Tag Archives: banking
By Charles H. Green
A review by the U.S. Government Accountability Office (GAO) found that U.S. Small Business Administration’s (SBA) Patriot Express loans, valued at $703 million, have a higher default rate than other loans under SBA’s other loan guarantee programs. The GAO report also said that losses for Patriot Express have exceeded its income.
“The Patriot Express program’s overall default rate was significantly higher for smaller loans, especially for loans below $25,000 (20 percent),” according to GAO. And it was revealed that one lender accounted for more than 64 percent of these smaller loans and experienced higher default rates than the remaining lenders.
From 2007 through 2012, losses in the Patriot Express program exceeded income by $31.1 million (not accounting for future fee revenues or funds recovered from loans in default). Patriot Express has continually operated in the red.
In 2010, SBA extended the Patriot Express pilot through 2013 to allow time to evaluate the effect of the program. To date, SBA has not evaluated the program or established a plan of what it intends to do to evaluate it. SBA officials reported to GAO that they “focused their resources on evaluating 7(a) loans because there are many more of them and, therefore, they pose a greater risk to SBA than Patriot Express loans.”
GAO also asserted that SBA’s internal controls over lenders may not provide reasonable assurance that Patriot Express loans are only made to eligible members of the military community and that only these members benefit from loan proceeds. This finding may lead to more direct consequences to participating lenders as this evaluation continues.
I keep hearing that we are waiting to recover from the great recession of 2008, but I will share a few thoughts on that statement that you might ponder. First of all, this period we are experiencing is no recovery. Nothing resembles the typical way our economy has always performed by taking a few months of rest, and resuming steady growth with consumer confidence restored and good job still held. We Americans always expect to return to the good life with gusto. And to do so quickly.
In fact, my view is that we are not in recovery – we are at the beginning of living with less. Recovery assumes you will return to where you were. Think about residential housing and new bank start-ups. We are not going back to the heedless growth in those two sectors, and they were a significant part of the economy that fueled our blind confidence. The fallout from the loss of those two sectors continues to reverberate in virtually every sector of our economy. Read More
Two things I believe (at least I hope) all my friends can agree with me about me is that 1) I am a fair person, and 2) I will readily admit when I’m wrong. Yesterday’s (November 14th) New York Times ran an interesting article about the projected long term (20 year) U.S. government budget deficit, and the choices for balancing it. I admit I was wrong.
The article provides an incredibly simple challenge to its readers:
You know how to fix the long term federal budget deficit? Here are the real numbers involved – do it.
So, I will admit that all the answers I have been touting presumptively for years were dispelled in about 15 seconds. I missed balancing the budget by hundreds of billions with my list of solutions.
I encourage every reader to check it out online, and throw your best course of action on the table. There is an interactive version of their worksheet that lets you test your big ideas and see how far they go toward resolving the problem.
I just finished another book about Wall Street (The Big Short by Michael Lewis), which is the latest of a long list of books, films, and other exposés about Wall Street, and just wondered to myself, when will the suckers quit coming?
There was a time (or at least I really want to believe so) when honorable men formed partnerships among other honorable men. They employed their business know-how, integrity, and innovation to help raise capital to help other businesses grow enterprises that created jobs, researched new technologies, built factories, and created wealth. Real, tangible wealth grown with patient, steady industry, that came from profits and value. Read More
Finance covers a broad swath of resources in addition to debt and equity. I often advise business owners to think more expansively about how to finance their business, and not to overlook smaller, incremental sources of finance. They add up. For example, lowering or eliminating the true cost of performing business is as important as finding capital to cover the costs we cannot avoid.
In that vein, I wanted to review more of the benefits related to the Small Business Jobs Act of 2010 discussed in my October 4th post, because they are each as important to business finance as the $30 billion expanded debt provisions that will enable entrepreneurs to get access to broader funding from community banks and SBA. Read More
After months of horse trading and high drama in the U.S. Senate, last week the President finally signed the Small Business Jobs Act of 2010 into law. If you have followed the news on this legislation, you might reasonably think that this act only appropriated $30 billion to fund 10 year investments in community banks (those with less than $10 billion of assets) to stimulate loans to small businesses.
Actually, the bill goes much further and contains provisions that will help many “small” businesses, which can range from a home-office consultant to a manufacturing company employing 450 workers. Read More
Remember the good old days when the daily mail brought two or three pre-approved business credit line solicitations? When bankers were calling to take you to lunch and play golf? And they urged you to borrow even more money and of course, would always finance the deal’s closing costs.
If those days seemed too good to be true, the financial regurgitation of the last 24 months proved that in fact they were. September, 2010 marks the second anniversary of the darkest days of modern commercial banking. For many bankers, if not for bad loans, they would now have had no loans at all.
Over the past two years, small business lending has been stymied by many factors: Read More
September, 2010 marks the second anniversary of the darkest days of modern commercial banking. It is still painful for me to recall going to my bank job each day wondering what else in the world could go wrong.
Just recount what happened over the course of roughly forty-five days: Read More