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Congresswoman Waters Writes Treasury, SEC Over Concerns with GM IPO

August 25, 2010
Press Release

Congresswoman Maxine Waters (D-CA) is concerned that none of the financial institutions selected to facilitate the sale of Treasury's common stock in General Motors - approximately 61 percent of GM's common stock - were minority- or women-owned businesses. The Congresswoman authored legislation to create Offices of Minority and Women Inclusion at the government's financial services agencies, legislation that was included in the Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by the President. Congresswoman Waters sent the following letter to Treasury Secretary Timothy Geithner and Securities and Exchange Commission Chairman Mary Schapiro today:

Dear Secretary Geithner and Chairman Schapiro,

As you are aware, the Treasury Department recently announced its plans to begin to sell its share of common stock in General Motors. These holdings comprise 61 percent of GM's total common stock and the initial filing could be worth up to $100 million. Unfortunately, I am troubled by reports that of the 10 financial institutions that have been selected to put together this transaction, none of them are minority- or women-owned businesses.

A major undertaking of this nature demands the inclusion of a diverse group of investment and banking companies. I am disappointed that the Treasury has failed to include any of the qualified minority- and women-owned businesses that applied to be a part of this historic effort. In addition, given the fact that these are taxpayer funds, I would expect an effort to have been made to ensure that a diverse group of firms were given the opportunity to participate.

Nevertheless, according to an August 19, 2010 article in the Wall Street Journal, it appears that the same financial institutions—Morgan Stanley, J.P. Morgan Chase, Bank of America Merrill Lynch, Citigroup, and Goldman Sachs—have been chosen to structure this offering, leaving minority- and women-owned businesses out in the cold.(1)  The exclusion of minority- and women-owned firms is even more troubling in light of the fact that non-U.S. institutions—Barclays Capital, Credit Suisse Group, Deutsche Bank, RBC Capital Markets, and UBS—have also been given underwriting responsibilities.(2)  Reconcentrating assets in these same financial institutions contradicts the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Public Law 111-203), which included provisions to address financial institutions that are "too big to fail."

This lack of inclusion of women and minorities is why I drafted Section 342 of the Dodd-Frank Act, which calls for the establishment of Offices of Minority and Women Inclusion at all of the government's financial services agencies, including the Treasury and the SEC. One of the duties of the Directors of these Offices is to advise the agency administrator on the impacts of agency policies and programs on minority- and women-owned businesses. Furthermore, the law also calls for the Director to develop standards to increase the participation of minority- and women-owned businesses in the programs and contracts of the agency.

While I am aware that neither of your agencies has yet to establish Offices, I know that had a Director been in place he or she would have advised you that by limiting the playing field to a handful of large banks that minority- and women-owned businesses would be harmed. In this sense the exclusion of minority- and women-owned firms from this transaction is contrary to the spirit of Section 342.

The Treasury should have the ability to influence this transaction at all levels and should demand diversity and diversification of and among participating institutions. Therefore, given the number of financial institutions involved in this deal and the fact that these institutions have agreed to a reduced fee in order to participate in the transaction, I see no reason why the number of participating institutions cannot be expanded to include minority- and women-owned businesses. I hope that you will take immediate steps to correct this oversight.

Please contact me or Charla Ouertatani of my staff at 202-225-2201 with any questions about this letter.



Maxine Waters
Member of Congress

(1)  Basar, Shanny, "And Now, Here Is the Starting Lineup of Banks Handling the GM IPO," Deal Journal, Wall Street Journal, August 19, 2010.
(2)  Ibid.