Editor’s Note: Wall Street Without Walls is a volunteer-driven investment consultancy dedicated to linking up the denizens of Wall Street with community financiers, nonprofits and municipalities nationwide. I recently spoke with Managing Partner John Nelson about his organization’s ongoing projects and the future of I-banking in community development.

What is Wall Street Without Walls and what are its goals?

John Nelson: Wall Street Without Walls is Doctors Without Borders for investment bankers who are interested in volunteering their time and expertise to help municipalities and non-profit organizations think through the financing of their transactions and, in particular, to try to bring new sources of capital into the community development space. We have about 150 volunteers and are working on about 25 - 30 projects around the country right now, and expanding globally. We have facilitated about $1.5 billion of transactions in our first eight years of existence.

We work with community development corporations, community development finance institutions, community-based credit unions and other forms of financial intermediaries that finance deals in low and moderate income communities that normally couldn’t be done by banks or government agencies. We help those types of groups in particular, but we also help municipalities like the city of New Orleans. We’ve also helped New York City, Ft. Wayne, Indiana, Washington DC, and San Francisco think through other kinds of financing challenges.

Who works at Wall Street Without Walls?

JN: We were founded by Greg Stanton. Greg used to work at Drexell Burnham Lambert, an investment banking firm. He also had his own structured finance firm, and was one of these ‘slice it and dice it’ kind of structure finance guys. He had a couple of heart attacks and had a second chance at life, and decided to connect his world of financial experts with community organization to help alleviate poverty and social problems. He started in 2000, and that’s when I began to work with him.

What we do is put together teams of volunteers from their desks or in their retirement, wherever they might be. We particularly want to work with retirees and senior investment bankers, and we have a large grant from the John Templeton Foundation to work with retired financial executives finding purpose in retirement. We have teams volunteering their time on conference calls that normally last under an hour, and we have them do three to five of these calls per transaction, providing ideas about how to structure the transaction, possibly finding sources of funding. We connect the dots using the rarified expertise of financial experts and investment bankers. We also work with commercial bankers and very often with foundation executives or community development specialists. We also have project associates who volunteer. These are often MBA students who help put this information on our virtual workspace, so we can manage these projects virtually. They then write up the cases so they become part of the lexicon of economic development finance. There is also a chance for young people–MBA types and public policy students–to work with senior investment bankers and community groups to learn about their business. It’s a good networking opportunity for everybody. We also have about 75 members on our advisory board. They provide advice, connections and ideas that are essential to our organization.

Greg basically connected all of his rolodex with the field of economic development to try to bring a new sense of scale in terms of the size of transactions and in terms of the kinds of investors that might get involved with economic development. We are fortunate to have the support of some large foundations, including the Rockefeller Foundation, Ford Foundation, Heron Foundation, Kellogg Foundation, and John Templeton Foundation. All of these have been crucial to our success.

Has there been a lot of interest in community development?

JN: There has been in a formal way. There have been tax credits like the low income housing tax credit, the new market tax credit, and other kinds of incentives for investors to get involved in community development. There’s also something called the community reinvestment act, which encourages and requires banks to make investments and provide services in low-income communities where they are taking out deposits.

Even though there has always been a tradition of investment bankers making investments in the field, there haven’t been too many opportunities for them to volunteer as individuals with their expertise. In general, we’re trying to have them volunteer their expertise, their acumen and their ideas to help groups that could normally not afford them. We do this as a pro bono exercise to help the nonprofits that normally would not have access to this kind of expertise.

Frankly though, at the end of the day volunteers can take off their volunteer hats and say, “my firm can do that deal.” And that’s often what happens. In a sense, it’s also a business development strategy for some of our volunteers. We’re always trying to send the message that there are innovations in community development finance that would lead to sustainable investments by these firms. We’re looking for ways of credit-enhancing these transactions with pools of collateral that have often been overlooked–like so-called dead or under-utilized assets like vacant lots that cities could use as collateral.

We’re also looking for foundations to make investments out of their endowments. 95 percent of the value of these foundations is in their investment portfolio. They just invest their money like any other investment company, but if they could get a nice return as well as make an impact, then this is clearly a win-win for everybody. We’re looking for insurance companies and pension funds to be able to invest in community development by mitigating the risk of these investments either with a credit enhancement or a financial guarantee. These are examples of using the tools of Wall Street to bring in the traditional sources of capital to help nonprofits and municipalities gain new sources.

Do you think this sort of community outreach is needed to help clean up Wall Street?

JN: I think that the Street is culpable in so many ways for some of the problems that our entire globe is facing right now. Investment bankers have made a lot of money working with community organizations in our country and world. I think that many of them do want to give up their expertise. I also believe that there are unintended consequences of the innovations that they come up with when working with community organizations, and to some extent maybe this is a way for them to give back and help organizations that normally couldn’t afford them to help them make their transactions more efficient.

What is the attitude of the MBA students that are volunteering with you?

JN: I sense a real shift among young people in this country coming out of college and grad school. They are really interested in things like micro-finance. They are interested in community development. They are interested in win-win partnerships with companies. They’re not necessarily going in just to make gobs of money. There’s a real openness to social service and sustainable enterprises that they are more socially responsible. The MBA students that we work with are really interested in community development, they are really into finance, and they are really interested in ways that there can be a collaboration among the different strains in our society that are often isolated from each other.

What are some of Wall Street Without Walls’s ongoing projects?

JN: We’ve done a variety of things. We’re involved in something called the Disability Opportunity Fund which is helping people with disabilities establish more inclusionary housing and inclusionary programs within the community development field. We’re also working on some environmental projects, including in the city of New York, with the energy retrofit of buildings over 50,000 square feet. We helped the city put together a finance fund to help with those renovations.

In the past, we’ve worked with businesses like the Greyston Bakery in Yonkers, NY. It was a nonprofit that had a bakery that was very successful and Ben & Jerry’s decided they loved their chocolate cookies and asked them to provide the chocolate chip cookie dough for their ice cream. So the Grayston Bakery put together a $9 million expansion to meet the new demand. We helped Greyston identify how to structure its expansion and that took place about 5 or 6 years ago.

We also worked with something called the Community Reinvestment Fund in Minneapolis. They are like a secondary market for community development assets. They purchase loans that are made by community organizations and put them into securities that they sell to investors that want to have a socially responsible slice of their portfolio but can only do so at a certain scale. These are $25 to 50 million issues, but they hadn’t been rated before, so it limited the amount of investment a particular fund could make. We actually took a $50 million deal, got it rated by S&P and, as a result of that, existing investors were able to expand their investments which led to $200 million more financing deployed into the development space.

How can organizations or investment bankers TakePart with Wall Street Without Walls?

JN: We definitely would like them to visit our website (www.wallstreetwithoutwalls.com) to look up background on our projects. People with experience in finance can sign up as volunteers, or organizations can request financial/technical assistance to do a project. They can also call me directly at (202)375-7762. I would encourage TakePart readers to contact me for more information on how to volunteer if they are an investment banker, or how to may be able to share information with any retired investment bankers they may know. We always needs more volunteers and we need more projects.