Start Up Lending Models

Deer In Headlights Financially Speaking

2011-10-20T16:11:00.000-07:00

Deer in the Headlights, Financially Speaking By RICHARD H. THALER, Published: October 8, 2011BY any measure, the global economy is facing unusually high levels of uncertainty and volatility. But human nature may be impeding our ability to turn the economy around.

Fear and anxiety don’t bring out the best in anyone. When normally loving spouses are lost in traffic and late for a flight, their conversation is rarely suitable for young ears, even when the children are in the back seat. Along with making people irritable, uncertainty can create paralysis. Some animals freeze when they are frightened. Acting like a deer in the headlights can be a good strategy if you are trying not to be seen, but it can get you run over. In humans, this behavior is illustrated by an experiment conducted by the Princeton psychologist Eldar Shafir. The subjects, who were graduate students, were told about an attractive deal for a spring-break vacation. They could get an especially good price if they bought their tickets now, rather than waiting a week. But, as part of the deal, the students wouldn’t hear the results of an important exam until the discount expired. That uncertainty caused many students to freeze: Although a majority said they intended to take the trip whether or not they passed the exam — either to celebrate their success or recover from failure — they didn’t want to buy the tickets until they found out the results. I worry that many Americans are now acting like Professor Shafir’s subjects. They know that there are investments they should be making, investments that are currently “on sale,” but they are waiting to see how things shape up before they act. Congress certainly suffers from this problem. The country has a long list of roads and bridges that are either dangerous or obsolete. We can begin the inevitable process of rebuilding this infrastructure now, when construction costs are low and borrowing costs are essentially zero, or we can wait. But why wait? Postponing will only make the projects cost more when we finally get around to starting them, and, in the meantime, we risk disaster if one of those bridges fails. Do we think we will no longer need bridges? If Greece defaults, American cars will not suddenly become amphibious. Congress is not the only place where we can see paralysis. Corporations are hoarding cash at record rates. The Federal Reserve recently reported that nonfinancial companies in the United States were holding more than $2 trillion in cash and other liquid assets — money that is earning next to nothing. A considerable amount of that cash has been accumulated in the last two years — and the totals exclude the substantial sums the companies hold abroad in foreign subsidiaries. Of course, it can be sensible for businesses to have a source of emergency cash, but many appear to be stockpiling so much that it’s hard to imagine what emergency they fear. To cite just one example, Google is holding more than $39 billion in cash. Google is far from alone. A recent survey of chief financial officers by Duke University reports that 55 percent of them say they won’t begin to deploy cash holdings in the next year. Many say they are waiting for economic uncertainty to decline.

Yet is such caution rational? As a shareholder, I would worry about a company that says it can’t find investments that can reasonably be expected to earn well above the tiny return of its cash. Investment does not necessarily have to involve increasing capacity. Are there no plants or equipment that need upgrading? No promising research-and-development opportunities to be explored? Not even any parking lots that need to be repaved and painted? I also do not buy the idea that companies need all this cash for acquisitions. If they really want to buy another business, they can issue stock to do so.

Loosening the purse strings just a little could have big effects on the economy. Suppose that American companies reduced their domestic cash holdings by just 10 percent and invested that $200 billion in productive investments. Using standard assumptions, these investments would spur growth in gross domestic product next year by about 1.3 percent and reduce unemployment by almost 0.7 percent. These investments would also increase tax revenue and generate long-term profits. Some people contend that uncertainty about government regulation is making businesses cautious, but no solid evidence supports this claim. Corporations always complain about regulators, but the fact is that corporate profits are strong in many sectors. Those piles of cash didn’t come out of thin air. SOME households are also displaying fearful investment behavior. I’m not referring to those that are struggling with debt and unemployment, but to the segments of our society whose finances have rebounded nicely. These folks are investing in United States Treasuries and money market accounts in record numbers. If you are among these more fortunate households, you may also be passing up attractive investment opportunities that will earn much more than the 0.01 percent you’re getting from your money market account. One such opportunity lies in making improvements to your home — assuming, of course, that you aren’t underwater on your mortgage. As a starting point, analyze ways to make your home more energy-efficient. Investing in insulation, windows, heating and air-conditioning and even solar collectors often provides excellent and highly predictable rates of return. Not only will you eventually make money, but you can pat yourself on the back with both hands since you’ll be helping to restart the economy while helping the environment. Some homeowners are already embracing this idea: one of the economy’s few encouraging signs is that residential remodeling permits were recently up 24 percent over the previous year. Sure, there is much to worry about these days. But freezing in place is seldom the right strategy. Personally, I am planning to hire someone to repaint my apartment. What about you? Maybe some new gutters? Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago.

17 Nations But Even More UnKnowns

2011-10-12T09:36:00.000-07:00

17 Countries, but Even More UnknownsBy GRETCHEN MORGENSONPublished: October 8, 2011 -New York Times Sunday Money“THE direct exposure of the U.S. financial system to the countries under the most pressure in Europe is very modest.”That’s what Timothy F. Geithner, the Treasury secretary, told Congress last week, trying to allay concerns that American banks might be hurt by the escalating crisis in Europe. Investors have heard such assurances before, and they have learned to take them with a barrel of salt. Remember how the subprime crisis was going to be “contained”? As the situation in Europe deteriorates, our own financial institutions are coming under growing scrutiny from investors. American banks have made loans to European ones. Some have also written credit insurance on the debt of European institutions and troubled nations like Greece. So if a default were to occur, some banks here would be on the hook. Last week, officials at Morgan Stanley worked overtime trying to calm investors about the bank’s exposure to Europe. The company had $39 billion in exposure to French banks at the end of last year, not counting hedges and collateral. (Some analysts argue that the amount today is far lower, and at the end of the week, Morgan Stanley appeared to have relieved investor fears.) Whatever the case, American banks have been writing more credit insurance lately. As of the end of June, some 34 federally insured commercial banks had sold a total of $7.5 trillion of credit protection, on a notional basis, according to the Comptroller of the Currency. That was up 2.3 percent from the end of March.

To be sure, these figures represent the total amount of insurance written and do not reflect other offsetting trades that bring down these banks’ actual exposure significantly. For investors, the challenges in trying to assess the true exposures are real. Many of the risks in these institutions are maddeningly hard to plumb, and open to a range of interpretations. The fact is, investors must deal with significant gaps in the data when trying to analyze a bank’s exposure to credit default swaps. Even the people who set accounting rules disagree on how these risks should be documented in company financial statements. A recent report by the Bank for International Settlements noted: “Valuations for many products will differ across institutions, especially for complex derivatives which may not trade on a regular basis. In such cases, two counterparties may submit differing valuations for valid reasons.” Investors, therefore, have to trust that the institutions are being appropriately rigorous. To compute the fair value of derivatives contracts, financial institutions estimate the present value of the future cash flows associated with the contract. On this part, everyone agrees. But there are two subsequent steps in the valuation exercise that can produce wide variations on an identical exposure. First is the manner in which an institution offsets its winning and losing derivatives trades to come up with a so-called net exposure. Accounting rule makers disagree about the right way to approach this process. Standard setters in the United States allow an institution to survey all the contracts it has with a trading partner and compute exposure as the difference between winning trades and losing ones. International standard setters have taken a different view. They have concluded that investors are better served by knowing the gross figures of all of an institution’s trades, both the profitable ones and the money losers. Those favoring this approach say it gives investors more information and greater insight into the risks on the books, like how concentrated the bank’s bets are. A recent report from the Bank for International Settlements illustrates how different the exposures can be, depending on which approach is used. Posing three hypothetical examples, the report noted that while the gross values of various derivatives totaled $41, the same trades dropped to $17 after netting, as is allowed in the United States. THE second area where investors must rely on institutions to do the right thing involves the collateral that has been supplied to secure derivatives contracts. Banks reduce their exposure to a possible loss by the amount of collateral they have collected from a trading partner. But is the collateral solid? Is the bank valuing it properly? Can it be located quickly? This, again, is a gray area. The B.I.S., in its most recent quarterly review, highlighted these challenges. It said that gleaning information about collateral was difficult, and that arriving at a proper valuation was, too. Further problems arise when it comes time to pay off a bet in a bankruptcy and close out one of these trades. At such a moment, liquidating collateral can put pressure on other positions carried by an institution, the B.I.S. noted. It is unclear whether institutions’ portfolio and collateral valuations reflect this reality. Some investors who have been worrying about potential losses associated with European banks may have taken comfort in the results of financial stress tests conducted earlier this year by the Committee of European Banking Supervisors. Of the 91 top European banks tested — accounting for 65 percent of bank assets — only seven failed the toughest measures. But, as an August report by Dun & Bradstreet pointed out, these tests were not as stringent as they might have been. They only assessed the risks posed by deteriorating assets in banks’ trading accounts. The tests did not measure those assets carried in the so-called held-to-maturity accounts. “In order to give a more adequate picture of European financial sector risk beyond the short term,” Dun & Bradstreet said, “we believe the hold-to-maturity bonds should have been included in the stress tests.” There is clearly a great deal that investors do not know about exposures to Europe, notwithstanding the assurances from Mr. Geithner and others. Three years ago, investors were ignorant of the risks in faulty mortgage securities. If we’ve learned anything from that episode, it’s that what you don’t know can, in fact, hurt you.

Where Are the Bond Vigilantes?

2011-10-03T14:01:00.001-07:00

SEPTEMBER 30, 2011 Where Are the Bond Vigilantes? During the Clinton administration, interest rates served to discipline government spending. That vital check is now missing. Wall Street Journal By RONALD MCKINNON In past decades, tense political disputes over actual or projected fiscal deficits induced sharp increases in interest rates—particularly on long-term bonds. The threat of economic disruption by the so-called bond market vigilantes demanding higher interest rates served to focus both Democratic and Republican protagonists so they could more easily agree on some deficit-closing measures. For example, in 1993 when the Clinton administration introduced new legislation to greatly expand health care without properly funding it ("HillaryCare"), long-term interest rates began to rise. The 10-year rate on U.S. Treasury bonds touched 8% in 1994. The consequent threat of a credit crunch in the business sector, and higher mortgage rates for prospective home buyers, generated enough political opposition so that the Clinton administration stopped trying to get HillaryCare through the Congress. In the mid-1990s, Democrats and Republican cooperated to cap another open-ended federal welfare program—Aid to Families with Dependent Children—by giving block grants to the states and letting the states administer the program. Interest rates came down, and the Clinton boom was underway. In contrast, after the passage of ObamaCare in March 2010, long-term bond rates remained virtually unchanged at around 3%. This was despite great doubt about the law's revenue-raising provisions, and the financial press bemoaning open-ended Medicare deficits and the mandated huge expansion in the number of unfunded Medicaid recipients. Even with great financial disorder in the stock and commodity markets since late July 2011, today's 10-year Treasury bond rate has plunged below 2%. The bond market vigilantes have disappeared.

Without the vigilantes in 2011, the federal government faces no immediate market discipline for balancing its runaway fiscal deficits. Indeed, after President Obama finally received congressional approval to raise the debt ceiling on Aug. 2, followed by Standard & Poor's downgrade of Treasury bonds from AAA to AA+ on Aug. 5, the interest rate on 10-year Treasurys declined even further. Since Alexander Hamilton established the market for U.S. Treasury bonds in 1790, they have been the fulcrum for the bond market as a whole. Risk premia on other classes of bonds are all measured as so many basis points above Treasurys at all terms to maturity. If their yields are artificially depressed, so too are those on private bonds. The more interest rates are compressed toward zero, the less useful the market becomes in reflecting risk and allocating private capital, as well as in disciplining the government. To know how to restore market discipline, first consider what caused the vigilantes to disappear. Two conditions are necessary for the vigilantes to thrive: (1) Treasury bonds should be mainly held within the private sector by individuals or financial institutions that are yield-sensitive—i.e., they worry about possible future inflation and a possible credit crunch should the government's fiscal deficits get too large. Because private investors can choose other assets, both physical and financial, they will switch out of Treasurys if U.S. public finances deteriorate and the probability of future inflation increases. (2) Private holders of Treasurys must also be persuaded that any fall in short-term interest rates is temporary—i.e., that the Fed has not committed itself to keeping short-term interest rates near zero indefinitely. Long rates today are the mean of expected short rates into the future plus a liquidity premium. The outstanding stock of U.S. Treasury bonds held outside American intergovernment agencies (such as the Social Security Administration but excluding the Federal Reserve) is about $10 trillion. The proportion of outstanding Treasury debt held by foreigners—mainly central banks—has been increasing and now seems well over 50% of that amount. Since 2001, emerging markets alone have accumulated more than $5 trillion in official exchange reserves. And in the last two years the Fed itself, under QE1 and QE2, has been a major buyer of longer-term Treasury bonds to the tune of about $1.6 trillion—and that's before the recently announced "Operation Twist," whereby the Fed will finance the purchase of still more longer-term bonds by selling shorter-term bonds. So the vigilantes have been crowded out by central banks the world over. Central banks generally are not yield-sensitive. Instead, under the world dollar standard, central banks in emerging markets are very sensitive to movements in their dollar exchange rates. The Fed's near-zero short-term interest rates since late 2008 have induced massive inflows of hot money into emerging markets through July 2011. This induced central banks in emerging markets to intervene heavily to buy dollars to prevent their currencies from appreciating versus the dollar. They unwillingly accept the very low yield on Treasurys as a necessary consequence of these interventions. True, in the last two months, this "bubble" of hot money into emerging markets and into primary commodities has suddenly burst with falls in their exchange rates and metal prices. But this bubble-like behavior can be traced to the Fed's zero interest rates. Beyond just undermining political discipline and creating bubbles, what further economic damage does the Fed's policy of ultra-low interest rates portend for the American economy? First, the counter-cyclical effect of reducing interest rates in recessions is dampened. When interest rates dipped in the past, at least part of their immediate expansionary impact came from the belief that interest rates would bounce back to normal levels in the future. Firms would rush to avail themselves of cheap credit before it disappeared. However, if interest rates are expected to stay low indefinitely, this short-term expansionary effect is weakened. Second, financial intermediation within the banking system is disrupted. Since early 2008, bank credit to firms and households has declined despite the Fed's huge expansion of the monetary base—almost all going into excess bank reserves. The causes are complex, but an important part of this credit constraint is that banks with surplus reserves are unwilling to put them out in the interbank market for a derisory low yield. This bank credit constraint, particularly on small- and medium-size firms, is a prime cause of the continued stagnation in U.S. output and employment. Third, a prolonged period of very low interest rates will decapitalize defined-benefit pension funds—both private and public—throughout the country. In California, for example, pension actuaries presume a yield on their asset portfolios of about 7.5% just to break even in meeting their annuity obligations, even if they were fully funded. Perhaps Fed Chairman Ben Bernanke should think more about how the Fed's near-zero interest rate policy has undermined fiscal discipline while corrupting the operation of the nation's financial markets. Mr. McKinnon is a professor at Stanford University and a senior fellow at the Stanford Institution for Economic Policy Research.

Very Interesting Analytics "Why it sucks to be middle class"

2011-09-21T18:30:00.000-07:00

If you are seeking to understand some very important aspects of this recession in terms of numbers, income and job growth or lack thereof, this video really captures it in it's simplest form. If you have a business and want to get some basic analytics in terms of the buying power of the consumer rignt now this really sums it up. From CNN Money Reports. "Why it sucks to be middle class"

Warning From S&P on Munis

2011-02-02T19:17:00.000-08:00

By JEANNETTE NEUMANN
Downgrades of bonds issued by state and local governments could increase this year, according to a report to be issued Monday by credit-rating agency Standard & Poor's.

The $2.9 trillion municipal-bond market has been thrown into tumult in recent months, in part because of growing fears that some state and local governments will default on their debt. Investors have pulled out record amounts from muni-bond mutual funds, while the yields on muni bonds, which move inversely to price, have hit their highest levels since the depths of the financial crisis.

A downgrade of a government borrower would likely put downward pressure on the price of its bonds, resulting in higher borrowing costs and potential losses for investors.

Standard & Poor's says it expects greater muni-market volatility this year, but cautions that a rise in borrowing costs wouldn't add to municipalities' credit concerns unless bond yields were to surge.

While rating downgrades may increase in 2011 compared with recent years, S&P says the majority of state and local government borrowers will maintain their medium to high investment-grade ratings. Read More

Bonds by Jack Hough (Author Archive)
$125,000 Muni Warning Yields Backlash
State and local government bonds have broadly fallen in price since late September, when celebrity analyst Meredith Whitney began publicizing a 600-page report predicting widespread defaults and a new financial crisis. Whitney recently told interviewers that the market turmoil is validating her thesis, but a rising chorus of dissenters say her statements are alarmist and unfounded, and that the fear they've helped stir is further straining municipal budgets by raising the cost of borrowing.

The matter is made more complicated by the unusual secrecy surrounding Whitney's report. Many key municipal players say they've been unable to obtain a copy. Some say Whitney's firm quoted them a price that they found shocking.

"I think it violates what are considered to be today's standards of research and transparency," says Iris J. Lav of the Center on Budget and Policy Priorities, a think tank. Lav and co-author Elizabeth McNichol published their own report last Thursday countering some of Whitney's arguments without naming her. Strained budgets are a "cyclical problem that ultimately will ease as the economy recovers," they argue, and long-term problems like pension shortfalls are fixable. According to Lav, state and local debt payments total only 4% to 5% of spending in most states, with no state over 7%.

Lav hasn't seen the Whitney report because "they want $25,000" for a copy. That might have been a relative bargain. A municipal researcher at one major financial firm says his employer was quoted $125,000 and declined to buy a copy.

Read more: Analyst's $125,000 Muni Warning Yields Backlash - SmartMoney.com

Bankruptcies Drop as Companies Heal

2011-01-29T13:24:00.000-08:00

By Matt Krantz, USA TODAYSome companies can finally say, "Rumors of our bankruptcy were greatly exaggerated."
Despite widespread speculation the credit crunch was going to grind up whole swaths of companies and force them into bankruptcy, companies are showing their mettle and are defying these dire predictions.

A dramatic drop-off in the number of companies going bankrupt is one of the most stark signs yet of how the Darwinian killing off of businesses is easing as the economy heals.

Perhaps more important for the future, though, is that the number of companies at immediate risk of failing is also sharply declining. This strength of companies pulling out of the recession gives further credence to the belief that despite the economy's problems, there's a recovery going on. Continue Reading Story Here

AP: Surge in Bankruptcies Shows Signs of SlowingRALEIGH, N.C. (AP) —The growth in bankruptcies around the country slowed significantly in 2010 from its breakneck pace in recent years, with about a dozen states recording a decline in filings from consumers and businesses, according to an Associated Press tally Tuesday.
Filings collected from the nation's 90 bankruptcy districts showed 113,000 bankruptcies in December, down 3% nationwide from the same month a year ago. That followed a similar year-over-year decline for the the month of October. It had been four years since an individual month showed such an improvement. Continue Reading
FINANCIAL TROUBLES
A state-by-state ranking of percentage change in bankruptcy filings last year from 2009.

1. Hawaii 22%

2. Utah 19%

3. California 19%

4. Arizona 18%

5. Colorado 14%

6. Florida 13%

7. Wyoming 13%

8. Maryland 12%

9. New Jersey 12%

10. Alaska 11%

11. Massachusetts 11%

12. Montana 11%

13. Connecticut 10%

14. Illinois 10%

15. District of Columbia 9%

16. Delaware 9%

17. Wisconsin 9%

18. Oregon 9%

19. Washington 8%

20. Maine 8%

21. Idaho 8%

22. South Dakota 7%

23. Rhode Island 7%

24. New Hampshire 7%

25. New Mexico 7%

26. Missouri 6%

27. Georgia 5%

28. Vermont 5%

29. Texas 5%

30. Nebraska 5%

31. Oklahoma 4%

32. North Dakota 4%

33. Pennsylvania 4%

34. Minnesota 4%

35. Kansas 2%

36. Virginia 2%

37. Louisiana 2%

38. Nevada 1%

39. Ohio unch.

40. Arkansas unch.

41. Michigan -1%

42. New York -2%

43. Indiana -2%

44. Alabama -2%

45. Mississippi -3%

46. Kentucky -3%

47. Iowa -3%

48. North Carolina -4%

49. South Carolina -5%

50. Tennessee -8%

51. West Virginia -10%

Timothy Geithner, U.S. Treasury Secretary on Charlie Rose

2010-10-18T09:27:00.000-07:00

I watched this recently, a very interesting segment....Check out the video here
Timothy Geithner on Charlie Rose

Charlie Rose Talks to Timothy Geithner
The U.S. Treasury Secretary discusses the global recovery, the ongoing American mortgage mess, and tensions with China over its currency

By Charlie Rose as in Bloomberg Businessweek

October 18, 2010

Tell me where the global economy is right now and what you expect to happen next.
The world's now healing. And it's growing. The IMF expects the world as a whole to expand at a rate of a little over 4 percent next year, which is not amazing but much better than we would have thought possible. But that overall number hides huge difference across regions. China, India, Brazil, emerging markets in Asia, Latin America, Eastern Europe, they've got a long period of very rapid growth ahead of them. In Europe and Japan, growth is much weaker. In the U.S., the picture is mixed. Most economists think we're growing at a rate of about 2 percent. But the private forecasters say they expect the economy to strengthen gradually into 2011 and grow at about 3 percent. That's not fast enough for us. We want it to be faster.

We are, in my judgment, a substantial way through the process of healing, of fixing the things that were broken. The financial sector is much less leveraged, we've had a traumatic, huge adjustment in house prices across the country, and private savings rates have already increased quite significantly. Those things are really important for future growth, and they're encouraging. But they do mean that we're not growing as fast as we'd like, and I think Washington's got more work to do to try to provide some support for the economy.

Should there be a national moratorium on foreclosures?
What you're seeing in housing is a national tragedy, still very, very difficult. A lot of people were taken advantage of, and a lot of people were too optimistic about what they could afford. Now you've seen some banks suspend the foreclosure process so they can make sure that they're not causing any injustice to borrowers, and that's very important. But a national moratorium would be very damaging to exactly the kind of people we're trying to protect. We want to make sure we're holding [lenders] accountable. But we also want to make sure that we're not going to make the problem worse.

"It's The Economy, Stupid" Courtesy of SmallCapInvestor.com

2010-10-03T15:18:00.000-07:00

"It's The Economy, Stupid" Ian Wyatt | SmallCapInvestor Daily | September 30, 2010 1:33pm EDT

When James Carville hung a sign with the phrase, "It's The Economy, Stupid" on Bill Clinton's Little Rock campaign headquarters in 1992 the message to campaign insiders was pretty clear - Clinton was a better choice than Bush because Clinton understood what the economy needed.

Now, I'm not going to get all 'political' on you today - but I am going to talk about the economy. Whether or not Clinton really delivered what the economy needed in the early 1990s is debatable. But what's not debatable is that the market and the economy are intertwined - so investors need to be aware of what's going on in the economy right now and consider how it will affect stocks moving forward.

***Earlier this week the Conference Board released the results of the latest Consumer Confidence Index. The results were dismal as the September consumer confidence level dropped to 48.5, down from 53.2 in August. The index measures consumers' feelings on the job market and general business conditions over the next six months.

"Overall, consumers' confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months" said Lynn Franco, director at the Conference Board Consumer Research Center.

Experts think consumer spending will increase only at a modest pace throughout the rest of the year. This will hold back GDP and limit growth in all sectors of the economy.

"The economy is stuck in an unvirtuous cycle. Consumers are waiting for more jobs to be created, and businesses are waiting for consumers" believes Wells Fargo economist Mark Vitner.

What's needed is a positive feedback loop in which greater consumer confidence leads to consumer spending. In other words, the consumer needs to be a part of the recovery - and that comes down to job creation. Keep an eye on job creation and consumer confidence numbers and look for stabilization in the trends to signal a good time to buy stocks. When they improve, the market will likely have already moved higher.

***Right now President Obama's staff could hang a sign on the oval office that says, "It's Housing, Stupid". Any politician that doesn't see the direct correlation between a stable housing market and economic recovery should get a place in the unemployment line.

According to the S&P/Case-Shiller Index, housing prices increased 3.2 percent from July 2009 to July 2010. New home sales, existing home sales, and new housing starts all beat estimates last month as well.

Continue Reading

Tarp Lending, 30 Billion Small Business Lending Fund

2010-07-31T14:43:00.000-07:00

TARP Lending Programs Curtailed

By DEBORAH SOLOMON - july 21, 2010
WASHINGTON—The Treasury Department, under Congressional orders to shrink and end sooner the much-maligned Troubled Asset Relief Program, plans to curtail two programs originally intended to help consumer and small-business lending.
Treasury officials say they plan to end a long-delayed, never-utilized $30 billion program designed to boost small-business lending and cut the amount of money available for a Federal Reserve lending program.

The Treasury will also stop creating any new programs to stabilize the financial sector.

The moves are expected to have minimal impact since the programs were not being used to the extent originally envisioned.

The Fed's Term Asset-Backed Lending Facility, which provided financing to bolster issuance of consumer and business loans, was used less than anticipated after markets stabilized.

The Treasury's small-business program, which never got off the ground, is expected to be replaced by a $30 billion lending fund. The House has already authorized the fund and the Senate could vote this week.

The Treasury's steps stem from a provision of the recently passed financial overhaul requiring the Treasury to cut TARP's spending authority to $475 billion from $700 billion and cease spending on new any programs. The provision brings forward the end of the government's ability to use TARP to fund any new programs retroactively to June 25 from Oct. 3.

The early end of TARP was included during last-minute negotiations between House and Senate leaders as a way to help pay for the new financial regulation. The nonpartisan Congressional Budget Office estimates it will save the government $11 billion.

President Barack Obama is expected to sign the legislation into law Wednesday.

Obama: Republicans holding small businesses "hostage"

WASHINGTON (Reuters) – President Barack Obama on Saturday accused Republicans of holding American small businesses "hostage to politics" after Republican senators refused to back a $30 billion small-business lending package.

Senate Republicans blocked the package on Thursday, dealing a fresh blow to Obama's efforts to show Americans, in the midst of a tough election year, that his administration is focused on tackling stubbornly high unemployment. Watch Video

Many Companies Reluctant to Hire- Watch Video

The Market's Mixed Messages- Watch Video

Fed Exempt From Most Oversight, FOIA- FBN?s Charlie Gasparino on the growing power of the Federal Reserve with little oversight by other areas of the federal government. Watch Video

Economic Outlook Not So Pretty Read Between the Lines

2010-07-17T08:37:00.000-07:00

It has been several weeks since the last posting. I will be doing a more in depth posting this weekend. Former Fed Governor Robert Brusca and WSJ's Gerry Seib weigh in on the latest economic data and its impact on the market. Feds say full recovery to take at least 5 to 6 years. Watch Video

Unemployment Across States
A look at unemployment across the United States, with CNBC's Scott Cohn.
Watch Video

UMB CEO: Reform Bill Will Cost More for Credit
UMB Banks CEO Peter DeSilva on how financial reform will impact his business.
Watch Video

SEC's Khuzami: Goldman Will Have 'Profound Effect' on Wall Street
SEC Director of Enforcement Robert Khuzami weighs in on Goldman Sachs' settlement with the SEC. Watch Video

How to Get Business Credit

2010-05-11T16:11:00.000-07:00

Call Lu'na Directly at 201.472.0759 to learn more about program. Free E-Book and Other informational Material. Initial Consultation ok.....

Community lenders hit the funding jackpot

2010-05-11T15:44:00.000-07:00

Community Development Financial Institutions (CDFIs) have been a rare small business lending success story this year -- and next year, they'll have more cash.
NEW YORK (CNNMoney.com) -- Goldman Sachs' banking titans and top congressional Democrats don't often see eye to eye -- executive pay caps, anyone? But here's something the megabank and Capitol Hill agree on: One of the best ways to get financing to worthy small businesses is through a little-known community lending vehicle called a CDFI.

Taken together, Goldman Sachs and the federal government have earmarked more than $300 million to invest in these local financiers in 2010. Compared to Wall Street's bailout billions, that's pennies on the dollar, but for CDFIs it's a jackpot. Next year's funding pool is almost three times bigger than any they've ever had before.

A CDFI is a Community Development Financial Institution, a certification conferred by the Treasury Department. The program gives low-interest government loans, grants and tax credits to organizations that specialize in economically developing low-income and otherwise underserved markets.

Citi Plans to Start a Small-Business Fund for Lower-Income Areas

2010-05-11T14:57:00.000-07:00

Communities at Work Fund™
The Communities at Work Fund™ was established to create jobs, drive economic recovery, and provide hope and opportunity to thousands of Americans living in disadvantaged communities.

The Fund will accomplish this goal by making affordable loans available on a timely basis to Community Development Financial Institution (CDFI) loan funds that finance small businesses, not-for-profits, charter schools, and other community service organizations in low-income and low-wealth communities. The Fund will primarily offer unsecured, interest-only loans with terms up to five years to CDFI loan funds and CDFI affiliates participating in the New Markets Tax Credit Program.

The Fund is initially capitalized with $200 million, and is structured as a limited partnership—with Citi as the Limited Partner, and Calvert Foundation and Opportunity Finance Network as General Partners. Calvert Foundation and Opportunity Finance Network will jointly manage the Fund, with Calvert Foundation responsible for managing lending and fund administration and Opportunity Finance Network responsible for marketing and compliance.

Citi Plans to Start a Small-Business Fund for Lower-Income Areas

Derivatives and Goldman Bust

2010-04-26T16:39:00.000-07:00

The Busted Homes Behind a Big Bet

Meet The Press Interview Sen. Dodd & Sen. Shelby

2010-04-26T16:08:00.001-07:00

Visit msnbc.com for breaking news, world news, and news about the economy

Meet The Press Sunday Mornings on NBC

David M. Walker Comeback America

2010-04-13T09:34:00.000-07:00

David M Walker, author of Comeback America: Turning the Country Around and Restoring Fiscal Responsibility he is also the president and CEO of the Peter G. Peterson Foundation, a great organization.

The Debt and the Deficit with Paul Krugman, David Walker of Peterson Foundation, Alan Auerbach of Univ. of Cal-Berkeley, Rep. John Spratt and Mohamed El-Erian of PIMCO

Watch very informative Interview with
Charlie Rose

Letter From Camden Fine, President Independent Community Bankers of America to Secretary Geithner

2010-04-13T08:41:00.000-07:00

Dear Secretary Geithner:

On behalf of the 5,000 members of the Independent Community Bankers of America, we greatly appreciate and support the Administration’s proposal to establish a Small
Business Lending Fund that would provide capital to interested community banks.Under the program, banks with less than $1 billion in assets could receive capital investments up to 5 percent of their risk-weighted assets, and those with between $1
and $10 billion in assets could receive up to 3 percent. $30 billion in repaid Troubled Asset Relief Program funds would be transferred to the new program.

February 17, 2010 Letter. Apparently as of yesterday in my conversation with the Independent Community Bankers of America, this proposal is still held up Congress.

Who is Fair Issac and What is so Fair About It?

2010-04-05T09:29:00.000-07:00

FICO (NYSE: FICO), founded in 1956 as Fair Isaac by engineer Bill Fair and mathematician Earl Isaac, provides consulting services and enterprise decision management systems. They developed the FICO scores, a measure of credit risk, which are the most used credit scores in the world. FICO scores are available through all of the major consumer reporting agencies in the United States and Canada: Equifax; Experian; TransUnion; and PRBC.[1] FICO is a registered trademark of Fair Isaac Corporation.

It's amazing how this statistical modelling method has become the standard for measuring credit and financial risk modelling to the consumer. Our financial health and lives are affected by the Fair Issac in every aspect of our lives literally. FICO and your credit score can determine:

-Whether or not you "qualify" for a credit card.

-Whether ot not you qualify for a home loan and how much of an interest rate you will pay on that loan.

-Whether or not your qualify for an auto loan.

- Whether or not you qualify for a small business loan, credit card or line of credit.

-May effect certain job prospects or opportunities.

- May effect certain health an insurance policies that you qualify for.

-Can and does effect whether or not you can rent an apartment or home.

-May require the need for an individual to place a deposit down before getting electric and or phone service.

Fair Issac (FICO) has a huge impact on quality of life issues. Most of us depend on some form of credit in the United States and if you have a lousy credit score this is going to have a direct impact on you. This is especially true if you do not generate other sources of income and cash flow "outside of the box" of a regular job. The good news is that you can turn your credit score around with time, usually within a two year period of conistently paying your bills on time, communicating with your creditors and staying on top of your credit file with the credit bureaus.

" The FICO score, which Fair Isasc says is used by 90% of the 100 largest banks, and other similar scores hold sway over the lives of millions of people. Some consumer groups have raised concerns about whether credit scores are being used properly and whether they are valid resources of credit risk for some groups of consumers especially minorities and lower -income individuals, says Travis Planket, the legislative director for the Consumer Federation of America."

Credit scores, which are calculated using proprietary models are also criticized for a lack of transparency. The new score model FICO 08 will target folks in the subprime category of scores in the 600's. These are the people that lenders are really struggling to predict how well they might pay their bills.

FICO 08 the newly implemented credit scoring system, rolled out in 2008 aims at connecting a making some adjustments to the scoring model and will be more "forgiving" to occasional slips by consumers. Despite the new scoring model, consumers still have to make sure the information in their credit reports which Fair Issac relies on to come up with the credit score is accurate. Errors must be disputed with the three major credit bureaus.

See article "FICO Reveals How Common Credit Mistakes Affect Scores", by Jerermy Simon, Creditcards.com

See also Suze Orman and Dave Ramsey

Start-Ups Chase Cash as Funds Trickle Back

2010-04-02T09:35:00.000-07:00

Starting a new business is easier than it was a year ago, but wealthy investors, venture-capital firms and banks are still trickling out money very selectively.

Track The Stimulus

2010-04-02T08:20:00.000-07:00

Track the Stimulus details where these investments are made, what jobs are being created and where, and attempts to measure whether these programs are achieving what they sought to achieve whether it is creating jobs, lowering the cost of borrowing to banks and corporations, etc.

China, Holding Upper Hand on Exchange Rate

2010-03-28T11:40:00.000-07:00

China Says It Will Not Adjust Exchange Rate By SEWELL CHAN
Published: March 24, 2010

WASHINGTON — Despite mounting pressure in Congress for the Obama administration to declare China a currency manipulator, the Chinese government is giving no indication that it will change its exchange rate policy.

After meeting with officials at the Treasury and Commerce Departments on Wednesday, China’s deputy commerce minister, Zhong Shan, told reporters, “The Chinese government will not succumb to foreign pressures to adjust our exchange rate.”

Important Points in the article:

- Mr. Zhong's visit to Washington comes weeks before an April 15 deadline for the Treasury to deliver its semiannual report on foreign exchange. Many economists believe that China has deliberately undervalued its currency to support its export-oriented economy.

- China's position has raised the ire of members of both parties in Congress, who say that the exchange-rate problem is holding back job growth in the united States.

-The Treasury has not found China to be manipulating its currency since 1994, making the argument among others, that manipulation involves intent.

-Senator Lindsey Graham (R) South Carolina states that, "China's merchantilist policies are hurting the rest of the world, not just America. It helped create the global recession that we're in. The Chinese want to be treated as a developing country, but they're a global giant, the leading exporter of the world.

- Two senators pointed to a new study by the Economic Policy Institute, a labor- backed research organization, saying the growing trade deficit between China and the United States resulted in the elimination or discplacement of 2.4 million American jobs between 2001 and 2008.

Watch Video: Business News Network (Out of Canada great programming) The Close : March 24, 2010 : Quantifying China's Cheap Currency [03-24-10 4:35 PM]

Much of Adam Smith's The Wealth of Nations is an attack on mercantilism. The Wealth of Nations, one of the earliest attempts to study the rise of industry and commercial development in Europe, was a precursor to the modern academic discipline of economics.

Venture Lists and Other Tidbits 2010 Still a Challenge for Start-Up Venture Funding

2010-03-15T12:18:00.000-07:00

Are you in search of venture funding...BEWARE? Know what you are getting into and how much you are giving up when you deal with some of these funders. A venture capitalist's motto is maximum ROI (Return on Investment). There is no romance here, this is all about the money especially now as the economy is shifting. Being part of the dot com boom and bust during the 90's and living in the San Francisco Bay area was quite an experience QUITE for me. I am glad because it has taken a lot of the myth of the process and bull which I can now share with others. Respect to my Berkeley, CA posse of engineers, coders and entrepreneurs.

Entrepreneurs who know ahead of time that they are going to take this route as an exit strategy must do their due diligence and get to know the venture funders there are going to engage and who will engage them because indeed this will be an engagement until the bitter end or not, ultimately an attractive IPO (Initial Public Offering).

Many years ago, I read a book about Ron Conway, The Godfather of Silicon Valley: Ron Conway and the Fall of the Dot-coms (Paperback)-Gary Rivlin (Author). It is a great read and I was delighted to meet Mr. Conway in person last fall at an event hosted by Warren Lee and Canaan Partners called StartupAtWork. It's a great event. Check out Ron's investments at Crunchbase.

Venture Hacks is also an excellent source as well as Scott Digs, Venture Dig. Here is the list that he complied, http://venturedig.com/venture-capital/the-top-75-venture-capital-blogs/.

Keep your head high enough to touch the clouds and your reality grounded enough not to get into a Bad deal. If you are a start-up and are in the process of raising capital via this route or have other questions please feel free to fill out some initial questions. If you have problems with the form email startuplendingmodels@gmail.com. Thanks

Small Business Know the IRS and Understand Your Taxes

2010-03-09T17:52:00.000-08:00

Over the last year and a half, I have gotten a crash course in a Wills, Trust and Estate matter that could make your hair stand while assisting a client through the help and guidance of attorney(s) and other professionals. As a start-up business owner, I also work as a certified paralegal and in small business finance. Fortunately, I have an extensive background in writing, research, case law analysis with in the trenches down and dirty work, court house visits and meeting clients in coffee shops and train stations included. I have a renewed sense of how serious and how amazing the powers of the Internal Revenue Service really are.

Without disclosing too much about this situation, let me say this, if you have assets, it is
seriously important to work with and hire "extremely" competent professionals with respect
to the management and the advice offered with regard to your estate. Actually, if assets, a business and or any other wealth has been passed onto you, it is seriously important to know what the heck is going on. Grill your lawyers, accountants and other professionals, do your research and make sure what they are telling you is correct, because this can be the difference between financial freedom or a financial nightmare. Don't let a $250 or $300 an hour charge impress you, especially if this or these individual(s) does more to harm then to help you.

As a small business owner, your relationship with the Internal Revenue Service is one that
can make or break you quite seriously. How many people really understand the tax code? How
many people understand how taxes are computed? Do you understand how payroll and social security taxes work? Do you know how to deal with liens? This is a very complex matter but in hindsight, when Joe the Plumber asked now President Obama about how much his taxes would increase under his plan, Mr. Wurzelbacher approached Obama and asked him if he believes in the American dream. He proceeded to tell Obama that, "after working as a plumber for 15 years, he is going to purchase his own business. The catch was that the business was worth more than $250,000 and Joe asked if he would be taxed more under Obama's plan."

"I'm being taxed more and more for fulfilling the American Dream," he said to Obama. While Obama made several attempts to explain his tax plan, the bottom line was always that Joe would suffer from increased taxes. "I'm gonna cut taxes a little bit more for the folks who are most in need and for the 5% of the folks who are doing very well - even though they've been working hard and I appreciate that – I just want to make sure they're paying a little bit more in order to pay for those other tax cuts," Obama told Joe.

Most recently, I came across the very informative web site of Alvin Brown & Associates, LLC
and I am extremely grateful to have found it. Check it out for yourself www.irstaxattorney.com also check out the forum at www.irsforum.org.

The Directory of State Tax Administrators may also be a helpful tool.

Ask Us About Small Business Financing

2010-02-24T07:49:00.000-08:00

It is not totally gloom. There are choices beyond loan shark and other ridiculous rates for small business. See contact information at the right and call for an initial consultation. Be a leader make a difference, GIVE! Thanks and Good Luck!

News Worth Noting: Stimulus Spending, Bi-Partisan Jobs Bill, The New Poor

2010-02-23T13:01:00.000-08:00

Bulk of Stimulus Spending Yet to Come, by Louise Radnofsky
Wednesday, February 17, 2010, Wall Street Journal

Highlighted Points:

-A third of the total $787 billion has been spent so far during the first year to maintain social services, government jobs and to provide tax cuts for workers.

-Infrastructure spending is set to step up in the second year with the goal of more money flowing to private-sector employers. Economists state that won't likely have a big effect on the unemployment rate.

-The bulk of the money proposed for projects like new rail lines and water projects about $180 billion is likely to be spent this year at the earliest. According to Kenneth Simonson, chief economist of the Associated General Contractors of America, " a lot more stimulus money will go into actual contracts and actual hiring in 2010". That will contribute 1.4 percentage points to the Gross Domestic Product (GDP) this year according to Brian Bethune, chief US financial economist for IHS Global Insight.

-Many signature projects including $20 billion for doctors to create electronic medical records, $4.5 billion for an energy Smart Grid and $7.2 billion for broadband networks are still in the very eary stages.

-Of the $179 billion in stimulus funds paid out last year, $112 billion has gone out in the form of large checks to state governments to plug holes in school, medicaid and unemployment-benefits or to increase funding for food stamps.

Bipartisan Jobs Bill Advances Past GOP Filibuster, By ANDREW TAYLOR Associated Press Writer WASHINGTON February 23, 2010

Highlighted Points:

-Four provisions, one including a measure exempting businesses hiring the unemployed from Social Security payroll taxes through December and giving another $1000 credit if new workers stay on the job a full year.

-$250 payment to Social Security recipients

-$25 billion to help cash-strapped states

-$30 billion in Wall Street bailout money redirected to help community banks lend to small business

The New Poor: Millions of Unemployed Face Years Without Jobs, By PETER S. GOODMAN, February 20, 2010

Highlighted Points:

-Economists fear that the nascent recovery will leave more people behind than in past recessions, failing to create jobs in sufficient numbers to absorb the record-setting ranks of the long-term unemployed.

-Social safety net is already showing severe strains.

-Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces — some embedded in the modern-day economy, others unique to this wrenching recession — might make it especially difficult for those out of work to find their way back to their middle-class lives.

-Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years.

-Large companies are increasingly owned by institutional investors who crave swift profits, a feat often achieved by cutting payroll. The declining influence of unions has made it easier for employers to shift work to part-time and temporary employees. Factory work and even white-collar jobs have moved in recent years to low-cost countries in Asia and Latin America. Automation has helped manufacturing cut 5.6 million jobs since 2000 — the sort of jobs that once provided lower-skilled workers with middle-class paychecks.

-“American business is about maximizing shareholder value,” said Allen Sinai, chief global economist at the research firm Decision Economics.

-Traditionally, three sectors have led the way out of recession: automobiles, home building and banking. But auto companies have been shrinking because strapped households have less buying power. Home building is limited by fears about a glut of foreclosed properties. Banking is expanding, but this seems largely a function of government support that is being withdrawn.

-The continued bite of the financial crisis has crimped the flow of money to small businesses and new ventures, which tend to be major sources of new jobs.

-“You have very large sets of people who have no social protections,” said Randy Albelda, an economist at the University of Massachusetts in Boston. “They are landing in this netherworld.”

Economic models can be such powerful tools in understanding some economic relationships, that it is easy to ignore their limitations. One tangible example where the limits of Economic Models collided with reality, but were nevertheless accepted as "evidence" in public policy debates, involved models to simulate the effects of NAFTA, the North American Free Trade Agreement. James Stanford published his examination of 10 of these models.

Small Banks and Trust Preferred Securities What?

2010-02-16T10:55:00.000-08:00

I came across a very interesting article in the Wall Street Journal the other day "Small Banks Hit Snag As They Raise Cash", by Robin Sidel. This is what made my eyeballs pop: From 2000 to 2008, more than 1,500 small and regional banks issued about $50 billion in trust preferred securities, according to Red Pine Advisors LLC, a New York firm that helps small banks value illiquid investments. The banks favored the securities, a mixture of debt and equity, because they could be counted as capital for regulatory purposes. That gave the banks firmer footing to lend and boost earnings.

Many of the trust preferred securities were placed into pools of collateralized debt obligations. Ratings downgrades have battered the value of many trust preferred securities, which trade infrequently. "For many banks, raising capital is contingent on the extinguishment of the trust preferred securities, " said Brad Larson managing director at Hexagon Securities LLC, a New York Firm that advises small banks on the problem and is affiliated with Red Pine. " A long list of banks is likely to fail if their capital- raising efforts are unsuccessful."

The Consumer and Main Street especially small business owners need to understand the impact of the residue of the meltdown and keep the pressure on.

Slow Start But a Good Start to 2010

2010-02-16T10:32:00.001-08:00

It has been a few weeks since the last post. A slow start but a good start as the economy continues to trek along, as more and more data is coming out about how "challenging" things really are with regard to getting small business lending and job growth on a re-newed course. About a week or so ago, the Obama administration announced a new initiative to use over 30 billion dollars of Troubled Asset Relief Fund (TARP) money to use for Coummunity Banks in as a guarantee to jumpstart lending for small business.

Let's track this process and see how successful this initiative will be.

Obama calls for $30 billion small business lending fund By Catherine Clifford, February 2, 2010 CNN Money

Re-Thinking and Expanding Strategies on Start-Up and Small Business Lending

2009-11-27T11:36:00.000-08:00

It is not new News that the world, with the United States economy and the US dollar at the center, that we are experiencing a significant shift and financial reckoning at this period in history. Now, more than ever, it is critical that we get back to basics when it comes to churning the financial engines of our economy (in this case, the US economy first in its relation to the world economy).

The dirt and and dust that have lay under the rug for so many years is out, and there is no vacuum that has yet been created in order to suck it up, and to get rid of it in an orderly fashion. The dirt has to be analyzed so that it can be properly disposed of,“hopefully” once and for all.

I am a voracious reader as you will learn, if you continue to follow this BLOG. That being the case, I will continue to share articles, books, videos, podcasts and other information that I think may be useful to the readers; and vice versa. We hope to also direct the reader to ACTIONABLE resources and networks as a way to assist you in reaching your start-up and small business financing goals.

Here is some interesting data:

-NASDAQ has lost over 40% of its value since the glory years of the late 1990’s. In all, about 1.5 trillion in investments have been wiped out. A lot of money was lost following the advice of stock market analysts, these experts usually work for big brokerage houses. (see John K. Romano, article High-Risk-Patient Equity Capital for Small Business, International Open Finance Association)

- See New York Times Article "Bill Shields Most Banks From Review" by By STEPHEN LABATON Published: October 15, 2009. I found these points very interesting *House Approved tougher regulations over derivatives. * Community banks and Credit Unions only control about 20% of the roughly $14 Trillion in assets held by commercial banks. According to the articles there are approximately 8200 banks. The 150 largest banks would face more regulatory scrutiny; hold the remaining four fifths of the assets.

-What is the Miller-Moore Amendment? Let's continue to learn more about this amendment. The Miller-Moore Amendment, a new agency that has been created by congress has the authority to write rules for all banks and other lenders.

Other notables from Op-Ed pieces include:

-New York Post September 20, 2009 Hillary Kramer, President A&G Capital Research, New York writes "Rally is For Suckers: Markets Six-month Run" unsustainable without profits, jobs

-Wall Street Journal, October 8, 2009 David Malpass, President of Encina Global, LLC writes "The Weak Dollar Threat to Prosperity". Here are a few points Malpass made that I made an important note of: *Investors have been playing the weak dollar trade for years, diverting more and more dollars in to commodities, foreign currencies and foreign stock markets. *Corporations borrow billions in dollars in order to expand foreign businesses. * Most of the market capitalization of US stocks held by Americans, the dollar devaluation has caused a massive decline in the share of global wealth.

-Many believe that we are becoming a "Casino Economy" meaning we have seen a shift of investment capital from productive investment in the "job creating real economy" to speculative investment in "paper assets". (see John K. Romano, article High-Risk-Patient Equity Capital for Small Business, International Open Finance Association)

- Over the last 15 years, Fortune 500 companies(companies most likely financed by Wall Street) have reduced their workforce from 16 million to five million. Over the same period, small business have added 20 million new jobs. Small business has done this with less than 1% of publicly traded equity capital; it is obvious that if this creative force had the capital, they could propel the economy forward in a spectacular fashion. (see John K. Romano, article High-Risk-Patient Equity Capital for Small Business, International Open Finance Association)

Romano is right to note the extraordinary feat that small business have in the creation of those 20 million jobs or so, whether it be temporary, contract, part time and or full time work. What is important to add and to note as well is that many of these gains in job creation are short-lived if these business go out of business before the five year success threshold and or if these businesses are without sustainable capital in order to keep the business flowing as the owners and their teams build out revenue models and obtain and sustain the staff and talent to help grow their business.

We also need to challenge the SBA lending models that unfortunately often fail in its objective to meet the needs of small business. Ongoing analysis and statistics regarding small business lending through the United States Small Business Administration should be used to improve loan distribution and business support.

These varying points shed light on how the overall economy is affected when small business is not properly leveraged as a foundation to building and growing the economy.

Goldman Sachs launches small business initiative

2009-11-21T12:22:00.000-08:00

Goldman Sachs launches small business initiative
(AP) – 3 days ago

NEW YORK — Goldman Sachs Group Inc. said Tuesday it is launching a $500 million initiative called "10,000 Small Businesses" to help employers overcome financial and education barriers that can limit growth and jobs creation.

The nationwide initiative includes a commitment by Goldman Sachs to invest $300 million through a combination of lending and philanthropic support. The money will be directed to community development financial institutions to increase capital and technical assistance available to small businesses in underserved communities.

Goldman Sachs also said the program will contribute $200 million to community colleges, universities and other institutions to provide scholarships to small business owners, and to expand education capacity.

In addition, small businesses will get advice, technical assistance and professional networking opportunities through partnerships with national and local business organizations.

An advisory council co-chaired by Goldman Sachs CEO Lloyd Blankfein will oversee the initiative. Other co-chairs are legendary investor Warren Buffett and Harvard Business School Professor Michael Porter.

The first community college to participate will be LaGuardia Community College in New York City's Queens borough, which houses a Small Business Development Center. The first community development financial institution to receive financing from Goldman Sachs will be New York-based Seedco Financial Services Inc.

Copyright © 2009 The Associated Press. All rights reserved.

Recession: Start Up and Small Business the Micro-Effects

2009-11-13T10:38:00.000-08:00

Wikipedia: The Free Encyclopedia

In economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction.[1][2] During recessions, many macroeconomic indicators vary in a similar way. Production as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits and inflation all fall during recessions; bankruptcies and the unemployment rate rises. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

The gross domestic product (GDP) or gross domestic income (GDI) is a basic measure of a country's overall economic performance. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living,[1] though its use as a stand-in for measuring the standard of living has come under increasing criticism and many countries are actively exploring alternative measures to GDP for that purpose.[2] GDP can be determined in three ways, all of which should in principle give the same result. They are the product (or output) approach, the income approach, and the expenditure approach.

The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total. The expenditure approach works on the principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying things. The income approach works on the principle that the incomes of the productive factors ("producers," colloquially) must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes.[3].

In economics, Inflation is described as a rise in the general level of prices of goods and services in an economy over a period of time.[1] When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.[2][3] A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.[4]

Taxes, To tax (from the Latin taxo; "I estimate", which in turn is from tangō; "I touch") is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law.
The Four "R"s
Taxation has four main purposes or effects: Revenue, Redistribution, Repricing, and Representation.[3]

The main purpose is revenue: taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like market regulation or legal systems. This is the most widely known function.[3]
A second is redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections.

A third purpose of taxation is repricing. Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax.[3]

A fourth, consequential effect of taxation in its historical setting has been representation.[3] The American revolutionary slogan "no taxation without representation" implied this: rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects.[4][5]

Start-up, A startup company or start-up is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets. The term became popular internationally during the dot-com bubble when a great number of dot-com companies were founded. A high tech startup company is a startup company specialized in a high tech industry.

Startup companies can come in all forms, including those that are simply life-style companies, but the phrase "startup company" is often associated with high growth, technology oriented companies. Investors are generally most attracted to those new companies distinguished by their risk/reward profile and scalability. That is, they have lower bootstrapping costs, higher risk, and higher potential return on investment. Successful startups are typically more scalable than an established business, in the sense that they can potentially grow rapidly with limited investment of capital, labor or land.

Startups enjoy several unique options for funding. Venture capital firms and angel investors may help startup companies begin operations, exchanging cash for an equity stake. In practice though, many startups are initially funded by the founders themselves. Factoring is another option, though not unique to start ups.

The newsmagazine The Economist estimated that up to 75% of the value of US public companies is now based on their intellectual property (up from 40% in 1980).[1] Often, 100% of a small startup company's value is based on its intellectual property. As such, it is important for technology oriented start up companies to develop a sound strategy for protecting their intellectual capital as early as possible.[2]

Small Business, A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. The legal definition of "small" often varies by country and industry, but is generally under 100 employees in the United States and under 50 employees in the European Union. In comparison, the definition of mid-sized business by the number of employees is generally under 500 in the U.S. and 250 for the European Union. In Australia, a small business is defined as 1-19 employees and a medium business as 20-200 employees. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships.

Small businesses are common in many countries, depending on the economic system in operation. Typical examples include: convenience stores, other small shops (such as a bakery or delicatessen), hairdressers, tradesmen, lawyers, accountants, restaurants, guest houses, photographers, small-scale manufacturing etc.

The smallest businesses, often located in private homes, are called microbusinesses (term used by international organizations such as the World Bank and the International Finance Corporation) or SoHos. The term "mom and pop business" is a common colloquial expression for a single-family operated business with few (or no) employees other than the owners. When judged by the number of employees, the American and the European definitions are the same: under 10 employees.

SoHo (Small Office Home Office), The modern concept of small office/home office, or SoHo, refers to the category of business, which can be from 1 to 10 workers. SOHO can also stand for small or home office or single office/home office. A larger business enterprise, one notch up the size scale, is often categorized as a small business. When a company reaches 100 or more employees, it is often referred to as a Small and Medium-sized Enterprise (SME).