tag:blogger.com,1999:blog-78351151971105469302024-03-13T23:35:13.681-07:00Fiscal Nitty GrittyIdentifying key fundamental economic and industry trends that demand organizations to rethink their models for doing business in the 21st century.Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-7835115197110546930.post-46673609923512373042010-10-09T10:48:00.000-07:002010-10-09T11:06:12.613-07:00"We want peace not war..."These were the words of French Finance Minister, Christine Legarde as the International Monetary Fund's (IMF) annual conference took off in Washington.<br /><br />The issue they are all talking about is "currency wars"and specifically the efforts to boost exports by embracing weaker currencies. Many have argued this will lead to protectionism and trade imbalances when economic growth is at its most vulnerable.<br /><br />The Chinese "undervalued" yuan was at the forefront of the argument as foreign officials have called for the currency's speedy appreciation. China has said it wants to avoid "shock therapy" and the yuan will have a "gradual" rise.<br /><br />However IMF Managing Director, Dominique Strauss-Kahn said using currencies as a means to dictate economic policy would lead to "very bad situations."<br /><br />The fear amidst it all is a relapse into the recession....Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-75086603542205642172010-06-26T07:39:00.000-07:002010-06-26T08:06:33.455-07:00Cogs Are Turning<meta http-equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CUsers%5CNyra%5CAppData%5CLocal%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" 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font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} </style> <![endif]--> <p class="MsoNormal">It has been a while – sorry for the delay, but the last year has been hectic and amazing. I don’t have to tell you that politics is the same, we are seeing some movements in the financial crisis and the US is through to the next stage in the World Cup in South Africa!</p> <p class="MsoNormal">On a serious note, 2010 is bringing some renewed excitement in business. I know we are not out of the woods just yet, but those cogs are turning and this machine is beginning to shift. I am steadfast in my prediction – I said in my first ever blog in May 2009 that the “recent financial crisis will demand the consolidation of our financial industry over the next five to seven years” – I stick by that statement!</p> <p class="MsoNormal">Watch this space. I promise I won’t leave it this long next time.</p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal"><o:p> </o:p></p> Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-88942960866727912182009-09-03T15:27:00.000-07:002009-09-03T16:10:11.422-07:00Who is the FDIC? The Next step for banks<span style="font-weight: bold;">What you need to know about the agency that is assuming the vast majority of bank losses</span><br /><br />The Federal Deposit Insurance Corporation (FDIC) is the Government agency providing insurance, which guarantees the safety of deposits in member banks.<br />Americans are hearing more and more about this once quiet agency, which was set up in 1933 to maintain consumer confidence.<br /><br />In the last 12 months, the insurance fund that secures banks has seen a huge knock in its value. It fell by 20% to $10.4 Billion in the second quarter, as banks across the US collapsed at a combined cost of $3.7Billion. With 109 banks failing this year, the federal fund is at its lowest since the Savings & Loans Crisis of 1992.<br /><br />With this current situation, economists believe that the agency may have to tap into Government money or worse - taxpayer dollars – to cover future bank losses.<br /><br />It’s not a pretty picture, especially as the FDIC estimates that bank failures will cost the fund $70 billion through to 2013. This year with over one hundred banks collapsing, analysts have predicted there will be hundreds more that follow, especially as we still haven’t seen the effect of the real estate crash.<br /><br />To top that the FDIC has made a pact with firms – many equity firms – that they will take on mortgage losses for companies that take over failed banks. They believe this is a cheaper option than letting banks liquidate their assets.<br /><br />The prospect of easing losses or at least giving the FDIC more time, these pacts with firms could provide some protection for the agency fund. James Wigand, deputy director of the FDIC's division of resolutions and receivership's said: “It's a great opportunity for banks........It's a great opportunity for us."<br /><br />The flipside to Mr Wigand’s optimism is if the economy doesn’t recover as quickly and effectively as we would like, then the FDIC will carry this burden for a long time and ultimately it could cost the taxpayer – because we are the ones paying for the losses now.<br /><br />The time is now for banks to actively pursue acquisitions to achieve the market penetration they had prior to the financial crisis. The Cousins Group will help you identify the right bank, acquire and integrate to achieve your goals for growth and profitabilityJay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-65360984966255139662009-08-04T14:17:00.000-07:002009-08-04T15:45:03.403-07:00IS MICROFINANCE THE ANSWER FOR SMALL BUSINESS IN AMERICA?<meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_themedata.thmx"><link rel="colorSchemeMapping" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_colorschememapping.xml"><!--[if gte mso 9]><xml> <w:worddocument> 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<br />American business has driven success, innovations and financial stability for this nation for as long as we can look back in history. It is the business spirit that brings about employment, prosperity and builds greater ties across continents.
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<br />This very notion of entrepreneurship is as American as ‘Apple Pie.’ But this building block of Americanism is being threatened because small and mid-sized businesses are finding it near impossible to find funding for start-ups and innovations.
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<br />For a very long time now, I have looked at how the developing nations have nurtured business and ultimately their economies. One of the most remarkable developments in the Third World has been the concept of microfinance. A system that has reached our shores, but has not been nurtured to its full potential.
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<br />Broadly speaking the ‘movement’ of microfinance is one that believes poorer households should have permanent access to high-quality financial services including credit, loans, savings, insurance and fund transfers. Advocates of the system believe microfinance will help people out of poverty by giving them financial freedoms, which in turn will be passed on to the wider community and economy.
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<br />This does not mean microfinance lenders should give loans to those that banks deem to be ‘risky,’ rather lenders of microfinance will be better able to judge the risks because they are not blindly accepting high risk – something we have seen rampant in the current crisis.
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<br />Now the system of microfinance seen in places like Bangladesh, India and many of the African countries is not necessarily the system that will work for us. In fact microfinance is not a ‘one size fits all’ practice. In the US it has to differ, because we do not see the levels of poverty and harsh political upheavals as the developing world. We are also a country that has a welfare system for the low-income.
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<br />The microfinance that should be fostered is a system geared to help the American entrepreneur in an America that is looking towards a new and better future. This ‘new’ form of microfinance should be able to work by giving start-ups and mid-sized business the monetary opportunities to bring about economic development in their communities. These businesses have always been the backbone of this country and are sadly being rejected by mainstream financial institutions.
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<br />Lets start today by helping American business. If you have a business idea, want to get a start-up off the ground or are already involved in microfinance, contact me at jay@thecousinsgroup.com Let’s get your idea working!
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<br />Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-87610585339800894162009-07-27T13:16:00.001-07:002009-07-30T21:08:49.567-07:00TOO BIG TO FAIL?<strong><em></em></strong><meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_themedata.thmx"><link rel="colorSchemeMapping" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_colorschememapping.xml"><!--[if gte mso 9]><xml> <w:worddocument> <w:view>Normal</w:View> <w:zoom>0</w:Zoom> <w:trackmoves/> <w:trackformatting/> 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mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} </style> <![endif]--> <p class="MsoNormal" style="font-family:arial;"><span style="font-size:100%;"><span style="font-size:130%;"><em style="font-family:arial;"><b><span style="font-style: normal;">When do we stop using taxpayer’s money to save financial institutions that made bad decisions?</span></b></em></span><i style=""><o:p></o:p></i></span></p>
<br />In today’s American, the one thing you can expect from Government, is if you are a big company that took unnecessary risk and gambled with people’s money and lives, then you will be rewarded with bailouts – so far over $ 3.5 Trillion worth of bailouts.
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<br />Tallying up the "true" cost of the bailout is difficult, and won't be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009; hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.
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<br />At the very least, the possibility of the U.S. losing its vaunted AAA credit rating - which determines the Treasury's borrowing costs - cannot be discounted.
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<br />As Americans and global champions of choice; hoping to make a difference in world politics, we should be asking when is it going to be enough? When do we stop helping institutions that are playing a part in our demise?
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<br />A great part of our history has taught us that we are a nation that was built on taking responsibility, standing accountable and always being the beacon for better decisions than those around us. For that reason it is incomprehensible to allow financial institutions (who have got us in this mess) to dictate the direction this country and world should take.
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<br />Last week, CIT was on the brink of collapse. The financial lender, which had already received $2.33 Billion of TARP, was refused another lifeline from the Government. A $3 Billion rescue from its debt-holders may still not be enough to prevent bankruptcy. What is interesting in all of this is the fact that the Government decided CIT was big enough to fail - whereas Wall Street institutions, which hold toxic debt from mortgages, credit default swaps and collateralized debt obligations, had to be rescued. CIT, which finances American businesses despite its failures, does not hold the above toxic debts.
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<br />I do not think we should have another taxpayer bailout for CIT, but I do see the discrepancy between one organization and another. It appears that the Government want to throw taxpayer money at the top tier of companies, who in turn award their failed leadership with bonuses.
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<br />This terrible disconnect is hurting the hard-working American businessperson and dividing a country into those that deserve Government assistance and those that have to learn to fen for themselves. The average American feels a disincentive to work when he sees people getting rewarded for failure at his expense.Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com2tag:blogger.com,1999:blog-7835115197110546930.post-51294883973763464522009-07-22T15:07:00.000-07:002009-07-30T21:07:02.369-07:00AMERICAN INNOVATION WILL RESUSCITATE THE ECONOMY<meta equiv="Content-Type" content="text/html; charset=utf-8"><meta name="ProgId" content="Word.Document"><meta name="Generator" content="Microsoft Word 12"><meta name="Originator" content="Microsoft Word 12"><link rel="File-List" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_filelist.xml"><link rel="themeData" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_themedata.thmx"><link rel="colorSchemeMapping" href="file:///C:%5CDOCUME%7E1%5CHP_Owner%5CLOCALS%7E1%5CTemp%5Cmsohtmlclip1%5C01%5Cclip_colorschememapping.xml"><!--[if gte mso 9]><xml> 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</w:LatentStyles> </xml><![endif]--><style> <!-- /* Font Definitions */ @font-face {font-family:"Cambria Math"; panose-1:2 4 5 3 5 4 6 3 2 4; mso-font-charset:0; mso-generic-font-family:roman; mso-font-pitch:variable; mso-font-signature:-1610611985 1107304683 0 0 159 0;} @font-face {font-family:Calibri; panose-1:2 15 5 2 2 2 4 3 2 4; mso-font-charset:0; mso-generic-font-family:swiss; mso-font-pitch:variable; mso-font-signature:-1610611985 1073750139 0 0 159 0;} /* Style Definitions */ p.MsoNormal, li.MsoNormal, div.MsoNormal {mso-style-unhide:no; mso-style-qformat:yes; mso-style-parent:""; margin-top:0in; margin-right:0in; margin-bottom:10.0pt; margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} .MsoChpDefault {mso-style-type:export-only; mso-default-props:yes; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Calibri; mso-fareast-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi;} .MsoPapDefault {mso-style-type:export-only; margin-bottom:10.0pt; line-height:115%;} @page Section1 {size:8.5in 11.0in; margin:1.0in 1.0in 1.0in 1.0in; mso-header-margin:.5in; mso-footer-margin:.5in; mso-paper-source:0;} div.Section1 {page:Section1;} --> </style><!--[if gte mso 10]> <style> /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} </style> <![endif]--> <p class="MsoNormal"><span style=";font-family:";" >The one thing Americans have maintained is the resolve to dream up inventions, generate new ideas and ultimately provide the world with organizations like Google, Apple and Facebook.
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<br />The opportunity for innovation and improvement is stronger today than it has ever been. No-one should assume the American spirit for entrepreneurship is over. Far from it – today young businesses, new graduates and fresh-faced leaders are pioneering the way for the economy of the later part of the 21st Century.
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<br />It seems the only obstacle in their way is lending – or the lack of lending. Lenders are reluctant to supply credit for businesses especially new start-ups, despite the Government’s efforts to pump billions into banks.
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<br />Bank analysts are monitoring asset quality very closely—credit deterioration is occurring throughout the industry, raising concerns from both regulators and the market. In times like these, banks first must stop the bleeding, before they open up the purse strings and are willing to become more aggressive in their lending practices to small business.
<br /></span></p><p class="MsoNormal"><span style=";font-family:";" >Behind close doors the bankers will tell you that this will not happen anytime soon and we have yet to see the bottom of this downturn.
<br /></span></p><p class="MsoNormal"><span style=";font-family:";" >To further exasperate the situation, the bank’s lack of lending has provoked criticism of bailout programs like Troubled Asset Relief Program (TARP) and skepticism of whether Obama can really revive the banking system.</span></p><p class="MsoNormal"><span style=";font-family:";" >One certainty throughout all of this is the simple reality that if banks cannot support the country’s innovators, they will play a huge part in prolonging this economic downturn.
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<br />Banks have a duty to lend money to those who will drive this nation and the rest of the world – the one thing this nation has always done and always done well.<o:p></o:p></span></p>
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<br />Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-61776873021185242592009-07-19T15:39:00.000-07:002009-07-20T09:04:12.185-07:00THE GREAT DELEVERAGING OF 2009:<span style="font-size:130%;"><span style="font-weight: bold;"><span style="font-family:'Times New Roman','serif';">If companies want to avert bankruptcy, they have to purge their debts</span></span></span><br /><br /><br />The ‘D’ word has not only reared its ugly head, it is here to stay. Banks and businesses across the western hemisphere have to begin ridding themselves of a balance sheet financed by debt.<br /><br />For those of us still grappling with this technical term – a dictionary description will tell you that deleveraging is: “The reduction of financial instruments or borrowed capital previously used to increase the potential return of an investment. It is the opposite of leverage.”<br /><br />Now what this delightful explanation omits to mention is that companies which are highly leveraged – one’s which have borrowed a lot of money – are at a huge risk of bankruptcy if they are unable to make good on their debts.<br /><br />Financial institutions are currently underway with the process of calling back loans especially from those who are seen as high risk borrowers. This is resulting in increasing the cost of credit for the rest of us and a drop in the value of investments.<br /><br />Deleveraging isn’t only affecting banks and businesses – it is affecting homeowners as well. Real estate information supplier, Zillow said that 20% of American mortgage holders owe more on their home than the home is worth. At the same time more people are foreclosing on homes and when those homes go to be sold, there is a huge decline in price. There is little doubt that the real estate market has to follow in the deleveraging process to be able to sustain itself in the future.<br /><br />The end result is that the spending patterns for both the consumer and business will languish and home valuations will continue to be under pressure back to 2003 levels relative to gross incomes. Paying down debt will take precedence over spending and business "Top line" earnings will be challenged. The reversal of this trend will take a few years to overcome.<br /><br />An important footnote to all of this is the effect on the emerging economies. The International Monetary Fund (IMF) has said because emerging economies are reliant on external funding (from developed nations); they will need to adjust monetary policy to prevent capital outflows. They concluded that theses emerging markets are vulnerable to the deleveraging realized in advanced economies – like ours.<br /><br />This crisis is indeed global.Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com1tag:blogger.com,1999:blog-7835115197110546930.post-50876750848200372672009-07-16T07:42:00.000-07:002009-07-20T08:55:00.935-07:00SEPARATION OF BANKERS AND BROKERS:<span style="font-family:times new roman;"><span style="font-size:130%;"><span style="font-weight: bold;">If Congress hadn’t reversed a six decade old legislation, would we be in the mess we are today?</span> </span></span><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><br /></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >There is a legitimate reason why <span class="yshortcuts" id="lw_1247754930_1" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">Thomas Jefferson</span> insisted on the <span class="yshortcuts" id="lw_1247754930_2" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">separation of Church and State</span> – despite having deeply religious convictions, he understood that intermeddling between the two would be “dangerous” and “injurious to others.”</span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" ></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >A hundred and fifty one years after Jefferson's guidance to us all, the <span class="yshortcuts" id="lw_1247754930_3">US Congress</span> passed a piece of legislation known as the <span class="yshortcuts" id="lw_1247754930_4" style="border-bottom: 1px dashed rgb(0, 102, 204); cursor: pointer;">Glass-Steagall Act</span> – in the aftermath of the Great Depression. </span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >The Glass-Steagall Act of 1933 was also resolute in its belief in separation - that is the separation of commercial and <span class="yshortcuts" id="lw_1247754930_5" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">investment banking. </span>Congress cited that “bankers and brokers were sometimes indistinguishable” and “mixing” commercial and investment banking had led to “<span class="yshortcuts" id="lw_1247754930_6" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">conflict of interest</span> and fraud.”</span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style=";font-family:times new roman;font-size:130%;" ></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >This economic stabilizer, which prohibited a <span class="yshortcuts" id="lw_1247754930_7" style="border-bottom: 1px dashed rgb(0, 102, 204); background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">bank holding company</span> to own other <span class="yshortcuts" id="lw_1247754930_8" style="border-bottom: 1px dashed rgb(0, 102, 204); background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">financial institutions</span> and arguably refereed institutions was repealed by the Clinton Administration in 1999 and replaced with the <span class="yshortcuts" id="lw_1247754930_9" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">Gramm-Leach-Bliley Act</span>.</span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" ></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >At the time only eight senators voted against the measure, while the rest allowed deregulation of banks, allowing them to merge with investment houses and <span class="yshortcuts" id="lw_1247754930_10" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">insurance companies</span>. It was the era of the “megabank” – a bank so big it couldn’t possibly be allowed to fail.</span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" ></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >One of the first banks to take advantage of the new law was <span class="yshortcuts" id="lw_1247754930_11" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">Citigroup</span>, which was the largest US bank by assets in 1999. It was now allowed to underwrite and trade <span class="yshortcuts" id="lw_1247754930_12" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">mortgage-backed securities</span>, <span class="yshortcuts" id="lw_1247754930_13" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">collateralized debt obligations</span> and create <span class="yshortcuts" id="lw_1247754930_14" style="background: transparent none repeat scroll 0% 0%; cursor: pointer; -moz-background-clip: border; -moz-background-origin: padding; -moz-background-inline-policy: continuous;">structured investment vehicles</span> (SIVs).</span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >Almost ten years later, the US Government gave Citigroup $306 Billion to prevent it from collapsing from losses of toxic debt.<br /></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" ></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >Looking back we cannot downplay the significance of repealing the Glass-Seagall Act. It is not the only factor in the current crisis, but it did blur the lines between commercial and non-commercial banking activities – in short banks over-leveraged, took unregulated risks and brought a nation down on its knees.</span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><br /><span style="font-size:130%;"></span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" ></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style="font-family:times new roman;"><span style="font-size:130%;"><span class="yshortcuts" id="lw_1247754930_15">Senator Christopher Dodd</span> (D-Conn), Chairman of the Senate Banking Committee said in 1999 after Glass-Seagall was repealed: “I welcome this day as a day of success and triumph...”</span></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;font-family:arial;"><span style=";font-family:times new roman;font-size:130%;" >Food for thought! </span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:'Times New Roman','serif';"></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:'Times New Roman','serif';"></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:'Times New Roman','serif';"></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:'Times New Roman','serif';"></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:'Times New Roman','serif';"></span></p><p class="MsoNoSpacing" style="margin: 0in 0in 0pt;"><span style="font-family:'Times New Roman','serif';"></span></p><div id="ft"><div class="globalbuttonbar clearfix" id="globalbuttonbarbottom"><div class="searchforms" id="searchtestfieldsbottom"><form id="searchTheWebbottom" name="searchTheWebbottom" action="http://search.yahoo.com/search" method="get" target="_blank"><p><noscript></noscript><input value="ush_mailm" name="fr" type="hidden"> <input value="UTF-8" name="ei" type="hidden"> <input class="inputbutton" title="Search the Web" value="Search the Web" type="submit"> </p></form></div></div></div><script type="text/javascript">gLaunchProfile.stop('RT_GB', false);</script><noscript></noscript><script type="text/javascript">gLaunchProfile.stop('RT_RP', false);gLaunchProfile.start('RT_BP');gLaunchProfile.start('LD_JS_BP');</script><br /><script type="text/javascript">YAHOO.mc.intl = "us";YAHOO.mc.IM_TOGGLE_STRINGS = {"im_settings_helpurl" : "http://help.yahoo.com/l/us/yahoo/mail/classic/chat/","im_settings_help_toggle" : "1","im_enable_mobile_l10n": "1","im_sign_in": "true","im_time_format_am" : "AM","im_time_format_pm" : "PM","im_date_time_format" : "{d}/{M}/{yy} {h}:{mm} {A}"};if (YAHOO.mc.page.generic) {YAHOO.mc.page.generic.initComposeMenu();}YAHOO.mc.page.TriggerULT=true;YAHOO.util.Event.onDOMReady(function () {sessionMgr.initSession();sessionMgr.loadFromBookmarks();});var adPrefetch = true;var isAdPrefetched = false;if (document.getElementById("JSMailOptionsLink")) {document.getElementById("JSMailOptionsLink").href = optionObj["JSMailOptionsLink"];}if (document.getElementById("chk_pop_options") document.getElementById("chk_pop_error") document.getElementById("option_bad_folder") document.getElementById("folders_options_spam") document.getElementById("folders_options_sent") document.getElementById("spam_edit_options")) {YAHOO.util.Event.addListener(YAHOO.mc.optionsID, "click", displayOptions, optionObj);}YAHOO.namespace("fcue"); <!--[if IE 6]>YAHOO.fcue.IE6 = true;<![endif]--> <!--[if IE 7]>YAHOO.fcue.IE7 = true;<![endif]--> YAHOO.mc.FCUE_METADATA = {imInit:"1",imSent:"1",fcElap:"1237478378093",fcEcap:"2",fcNag:"",inEcap:"",inElap:"1247610230504"};YAHOO.mc.noCues = false;YAHOO.mc.msgrLoaded = false;YAHOO.mc.loadMsgr = function () {clearTimeout(YAHOO.mc.msgrLoadID);if (hasIM && !YAHOO.mc.msgrLoaded) {YAHOO.mc.msgrLoaded = true;YAHOO.util.Get.script("http://mail.yimg.com/d/combo?/mg/5_4_13/js/im_blue_all.js&/mg/5_4_13/js/us_strings.js&/mg/5_4_13/js/msgr.js");}};YAHOO.util.Event.on(window, "load", YAHOO.mc.loadMsgr);YAHOO.mc.msgrLoadID = setTimeout(YAHOO.mc.loadMsgr, 5000);</script><br /><script type="text/javascript">gLaunchProfile.stop('LD_JS_BP', false);</script><br /><script type="text/javascript">resizeLeftPane();</script><br /><script type="text/javascript">gLaunchProfile.start('RT_AD_FOOT');</script>Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-57797923162732185942009-06-29T17:41:00.000-07:002009-07-20T23:01:35.953-07:00BANK FAILURES "The Next Tsunami""<span style="font-size:130%;"><strong style="font-family: arial;">Tidal waves continue to hurtle through the banking industry</strong></span><br /><br /><span style="font-family:arial;">Manoeuvring a vessel with accuracy and precision through stormy waters is a fundamental skill, which most financial seaman acquire over time. But in the face of an all-out financial tsunami, those skills are of little use. This impending financial monster wave continues on a crash-course across America, leaving bank debris in its wake.</span><br /><br /><span style="font-family:arial;">Bank insiders are reluctant to tell the public that the financial sector is still under tremendous pressure, with credit quality and toxic assets continuing to plague banks for the next 18 months to three years. Literally hundreds of banks will cease to exist over the next two years.</span><br /><br /><span style="font-family:arial;">Commercial Real Estate will lead the next downturn - during the remainder of 2009 and the first half of 2010. Banks have tightened their credit criteria and hiked up fees to scandalous levels in an attempt to make back their losses and at the expense of the loyal customer. It appears the situation will get worse before it gets better.</span><br /><br /><span style="font-family:arial;">Five institutions insured by the Federal Deposit Insurance Corp. (FDIC); two in Georgia and California respectively and one in Minnesota were closed Friday, bringing the total of bank failures for 2009 to 45. It is anticipated that over 100 banks will fail in 2009 alone. </span><br /><br /><span style="font-family:arial;">Community Bank of West Georgia and Neighborhood Community Bank were both closed by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver. Neighborhood Community Bank’s deposits will be assumed by West Point, Georgia-based CharterBank, which entered into a purchase and assumption agreement with the FDIC.</span><br /><br /><span style="font-family:arial;">In California, Irvine-based MetroPacific Bank and LA’s Mirae Bank were closed by the California Department of Financial Institutions. The FDIC, again acting as receiver, entered into purchase and assumption agreements with SunWest Bank to assume MetroPacific’s deposits (minus those from brokers) and with Wilshire State Bank to assume all of Mirae Bank’s deposits.</span><br /><br /><span style="font-family:arial;">The government's plan to enable banks to dump troubled assets is facing problems of its own. The Public-Private Investment Program (PPIP), like many of the government programs, have fallen short in their execution. So what will the Treasury do? Announce a new and improved PIPP to keep enthusiam running high? The Markets rallied in March when Treasury Secretary Timothy Geithner announced that plan and will likely rally again only to falter due to poor execution.</span>Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com1tag:blogger.com,1999:blog-7835115197110546930.post-28592488504167008352009-06-16T15:24:00.001-07:002009-07-27T13:42:46.421-07:00ECONOMIC RECOVERY– “Not according to Bank insiders”Economists and politicians chatter about green-shoots and pundits come out waving the flag – predicting the worst is over. Then the bottom falls out – we hit the depression. Sound familiar? History is not only a great healer – but a fantastic teacher. Let’s take a little trip down memory lane. Its 1929, Wall Street crashes. But the DOW rallies solidly over six months in 1930, reclaiming nearly half of its losses.<br /><br />Not so long ago, Japan’s economic “Lost Decade”- between 1990 and 2000 was seen as one of the most turbulent ever for the archipelago (in a sense, the country is still waiting to fully recover). Nevertheless in that first year, pundits squealed that the worst was over as the Nikkei peaked at 38,900. At one point the biggest rally came in at 140% and then inevitably the bottom fell. The Japanese stock market is the lowest it has been since the 80s.<br /><br />Now, to presume that this is a fate we are impervious too, is a whopping presumption. All we need do is look at the real estate market – do you honestly believe that we have seen the worst there is in the housing market? This year alone witnessed house equity fall by $2T and we haven’t even reached the full throws of summer. To top that, consumption is plummeting and unemployment is at record levels and will rise further.<br /><br />Fundamental scrutiny of economic data illustrates we are no way out of the woods. Unfortunately recovery is not around the corner. In all seriousness, we have not even bottomed in this recession. To be able to genuinely declare an upturn, we have to dissect the issues surrounding the banks credit quality, deposit growth, real estate foreclosures and toxic assets.<br /><br />Banking insiders will tell you that until the credit quality calamity and toxic assets, now referred to as "legacy" assets are resolved; they will be severely restricted in their lending practices. This is the main reason we haven't seen much on the merger and acquisition front. The only way the M&A activity will pick up is when the banks feel confident about their internal business. <br /><br />When you have a credit crisis of this magnitude, it is essential we are cautious and steer away from reckless, baseless and hasty declarations that assert all is well. News of good tidings is always welcome, but don’t let this false prophet make phoney declarations.Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com0tag:blogger.com,1999:blog-7835115197110546930.post-23453996945950989452009-06-03T13:10:00.000-07:002009-06-04T07:17:51.101-07:00Bamboozled By Banking Fees: When Will Banks Stop Gouging the Public!How would you like to pay $ 51 dollars for a $1.70 cup of coffee at Starbucks or $ 16,500 dollars for a 550 dollar small laptop computer from Comp USA or even $75 dollars for a 2.25 gallon of gas?! Sounds preposterous right?<br />Wrong! Banks are charging in many cases over 3000 % mark-up over their costs for many of their basic services from overdrafts and wire transfers to account fees.<br /><br />I continue to be dumbfounded at how banks are reporting historic loses. It's really quite simple; banks make money by charging interest on loans. In fact they have preserved the old “3-6-3 rule,” bankers paid a 3 percent rate of interest on deposits, charged a 6 percent rate of interest on loans, and then headed to the golf course at 3 o’clock.<br /><br />Even though this is known as banker’s banter, the “3-6-3 rule” mixes a grain of truth with a hard dose of reality. Today the joke is on us with the NEW BANK RULE, ".65 - 5 to 27% - 3! According to the New York Federal Reserve statistics, banks today typically pay on aggregate less than 1%(.65%) for all deposits and charge an alarming 5% to 27% interest.<br /><br />Unquestionably, the interest margin banks earn by intermediating between depositors and borrowers continues to be the primary source of profits for most banking companies. But banks also earn shameful amounts of non-interest income by charging their customers fees and penalties in exchange for a variety of financial services.<br /><br />Over the last decade, advances in information, communications, and financial technologies have allowed banks to produce many of their traditional services far more efficiently for only pennies on the dollar. These efficiencies have clearly not been passed on to the "Valued Customer".<br /><br />For example, banking cost of ownership statistics and metrics will tell you that world class banks can process a wire transfer for $1.75 but the cost to the customer is a whopping $45.00. A simple overdraft on a checking account routinely costs about $1.50 - the charge to the valued customer is about $35.00 to $50.00.<br /><br />Personally I find this situation infuriating, having worked in banking over the course of 25 years. When a branch manager looks you in the eye and acts like he is doing you a huge favor by cutting the penalities in half. The reality is instead of charging you 3000% markup he is giving you a deal by only charging you 1500%.<br /><br />The ABA described these exception fees as “avoidable” through some simple changes. The banks have conditioned us into thinking that it is our fault for these fees and if only we managed our money better they could be avoided. The fact is the banking industry is exploiting the public because we have become so dependant on their services. All banks are complicit – they know what the real costs are and what they end up charging the customer.<br /><br />The bottom line is that banks have to change their outdated business model and come up with creative ways to increase revenues and drive efficiency, rather than charging shameful fees to people who can least afford them.Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com2tag:blogger.com,1999:blog-7835115197110546930.post-76302643349090945932009-06-01T15:15:00.000-07:002009-06-02T12:10:03.767-07:00GM Today, State and Local Government TomorrowGM has been a sinking ship for decades – a company that stopped moving with the times and found it more and more difficult to adapt to the shifting landscape. The failure of management to adjust to change and a broken financial business model has ended up costing the taxpayer billions.<br /><br />They had their eye off the ball, thinking that they could make money through their financing rather than building more competitive and innovative vehicles. Today, the GM website’s home page parades the words “RE: INVENTION” – a day late and $50 billion dollars short, don’t you think?<br /><br />Why do we have to come face to face with disaster before we get the message and take action? GM's failure is an indictment of American mismanagement – a mismanagement that has been tolerated for far too long. It highlights the damage to our economy and demonstrates what happens when we refuse to move with the world around us.<br /><br />The parallels within the government at the Federal, state and local levels are bloodcurdling. I have been on the inside of the hallowed walls of government and observed first hand the enormous misuse of taxpayer’s funds. California is a prime example of failures in management – both at State and local level. I have seen first hand hundreds of millions of dollars literally thrown down the drain, because Government departments fail to execute cost-effective, premptive business models.<br /><br />There is unprecedented growth in government entitlements, unemployment benefits, housing subsidies, health care, etc. Legacy costs, exhaustive project cost overruns, no focus and clear set of priorities. To top it off, there is little if any accountability by government to get things done.<br /><br />Governor Schwarzenegger has gone to Washington to ask for government assistance. At the same time he’s making a public statement that California is spending more money than it is taking in. The Governor has an eye for the obvious.<br /><br />The question is what we are prepared to do to rectify the problem, and keep it from happening again. Sadly drastic measures like layoffs and closing parks does not solve the problem. This is not unlike taking an obese person and amputating his leg, instead of putting them on a strict diet and exercise program.<br /><br />We need a plan of action not rhetoric to solve these problems in the form of a “New American Business Model” for both the private and public sector. One that mandates three basic tenants:<br /><br />1) Don’t spend more than you make.<br />2) Increase productivity and efficiency equal to any increase in spending.<br />3) Refresh and modernize your business model and strategic plan every two years.<br /><br />It really couldn’t be simpler. If the Governor of California is serious about getting back on the right track, he can always can give me a call.Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com3tag:blogger.com,1999:blog-7835115197110546930.post-46489124933213490882009-05-31T23:25:00.000-07:002009-06-01T22:08:29.389-07:00Merger & Aquisition : Integration Hazards and Lessons LearnedThe recent financial crisis will demand the consolidation of our financial industry over the next five to seven years. There are about 8,000 banks today that will be whittled down to 4,000 during this period. These events must not be taken lightly if organizations are to realize the essential savings through economies of scale and significant productivity gain.<br /><br />Industry research indicates that most acquisitions fail to achieve expectations. It is not uncommon for companies to experience a drop in productivity of 50% in the first 4 to 8 months of a merger and a 50% loss of key senior executives in the acquired firms in the first year.<br /><br />Essentially a merger and acquisition occurs in two stages; first making the deal and second making the deal work. The resources committed to “making the deal” trail off as the merger is finalized and the integration approved. The majority of the problems however are related to the integration occurring during implementation.<br /><br />There are normally no corporate standards or documented model, sequence of events, or blue print for “making the deal work.” The size and scope of the acquisition is normally much larger than companies have experienced in the past and demand a more structured approach; this is typical for an organization that only goes through acquisitions every few years if at all.<br /><br />Another major source of contention and problems are rooted in the differences in the corporate cultures. Every corporation has its own sense of identity and its own way of doing business.<br /><br />Based on my experience, these are the lessons learned for all mergers:<br /><br />1. Integration management must be recognized as a full-time job and as a distinct business function and organization. Without a team dedicated solely to the process, the organization will suffer from burnout, diminished quality, delays — and risk losing valuable contributors.<br /><br />2. A formal integration methodology, including phases, sequences of events, organization structure, roles and responsibilities, description of deliverables and templates should be followed. This will avoid problems with quality and consistency of deliverables, eliminate the duplication of effort, and unnecessary omissions and delays.<br /><br />3. An Integration Program Office (IPO) should be formed immediately following due diligence so that integration planning can begin before a deal closed.<br /><br />4. Training and education regarding the goals, objectives, policies, guidelines and deliverables of the integration should take place at the beginning of the integration to avoid issues related to poor quality and inconsistent deliverables.<br /><br />5. Decisions about management structure, key roles, reporting relationships, layoffs and restructuring should be made, announced and implemented as soon as possible after the deal is signed. This avoids the uncertainty and anxiety that lasted for months and distracted employees from moving the integration forward.<br /><br />6. Effective lines of communication must be established across the corporation to educate management and staff on the goals, operating strategies, established models of operation, integration assumptions, and progress. The communications process must be continuous, broad based, and reach all levels of the organization.<br /><br />7. Provide employees with the opportunity to practice; simulate “real life” situations in which to apply learning. Reinforce/Evaluate comprehension of information on which employees are trained. Jay Cousinshttp://www.blogger.com/profile/13959569856769396532noreply@blogger.com2