Tag Archives: financial regulatory reform

When There Aren’t Enough Borrowers, Train New Ones

I keep reading about the debate playing out across the country among the many interested parties. Who is the culprit behind tight credit and a continuing sluggish economy? Some say banks are still too tight with their credit decisions. Others cite a lack of demand for credit as the problem with growth. My answer: It depends.  

It is demonstrably true that hundreds of banks continue to struggle with capital issues, and frankly don’t have the money to lend.   It is also true that many banks do have sufficient funds to lend, but are still holding a tighter grip on lending criteria, and only funding the best deals. And both sides can accurately point to a zealous regulatory environment, which perhaps didn’t act forcefully enough when the bubble was inflating, but are darn determined to keep it flat now. Read More More

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Straight Talk About Our National Debt

In honor of the 250th anniversary Albert Gallatin’s birth, a Swiss native who became the fourth and longest serving U.S. Treasury Secretary, Atlanta’s Swiss Consul General Claudio Leoncavallo recently organized a forum to offer international perspectives on two timely topics on which Gallatin was quite outspoken: public debt and fiscal policy.

Emigrating to the U.S. at age 19, Gallatin was elected to the U.S. Senate only 13 years later. Venomous politics shortened his tenure, yet he later spent six years in the U.S. House of Representatives where he served as majority leader and founded the Ways and Means Committee.    

Thursday’s panel discussion at The Commerce Club was titled Balancing Act: A Dialogue on Public Debt and Fiscal Policy and gathered well qualified panelists for an insightful discussion – Fritz Zurbrügg, Director General of the Swiss Federal Finance Administration; Dennis Lockhart, President and CEO of the Federal Reserve Bank of Atlanta; Annabelle Malins, Her Majesty’s Consul General of Great Britain, Atlanta; and Glenn Campbell, the Consul General of Canada, New York and Head of their Economic Finance Program. I was selected to moderate the discussion, which was a real treat to share a conversation with such an imminent gathering of economists, bankers and diplomats. Read More More

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FDIC Assembles Forum to Offer Funding Solutions

The FDIC convened a broad panel of experts and stakeholders of the small business sector in Arlington, Virginia on Thursday to examine the issues of and potential solutions to the challenges facing small business funding.

Entitled “Overcoming Obstacles to Small Business Lending Forum,” the event offered two distinct panels: “Framing the Issues[1],” which provided a macroeconomic context of these funding challenges, and “Confronting the Obstacles[2],” which offered potential solutions from various perspectives.

The first panel offered much familiar information with little debate about where the economy had risen from since the darker days of 2008. Even U.S. Chamber Chair Thomas Bell grudgingly agreed that TARP and other government intervention prevented a meltdown of the capital markets, and was proving to have been legendary action by the Federal Reserve and Bush Administration. Read More More

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Looking Back At 2010

Is it the mega-gigabytes of memory enabling constantly faster computer processing speeds that makes an entire year seem to elapse in the space of what felt to be only a few months? The year 2010 is almost over as fast as it was upon us, and the events that shaped it are now history.

So what happened in economic and finance terms? Plenty – definitely some maneuvering around the globe as central bankers and markets everywhere positioned and repositioned to jump start a disappointing economic recovery. Although the Great Recession was certified to have ended in the summer of 2009, it just doesn’t feel that way.

Looking back over the past eleven and a half months, here are the stories I think were most intriguing, and will impact our 2011 more than most:

Federal Reserve – the Fed was probably in the news much more than they wanted to be in 2010, accentuated by a tense election cycle commandeered by an angry contingent of conservative libertarians named the “Tea Party.” Promoting strict adherence to the U.S. Constitution, which few apparently understood or was given a creative license to define. They railed about much and actually elected a few people to Congress who subscribe to the conspiratory myths about its origin and therefore oppose the existence of the Fed.

Hopefully, the new Congress will begin attacking the unemployment rate, budget deficit, and complicated tax code, and leave the paper monsters alone until the next election. I am afraid the fireworks will continue though, as perennial gadfly and Tea Party kindred spirit Rep. Ron Paul is set to Chair a House subcommittee overseeing the Fed.

Domestic Banks – Banks did not fail at the predicted rate in 2010. Only 154 failed through December 17th, which is far short of the predicted 200-250 failures that were expected by none other than the Federal Deposit Insurance Corporation.

While many banks have begun to see daylight, some markets like Atlanta, Phoenix and Las Vegas are still going to be tough places to get new financing. The real estate recovery in those cities will be slow to unload their remaining volume of unsold properties.

The Dodd-Frank Act enacted a number of sweeping financial regulatory reform measures, particularly regulations to break up a major failing bank, provide consumer protection, and beef-up bank capitalization.  

Wall Street – The Street is back – profits soared again at most major brokerage firms and year-end bonuses have returned with a vengeance. Lobbyists for the industry did an effective job of avoiding much of the feared regulatory reform in the Dodd-Frank Act, which barely tightened a modest oversight of derivative trading.

These overpaid, “masters of the universe” traders also proved to be fairly thin-skinned when made the object of criticism of the economic malaise presently sidetracking most of Main Street. The Dow Jones Average has returned to its highest level since mid-2007.

Small Business Jobs Act – A bone was thrown to the small business sector in the form of the Small Business Jobs Act, bantered around unnecessarily for months by politics in the U.S. Senate. The final bill provided a $30 billion fund to invest in community bank capital, which could be leveraged 10:1 into $300 billion of small business financing. The more banks grow that lending, the cheaper the payback will be to Uncle Sam.

Also big news was authorization to increase SBA loan size limit to $5 million (from $2 million) which will enhance program’s utility for larger companies. Concurrently, the agency expanded eligibility for an SBA loan to tens of thousands of new businesses.

European Union – Some of the poor cousins in the EU had to face up to a debt crisis, with pending defaults. During 2010, booth Greece and Ireland had to be bailed out of a crisis, with a poorly kept secret that Spain and Portugal are probably next.

Finance ministers continue to grapple with longer term solutions, and are beginning to talk publicly about the possibility of “common fiscal policy.” That will be an interesting idea to follow next year.

China – It’s another year, another continuation of an undervalued Renminbi to other major world currencies. That trend may prove to have lasted too long, because in 2011 the Chinese Central Bank will have to deal with an accelerating inflation rate, fueled by a 9% GDP growth rate. Watch for more pressure on their own housing bubble as well.

A more ominous trend for American’s to watch is the recent approval to exchange the Renminbi outside China for the first time. They are settling trades with Russia directly with Rubles and Renminbi, instead of using Dollars.   What’s next, the Petro-Renminbi?

There were plenty more stories, but needless to say, 2010 has proven to be another fascinating year in finance.   Tune in next week for a look ahead to 2011.

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Why Consumer Protection is Important to Small Businesses

In an earlier post, I discussed many of the benefits for small businesses of financial regulatory reform, which was passed by Congress back in the summer. Among the most curious to many turns out to be my inclusion of the consumer protection provisions in the legislation, which will create a new federal watchdog to prevent predatory practices with credit cards, checking accounts, and debit transactions.

So why do consumer protection provisions concern small business owners?

  • Does your business accept credit or debit cards?
  • Have you borrowed money for your business from a Master Card, Visa, or American Express account?
  • Does your business have a checking account?

Read More More

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Financial Regulatory Reform Will Help Small Business

Two years after the financial meltdown and all of the endless hand-wringing, demagoguery, and political showdowns since, Congress finally adopted a financial regulatory reform bill this summer. The debate about did-it-go-far-enough vs. oh-my-gosh-it’ll-ruin-us has finally quieted down, and it’s back to the job of financing or governing, whatever your duty may be.

 So how does this 2,600 page bill affect small business owners? Not surprisingly, the answers are about as diverse as the final vote on its passage. Many worry about the “what-if” scenarios that eventually will gobble every business and make them a ward of the state – I do not.   I believe this bill will be good for small business, and here are some of my reasons: Read More More

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