Native American Communities Should No Longer Be Overlooked by Banks

Dawson Her Many Horses, who grew up on the Rosebud Indian Reservation in South Dakota, had a deep cultural background but was deprived of essential resources along with his family.

Inspired by this personal experience, Her Many Horses has dedicated his career in finance to advocating for Native American and Alaskan Native communities. Presently, he holds the position of head of Native American banking at Wells Fargo, and in July, the bank revealed his promotion to managing director.

Before speaking with Her Many Horses, Before the Bell explored the reasons behind the generational wealth gap faced by Native American populations, including the scarcity of economic data regarding tribal communities and the need for greater institutional investment.

According to Her Many Horses, banks should prioritize working with tribal communities as it not only benefits the communities themselves but also makes good business sense. In fact, Wells Fargo currently maintains banking relationships with one-third of all federally recognized tribes in the United States, accounting for around $3.4 billion in credit commitments and $4.1 billion in deposits.

This interview has been edited for length and clarity.

Before the Bell: What do investors need to know about investing in Native American and Alaskan Native communities?

Dawson Her Many Horses: Native American and Alaskan Native communities are more than mere ethnic or racial groups. As a tribal member myself, I acknowledge that we belong to Native nations, which are considered governments. Similar to states, tribes hold a legal status as sovereign entities. In the United States, there are 574 tribes that are federally recognized. This recognition has significant implications for their business operations.

The businesses owned by tribes often exhibit characteristics of a government. For instance, many are aware that tribes operate casinos, which are treated as legal entities affiliated with or owned by the tribal government. This arrangement adds an element of complexity.

The lack of capital and data in tribal communities leads to underinvestment. These communities are often invisible due to the lack of research and reporting on business opportunities within them. There is a lack of information on the size, complexity, and job creation of tribal businesses.

Tribal casinos make up approximately 45% of all casino revenue in the US. The National League Gaming Commission, the regulatory body for Native American casinos, publishes an annual report on gross gaming revenues. In August, they announced that tribal casinos generated a staggering $41 billion in revenue. This significant contribution is often overlooked by most people.

Is the lack of knowledge the reason why institutional-level investment in these communities is not happening?

Working with tribes involves some complexities, and I believe that sometimes people may not grasp how to navigate those complexities. For instance, I was discussing tribes that operate casinos as government entities. As a banker, it is part of my job to assist our credit personnel and underwriters in comprehending these legal intricacies, allowing them to feel confident in providing loans to these prospective borrowers.

Potential investors may not fully comprehend or recognize these subtle distinctions. In my role at Wells Fargo, I serve as an advocate, striving to enlighten individuals and enable them to grasp the potential of the opportunity. However, for companies lacking internal proficiency in this area or lacking a champion well-versed in these intricacies, it becomes a hindrance. This impediment can restrict the influx of capital and investment into tribal communities. So, what steps can we take to rectify this situation?

Firstly, we require additional economic data. Subsequently, it is necessary to bring together the various stakeholders. Ultimately, we do not possess the data ourselves, but rather function as an organization that utilizes it. Therefore, during discussions with policymakers, tribal leaders, and tribal organizations, we emphasize how the private sector employs data to make decisions regarding investments, capital relocation, and resource leverage. If we desire increased capital inflow into tribal communities, we must devise a method for sharing data that safeguards the confidentiality of individual tribes and the revenue of their businesses, while also demonstrating the national level opportunities.

In 2017, a report discovered that the housing needs of tribes exceed $33 billion, surpassing the capabilities of Wells Fargo, Bank of America, and even the Federal Government. It is imperative to attract more investor capital to support these tribal housing projects, which is why data is crucial. By showcasing the profitability of tribal businesses and governments, investors can perceive them as reliable borrowers. This creates a sense of comfort in investing in projects addressing significant needs such as housing, education, and healthcare.

Do regional banks have a greater involvement in this aspect? Has that involvement changed since the recent banking crisis?

The participation of large national banks in this area has been consistent. Their involvement is largely driven by their exposure to the casino industry, with dedicated teams focusing on this sector. Consequently, many financial institutions have entered this field through these banks. Over time, bankers have gained a better understanding of Native American Finance, and as they transition between institutions, they bring their knowledge along with them.

However, regional banks have significantly improved their services to tribes and their respective regions, resulting in increased competition. From a tribal perspective, this is highly beneficial as it introduces more advantages such as lower rates, better structures, and additional options for historically underserved tribes.

Currently, the collapse of Silicon Valley Bank poses a new challenge and raises concerns about its potential impact. While most regional banks working with tribes remain stable, no institution is entirely immune to the ongoing crisis. Certain tribes are beginning to experience the consequences as we have received reports of regional bank partners being unable to fulfill their commitments to tribes. In one particular instance, Wells Fargo intervened to support a client when a regional bank failed to honor their agreement.

What other opportunities are available apart from casinos to facilitate collaboration between banks and tribal authorities? Many tribes are considering government contracting as there is a federal preference for tribes in that bidding process. Additionally, they are exploring opportunities in real estate, specifically in areas that support the supply chain, such as warehouses and storage facilities that facilitate the movement of goods across the country.

Native populations experience a significant lack of access to banking services as compared to the general population. This discrepancy further exacerbates the existing generational wealth gap. What measures can be taken to bridge this gap?

A crucial step towards finding a solution is open dialogue and acknowledgment of the issue. By naming and discussing these disparities, we can shed light on the root causes. Research consistently shows that Native American and Alaskan Native households are consistently the most underbanked, and our aim is to comprehend the underlying reasons behind this phenomenon.

Native American communities suffer from limited infrastructure, leading to a lack of broadband and Wi-Fi accessibility. Unlike the communities in New York City, tribes face challenges in accessing these resources. This lack of technological advancement significantly affects the evolution of banking and banking services in the US. Moreover, a significant number of Native households do not own smartphones, and there is a dearth of cell towers or a 5G network in these areas. These factors contribute to the existing limitations.

What are some common misconceptions regarding investments in tribes?

People often gravitate towards the negative portrayal of Native American and Alaskan Native communities, emphasizing aspects such as high unemployment rates - what I term as poverty porn. However, if we enhance our data collection efforts, we can reshape the story and distance ourselves from this deficit-oriented mindset.

Instead, let's shift our focus towards the abundance of opportunities. Tribes stand as major employers in regions such as South Dakota, Alaska, and Oklahoma, while Alaska regional corporations prominently feature among the state's largest companies. This presents us with a chance to highlight the positive aspects of tribal communities and showcase their significant contributions.

My hope is that if we can gather more data regarding this matter, we can encourage additional banks to consider not only investing capital but also potentially establishing branches in some of these areas. I am hopeful that this can stimulate the influx of capital and support for individual tribal members. Consequently, we will witness various positive outcomes, such as an increase in mortgages, the emergence of more small businesses, and the development of larger, stronger, and healthier tribal economies.

The stakes were high for Hershey this Halloween weekend

Customers have altered their Halloween shopping habits this year, as they have chosen to take their time rather than making early purchases. According to Danielle Wiener-Bronner, my colleague, the timeframe for Halloween shopping has been extended. Given this change, Hershey, a renowned manufacturer of various confectionery products such as Reeses, Kit Kat (in the US), and Twizzlers, relied heavily on the recent weekend to encourage shoppers to stock up on candy in order to meet their targets. Considering the decline in regular chocolate sales and the significant rise in cocoa prices, the pressure on Hershey is particularly intense.

Hershey CEO Michele Buck, discussing the company's third-quarter results, stated that consumers are now buying their trick-or-treat candy closer to Halloween. This shift in purchasing behavior is a result of concerns about supply chain and availability, which led to earlier purchases last year. However, it is still uncertain how things will unfold this year. According to Dan Sadler, a principal of client insights at consumer research firm Circana with expertise in confections, there were some initial challenges at the beginning of this month.

S&P 500 is in correction territory as huge market week looms

According to him, the Halloween candy sales in 2021 were exceptional, as people were enthusiastic about celebrating following the Covid shutdowns. The previous year was comparatively poorer. However, he mentioned that this season, the sales have been even lower than the underwhelming performance of the previous year. He stated, "We have observed a slight decline in the sales of both chocolate and non-chocolate items."

Wall Street is making an effort to recover from a challenging week.

Stock futures are climbing on Monday morning. On Friday, the Dow experienced a 1.1% decline, closing the week at its lowest level since March. Additionally, the S&P 500 entered a correction phase, surpassing a 10% decline from its peak in July.

CNN's Fear and Greed Index, which monitors seven market sentiment indicators in the United States, entered a state of "extreme fear" on Monday morning. Concerns among investors revolve around lackluster third-quarter earnings, elevated bond yields, ambiguous economic data, and conflicts in the Middle East. The upcoming week is poised to have a significant impact on both the economy and the markets. On Wednesday, the Federal Reserve will disclose its policy decision, followed by Apple's earnings report on Thursday, and the October jobs report on Friday.