credit, and demonstrating that the members of this subcommittee on both sides of the aisle really believe in the fundamental American concept of equal opportunity for all, the hearing 

took place in July 2004. The New America Alliance’s then-Chair, 

Ana Marie Fernandez Haar, was honored by being allowed to testify at that hearing. Following the hearing, we requested that this 

subcommittee approach the GAO to see what information that 

agency could collect on the status of diversity in the financial services industry. The GAO has now completed its report entitled, ‘‘Financial Services Industry: Overall Trends in Management Level 

Diversity and Diversity Initiatives 1993 to 2004.’’ 

We wish to again commend this subcommittee and the GAO for 

this very important first effort in the form of the GAO report. It 

is impossible based solely on anecdotal evidence to determine to 

what extent progress has been achieved and to what extent it remains to be achieved in an industry as extensive and as vital to 

all of us as Americans as the financial services industry. That industry not only holds, invests, and manages must of the savings of 

all of our people, it is also a source of virtually all consumer and 

commercial credit in our country. 

Given the importance of the financial services industry to the 

economic advancement of all persons in our country, we believe it 

10

is particularly important that this industry reflect, to the extent 

possible, the very diverse human community that we are privileged 

to have in this country. We believe that over time this will largely 

happen anyway, both as a matter of demographics and through 

market forces. The issue before us today—are there non-coercive 

ways available to this subcommittee to accelerate this process so 

that the time involved and the human lives measured will be shortened? 

We also believe in what the late President Theodore Roosevelt 

used to call the ‘‘bully pulpit,’’ as well as that our national leaders 

must periodically mount that pulpit and lead. In this regard, we 

believe that the hearings held by this subcommittee in July 2004 

and now, as well as the GAO report, send a powerful first message 

to the financial services industry that the honorable members of 

this subcommittee do care whether there is equality of opportunity 

for all in this industry. 

There are, of course, many ways for this committee to continue 

to manifest its interest in this issue. Some can be extremely informal. Imagine, for example, that the honorable members of the 

House Financial Services Committee, acting individually, decided 

to systematically take advantage of their frequent meetings with 

constituents or their representatives to ask about the status of diversity in each constituent’s business, and perhaps even request a 

brief written update on the constituent’s efforts, programs, and results in this regard. Were this to become a common approach 

among many members of the committee, a very powerful message 

would quickly be sent to the entire industry. 

In terms of more formal Congressional action, we would very 

much like to see various follow-up inquiries on the GAO report. For 

example, we would like the GAO to survey leading entities in various sectors of the industry to see what the status is of diversity 

among these firms, what programs they are utilizing to improve diversity, and with what success. We realize that neither this subcommittee nor the GAO has the power to compel private sector responses to such surveys, but we believe it highly unlikely that the 

firms approached in this regard by this subcommittee would decline to respond. It would be a great honor for us in the New America Alliance to work with this subcommittee and the GAO in this 

effort. 

Similarly, we would like to see the GAO inquire of the Federal 

regulatory agencies responsible for our Nation’s financial services 

industry, the OCC, the Federal Reserve, the FDIC, the OTS, and 

the SEC, what the status of diversity is within their own agencies, 

what programs they have in place to promote diversity, and what 

the results of those programs have been. While we believe that we 

have adequate legislation in place, we also believe that as a practical matter it is difficult for regulators responsible for the implementation of that legislation to lead the way if their own agencies 

are not themselves achieving diversity. 

The New America Alliance commends and thanks in particular 

Representatives Oxley, Frank, Gutierrez, Scott, and you, Madam 

Chairwoman, for requesting that the GAO provide the overview on 

the status of diversity in the financial services industry. As you can 

see, in all of the instances what we are essentially asking the subVerDate 0ct 09 2002 13:16 Jan 23, 2007 Jkt 031536 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 F:\DOCS\31536.TXT HFIN PsN: TERRIE
11

committee to do is to continue to shine a powerful spotlight on this 

issue, allowing the innate sense of fairness that is strong in the 

American people, together with a market, the press, and organizations like ours and the other ones appearing before you today to 

take the matter further. 

Thank you very much. 

[The prepared statement of Mr. Loumiet can be found on page 

47 of the appendix.] 

Chairwoman KELLY. Thank you very much. 

Mr. Fernandez? 

STATEMENT OF MANUEL J. FERNANDEZ, NATIONAL 

MANAGING PARTNER, CAMPUS RECRUITING, KPMG, LLP 

Mr. FERNANDEZ. Good afternoon, Chairwoman Kelly, Ranking 

Member Gutierrez, and members of the subcommittee. My name is 

Manny Fernandez, and I am KPMG’s national managing partner 

for campus recruiting. KPMG is a Big Four accounting firm that 

provides audit, tax, and advisory services to a global clientele. Beyond my responsibilities for the firm’s recruiting strategy and execution, I continue to have client responsibilities serving a Fortune 

300 client. Beyond my role at KPMG, I also sit on the board of the 

KPMG Foundation. The mission of the Foundation is to enhance 

business higher education, and community involvement. 

By way of background, I came to the United States from Cuba 

when I was 8 years old. After college, I took a job with KPMG 

where I have worked for 22 years, including the last 10 as a partner. I have experienced firsthand KPMG’s powerful commitment to 

a diverse workforce. Being bilingual has contributed greatly to my 

success at KPMG and it has been very valuable to the firm as well. 

For example, in 1994, I took a 3-year assignment in Mexico City, 

serving our large multi-national clients with substantial Latin 

American operations. 

KPMG is committed to increasing the diversity of employees and 

partners nationwide. Currently, 25 percent of our professionals and 

6 percent of our partners are minorities. While we are proud of the 

progress we have made, we are by no means satisfied. We can and 

will do better. 

Along with our competitors, KPMG aggressively seeks to attract 

and retain qualified minority accountants. But as the GAO report 

notes, ‘‘One reason for the lack of diversity in key positions in the 

industry is that relatively few racial, ethnic minorities tape the 

CPA exam and thus relatively few minorities are CPAs.’’ 

KPMG and the KPMG Foundation are advancing systemic solutions to the problems of supply and quality of minority accounting 

students. We have programs to grow the pool of qualified business 

graduates of our universities and colleges, including Historically 

Black Colleges and Universities. Twelve years ago, the Foundation 

introduced the following three programs: the Ph.D. Project, the Minority Doctoral Scholarship Program, and the HBCU Accreditation 

Grant Program. One barrier we identified to attracting minorities 

to business graduate programs was the lack of minority faculty to 

serve as role models and mentors. The Ph.D. Project’s mission is 

to increase the number of minority faculty in business schools. 

Twelve years ago, out of 26,000 business school professors, we 

12

could identify only 294 that were either African-American, Latino, 

or Native American. Today, through the work of the Ph.D. Project 

and initiatives by others, there are 812 minority faculty with 346 

minority doctoral students in the pipeline. The investment in the Ph.D. Project to date exceeds $17.5 mil- lion, with the Foundation having provided nearly $8.5 million of 

that, as well as all administrative costs since 1994 on a pro bono 

basis. The Foundation has also given $8.2 million in direct doctoral 

scholarships and grants to minority students. Over 25 percent of 

the minority accounting faculty added in the last 12 years have received scholarships from the Foundation. 

Lastly, we have the HBCU Accreditation Grant Program. While 

putting in place the Ph.D. Project, we recognized that over 35 percent of African Americans earning business degrees were from Historically Black Colleges and Universities. To assist those institutions in gaining accreditation from the premier accreditation organization for business schools, the Association of Advanced Collegiate Schools of Business International, the AACSB, we offered 

grants to cover the accreditation candidacy process. Currently, 

there are 82 HBCU’s that grant undergraduate business degrees. 

When we started this program, only five HBCU’s had AACSB accreditation. Today, there are 16 and another eight in the pipeline. 

The Foundation has established endowments and annual scholarships at a number of HBCU’s. 

In conclusion, KPMG is committed to increasing the diversity of 

our professionals, and in particular our partners, and the graduate 

student populations to assist in bringing more minorities into the 

accounting field. We are proud of the steps we have taken to recruit, retain, and promote minority accountants. We are equally 

proud of our Foundation’s programs that are creating a new generation of minority accountants throughout the accounting profession. Diversity is critical to KPMG’s future and helps us deliver on 

our promise of professionalism, to ourselves, to our clients, and to 

our capital markets that we serve. 

Thank you for this opportunity to share my views. 

[The prepared statement of Mr. Fernandez can be found on page 

30 of the appendix.] 

Chairwoman KELLY. Thank you very much, Mr. Fernandez. Ms. 

Williams, your testimony is very clear that the financial services 

industry is committed to diverse employment. Unfortunately, it 

doesn’t seem to be working. One of the things that seems to be of 

difficulty is putting metrics on things like the informal structures 

and networks, friendship circles, common experiences, the things 

that help people determine hiring and promotion. And many employees, according to your testimony, say that these are barriers to 

their promotion. From what I have seen, there is a strong corporate 

commitment to try to have equal opportunity. I am wondering if 

part of the problem is the fact that starting from such a small base 

of diverse employees at senior levels, that some of these perceived 

barriers to promotion are going to exist long after the actual barriers are gone. And I wonder if you could talk about that a bit? 

Ms. WILLIAMS. I can share with you some of the things we have 

heard. We have heard that some companies were surprised when 

they had staff identify this as a challenge, for example, that they 

13

felt the lack of diversity at senior levels really impacted their ability to ascend in an organization. And the metrics issue is a challenge. And also coming up with a critical mass is a huge piece of 

this, that usually at the 5- to 7-year mark we heard is kind of the 

critical period for a lot of women and minorities to decide whether 

or not they are going to stay with a particular firm, and one of the 

things we heard from companies is that at that point they look 

around the organization and they ask themselves if they see people 

who look like them and if they don’t, then they may make a decision to go to another organization. So we did hear that firms are 

beginning to focus on this issue and they realize that critical mass 

is a challenge and getting that critical mass is a huge challenge 

that they have to deal with and that they are trying to deal with 

in a variety of ways in building networks and mentoring programs. 

Chairwoman KELLY. Thank you. Mr. Fernandez, I congratulate 

you on the efforts that you have made at KPMG but part of moving 

past the status quo and increasing opportunities for existing employees is really important. I would be interested in what you have 

done at KPMG to have that happen? 

Mr. FERNANDEZ. Well, one of the things that we have implemented is a program where every one of our employees, whether 

right out of college or direct hires, we encourage them to pass the 

CPA exam. So we have a program where we reimburse their Becker CPA review courses, it is one of the larger companies that offers 

that and their sitting fees and any ethical courses they are required to take by State rules. So that is one of the things that we 

have done in terms of allowing our employees, including minorities, 

to get their accreditation to be CPAs. 

Chairwoman KELLY. Thank you. I think my time is up so I will 

turn to Mr. Gutierrez. 

Mr. GUTIERREZ. I want to thank all of the witnesses. I want to 

start with Ms. Sims. Most believe the key to increasing diversity 

in financial services is greater recruitment but you raise a good 

point that too much emphasis on recruitment can be a bad thing, 

with many professionals never fully assimilating into the corporate 

culture and leaving the industry before making it to the executive 

level. What can be done to shift away from this trend? 

Ms. SIMS. One of the things that I cited in my testimony is that 

in order for someone to become a senior managing director or to become an executive on the board of directors of their firm, it is imperative to them to have success in whatever it is that they are 

doing so they have to generate revenue. And so if there is a way 

that particular person could be mentored such that they could take 

over large accounts and be responsible for significant amounts of 

revenue coming into the firm, that would certainly help their ascension. And what could happen is that on the outside, external 

forces, like the Federal Government as a client as well as the CEO 

of the company from the top stating that individual managers need 

to have diverse people on their teams can also benefit. 

Mr. GUTIERREZ. Let me follow-up with Mr. Fernandez. Thank 

you for all you do. Why don’t you follow-up where Ms. Wilson left, 

what about your firm, what she said, too much emphasis on recruitment, what do you think about that? What is the key thing 

that we have to do? 

14

Mr. FERNANDEZ. In terms of recruitment? 

Mr. GUTIERREZ. Well, because if we spend too much time—as Ms. 

Wilson said—too much time on recruitment and not enough time, 

as she suggested, on mentoring and what we do internally, how do 

you see it? 

Mr. FERNANDEZ. We really look at it from a three-prong approach: recruitment, retention and development, and then promotion. As an example, we have approximately 1,000 Latinos and 

African Americans combined in our staff ranks, who have 1- to 5 

years of experience. We have approximately 300 out of our total 

population of 20,000 employees in the manager ranks, who are 1- 

to 5 years away from partnership or the potential to be partner. So 

the key is to bring in more—our initiatives are to bring in more, 

retain more, develop more, mentor more, and promote more. 

Mr. GUTIERREZ. I want to follow-up on that. So you have a plan? 

Mr. FERNANDEZ. Yes. 

Mr. GUTIERREZ. As a partner? You sit down with the other partners, you review the plan, are people judged on how they meet 

the— 

Mr. FERNANDEZ. Absolutely. 

Mr. GUTIERREZ.—recruitment, retention, promotion? 

Mr. FERNANDEZ. Well, I run the recruiting organization. 

Mr. GUTIERREZ. Right. 

Mr. FERNANDEZ. In fact for the last 3 months, so I am fairly new 

in the job. One of our key initiatives is diversity; one of our guiding 

objectives is diversity. 

Mr. GUTIERREZ. So let me ask you—I issued a challenge earlier 

that we not have the same dismal situation 10 years from now. So 

as we look back, you and I are a little older and we come back— 

Mr. FERNANDEZ. A little older, yes. 

Mr. GUTIERREZ. Right, just a little bit older, 10 years from now, 

that we not have the same situation. So I said why don’t we issue 

ourselves, what is your goal, do you have such a goal within—do 

you have any goals? What are those goals? How do you look into 

the future, how does your firm look into the future, this is what 

we want to accomplish? 

Mr. FERNANDEZ. Yes, our goal has been to add more in the population. In order to add more in the population, we need more students to enter colleges and universities that are accredited. So it 

goes to the accreditation focus of HBCU’s, so forth and so on. So 

we really need more of a pipeline into the universities and colleges, 

both at the traditional universities and the Historically Black Universities or minority-based universities, we need to get more of 

those. We have strategies to do that through the KPMG Foundation and the accreditation. We need more of those 82 HBCU’s to 

get accredited for one thing. So we really need more students from 

the high school levels to enter college, choose business as a profession, and choose accounting as a profession, so that we can then 

have a bigger pool of the population to attract from. We need that 

to happen. Then it becomes our job to recruit them, bring them in, 

and then they become part of a mentoring process and so forth. Six 

months ago, we started a National Diversity Network that I cochair for the Hispanic/Latino side, and we have two partners on 

the African American side. And we actually held part of the NABA 

15

conference 2 months ago. And upcoming in the ALFA Conference 

in Dallas, Texas, we are bringing all of our managers who are 

Latino/Hispanic to Dallas, all for the purpose of creating networks, 

creating mentoring relationships, and hopefully getting those managers to build their skill sets and competencies to be able to be in 

position to make partner because that is really my end goal, to 

have more people like me be partners at KPMG. 

Mr. GUTIERREZ. Thank you so much, Carlos, number one for your 

organizational effort for requesting the GAO report initially. What 

is the one single thing we can do? What is the one single thing we 

can do? 

Mr. FERNANDEZ. The one thing you can do is to shine a beacon 

on this issue and continue to do so. We all get busy, we all have 

to prioritize in life. There is no question that the industry, if you 

look at it now as opposed to 20 years ago, there is no question that 

the industry has come a long way in terms of creating programs 

to foster diversity. There is also no question that there is a long 

way to go and that the only way that we are going to achieve that 

remaining distance in the time I think you and we would like to 

see is if this becomes a top priority for the industry. 

Mr. GUTIERREZ. I would like to say that I think we probably need 

to have a conversation between the Asian Pacific and the African 

American Caucus so that we can challenge the institutions that are 

out there, as you suggest, as many of you have suggested, continuing to challenge them and to challenge them on what the reality is and bring them forward. The GAO report is giving us the 

information and that information is power and how we utilize that 

information and power, and obviously the Alliance and what you 

are doing, I want to thank you. And the other thing is I want to 

make sure that when we do these GAO reports—my daughter took 

a sociology class and the professor began by defining Latino. And 

he was a nice Spaniard from Madrid. He started with a definition, 

‘‘like me.’’ My daughter said, ‘‘Well, I don’t think so, kind of from 

Latin America, we had our wars of independence. Lots of people 

lost their lives to be different from you, but we have resolved all 

of those things.’’ Well, she came home and I told her, ‘‘I think you 

said the right thing.’’ So let’s make sure we are defining the population as it should be because we do have people who come from 

Latin America even and from a culture, which they don’t need a 

lot of help, given the socio-economic background that they come 

from. It is a lot different coming from a well-established family in 

Venezuela or Argentina than the ‘‘un-well-established’’ families 

from Chicago and LA and New York and Miami. It is very, very 

different so I want to make sure that we are also focusing on that. 

Thank you all so very, very much for all of your testimony. 

Chairwoman KELLY. Mr. Scott? 

Mr. SCOTT. Thank you very much, Chairwoman Kelly. Again, I 

want to commend this committee for following up and you, Chairwoman, and Mr. Gutierrez, for your leadership on this important 

issue. We brought this up and it is great to see us moving forward. 

I have been so concerned about this issue. In my own experience 

as a Congressman, I represent perhaps the fastest growing minority business owned area in the Nation, certainly one of them, and 

that is the Atlanta Metro Area where I represent many, many midVerDate 0ct 09 2002 13:16 Jan 23, 2007 Jkt 031536 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 F:\DOCS\31536.TXT HFIN PsN: TERRIE
16

dle-class African Americans, those who are opening up businesses, 

going into business. It is a very, very growing sector so access to 

capital and having African Americans in key decision-making decisions in the financial service industry to understand the sensitivities that other African Americans are going through are very critical. It is also important that we understand the Jackie Robinson 

Syndrome here and that is you have to have role models. You have 

to have successful African Americans that you spotlight, that you 

promote, that you get on an accelerated track. We should shy away 

from this notion of feeling that we should be denied this effort to 

push out very quickly to make up for the ground that we have lost 

due to past racial discrimination and prejudice in the financial 

services area. We are in this shape where we have so few, where 

retention is weak, where you don’t have it at the high school level 

of those being trained and wanting to go into accounting, there is 

a reason why we don’t have the African Americans as we should 

that are attracted to accounting and financial analyst work, banking, auditing, and those areas. 

I come from a little bit of experience, and I just want to take a 

moment to share this because this issue is so very important to me. 

It is one that I have been devoting so much of my life. I happen 

to have been the third African American to graduate from the 

Wharton School of Finance with an MBA. I understand diversity, 

understand the meaning of it. One of my first jobs, I might add, 

was with KPMG. So I understand that and what we need to do. 

We started a firm called Recruiting Management Consultants 

where we went all over this country to deal with it. There is nothing more important that this committee can be involved in at this 

time than correcting some of the past errors that we have made 

due to discrimination, prejudice, and denying and keeping African 

Americans out of what we are doing. 

Now that I have gotten that out of the way, I want to talk about 

three very important issues. First of all, how can we get senior 

management and middle management in the financial services industry to completely buy into the program? I would think from 

what you all have said here that you have three basic areas: recruitment, retention, and the other thing you said is promotion. 

And the promotion, I think, is the one that is key to the recruitment and the retention. So I would like for each of you to just give 

me your comments on—before my time runs out here—on the recruitment, the retention, and promotion, and what each of you are 

doing. And also if you could address that important issue of whether top management is genuinely buying into this program or—I 

don’t want to put you on the spot—or, as in so many cases, we are 

getting just lip service? Ms. Wilson, would you mind starting that 

off because your comments kind of sparked my question? 

Ms. WILSON. Congressman Scott, thank you. I have been an investment banker for 23 years and you can see from my bio I have 

worked for some of the largest investment banking firms in the 

country. So with my practical knowledge, if you look around, there 

are precious few minorities and women who are partners and who 

are, if they are public companies, on the boards of directors of 

major investment banking firms. I could also speak for asset management firms; it is the same thing. So there are, as my colleague 

17

Mr. Fernandez said, there is a large pool of people on the front end, 

the people from 1- to 5 years, 3,000 people, I forget exactly what 

number he said. But how do we get people from mid-management 

to become partners? How do you mentor them into the highest levels of the organization? And I have said in my testimony the way 

to do that is you have to economically incentivize people to do that. 

You become a partner because, for example, if you are in the M&A 

department at say Goldman Sachs, you become a partner because 

you were riding the point on a huge merger. You become a partner 

at another firm if you were handling the General Motors account. 

So people have to be mentored into the highest levels and the most 

visible and the most profitable areas of a firm for them to generate 

the revenue, because Wall Street is a ‘‘meritocracy’’ mostly, to become a partner and an owner and at the highest level of that firm. 

And I think that the Federal Government, through the business 

that it controls as huge client in financial services across so many 

areas, I have mentioned Federal pensions, there are various departments, Transportation, etc., etc., those agencies in the past 

have focused more on hiring janitorial services and other types of 

contracting and not as much on financial services. But if the Federal Government insisted that there be a diversity component in 

their evaluation of their service providers in the financial services 

industry, that would be the external stimulus that would help 

these major firms to mentor people into the highest levels, generate 

the revenue, and have the business success so that they could become a partner on the merits. 

Mr. SCOTT. One of the things that we are trying to do in the Congressional Black Caucus, I know Mr. Meeks, Mr. Wynn, I know Ms. 

Waters and all of us are very much concerned about is to figure 

out how we can increase wealth, how we can increase economic and 

financial empowerment. Would you recommend that a part of what 

we may do as government officials and policy setters is to as a condition, as a requirement, as one of those things we look at prior to 

giving government contracts, that we take a look at that individual’s diversity program and that that diversity program be considered as a part of the criteria to determine whether they get that 

contract? 

Ms. WILSON. Yes, Mr. Scott, in my written full testimony, I 

state—and I will give the example that I used—let’s say for example the Pension Benefit Guarantee Corporation, that agency or the 

Federal Retirement Thrift, which manages hundreds of billions—

hundreds of billions of assets for the annuitants who are government workers, if the Federal Government, when they are deciding 

what service providers to hire to handle those assets, look at not 

only their individual diversity profile, how many partners do you 

have, senior level managers, mid-level managers, EEOC data, but 

as well if you were to also look at supplier diversity, how much 

business have you major service provider managing the assets of 

the Pension Benefit Guarantee Corporation, how much business 

are you doing with minority- and women-owned firms. And have 

that be part of the evaluation component, just a part. Three firms 

have similar fees, three firms have similar performance, one firm 

stands out in terms of the diversity initiatives, which is a new goal 

of the Federal Government, then that firm could win the business. 

18

Mr. SCOTT. Okay. Thank you. 

Chairwoman KELLY. Thank you, Mr. Scott. Mr. Meeks, do you 

have any questions? 

Mr. MEEKS. Thank you, Chairwoman Kelly and Ranking Member 

Gutierrez. I want to thank you for allowing me to participate in 

this hearing even though I am not on the subcommittee, for indeed 

this is a subject matter that has been very near and dear to me. 

And I want to also thank all of the panelists for your testimony 

today. 

It is funny coming from New York, the financial capital of the 

world, and as I go visit many of the different financial institutions, 

it would be funny if it wasn’t so serious when I see how the CEO’s 

when they know that I am coming, kind of find somebody of color 

to meet with me when I am there. And, oftentimes, they go to such 

a degree that you know that they really have no responsibility, 

they just have them sitting there to eat lunch with me or to talk 

at the meeting just so I might get the impression that somebody 

of color is working with the firm. But then I ask the appropriate 

question as to—and I do it right in front of them—what are their 

responsibilities and what track are they are on, then you see the 

red faces coming up because clearly they just had them there because they were trying to pacify me. And so to watch those faces, 

if it wasn’t so serious, I would crack up laughing because of their 

nervousness and the lack of inclusion in a city like New York 

where the majority of the population in fact is African American 

and Latino. But, yet, when you look at the makeup of those companies, and even the outreach into some of the communities so that 

people know that opportunities are there for them to have, it is just 

not there. 

Like Congressman Scott had indicated, I am also—and I hear the 

difference between getting someone in on the bottom level but putting them in mid-management so they can promote on to partner, 

but some of that has to do with the whole climate. If you are walking into a climate where you know that you don’t feel welcome, and 

I think that is what Ms. Wilson is talking about the mentoring, if 

you are in a climate, they know when that fifth year is coming 

what to do to get you out of there so that you are never on a partnership track. And so I appreciate the testimony about what we 

can do in government to try to make sure that there is a difference. 

But I also want to know what we could do to help build minority 

firms. And maybe I will ask this question to Mr. Lackritz in this 

sense, there seems to be a substantial decrease recently in the opportunities for minority investment banking firms to participate in 

IPO’s because the private equity firms are picking up a greater percentage of the market. So the firms that I am talking about, the 

few that I see in New York, they are no longer—they are saying, 

hey, we are basically going out of business. I am wondering what 

incentives can we create in majority firms, majority businesses to 

seek out minority firms to be partners or joint ventures in various 

activities because that has become—that is how a firm, you can 

pick up the level of minority firms in a city like New York or all 

over this country, any ideas there? 

Mr. LACKRITZ. Well, I think it is a very good question, and I 

think your description of what is happening in the market, I don’t 

19

know enough about the specifics of what you are describing, but it 

doesn’t sound like it is too far fetched. Clearly, there has been a 

great growth in the area of private equity recently and the market 

has been shifting a lot, particularly on the institutional capital 

market side. But it seems to me that the key here is to outline and 

make clear and educate everyone about the business case that is 

here and important for firms to succeed in the future. And from 

this perspective, demographics I think are destiny. And as you 

have described the situation in New York, similarly for our country, broadly speaking, by the middle of the century, the country is 

going to be majority/minority. We are going to have a majority of 

minority groups in the United States. And as the economics of that 

develop, for firms to succeed, they are going to have to look like the 

country and look like the economy to be able to be successful in attracting that kind of business. So I think the important thing first 

is education. The second thing I think is important in terms of recruitment, and I know a number of our firms are engaging in a lot 

of activities to build retention. They build retention through training, through mentoring, through career development councils, 

through affinity networks, through identifying high potential 

women and minorities, and I think all of that is part of it. What 

we are trying to do at SIA is to drive this in every different part 

that we can, whether it is in our professional education program 

where we have a mandated diversity part of our core curriculum 

that every attendee has to attend for 3 consecutive years, whether 

it is our leadership awards at our annual conference, whether it is 

our programming, whether it is our teleconferences of our diversity 

committee. All of these are sharing of best practices. All of these 

efforts, it seems to me, have to be focused and it requires a commitment from the top. 

And I want to tell you also, just in response to Mr. Scott’s question earlier, the CEO’s in the securities industry really get it. Our 

top 20 firms, every single one of them is committed to increasing 

and improving diversity and have programs in place to do that. The 

overwhelming majority of our mid-size firms also have those kinds 

of programs. I think we are getting it and it is a process. And, believe me, I am not here to say we are there yet because we are not, 

we have a lot further to go, but I think we have made a good start, 

we are making progress, and we have more work to do. 

Mr. MEEKS. I know my time has expired but here is my other 

concern, sometimes it seems to me, and I always look to see what 

we can do as a government, and I would just like to know what 

your experiences have been also because oftentimes the farm system, if you will, for individuals to come and get high placed office 

right off the bat is when they come out of government, if they have 

worked for the SEC or if they have worked for some large government agency and had a high-level position there, they can springboard across. What do you see that we can do or are we missing 

something here, as Members of Congress and as part of the government, to make sure that those large agencies, having individuals 

of color there who can easily move forward and jump into partnership ranks straight from a government position because I read the 

papers everyday, and I see how these folks leaving government, 

they are making these huge salaries straight out of here, and some 

20

of them are very young. And I want to make sure that everybody 

has an opportunity to do that and be successful like that. 

Chairwoman KELLY. Thank you, Mr. Meeks. Ms. Waters? 

Ms. WATERS. Thank you very much, Chairwoman Kelly, for holding this hearing. Deja vu. It seems as if I have been involved in 

this kind of discussion for all of my career. I come from the State 

of California where we opened up opportunities for minorities and 

women through special legislation that I developed, AB–1933; I will 

never forget it, where we were able to have an emerging fund that 

was dedicated to minorities and women with PERS, the Public Employees Retirement System, and with STRS. We really did move 

some minority firms into significant positions for doing business 

and creating wealth some time ago. Unfortunately, it appears that 

the recommendation that is being made by Ms. Donna Sims Wilson, someone whom I have known for about 20 years now, is a recommendation that we really need to take seriously, since I don’t 

see these kinds of initiatives, and we don’t reach into those departments and agencies from our committees in ways that we should. 

I must say to Ms. Wilson that she really did do this work working with me when we opened up some opportunities in Fannie Mae 

for some asset management some years ago, but we have not 

moved much beyond that point because most of us really won’t be 

able to do it unless we have the kind of assistance that we had 

when we opened up those opportunities with Fannie Mae. And, obviously, you are a member of a board that was organized because 

of this problem that we have with getting minorities and women 

not only involved in these firms but basically involved with government business, etc., etc. 

So I want to thank you all for being here today. I think that the 

recommendations that you have made, if you work with us, can be 

put into legislation. This will show our agencies how they can create the means by which we can evaluate their performance, so that 

we can make some determination about whether or not they truly 

have diversity programs. Legislation could also be used to help 

them decide with whom they are going to do business. I think that 

makes a lot of sense. 

Let me just ask you a very difficult question and anybody can answer this. There is something that is not being said, there is something that is not being talked about. It sounds very good to talk 

about recruitment, retention, and promotion, and I have heard this 

before. I know of African Americans who have been on Wall Street, 

and I know an African American woman whom I am thinking 

about in particular, and I think Ms. Donna Sims Wilson will know 

who I am talking about, who was doing very well on Wall Street 

and she was absolutely superb in her ability to deliver for the firm 

and she had huge success. She had to end up suing that company, 

and I am sure that you remember this case. There are other cases 

that I have heard about, because there was discrimination related 

to compensation, and they were absolutely paying white males in 

a different way than they were compensating women and minority 

women in particular. Are we not talking about something here that 

needs to be talked about, needs to be put on the table in terms of 

what is encountered by women and minorities once they get in 

these firms? What is it, and it has nothing to do with whether or 

21

not they are competent, they don’t get there unless they are competent. It has nothing to do with whether or not they are qualified 

to do the job. What is going on inside these firms that prevents upward mobility? What are the little things that happen? What about 

things that are occurring? Can you help me with this phenomenon, 

and I will start with Donna Sims Wilson because she has always 

told me the truth. 

Ms. WILSON. Thank you, Congresswoman Waters, I think. Well, 

I am an African American woman and I have been on Wall Street 

for 23 years and how do I put this elegantly? It is a zero sum game. 

It is a very intense industry with highly articulate, intelligent, energetic people who are striving to become partner and earn a lot 

of money. It is capitalism at its most raw form. And so because of 

that, there are a lot of sharp elbows as everyone is climbing to get 

to the top of the pyramid. And so I think only the hardy need apply 

at the beginning and there are casualties along the way. That is 

just fact. I don’t know what Congress can do about that. I believe 

it was Congressman Meeks when he talked about the viability of 

minority-owned firms and how can he help minority-owned firms, 

again in other syndicates where minority-owned firms, such as 

mine, are competing against all the other firms to get as much 

stock as possible to distribute to our clients, the stock that I get 

is the stock that somebody else doesn’t get. And everybody is being 

compensated based on what they produce. Again, capitalism at its 

rawest form and that is why it is so important for mentorship to 

occur so that people can be mentored into the highest levels of the 

organization working with the most profitable accounts so that 

they can generate the most money and so that they can move up. 

That is just a first stab at the question. 

Ms. WATERS. And that is a good stab because what you have 

done is basically describe the way the world works on Wall Street 

in the most general and simplistic way. But I guess I am asking 

questions beyond that. What I am asking you as a successful minority firm, and you are a brilliant, competent, capable young African American woman, could you use the same talent to be a partner in one of the other white major firms on Wall Street, would it 

work the same way for you? 

Ms. WILSON. I would hope so, Congresswoman Waters. 

Ms. WATERS. Have you been in that situation where you tried in 

the beginning of your career, at some point in your career in a 

major white firm? 

Ms. WILSON. I have worked for major firms in the past in my career. I have been a vice president at a firm. I started my career 

as an associate in corporate finance at another major firm. And I 

worked hard and I believe I had some success in those institutions. 

And I gained a lot of experience that has helped me throughout my 

career. 

Chairwoman KELLY. Thank you very much, Ms. Waters. Ms. 

Moore? 

Ms. MOORE. Thank you, Madam Chairwoman. Can I yield 3 minutes of my time to Ms. Waters? Is it possible to yield her 3 minutes 

of my time? 

Chairwoman KELLY. Yes, that is fine. If you want to yield your 

time to Ms. Waters, just go ahead. 

22

Ms. MOORE. I will yield you 3 minutes of my time. 

Ms. WATERS. Oh, thank you very much, Ms. Moore. I guess you 

would like me to continue that line of questioning. I would like to 

get back to the point where I was asking about that which is difficult to talk about, that which is very difficult to discuss; whether 

or not the opportunities for minorities on Wall Street are not seen 

in terms of minorities’ ability to be recruited. We understand that 

and we understand recruitment must take place. And when you 

talk about those educational institutions that are certified to educate people so that they are competent for the market, are you 

talking about major black colleges and universities not having programs to train and develop young African Americans? For example, 

what happens at Morehouse in Atlanta, are they training for the 

financial services industries that we are talking about today? 

Ms. WILSON. I can tell you about a program called Sponsors for 

Educational Opportunity, Congresswoman Waters. The SEO program, of which I am an alumna, started, I believe, in 1980 and initially had 10 students from Harvard, Yale, Princeton, and Dartmouth. That was the first class. I was in the second class that had 

12 students, and I was placed at Salomon Brothers. And I believe 

that this program, and I don’t have the exact numbers, but this 

program is responsible for in many ways the ‘‘colorization’’ of Wall 

Street. And many of the alumna and alumni of this particular SEO 

program have come from over the years—it started with 10 people 

I believe, this summer class has something like 357 people. In my 

class in 1981, and so now I have dated myself, okay, I did it, in 

1981, people were placed at Salomon Brothers, Goldman Sachs, 

and Lehman Brothers. 

Ms. WATERS. May I interrupt you for a moment? 

Ms. WILSON. Yes. 

Ms. WATERS. I specifically mentioned Morehouse, I could mention 

some other black colleges and universities. Am I to understand that 

they do not have programs in those colleges and universities that 

train and develop their students for the securities industry and investment banking programs? Am I to understand that is non-existent or what? 

Ms. WILSON. Yes, they do. And what I am saying is that this 

SEO program started out recruiting only at Ivy League schools 20-

plus years ago but now it recruits all over the United States, including many HBCU’s such as Morehouse. And many people on 

Wall Street are quite familiar with the SEO program and it is 

heavily supported by the major firms because they view it as a 

wonderful way to recruit talented individuals into their organizations. And many of the alumna of this program are managing directors and other senior people on Wall Street. 

Ms. WATERS. So recruitment is no real problem? 

Ms. WILSON. I don’t believe that recruitment is the problem, no, 

Congresswoman Waters. 

Ms. WILSON. Okay, so recruitment is not the problem, the people 

are there, the interest is there, the educational institutions are 

there, and even though I am talking about Morehouse and black 

colleges and universities, whether it is Cornell or others, there are 

African Americans who are interested and who are graduating and 

who want to go into the industry. So recruitment is not really the 

23

problem. Retention, why is it people don’t stay? And you don’t have 

to answer this all by yourself. Why don’t we get some help from 

some of the other panelists. 

Mr. FERNANDEZ. I wanted to just mention your question about 

the HBCU’s, I mentioned earlier, and maybe you weren’t in the 

room at the time, but there are 16 accredited business schools of 

HBCU’s out of 82. I think it is not so much recruitment because 

if there are talented students who are graduating from universities 

with the talent and the grades and the curriculum that supports 

that, I think you will see Wall Street hire more. I think what you 

need is a bigger pipeline of students at those universities, graduating with good business degrees that would give them the talent 

and the skill sets to compete in that market that she is talking 

about. 

Ms. WATERS. Okay, I am going to yield back my time because 

Congresswoman Moore was just generous in allowing me to have 

this time. But let me just say that I want to make sure that the 

recruiters are at the doors of the HBCU’s because I believe that 

qualified students are there. I believe that they are there, and that 

they are interested. As a matter of fact, I am almost a little bit concerned that too many of our young people want to get rich fast and 

want to get to Wall Street. So I just don’t think recruitment is a 

problem. And I yield back the balance of my time. 

Chairwoman KELLY. Ms. Moore, you are recognized for 2 minutes. 

Ms. MOORE. Well, thank you so much, Madam Chairwoman, and 

thank you all, I thank this distinguished panel for being here. 

Chairwoman KELLY. Ms. Moore, I am going to interrupt you and 

not charge you for this time but, Mr. Fernandez, you said you needed to leave to catch a plane. If you need to leave now, you may be 

excused. 

Mr. FERNANDEZ. That would be very much appreciated, so that 

I don’t get home at 2:00 a.m. Thank you. I have enjoyed being here 

with all of you. 

Chairwoman KELLY. Thank you very much for being here and for 

your testimony. 

Mr. GUTIERREZ. Please leave and catch the plane. Thank you so 

much, seriously please. Thank you for all you do, too. 

Chairwoman KELLY. Now, we turn to you, Ms. Moore, for your 

full 2 minutes. 

Ms. MOORE. Thank you so much, Madam Chairwoman, and 

ranking member and others. I was very interested in Ms. Waters’ 

line of questioning because she has really made a very important 

point, that it is not for the lack of trying it seems on the part of 

the industry to recruit people, to train people, to give them experiences, but the real thing might be—the truth might be found in the 

testimony of you, Ms. Wilson, when you said the path to senior 

management and corporate board membership in majority firm institutions is job success. And so while mentoring is important, people have to have job success. 

I worked for many years as a State legislator as a board member 

of the Wisconsin Housing and Economic Development Authority 

Board. They would have minority firms doing co-management, and 

I was never sure the extent to which they were really part of the 

24

deal. And you don’t really expect investors to have confidence in 

people who are not proven, they don’t have job success. And so I 

guess what I am asking of this panel is to what extent do we go 

beyond recruiting, training, mentoring, having people in our classes, going into high schools, but really trying to make sure that people are substantial parts of the deals that are successful? 

I remember Reggie Lewis, the Michael Jordan of finance, being 

my hero and reading the Wall Street Journal reports every day 

about him. Who wouldn’t? Black, white, how else do you break 

those color barriers other than job success so that anybody who 

wants to make money would abandon any fears of racism or so on 

to get a Reggie Lewis to do their deal? To what extent do these 

companies try to put minorities and women at the table for the biggest deals? 

Mr. LACKRITZ. Well, if I can just answer first, Congresswoman 

Moore, I think that we are making a lot of progress in this area. 

And I think that not only if you look across the board at some of 

the progress, if you look at the way the deals are being done now, 

one of the things that has happened in the marketplace is that the 

entire syndicate business has changed dramatically. And instead of 

having 20 or 30 or 40 firms involved in a deal, there are fewer 

firms because of the economics of it. It is much more efficient. And 

for the issuer, for the company owner or for the school authority 

or for the public officials, it is a much better deal if they get an 

efficient deal. So they have fewer participants in the syndicates, 

that means it is challenging to increase the number of other firms 

that are going to be participants, just as a matter of the economics 

before you even get to the specific issue that we are dealing with. 

I think the key here for us as an industry, and the key for our 

firms, is not only commitment from the top but also beginning 

early. 

One of the things that I am very proud of that we do, we have 

a foundation for investor education. It has in schools, middle 

schools and high schools, across the country our stock market game 

educational program, which teaches kids of all ages, of all income 

levels in the public schools and in the private schools, over 500,000 

kids a year from grades 7 through 12 learn about the difference between consumption and saving, about compound interest, about the 

difference between equity and debt, about asset allocation and portfolios, and our firms are providing internships for high school kids 

to get them interested in finance earlier rather than later. This is 

a process, I think. I don’t think we solve this sort of with a quick 

fix. I remember, I guess it was President Johnson who talked about 

whether you give somebody a fish or you teach them how to fish. 

I think what we are committed to doing is teaching people how to 

fish. And then in the long run, that is going to be much more important in terms of increasing participation and broadening and expanding the circle than by any kind of quick fix that we might 

come up with in terms of specifics here. 

Ms. MOORE. Well, I appreciate those comments. I am just saying 

that I hope that Wall Street would make itself more responsible for 

helping develop the relationships because I have already assumed 

that by the time you get to be Ms. Wilson there, that you know the 

difference between equity and debt. I don’t think I do personally. 

25

But in all seriousness, relationships and really being part of the 

bigger deals I think is where I would like to see the firms take an 

extra step. Thank you, Ms. Kelly. 

Chairwoman KELLY. Thank you very much, Ms. Moore. I really 

appreciate the fact that the panel was very patient with us today 

because we had to start and then go to a vote and all of that. You 

have been very good and we thank you so much. I would like to 

point out just one or two things. We are talking here about diversity. Only 13 percent of this body has women. One of the interesting things also that ought to be noted I believe is that in Wales 

they just had a vote. The new Welsh parliament is the first womendominated elected parliament in the western world. So we have a 

little ways to go here in the Congress as well. 

The Chair notes that some members may have additional questions for this panel. They may wish to submit those questions in 

writing. So without objection, the hearing record will remain open. 

Oh, I am sorry. Mr. Scott? 

Mr. SCOTT. Can I get clarification, please? 

Chairwoman KELLY. Sure, of course. 

Mr. SCOTT. Because I was a little bit confused with the last line 

of questioning and I want to get it clear. Do we have a recruitment 

problem or don’t we have a recruitment problem? From the written 

testimony, and from your earlier conversations, you said recruitment is a problem. In response to Ms. Waters’ question, she said, 

‘‘So recruitment is not the problem.’’ You said, ‘‘No, recruitment is 

not the problem.’’ What are we here, which way is it? On the other 

hand, someone said, well, we don’t have enough kids graduating 

with degrees and business degrees and accounting and so forth. Do 

we have a recruitment problem or don’t we have a recruitment 

problem? 

Chairwoman KELLY. Why don’t we take one quick answer from 

every member of the panel, just starting with you, Ms. Williams, 

and let’s move on down. What is your perception and then move 

to Mr. Lackritz, Ms. Wilson, and Mr. Loumiet. 

Ms. WILLIAMS. Based on our conversations with firms, recruitment is an issue as well as retention. 

Mr. SCOTT. Okay. 

Mr. LACKRITZ. I think that recruitment, training, retention, all of 

it is a challenge and an opportunity for our industry to improve on 

the progress that we made so far. 

Ms. WILSON. I would agree that recruitment is just one component of the issue. It is recruitment, retention, advancement, and 

promotion to the top. It is one continuum. And there certainly are 

more people at the bottom than there are at the top. 

Mr. LOUMIET. I would say that recruitment is not the biggest 

problem. But the problem arises along the way, as Ms. Wilson has 

suggested. 

Chairwoman KELLY. Thank you very much. Without objection, 

the hearing record will remain open for 30 days for members to 

submit written questions to the witnesses and place those responses in the record. 

This hearing is adjourned. 

[Whereupon, at 4:50 p.m., the subcommittee was adjourned.] 

(27)

A P P E N D I X

July 12, 2006

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