Huge losses in the Small Business Administration’s main loan program have led President Barack Obama to propose phasing out the government subsidy for 7(a) loans beginning in fiscal 2012.
This would force the agency to support its government-guaranteed loans by charging higher fees on borrowers and lenders. That’s what occurred when Congress ended the subsidy for 7(a) loans – at President George W. Bush’s request – in 2004. Congress restored the subsidy this fiscal year, at a cost of $80 million.
The economic stimulus bill provided the SBA with an additional $375 million to waive fees for borrowers on most 7(a) loans and 504 loans, which mostly finance real estate, and increase the government guarantee on SBA loans from the typical 75 percent to 90 percent. Those enhancements made the loans more affordable for borrowers and less risky for lenders, enabling SBA lending to rebound after cratering during the financial crisis.
SBA loans are an important source of credit for small businesses that can’t obtain conventional loans.
In December, Congress came up with another $125 million to extend the fee reductions and higher loan guarantee until the end of February. Obama wants Congress to pass additional legislation extending them through Sept. 30, the end of the fiscal year.
The president’s budget proposal for next fiscal year, however, reveals that defaults on SBA loans have exploded over the past year, costing the government a projected $4.5 billion. Most of the problem loans were made between 2005 and 2007.
The administration proposes a $165 million subsidy for 7(a) loans next year, double this year’s subsidy if economic stimulus funds are excluded.
Beginning in 2012, however, Obama wants to give the SBA “the flexibility to adjust fees in the program to enable it to be self-sustaining over time,” according to the president’s budget plan. This would “strengthen the program’s long-term economic foundation,” the budget plan states.
Default rates for 7(a) loans aren’t much worse than the default rates for conventional loans, said Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, which represents SBA lenders.
If the economy improves, default rates should fall, he said. A better business climate also could make an end to the government subsidy for 7(a) loans bearable, he said.
Life insurance quotes from affordable life insurance companies. Life insurance agents, life insurance guides, life insurance articles.
Toyota’s suspension of U.S. sales of some of its top-selling models — amid intense pressure from the federal government — deals a blow to the automaker’s reputation for quality.
Toyota Motor Corp. announced late Tuesday it would halt sales of certain models — including the Camry and Corolla sedans and the RAV 4 crossover — to fix gas pedals that could stick and cause unintended acceleration. Last week, Toyota issued a recall for the same eight models affecting 2.3 million vehicles.
Toyota is also suspending production at six North American car-assembly plants beginning the week of Feb. 1. It gave no date on when production could restart.
Toyota insisted the problem — sudden, uncontrolled acceleration — was "rare and infrequent" and said dealers should deal with customers "on a case-by-case basis."
Officials under President Barack Obama said they pressed Toyota to protect consumers who own vehicles under recall and to stop building new cars with the problem.
David Strickland, the administrator of the National Highway Traffic Safety Administration, told reporters in Washington that the Transportation Department had been in regular
communication with Toyota about the recall.
"Toyota was complying with the law. They consulted with the agency. We informed them of the obligation, and they complied," Strickland said. He wouldn’t address why Toyota failed to stop selling the vehicles five days earlier when it announced the recall.
Across the country, Toyota dealers —swamped by calls Wednesday from drivers — said they were concerned the move would hamper sales. They hoped parts to fix the problem could be distributed quickly.
John McEleney, who owns a Toyota dealership in Clinton, Iowa, said the sales stoppage affects about 60 percent of the inventory on his lot.
He said he was hopeful Toyota would come up with a fix soon — especially because the longer a vehicle stays on a dealer lot, the more money a dealer pays in interest fees.
"Short-term, it’s going to be difficult," McEleney said. "It will certainly set us back, but I think the impact will be very short-lived."
Still, Tom Seeger, president of Seeger Toyota in Creve Coeur, said the automaker did the right thing by suspending sales of affected models until the problems are corrected.
"I am just unbelievably impressed by the decision Toyota has made out of concern for safety," he said.
Seeger said Toyota dealerships would provide loaner vehicles for owners whose vehicles show symptoms of the problems. No one had brought such a vehicle back to Seeger Toyota by late Wednesday, he said.
Gerry Hogan, sales manager at Jay Wolfe Toyota of West County in Ballwin, said: "We’ve had calls, but it’s not as bad as I thought it would be. We’ve sold thousands of these Toyotas, and I haven’t seen one (with the gas pedal problems) yet."
Meanwhile, rental car companies Avis Budget Group and Clayton-based Enterprise Holdings on Wednesday said they were pulling thousands of Toyota models covered by the recall.
Enterprise Holdings, which controls the Enterprise, National and Alamo brands, said it would pull an unspecified number of Toyota models from its fleet, accounting for about 4 percent of the cars it has in service. The company also will stop selling used Toyotas while the automaker finds a fix for the problem.
The suspect parts are made by a U.S. supplier, but they are also found in its European-made vehicles. Toyota said it hasn’t decided what to do there.
Sean Kane, director of Safety Research and Strategies, a consumer group that conducts research into motor vehicle safety issues, said his firm has identified 2,274 incidents of sudden unintended acceleration in Toyota vehicles leading to at least 275 crashes and 18 deaths since 1999.
The firm cites as sources the National Highway and Traffic Safety Administration, direct reports from drivers and incidents mentioned in lawsuits. Toyota would not confirm the numbers.
The supplier of the gas pedals used in the recalled car and trucks, CTS Corp. of Elkhart, Ind., said it knew of only a few cases of drivers having problems with accelerators. It said it’s working with Toyota to design a new pedal.
Also late Wednesday, Toyota said it will add 1.09 million vehicles in the United States to an earlier recall over the risk of accelerator pedals becoming stuck in the floor mats.
The fresh recall would affect five models — 2008-2010 Highlander, 2009-2010 Corolla, 2009-2010 Venza, 2009-2010 Matrix, and 2009-2010 Pontiac Vibe, which is built on a Toyota platform. Toyota has already recalled 4.2 million vehicles in the U.S. over such problems. About 1.7 million vehicles fall under both recalls.
Two years ago, Toyota beat out General Motors Co. to become the world’s largest automaker. Now it is stopping some sales in its biggest market, the U.S., when it desperately needs to sell cars here after reporting its first-ever annual loss last year.
John Wolkonowicz, a longtime auto analyst with IHS-Global Insight, said Toyota is fortunate in that it has a loyal customer base — primarily baby boomers who have been buying Toyotas for decades. That, he said, will help minimize the sales impact in the short term.
"But it will further impede their ability to get the younger buyers that they so dearly want to get into the Toyota fold," Wolkonowicz said.
The sales halt calls into question the aggressive growth strategy pursued under former company president Katsuaki Watanabe, a cost-cutting expert, who led the Japanese automaker to the No. 1 spot in global vehicle sales in 2008, analysts say.
The automaker’s problems in the U.S. may be an extension of the spate of quality problems that plagued Toyota several years ago in Japan, its home market, during the aggressive growth strategy pursued under Watanabe.
In 2006, the Japanese government launched a criminal investigation into accidents suspected of being linked to vehicle problems, though no one was charged. Watanabe later acknowledged overzealous growth was behind the quality problems.
Watanabe was replaced last year by Akio Toyoda, the grandson of Toyota’s founder.
The problems hit Toyota extra hard because it has touted quality for years to gain advantage over competitors, said Brenda Wrigley, chair of the public relations department at Syracuse University’s S.I. Newhouse School of Public Communications.
"Quality was their differentiator, and now it’s their Achilles heel," she said.
The Associated Press, Detroit Free Press and Robert Kelly of the Post-Dispatch contributed to this report.
Get up to $1500 with an fast cash loans in less than 1 hour - 100% online.
The fat cats were supposed to get their comeuppance.
After Wall Street’s most prominent firms — by their own admission — helped cause the 2008 financial meltdown and got bailed out by the government, they were supposed to stop handing out million-dollar bonuses to employees. No one was supposed to get seven- and eight-figure rewards, not after the Great Recession left one in 10 Americans unemployed. Not after President Barack Obama — who on Thursday called such pay "obscene" — had promised to clamp down on lavish bonuses.
It turns out little actually changed.
Americans will see that starting Friday when JPMorgan Chase & Co. releases its 2009 financial results. The other big banks will follow. The messages will be the same: Compensation is at near-record levels.
The form of the pay is changing. Instead of cash, bonuses will be paid mostly in stock that can’t be redeemed for years. But the numbers are still staggering. Together, the six biggest U.S. banks are on pace to pay $150 billion in 2009, slightly less than the record $164 billion in 2007 before the crisis, according to New York state comptroller’s office.
How this happened is complicated. It involves a remarkable turnaround by the banks, but one fueled by the bailout. It shows the power of the financial lobby. And it highlights the age-old debate about how much U.S. companies need to pay to retain talented bankers and traders.
Scott Talbott of the Financial Services Roundtable says keeping those workers from going to overseas firms is critical. "The market will find a way to pay these people what they’re worth," says Talbott, chief lobbyist for the group representing some of the largest financial firms.
But Douglas Elliott, a fellow at the Brookings Institution and a former banker, thinks "The way the public sees it is that we wrote a $700 billion check to the banks, and they got to burn through it as they pleased."
THE BAILOUT
The government played a big role in the bonanza by bailing the banks out. In the days after the meltdown, banks were given access to cheap government loans and other federal subsidies. Because the banks weren’t required to put it toward lending, they could use it as they pleased.
Many bet on risky securities that paid off when the markets surged. The result: big profits and big bonuses. Profit at Goldman Sachs nearly doubled to $8.4 billion in the first nine months of 2009 from the previous year, and analysts expect its full-year profits to top $10 billion.
Goldman set aside $16.71 billion from January through September for compensation, including salaries, bonuses and associated costs. That puts it on pace to meet the record $20.2 billion in compensation costs it had for all of 2007.
Should Goldman’s annual compensation go that high, it works out to $600,000 each for its 31,700 employees. It won’t be distributed like that, of course. The best performers and executives stand to earn millions.
The nation’s biggest banks all took money from the Troubled Asset Relief Program. Some needed it; others were pressured by federal officials to take it. Regardless, the banks weren’t restricted in how to spend it. They faced limits on compensation, but that lasted for only as long as they held the funds, which gave them incentive to pay the TARP back quickly. In total, banks took $245 billion and have paid back $162 billion.
LOBBYING MACHINE
Bonus outrage and the momentum to do something about it peaked last February, when crippled insurer American International Group Inc. moved to pay $165 million in bonuses to hundreds of employees in the same financial unit that brought down the company. Treasury Secretary Timothy Geithner called Wall Street pay "out of whack."
The fact it didn’t happen speaks to the industry’s powerful lobbying machine. In the past decade, no industry has spent more lobbying dollars than Wall Street and its offshoots. From 1998 to 2009, the FIRE lobby — or finance, insurance, real estate — spent $3.8 billion, according to the Center for Responsive Politics. By comparison, the energy and defense industries spent $2.6 billion and $1.08 billion, respectively.
Meanwhile, Wall Street’s generosity to political candidates ramped up even as the industry began careening. Financial firms contributed a record $476 million in the last election cycle. That’s more than double the No. 2 donor, the health care industry, which gave $166 million, even as Congress began to debate landmark health care legislation.
WHAT’S NEXT
Washington is scrambling to get something done to temper the populist anger. The financial lobby still could block those efforts.
The Obama administration is proposing a 10-year tax on the largest banks to cover a projected $117 billion shortfall in the bailout fund.
The Fed is reviewing a plan that would give it more oversight on compensation by reviewing pay practices at thousands of banks. The central bank would be able to veto pay plans if it found them to encourage excessive risk-taking by executives, traders or loan officers.
The Federal Deposit Insurance Corp., which regulates most of the nation’s banks, is seeking input on a plan that would tie fees that banks pay for deposit insurance to how much a company’s compensation plan encourages workers to take risks in order to achieve higher returns.
A few in Congress want to go further. Rep. Dennis Kucinich, D-Ohio, introduced legislation Tuesday to impose a 75 percent bonus tax.
"What you’re seeing is a public-be-damned attitude from the banks," he said. "They’re rolling in dough while the taxpayer has to sacrifice.
Treasurys were mixed late Wednesday following the government’s $21 billion offering of 10-year notes and after the Federal Reserve said economic activity is weak but recovering.
What prices are doing: The benchmark 10-year note was down less than 1/32 at 96-19/32, and the yield rose to 3.78% from 3.72% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year bond was up less than 1/32 to 94-20/32 and its yield was 4.72%. The 2-year note was flat at 100-2/32 and yielded 0.96%.
What’s moving prices: Investors submitted bids totaling $63 billion at Wednesday’s auction of reopened 10-year notes. The bid-to-cover ratio, a measure of demand, was 3. That compares with 2.62 at the last 10-year sale in December.
It was the second of three auctions this week aimed at selling $84 billion worth of U.S. debt. On Tuesday the government received solid demand at its sale of 3-year notes. On Thursday, it will auction $13 billion worth of reopened 30-year bonds.
Meanwhile, the Fed’s reading on the economy, known as the Beige Book, said that while the economy remains weak, conditions are improving.
Separately, the Treasury posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier need a personal loan with bad credit.
Bond prices were also pressured by comments from a key Federal Reserve official.
Charles Plosser, president of the Philadelphia Federal Reserve, said late Tuesday that the Fed should raise interest rates before unemployment reaches an "acceptable" level.
Plosser also said the central bank should not deviate from its plan to stop buying mortgage-backed securities this quarter.
What analysts are saying: Bill Larkin, a portfolio manager at Cabot Money Management, said Treasurys have been trading in a range since last week’s dour jobs report damped enthusiasm for more risky assets.
Government data showed Friday that employers cut 85,000 jobs in December after adding 4,000 jobs the month before. The nation’s unemployment remains at 10%.
Larkin said the market is also focused on the corporate sector as the quarterly reporting period gets into full swing.
"If earnings are mixed, we’ll probably stay where we are," he said. "If we get more strength in earnings, we could break out to higher yields."
Heartland Bank sold its ownership in Heartland Payment Systems 10 years ago, but the Clayton-based bank didn’t quite escape involvement in the payment company’s massive computer security breach.
A $60 million settlement announced last week has the bank acting as a middle-man, passing settlement and fine money from the payment company to Visa, the credit card company, and other companies that issue credit cards.
A year ago, computer hackers broke into Heartland Payment’s computer system, compromising 130 million credit card accounts. Credit card issuers across the country, including Heartland Bank, replaced the compromised credit cards for customers.
Heartland Payment Systems, based in New Jersey, processes credit card payments for small and mid-sized merchants. Heartland Bank helped found the company in 1997, but sold its ownership in 2000.
However, Heartland and KeyBank of Cleveland remained as bank "sponsors" of the payment company. When Visa imposed a $780,000 fine, Heartland Bank and KeyBank paid it and collected the money from the payment company, according to a filing by the payment company with the Securities and Exchange Commission.
In the settlement, the payment company will pay up to $60 million to reimburse credit card issuers that absorbed costs because of the security breach. The payment company intends to borrow $53 million of that.
The settlement, if finalized, would let Heartland Bank, KeyBank and the payment company off the hook for any claims resulting from the hacking incident. Heartland Bank executives could not be reached for comment. The privately held bank had $967 million in assets as of September, ranking it a mid-sized player in the St. Louis banking market. It earned $1.7 million in profit in the first nine months of last year.
In a filing with the SEC in November, KeyCorp, KeyBank’s parent company, said it sponsored Heartland Payment’s participation in Visa and MasterCard. KeyBank said Heartland Payment had indemnified it against losses, but that KeyBank could face "significant" costs if the payment company can’t pay.
The Arizona Cardinals well get some high-profile home games next season — including contests against the Dallas Cowboys, Denver Broncos and Oakland Raiders.
The Cardinals’ 2010 regular season schedule lineup is set in terms of teams but dates and times and what kind of national games the Cards will be play will be determined later this year. The Cardinals will also host the New Orleans Saints, Tampa Bay Buccaneers and games against NFC West foes (San Francisco 49ers, St. Louis Rams and Seattle Seahawks).
High-profile teams such as the Cowboys, Broncos and Raiders all have strong followings in the Phoenix sports market, which should insure quick sellouts for those games and push up ticket prices next year free business cards.
The Cardinals have sold out all their home games since moving from Tempe to Glendale’s University of Phoenix Stadium in 2006.
The Cards' road games include visits to San Diego, Minnesota, Atlanta, Kansas City, Carolina and the NFC West rivals.
The NFL playoffs start this weekend and include a 2:30 p.m. Sunday game between the Cardinals and Green Bay Packers that will be televised by Fox.
WASHINGTON–The U.S. economy grew at a 2.2 per cent pace in the third quarter as the recovery got off to a weaker start than previously thought. But all signs suggest the economy will end the year on a stronger footing.
The commerce department’s new reading on gross domestic product for the July-to-September quarter was slower than the 2.8 per cent growth rate estimated a month ago. Economists had predicted this figure would remain the same in the final estimate of the quarter’s GDP – the value of all goods and services produced in the United States.
The main factors behind the downgrade were that consumers didn’t spend as much, commercial construction was weaker, business investment in equipment and software was softer and companies cut back more on their stockpiles of goods.
Even so, the economy managed to return to growth during the quarter, after a record four straight quarters of decline. That signalled that the deepest and longest recession since the 1930s had ended and the economy had entered a new fragile phase of recovery.
Despite the lower GDP reading, many analysts still think the economy is on track for a better finish in the current quarter.
Tuesday’s report showed consumer spending grew at a 2.8 per cent pace, slightly weaker than the 2.9 per cent rate previously estimated and one of the factors behind the lower overall reading.
Retail sales, though, showed momentum in October and November. That raised hopes that holiday sales would fare better than last year’s season, the worst in nearly four decades.
The economy is probably growing at nearly 4 per cent in the October-to-December quarter, analysts say. A few peg it closer to 5 per cent. If they’re right, that would mark the strongest showing since 5.4 per cent growth in the first quarter of 2006 – well before the recession began. The government will release its first estimate of fourth-quarter economic activity on Jan. 29.
NEW YORK–Google appears to be preparing to market its own smartphone, a move that would intensify the company’s rivalry with Apple Inc., whose iPhone dominates the high-end smartphone market.
On Friday, Google distributed a new phone running its own Android operating software to many of its employees. On the messaging service Twitter, some Google employees described the device as a "Google phone," renewing speculation that the company is getting ready to release a mobile phone with its own brand.
Google employees who asked not to be identified confirmed recently that the company was indeed developing new hardware and software for Android phones and coming up with new ways to get those phones into the hands of consumers, but they would not give more details. One Google employee said the new phone was designed by Google No teletrak payday loan.
The Wall Street Journal reported on its website that Google would sell the phone directly to consumers rather than through carriers. The move, if confirmed, would signal a more aggressive effort by Google to become a force in mobile devices.
On Saturday Google acknowledged on a corporate blog that it was indeed distributing a new class of Android phones to employees to experiment with new features.
Mario Queiroz, a vice-president of product management, said, "This means they get to test out a new technology and help improve it."
Continuing a Thanksgiving tradition, every year I ask our staff what they’re thankful for, excluding family, friends and good health — none of which we ever should take for granted, but too often do.
Here’s what they said this year, with a few items from me thrown in for good measure.
• Mentors. Each year I try to learn from people. It could be co-workers, business relationships, friends or family. Having a mentor has helped me be a better salesperson and has helped me in personal and business relationships.
• Mistakes. You can learn from other people’s mistakes and your own. Making mistakes in life is natural and makes people even stronger if they learn from them.
• People who admit their mistakes. This is mine, and I’ll give you an example. In last week’s column, I misspelled the name of Rebecca Kenyon, a local woman who tried out for and made a pro football team here. No excuses. Stupid mistake.
• Is it too corny to say I am thankful for my job? I think of all those people at the Tribune who will be facing some tough times this holiday season. I really am thankful to be a part of a well-respected publication — my home away from home.
• I am thankful that it looks like a buyer may have been found for the Tribune after all, hopefully saving at least some of those jobs.
• For all the trials and tribulations that have come my way. It has caused me to learn that we all have two choices: We either pull ourselves up by the bootstraps and make it through and become much stronger people, or we sit and wallow in self-pity and ask “Why me?” When we choose to push through whatever may happen in our lives, it gives us a better perspective of what life is really all about and how we need to focus on the present moment.
• Giving back and having compassion for people less fortunate. Whether it be monetary or hands-on support. Working with and seeing businesses and people who help the less fortunate has made me more aware that I need to give back more. Giving back to our community is something we all should be doing — not only during the holidays, but during the entire year.
• For the medical industry — particularly the nursing profession. … Health care workers are in the trenches every day taking care of people we love, and they truly are the unsung heroes of our community.
• The things I am grateful for this year are things in previous years I have taken for granted, probably along with many others. Seeing that this economy is so bad and a lot of people are losing their homes and jobs, I am extremely grateful for my job, for having a roof over my head and food on the table every night for my family and me.
• And all of us here at the Business Journal are thankful for you, our readers. We appreciate your continued support and feedback. We all have lots of things to be thankful for, and may we remember to think about them a lot more often in the year ahead.
Don Henninger can be reached at dhenninger@bizjournals.com.
Prime Minister Gordon Brown’s ruling Labour government is increasingly being blamed by voters for Britain’s “economic quagmire” even as the recession shows signs of easing, ComRes Ltd. pollster Greig Baker said.
“There is a high level of personal animosity towards Gordon Brown and regardless of the economic figures, that’s going to be very, very difficult for Labour to get past,” Baker, research director at the U.K. polling company, told Bloomberg Television today. “The voting public is increasingly blaming the government for the economic quagmire we’re in.”
Data today showed the British economy shrank 0.3 percent in the third quarter, less than previously estimated, in the nation’s longest recession on record. Brown is fighting to rebuild support in time for an election due by June. Labour narrowed Conservative Leader David Cameron’s lead to six points in an Ipsos Mori poll published Nov. 22.
“If the government can claim that they steered the economy through recession, that will become their overbearing election theme,” Baker said. “It may change the political narrative of the time but I don’t think that will be enough to overcome the personal animosity that exists towards Gordon Brown. People simply don’t like him.”
Cameron pledged to work “night and day” to win a majority in Parliament at the next U no checking account payday advance.K. election after the Ipsos Mori poll in the Observer newspaper showed the Conservatives with the narrowest lead this year. That suggests he may fail to clinch enough lawmaker seats to control the House of Commons.
‘Anybody But Gordon’
“Looking at the poll over the weekend, it was slightly out of kilter with some of the others we’ve seen recently,” Baker said. “What it does suggest is that there’s not a huge affinity amongst the voting public with David Cameron. Basically, it’s an ‘Anybody but Gordon vote.’”
ComRes’s most recent poll, finished on Nov. 12, showed the Conservatives with a 14-point lead. Cameron needs a lead of about 10 percentage points to win a clear majority, according to Anthony Wells of pollsters YouGov Plc. A minority government, known as a ‘hung parliament,’ may face greater difficulty in tackling Britain’s record budget deficit.
The U.K. economy’s contraction was revised from a 0.4 percent drop, the Office for National Statistics said today in London. The Bank of England forecasts Britain will exit the recession in the fourth quarter. The economy will expand 2.2 percent in 2010 and 4.1 percent in 2011, according to policy makers’ projections published on Nov. 11.
Powered by WordPress -- XHTML 1.0