© SOLOMON HESS CAPITAL MANAGEMENT www.solomonhess.com Spring Edition 2019 CRA Modernization Update: Is Regulator Consensus Attainable? ecent events have sparked hope discussing all the ideas with fellow R that the regulators responsible for regulators as we work together towards overseeing the Community Reinvestment proposing improvements to the current Act (“CRA”) can reach consensus on key CRA framework.” components of CRA reform and that an inter-agency proposal could be in CRA stakeholders monitoring regulator Mad Monkfish is a sushi and Asian fusion restaurant progress. comments are optimistic that consistent located in a moderate-income census tract in Middlesex County, MA. The borrower self-reported to the Small themes seem to be emerging and that Business Administration (“SBA”) that this SBA 7(a) In March, both the Federal Deposit consensus on key components of CRA loan supported the creation and/or retention of 10 jobs. Insurance Corp (“FDIC”) Chairman reform may be possible. “There’s a real Above, a chef. Jelena McWilliams and Federal Reserve opportunity for momentum here. What (“FED”) Governor Lael Brainard gave we are hearing from agencies is not SBA Loan Profile: Mad separate speeches and shared initial inconsistent with one another, which thoughts on how their agencies are gives us a path towards a proposal,” said Monkfish, Middlesex, thinking about reforming CRA. This Steve Sugarman, senior adviser and chief Massachusetts marked the first time these agencies have counsel at the National Diversity commented on specific CRA reform Coalition. hen portfolio managers at Solomon issues since the Office of the Comptroller W Hess Capital Management of the Currency (“OCC”) took the Some of the consistent themes in (“Solomon Hess”) invest in CRA-eligible unusual step in August of last year to regulator comments include the need to loans on behalf of bank investors, they try to work independently in issuing an Advance assess the role of digital banking in CRA, find loans that not only meet the technical Notice of Proposed Rulemaking the importance of clarifying for banks requirements of the CRA program but also (“ANPR”) to gather public comment what activities qualify for CRA credit, and the spirit under which CRA was created. An about modernizing the CRA. In response the imperative of ensuring that CRA example of the types of loans that Solomon to the two speeches, OCC spokesperson investments go to the communities most Hess acquires is the loan to Mad Monkfish. Bryan Hubbard said, “Comptroller of the in need of credit. All three regulators Currency Joseph Otting looks forward to have reviewed the over (continued on page 2) Mad Monkfish is a casual restaurant that features live jazz located in Central Square in In Memoriam: Anthony J. “Gino” Heilizer Boston, MA. Established in early 2011, the restaurant serves sushi and Asian fusion nthony J “Gino” Heilizer, co- dishes. The sushi is (continued on page 3) A founder of Solomon Hess Capital Management, died from complications of lung cancer on April 19 at his home, surrounded by those who loved him. Gino founded Solomon Hess with Bill CRA Modernization 1-2 Einstein 15 years ago with a mission to provide investors with access to investments in small business loans made In Memoriam 1-2 in conjunction with the SBA 7(a) program, where the borrower is located in SBA Update 2 an economically distressed community or employs low– or moderate-income SBA Loan Profiles 1-3 persons. Today Solomon Hess has over $700 million assets (continued on page 2) Above, Gino Heilizer (1968 - 2019) For Institutional Use Only In Memoriam (from page 1) under CRA Modernization (from page 1) 1,500 management in two funds with over 160 comments to the ANPR and SBA Loan Fund investors. “The success of Solomon Hess acknowledge the call for the agencies to 2018 Impact Report is a true testament to Gino’s intellect, work jointly on CRA reform going creative thinking and determination. To forward. have worked with Gino was a true privilege,” said Bill Einstein. “Gino was a While agreement on broad themes and special person: a remarkable businessman, the intent to work jointly are reasons for a caring husband and father, a generous optimism, it is still uncertain as to citizen of the community and a true whether the regulators can find common friend.” ground in the details. The exact nature of any disagreement between the agencies has always been unclear and the issues of CRA reform are complex. Constituents have raised concerns that if the regulators do not act in tandem, the CRA framework, already fraught with inconsistencies and confusion, will be even more complicated and less effective. Still, the regulators are signaling that an interagency plan may be possible as early as the beginning of next year. On April he Solomon Hess SBA Loan 3, speaking separately at a conference of T Fund 2018 Impact Report is now a v a i l a b l e for download at the Consumer Bankers Association, www.SolomonHess.com. This report FDIC Chairman McWilliams and highlights the quantifiable impact that the Comptroller of the Currency Otting each fund has made in low– and moderate- expressed confidence that bank income and otherwise economically regulators could agree on a CRA distressed communities nationwide. Since The firm was named in honor of modernization plan by 2020. Without inception in 2004, the fund has invested Gino’s grandfather, Solomon Hess, knowing any specifics of such a plan, it over $1.86 billion in over 3,700 small who owned a small garment factory in may be enough of a win for CRA if the business loans that supported over 52,000 Berlin. The factory was confiscated by regulators do, in fact, act in unison. jobs. the Nazis immediately after Kristallnacht in 1938. Mr. Hess fled to Holland where he and his daughter SBA Update: Jovita Carranza Tapped to Lead (Gino’s mother) spent the war years in the Small Business Administration hiding. Mr. Hess immigrated to the United States in 1947. Above, Solomon Hess with his employees. On April 4, President Donald Trump In her role at the Treasury Department, identified Jovita Carranza, the U.S. Ms. Carranza is an adviser to Treasury Gino was a native of Chicago, IL and a Treasurer, as the next head of the Small Secretary Steve Mnuchin, oversees the graduate of Northwestern University. He Business Administration. This followed Office of Consumer Policy and works earned an MBA from Georgetown Linda McMahon’s announcement on with the Federal Reserve. She previously University’s McDonough School of March 29 that she was stepping down held the deputy administrator position at Business in 1999. Prior to the founding from her position as Small Business the SBA during former President George of Solomon Hess, Gino was a Vice Administrator to return to the private W. Bush’s time in office. President of New Business Development sector. Ms. McMahon’s resignation went with Meridian Investments. Ms. Carranza also spent over 20 years at into effect on April 12. United Parcel Service, where she rose Gino enjoyed life and relished it with an “I am pleased to announce from being a box handler during the energy all his own. He had a true that Jovita Carranza will be night shift to the president of Latin nominated as the new curiosity and was generous in sharing American and Caribbean operations. himself with others, which was reflected Administrator at the @SBAgov,” President in the many connections he made with so Trump tweeted. “Jovita was Ms. Carranza’s nomination must now be many different people. Out of all the a great Treasurer of the approved by the Senate. If confirmed, connections in his life, however, Gino’s U.S.! I look forward to her she will be one of five women in joining my cabinet!” Left, greatest love was for his wife Christina President Trump’s cabinet. and their three children. Jovita Carranza. SBA Loan Profile: Deering Banjo Company, San Mad Monkfish (from page 1) creatively– named and with a music theme, such as “C Diego, California Jam Blues,” “Sophisticated Lady” and “Mood Indigo.” Live jazz is offered on most weekend nights in the restaurant’s Proceeds of the SBA 7(a) loan were Jazz Baroness Room and the space was used to finance the working capital designed with such performances in mind. needs of the Deering Banjo At the front of the jazz room, overlooking Company. The borrower is located Massachusetts Avenue, is a spacious stage in a moderate-income and CDFI where a grand piano resides on one end. Fund Qualified Investment census The interior features reclaimed old-growth tract. oak, old barn board and plush leather The borrower supports over 50 jobs chairs, fostering a home-like ambiance. and is a woman co-owned business. Owner Jamme Chantler and his musical Left, a banjo player. director Scott Goulding work hard to curate jazz that can be enjoyed by everyone, focusing on singers and lyrical ounded in 1975 by couple Greg and doing instrument repairs at the pianists with their trios. F and Janet Deering, the company American Dream Co-Op. In 1975, Greg specializes in manufacturing hand-crafted and his wife Janet founded the Deering Chantler is invested in women’s banjos of the highest quality and in all Banjo Company in their home. equality and is committed to furthering price ranges. The business is family- the role that jazz can play in the larger Today, the Deering Banjo Company is owned and operated and located in Spring struggle for gender justice. According located in an 18,000 square foot facility Valley, just 10 miles east of downtown to Chantler, 75% of the jazz bands and is one of the largest manufacturers of San Diego.