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Big Data for a Small World: SMEIoT

smeiotIoT

The world is a great big database and algorithmic wizards and mad data scientists are burning the midnight oil to mine the perplexing infinities of ubiquitous data points.  Their goal is to put data to use to facilitate better governance, initiate pinpoint marketing campaigns, pursue revelatory academic research and improve the quality of service public agencies deliver to protect and serve communities. The convergence of Big Data, Cloud Computing and the Internet of Things (IoT) make this possible.

The earth is the mother of all relational databases.  It’s six billion inhabitants track many billions of real time digital footprints across the face of the globe each and every day.  Some footprints are readily apparent and easy to see.  Facebook likes, credit card transactions, name and address lists, urgent Tweets and public records sparkle like alluvial diamonds; all easily plucked by data aggregators and sold to product marketers at astonishing profit margins.  Other data points are less apparent, hidden or derived in the incessant hum of the ever listening, ever recording global cybersphere.   These are the digital touch points we knowingly and unknowingly create with our interactions with the world wide web and the machines that live there.

It is estimated that there is over 20 billion smart machines that are fully integrated into our lives.  These machines stay busy creating digital footprints; adding quantitative context to the quality of the human condition.  EZ Passes, RFID tags, cell phone records, location tracking, energy meters, odometers, auto dashboard idiot lights, self diagnostic fault tolerant machines, industrial process controls, seismographic, air and water quality apparatuses and the streaming CBOT digital blips flash the milliseconds of a day in the life of John Q. Public.  Most sentient beings pay little notice, failing to consider that someone somewhere is planting the imprints of our daily lives in mammoth disk farms.  The webmasters, data engineers and information scientists are collecting, collating, aggregating, scoring and analyzing these rich gardens of data to harvest an accurate psychographic portrait of modernity.

The IoT is the term coined to describe the new digital landscape we inhabit.  The ubiquitous nature of the internet, the continued rationalization of the digital economy into the fabric of society and the absolute dependency of daily life upon it, require deep consideration how it impacts civil liberties, governance, cultural vibrancy and economic well being.

The IoT is the next step in the development of the digital economy. By 2025 it is estimated that IoT will drive $6 Trillion in global economic activity.  This anoints data and information as the loam of the modern global economy; no less significant than the arrival of discrete manufacturing at the dawn of industrial capitalism.

The time may come when a case may be made that user generated data is a commodity and should be considered a public domain natural resource; but today it is the province of digirati  shamans entrusted to interpret the Rosetta Stones, gleaning deep understanding of the current reality while deriving high probability predictive futures.  IoT is one of the prevailing drivers of global social development.


SME

There is another critical economic and socio-political driver of the global economy.  Small Mid-Sized Enterprises (SME) are the cornerstone of job creation in developed economies.  They form the bedrock of subsistence and economic activity in lesser developed countries (LDC).  They are the dynamic element of capitalism.  SME led by courageous risk takers are the spearhead of capital formation initiatives.  Politicians, bureaucrats and business pundits extol their entrepreneurial zeal and hope to channel their youthful energy in service to local and national political aspirations.  The establishment of SME is a critical macroeconomic indicator of a country’s economic health and the wellspring of social wealth creation.

The World Bank/ IFC estimates that over 130 million registered SME inhabit the global economy. The definition of an SME varies by country. Generally an SME and MSME (Micro Small Mid Sized Enterprises)  are defined by two measures, number of employees or annual sales.  Micro enterprises are defined as employing less than 9 employees, small up to 100 employees and medium sized enterprises anywhere from 200 to 500 employees.  Defining SMEs by sales scale in a similar fashion.

Every year millions of startup businesses replace the millions that have closed.  The world’s largest economy United States boasts over 30 million SME and every year over one million  small businesses close.  The EU and OECD countries report similar statistics of the preponderance of SME and numbers of business closures.

The SME is a dynamic non homogeneous business segment.  It is highly diverse in character, culture and business model heavily colored by local influence and custom. SME is overly sensitive to macroeconomic risk factors and market cyclicality.  Risk is magnified in the SME franchise due to high concentration of risk factors.  Over reliance on a limited set of key clients or suppliers, product obsolescence, competitive pressures, force majeure events, key employee risk, change management and credit channel dependencies are glaring risk factors magnified by business scale and market geographics.

In the United States, during the banking crisis the Federal Reserve was criticized for pursuing policies that favored large banking and capital market participants while largely ignoring SME. To mitigate contagion risk, The Federal Reserve  quickly acted to pump liquidity into the banking sector to buttress the capital structure of SIFI (Systemically Important Financial Institutions). It was thought that a collateral benefit would be the stimulation of SME lending.  This never occurred as SBA backed loans nosedived. Former Treasury Secretary Timothy Geithner implemented the TARP and TALF programs to further strengthen the capital base of distressed banks as former Fed Chairman  Ben Bernanke pursued Quantitative Easing to transfer troubled mortgage backed securities onto Uncle Sams balance sheet to relieve financial institutions  of these troubled assets. Some may argue that President Obama’s The American Recovery and Reinvestment Act of 2009 (ARRA)  helped the SME sector.  The $800 billion stimulus was one third tax cuts, one third cash infusion to local governments and one third capital expenditures aimed at shovel ready infrastructure improvement projects.  The scale of the ARRA was miniscule as compared to support rendered to banks and did little to halt the deteriorating macroeconomic conditions of the collapsing housing market, ballooning unemployment and rising energy prices severely stressing SME.

The EU offered no better.  As the PIGS (Portugal, Ireland, Greece, Spain) economies collapsed the European Central Bank forced draconian austerity measures on national government expenditures undermining key SME market sensitivities.  On both sides of the Atlantic, the perception of a bifurcated central banking policy that favored TBTF Wall Street over the needs of  an atomized SME segment flourished.  The wedge between the speculative economy of Wall Street and the real economy on Main Street remains a festering wound.

In contrast to the approach of western central bankers, Asian Tigers, particularly Singapore have created a highly  supportive environment for the incubation and development of SME. Banks offer comprehensive portfolios of financial products and SME advisory services. Government legislative programs highlight incubation initiatives linked to specific industry sectors. Developed economies have much to learn from these SME friendly market leaders.

The pressing issues concerning net neutrality, ecommerce tax policies, climate change and the recognition of Bitcoin as a valid commercial specie are critical developments that goes to the heart of a healthy global SME community.  These emerging market events are benevolent business drivers for SME and concern grows that legislative initiatives are being drafted to codify advantages for politically connected larger enterprises.

Many view this as a manifestation of a broken political system, rife with protections of large well financed politically connected institutions. Undermining these entrenched corporate interests is the ascending digital paradigm promising to dramatically alter business as usual politics. Witness the role of social media in the Arab Spring, Barack Obama’s 2008 election or the decapitalization of the print media industry as clear signals of the the passing away of the old order of things.  Social networking technologies and the democratization of information breaks down the ossified monopolies of knowledge access. These archaic ramparts are being gleefully overthrown by open collaborative initiatives levelling the playing field for all market participants.

SMEIoT

This is where SMEIoT neatly converges.  To effectively serve an efficient market, transparency and a contextual understanding of its innate dynamics are critical preconditions to market participation.  The incubation of SME and the underwriting of capital formation initiatives from a myriad of providers will occur as information standards provide a level of transparency that optimally aligns risk and investment capital. SMEIoT will provide the insights to the sector for SME to grow and prosper while industry service providers engage SME within the context of a cooperative economic non-exploitative relationship.

This series will examine SME and how IoT will serve to transform and incubate the sector.  We’ll examine the typology of the SME ecosystem, its risk characteristics and features.  We’ll propose a metadata framework to model SME descriptors, attributes, risk factors and a scoring methodology.  We’ll propose an SME portal, review the mission of Big Data and its indispensable role to create cooperative economic frameworks within the SME ecosystem. Lastly we’ll review groundbreaking work social scientists, legal scholars and digital frontier activists are proposing to address best governance practices and ethical considerations of Big Data collection, the protection of privacy rights,  informed consent, proprietary content and standards of accountability.

SMEIoT coalesces at the intersection of social science, commerce and technology.  History has aligned SMEIot building blocks to create the conditions for this exciting convergence.  Wide participation of government agencies, academicians, business leaders, scientists and ethicists will be required to make pursuit of  this science serve the greatest good.

 

This is the first in a series of articles on Big Data and SMEIoT . It originally appeared in Daftblogger eJournal. Next piece in series is scheduled to appear on Daftblogger eJournal within the next two weeks.

#smeiot #metasme #sum2llc #sme #office365 #mobileoffice #TARP #capitalformation #IoT #internetofthings #OECD #TBTF #Bitcoin #psychographics #smeportals #bigdata #informedconsent

July 9, 2014 Posted by | banking, Bernanke, capitalism, commerce, credit, credit crisis, culture, economics, information technology, internet of things, legal, legislative, metasme, OECD, politics, private equity, psychology, regulatory, risk management, small business, SME, smeiot, TALF, TARP, Treasury, Uncategorized | , , , , , , , , , , , , , , , , | Leave a comment

Corporate Governance and Financial Health

16414033-abstract-word-cloud-for-corporate-governance-with-related-tags-and-termsThree years ago I did some work for an independent credit rating agency utilizing a quantitative methodology to determine financial health of corporations.  Dr. Patrick Caragata founder of the firm conducted a study of 200 TSX listed firms with high CGI ratings (Governance Metrics International).   Dr. Caragata was seeking to determine the correlation of Corporate Governance (CG) and financial health.  His findings revealed that “CG ratings failed to indicate when a company was in poor health 75% of the time.  In fact, they wrongly identified 32% of weak companies as being highly rated on GMI.”

Dr. Caragata also extended his model to use financial health score as an early warning signal for a listed company’s share price.  KMV, established ratings agencies, Altman’s Z Score were also determined as lagging predictors of share price.  Dr. Caragata’s research on bond pricing and CDS where better predictors of financial health momentum and ultimate predictors of share price but still failed to correlate financial health score as an early warning signal for share prices.  The problem that the model continually encountered was that valuation always exhibited a bias towards share price (market momentum)  not financial health score.  The determination of a “fair value” based on historical spreads of financial health score and share price was overly and overtly price sensitive. Perhaps a signal of an inefficient market?  This was particularly true for bubble stock anomalies and commodity sensitive equities.

Purveyors of Business Process Management (BPM) suggest that listed practitioner’s of BPM trade at a 15% premium to non-practitioners.  I wonder if its marketing boast.  Though BPM is not CG;  it does speak to having CG excellence in the corporate DNA.   A cultural commitment   to sound practices create valuation premiums and sustainable business models.  That’s the message well managed companies consistently deliver as a central theme of their value proposition.  Integrating sound practices and CG excellence into the corporate culture does create valuation premiums because it suggests an intentionality of business process deeply wedded to the enterprise mission.

I believe the radical reconfiguration of Wall Street offers a telling example of incongruity of good CG practitioners and financial health.  It was always a self evident truth that Wall Street firms that folded or transformed into commercial banks were probably some of the best rated CG enterprises.  CG excellence can do nothing to save an enterprise with a structurally flawed business model.  Though CG excellence does presuppose a board of directors in tune with the vicissitudes of the market; who would have thought that we would be looking at the extinction of the global investment banking business?  Merrill Lynch, Morgan Stanley, Lehman Brothers, Bear Stearns and the mighty Goldman Sachs were walking dinosaurs with flawed unsustainable business models?  All either folded, were acquired or became FDIC insured commercial banks.  I still can’t believe it but it’s true.  The world is being turned upside down.

Sum2 is a firm believer in coupling quantitative and qualitative risk measures to maintain operational excellence to build a healthy sustainable enterprise.  Effective CG alone cannot assure financial health.  It  must be a critical pillar of the governance, risk and compliance (GRC) triad.

When we speak about the principles of good governance, how about the original dissertation on the ideal of governance excellence.  Seemingly an insistence on an honest evaluation of reality to determine what is good is all it takes.  Its really that simple.

Visit the blog Risk Rap and the Allegory of the Cave post on FAS 157:

Sum2 welcomes the opportunity to speak with partners who share our passion for GRC excellence.

originally published 6/12/13

June 12, 2013 Posted by | Bear Stearns, business continuity, credit crisis, Credit Redi, culture, FASB, operations, risk management, sound practices, sustainability | , , , , , , , , , , , , , , , , , | Leave a comment

How Deep is the Ocean?

The crisis in the credit markets is creating some new American superheroes. Fed Chairman Bernanke and Treasury Secretary Geithner are today’s dynamic duo engaged in a titanic struggle with the evil forces of inflation, stagflation, a weak dollar and dysfunctional credit markets. Their mission is to keep the specter of a recession from reappearing again.

Their weapon of choice is a high octane capital swap, low interest generator and paper guarantee machine. The machine produces accelerated capital flows by pumping liquidity into credit channels faster than water surging through the Hoover Dam at the height of a Rocky Mountain snow melt.

Just as the great Colorado River brings life and growth to the parched deserts of the American southwest so to is liquidity the essential condition to sustain the economic viability of a corporate enterprise.

Liquidity concerns grow particularly close to the bone of small businesses. Liquidity is their bread of life and small businesses must master the fine art of liquidity management. Unlike large corporations and governments, the ability of small businesses to print money, tap commercial paper markets, leverage or sell assets or engage in other forms of exotic balance sheet alchemy is limited. So at the end of the day, when the payroll is due, a key supplier is waiting by the receptionist for a check and your best sales person is doing her best to close that huge new deal your anxiety grows a bit as you ponder your cash position and begin to project the next three months.

You call your local banker. You are a long standing and valued customer but “risk aversion” continues to creep into the discussion and they tell you that their funding sources have grown “risk averse” due to losses in the sub-prime mortgage market and finding new funding sources have been difficult. So for now at least the expansion of a credit facility with them is not an option.

You keep getting calls from those merchant finance companies that are offering short term loans but the prospect of paying usurious rates of 18%-30% on future credit card receivables will put a major dent in your profit margins. That makes this credit channel’s cost of operating capital prohibitively expensive.

That’s where risk management comes in. Many small business owners are masters at risk management. They are skilled entrepreneurs that put personal capital at risk. They got major skin into the game and that motivates them to continually evaluate how to protect their assets and maximize returns. Many small business owners are extremely gifted at leveraging assets to address opportunities. Assets such as monetary capital, people, intellectual capital, suppliers, facilities and products are routinely utilized to enhance and extend liquidity. But as credit markets tighten all small businesses need to become more aware of preserving liquidity. This can be accomplished by incorporating a few simple risk management practices.

A good place to start is to make sure your systems and business processes are optimized to support efficiencies. Many of the traditional cash management techniques are well known. Small business accounting software and the availability of internet banking tools are a great help to small businesses. These tools help to extend and manage payment cycles, match assets to liabilities and a good banker will help you develop specific strategies and practices to address these issues and improve your cash position.

Another area to consider is to arbitrage credit providers. Obviously this tactic works great during times of enhanced liquidity but credit channels are still vibrant and the market is crowed with numerous providers and products. Though it is true that as more participants enter markets they tend to become more efficient resulting in small spreads the volatility of the credit markets can work to your advantage. If you can replace a line of merchant finance credit with a bank offered facility you will increase your margins by the spread of the savings.

Sources of capital leakage from the company are a major threat to liquidity. Small business managers must be aware of how to assess this risk factor and how to minimize potential damage it can cause. By “leakage” of enterprise capital we mean to suggest that capital invested by the business did not create an acceptable rate of return. A concerted approach to assessing and managing risk factors preserves liquidity, builds equity and a strong balance sheet.

The principal villains that contribute to capital leakage are poor cash management and inappropriate, non-prioritized or misdirected capital allocation initiatives. These initiatives are acquisitions or projects requiring the investment of time, money, personal energy and corporate resource that do not produce an optimal rate of return.

Small businesses need to incorporate opportunity cost in determining ROI on business initiatives. This is because a small business must limit the number of projects it can engage. It must be certain that current projects will build greater value for the business then the project it declined to pursue. An understanding of value at risk (VaR) is also a useful metric to determine what initiative or project will mitigate the greatest risk and produce the greatest return on capital expenditures.

Risk assessment is a powerful opportunity discovery exercise that requires intentionality and discipline. Many small business owners do these assessments in their head and make decisions based on gut feeling or intuition. An opportunity discovery methodology that walks you through an objective assessment of risk factors is a wonderful complement to the fine tuned business instinct of the small business owner.

Lastly, small businesses need to focus on their most profitable products, best clients and key suppliers within their most promising markets. This may seem obvious but many businesses are reluctant to alter their business models to accommodate this blatant reality. Inertia, culture and ego are the principle culprits and ironically clients, products, suppliers and markets pose some of the greatest risks to small businesses.

It is true that a rising tide lifts all boats. We have just experienced one of the greatest economic expansions in the history of the global economy. It’s been a great run. But the party is over. The era of an unending flow of easy credit and cheap capital is over for now. Until happy days return again we must adapt and protect our solvency through effective liquidity management practices. During times of economic uncertainty and distress it’s a great opportunity to build financial health through effective risk management because when the tide goes out the rudderless businesses captained by poor stewards will crash upon the rocks and get beached on unforeseen shoals or sink into the depths of the unforgiving briny deep.

You Tube Music Video:  Billie Holiday,  How Deep is the Ocean?

Risk: credit, small business,  SME, recession, liquidity

April 29, 2010 Posted by | banking, credit crisis, risk management, small business, SME | , , , , , | 1 Comment

Credit Tight from SBA Lenders

Last year lending to small businesses evaporated with glaring exception of Wells Fargo which increased its lending through Small Business Administration (SBA) programs.  With bank lending to small businesses nearly frozen many small businesses are scrambling for the credit lines and loans they need to keep their companies alive.

The landscape of lenders willing to provide credit to small business is evolving.  Wells Fargo has emerged as the principal provider of credit to the small business market becoming the number-one lender through the SBA loan programs during 2009.

CIT Group, JPMorgan Chase, Banco Popular and Bank of America have cut their SBA lending by more than 70% this year.  While Wells Fargo buttressed by its acquisition of Wachovia, increased its loan volume 4%, from $583 million in 2008 to $605 million during 2009.

Wells Fargo acquisition of Wachovia closed three months into the 2009 fiscal year allowing Wells Fargo to book only nine months of Wachovia SBA lending which totaled $742 million a decrease of  24% from aggregate SBA loans extended during 2008.   During 2009 the number two lender to small businesses was U.S. Bank which made $250  million in loans through the SBA’s lending program.

The large banking institutions that received TARP funds  used that infusion to prop up the capital ratios to improve weak balance sheets.  Little of these funds were used to fund credit programs for small businesses.  Wells Fargo’s capital ratios were healthier then its larger competitors.  This allowed Wells Fargo to take advantage of their rivals distraction from the small business market.  Indeed the bankruptcy filing by CIT, the management tremors at Bank of America, Citibank’s scramble for capital and JP Morgan Chase digestion of Bear Stearns allowed Wells Fargo to fill the large vacuum in the  neglected SBA lending market.

Wells Fargo also had the advantage of not being dependent on securitizing its SBA loans and selling them in the  secondary market.  As evidenced by CIT’s bankruptcy filing,  funding for securitized loans disappeared as the risk aversion of institutional investors grew and liquidity evaporated from the market.  These market events led Wells Fargo to develop a focused discipline on the small business lending market.  The bank was committed to closing larger 7(a) SBA loans which are held and managed in the banks loan portfolio.  Wells Fargo’s small business strategy discouraged originating SBA Express Loans that offer lower credit limits and tend to have much higher default rates.  Wells Fargo’s SBA program and business model should be studied and replicated by community banks to energize small business lending.

Small business lending and capital formation in the sector is a critical component for sustainable economic growth.  Banks need to engage the small business market with a deeper understanding of the risks associated with the market.  Small business managers must demonstrate to bankers and shareholders that they are worthy stewards of credit and equity capital by implementing sound risk management and corporate governance practices.  This assures bankers that  small business managers are a good credit risk capable of building a mutually profitable business relationship for the many years to come.

Risk: SME, SBA, credit, small business, banking, community banks

March 11, 2010 Posted by | banking, bankruptsy, credit, credit crisis, recession, risk management, SME, TARP | , , , , , , , , , , , , , | Leave a comment

Sum2’s Hamilton Plan Getting Scholarly Attention

The following research paper on The Hamilton Plan was written by Deepak Verma, a business student at Baruch College. To our knowledge it is the first scholarly research that incorporates the Hamilton Plans theme of a focus on SME manufacturing.

ISSUES MANAGEMENT PROJECT
Prof. Michael Kirk Stauffer

DEEPAK VERMA
The Societal and Governmental Environment of Business
Baruch College, the City University of New York
December 16, 2009

Table of Content

Topic Page No
1. Executive Summary 2
2. The Issue: Shrinking Manufacturing Base 3-4
3. The Origin of the Issue and Solution 4-5
4. Small & Medium Enterprises; Catalyst of Sustainable Growth 6
5. Initiative for Development of SMEs 7-8
6. Future of SME and SMEs in USA 9
7. Appendix : References 10

EXECUTIVE SUMMARY
Living beyond means is not sustainable. One of the primary reasons of prolonged Economic and Credit Crisis in United States is its low manufacturing base and American way of consuming more than what is produced. This research paper will examine issue of shrinking manufacturing base of USA, unfair and unethical business practices adopted by countries such as China to boost export thereby causing trade deficit to USA, reasons for low manufacturing base and role of small and medium enterprise (SME) manufacturers in developing a sustainable manufacturing base of the US economy.

Prior to coming at Baruch College for pursuing MBA in finance and investments, I worked for over 10 years with Small Industries Development Bank of India (SIDBI), an apex financial institution of India engaged in the development and financing of SMEs and micro financial institutions. Having worked with this financial institution, I realized the importance of SMEs in bringing sustainable economic development and employment creation, particularly in a mixed economy like India.

The paper will discuss on public-private initiative in USA for development of SMEs, their efforts and capital investment for empowerment and financing of SMEs. Various initiatives taken by private and public sector will be analyzed. Efforts have been made to forecast future of SMEs vis a vis manufacturing sector, role of community development financial institutions (CDFIs), and flow of commercial bank credit and private equity investment in SMEs in the United States.

THE ISSUE: SHRINKING MANUFACTURING BASE
Why should shrinking manufacturing base be an issue in a market driven service oriented economy like US? Federal Reserve Chairman Ben Bernanke stated on Feb. 28, 2007, “I would say that our economy needs machines and new factories and new buildings and so forth in order for us to have a strong and growing economy.” Strong Manufacturing base is the only solution to rising trade deficit and industrial job loss. Manufacturing promotes innovation which leads to investments in equipment and people, research and development, improved products and processes and increase in productivity and higher standards of living. Increase in manufacturing leads to increase in demand for raw materials and other commercial services.

United States has transitioned from an agricultural economy to Industrial economy to a service economy. Over a period of this transition US has lost its manufacturing base substantially and has been importing goods from around the world which has resulted into huge trade deficit and industrial job losses. IMF has categorized the US current account deficit as unsustainable. Warren Buffet also once commented “The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.”

Since the United States joined the WTO, US trade deficit has risen from $150.6 billion in 1994 to $817.3 billion in 2006. US reliance on imports ranges from electronic items to apparels and other consumables. For example, electronic items sold in United States are developed by companies such as Philips, Toshiba, Sony, Hitachi, Samsung and Sharp. We have lost significant market share in Auto Industry also. Toyota has surpassed General Motors to become leading auto manufacturer in terms of global sales. Ironically, items such as clothing and apparel where USA had its dominance are also being imported from foreign countries. Over 90 percent of clothing and shoes sold in the United States are made in foreign countries. US economy has thrived on consumerism which has led to increase in demand for goods over the years but production of domestically manufactured goods has been declining, thereby giving rise to imports from foreign countries and loss of industrial jobs.

Critics of the argument say it is the increase in production efficiencies, resulted from technological innovation and advancement that has resulted in loss of jobs. Additionally, it is the increase in consumption which is the root cause of import deficit rather than shrinking manufacturing base. Undoubtedly long term data indicates an increase in US manufacturing, but the way we are loosing our manufacturing share from last 2 decades and if we continue shrinking, we will soon have no choice but to consume whatever is dumped in our market and will be on the mercy of foreign imported goods. Increase in manufacturing has not kept pace with global growth in manufacturing in USA. Since 2000 global manufacturing growth has been 47%, whereas USA has recorded a growth rate of only 19%.

ORIGIN OF THE ISSUE & SOLUTION
What is causing shrinking manufacturing base in the United States? Is it purely competitive and cheaper products manufactured in Asia and Europe or some other factors are also responsible? Undoubtedly competitive global business environment has severely affected domestic production in the United States, this crisis in large arises due to unfair and unethical business practices adopted by its trading partners mainly China. Some of those practices are significant government subsidies, currency manipulation, large-scale dumping in the U.S. market, and other market-distorting practices. Additionally, unfavorable govt. policies, tax structure, increase in cost involved in healthcare, litigation, and regulation has significantly affected the bottom line. Increase in cost and strict regulation forced manufacturing units to move their facilities to other countries where companies do not face those kinds of impediments. Companies operating in the U.S. started outsourcing low-value tasks like simple assembly or circuit-board stuffing, but lower cost of outsourcing and shrinking margin lured them to continue outsourcing sophisticated engineering and manufacturing capabilities that are crucial for innovation in a wide range of products. As a result, the U.S. has lost or is in the process of losing the knowledge, skilled people, and supplier infrastructure needed to manufacture many of the cutting-edge products it invented.

Is there any way to bring back our manufacturing base?
The view that the U.S. should focus on R&D and services is completely flawed. Manufacturing is part of the innovation process and United States has to expand its manufacturing base to remain a world leader.

Following may be suggested to address the issue:

(1) Increase the tariffs on foreign goods so that they are more expensive than domestic goods.
(2) Demand the same level of quality in all foreign goods as American goods.
(3) Diplomatic measures should be taken to create pressure on foreign countries particularly China to stop manipulating their currencies.

Efforts should be made to open up foreign consumption markets adequately to U.S. producers so as to increase export and minimize trade deficit and should endeavor to combat predatory foreign trade practices aimed at undermining U.S. producers in their home market. Next big step is to promote small and medium enterprises to set-up manufacturing units.

SMALL & MEDIUM ENTERPRISES (SMEs); CATALYST OF SUSTAINABLE GROWTH
The issue of shrinking manufacturing base in the United States has been discussed by economist, policymakers, industrialists, and think tanks since economic integration and various measures to improve domestic manufacturing base have been suggested. But considering our free market dominance no sincere efforts were made to expand manufacturing base. Alarming rise in trade deficit and current economic and credit crisis which resulted in to massive industrial job loss has called for immediate intervention of private-public participation to protect and develop domestic manufacturing base for long term sustainable economic growth of United States. It is this time only that the role of SME manufacturers was felt inevitable to address this alarming issue.

President Obama during an interview said “We’ve got to make sure that we’re cultivating small businesses and entrepreneurs who are going to be driving employment growth,” the President said, “so that 20 years from now we can look back and we can say, ‘This was the pivot point, this is where we started to turn the corner.”

US need to change course at this point of time and need to develop a network of small and medium enterprises focusing on cleaner and green technology. The U.S. can explore strategies used in emerging markets for development of SMEs. According to Hau L. Lee, a professor at Stanford Graduate School of Business, “America needs large industrial zones devoted to specific industries–similar to zones in Taiwan, Singapore, Malaysia, and much of China. Such areas offer tax breaks, cheap or free land, workforce training, plenty of water and power, and agencies that serve as one-stop shops for all of the necessary permits and regulatory approvals.” A national level specialized financial institution may be created to provide low cost credit to newly setup SMEs in the manufacturing sector. US strength lies in high end technology, innovation, R&D, robust infrastructure, and know-how.

INITIATIVE FOR DEVELOPMENT OF SMEs

US govt. runs a number of programs for providing technological know-how, contracting opportunities, counseling and assistance, financing, and R&D facilities to small and medium enterprises. Some of the prominent programs run by US department of commerce are Manufacturing Extension Program, Advanced Technology Program, Technology Transfer, and Small Business Innovation Research (SBIR) Program. State govt. and number of govt. agencies are deployed for implementation of these schemes across the United States. SBA provides technical and financial assistance to SMEs through its partner lending institutions.

On November 17, 2009 The Goldman Sachs Group, Inc. launched 10,000 Small Businesses — a $500 million initiative for development of 10,000 small businesses across the United States. The plan envisaged to provide greater access to business education, mentors and networks, and financial capital to small businesses. Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs quoted “Small businesses play a vital role in creating jobs and growth in America’s economy.” Warren Buffett, CEO of Berkshire Hathaway also mentioned “Our recovery is dependent on hard working small business owners across America who will create the jobs that America needs. I’m proud to be a part of this innovative program which provides greater access to know-how and capital – two ingredients critical to success.”

Sum2 LLC, a firm which assists SMEs in implementing sound business practices by offering a series of programs and products, announced The Hamilton Plan on Labor Day. The Hamilton Plan is a ten point program to foster the development of manufacturing in the United States by tapping the entrepreneurial energy of small and mid-size enterprises (SME). The Hamilton Plan requires concerted focus of investment capital to fund development and establishment of an SME Development Bank (SDB) which will focus, manage and administer capital formation initiatives to incubate and develop SME manufactures.

I contacted James McCallum, CEO of Sum2llc to discuss the issue of shrinking manufacturing base and how SMEs can help in restoring manufacturing base in the United States. In response to my comment here is what he stated “It is pretty amazing that the United States has not done more to specifically encourage and address the unique needs of this critical economic driver. Many Asian countries are miles ahead of the US in SME banking and capital formation. These banks have extensive portfolios of finance products and technical assistance they provide to SME’s. The reasons that the US lacks focus in this area are many. US commitment to free market forces has badly warped our economic infrastructure. SMEs in the US have primarily relied on community banks for financing. Most of which went for real estate and construction projects. SME manufactures have just about disappeared from the economic landscape of the US. The credit crash and the economic malaise are awakening our understanding of the critical nature of SMEs and our need to manufacture products. Goldman’s 10,000 Businesses Initiative coalesces nicely with the Hamilton Plan we developed in 2008.”

USA MANUFACTURING & SMEs IN YEAR 2030

With the concerted government efforts for promotion and development of SMEs and private sector initiatives such as “10,000 Small Businesses plan” by Goldman, SMEs will be largely benefited having access to innovative financial products and services from a network of financial institutions. Ten point program suggested in Hamilton plan, if implemented, will bring cluster based development of SME manufacturers. Cleaner and green technology will drive long term sustainable growth, increase national income and result in employment creation. Healthy SMEs will be focusing on export of goods thereby reducing the trade deficit and offer a new market for commercial banking sector. High-tech growth oriented SMEs will also have access to private equity investments and will offer a new avenue of diversification to private equity industry.

But the task of SME development is a challenging task and requires strong will on the part of different stakeholders. SMEs are considered to be the riskiest segment of borrowers from a financial institution’s perspective and thus struggle for timely and adequate credit. Access to technical and market information, financial assistance and trained and educated workers is the biggest challenge for SMEs. Future SMEs require sound business practices such as corporate governance, risk management, stakeholder communications and regulatory compliance.

I believe that SMEs are sine qua non for manufacturing sector & I can foresee a bigger space for SMEs in next 20 years from now. I am so intrigued with the idea of SMEs development and their contribution in the economic growth that in the long run I wish to work as a freelancer offering consultancy and advisory services on financial and strategic matters to SMEs. I would work with a network of financial institutions, venture capitalists, engineers, environmentalists, social workers, suppliers, and policy makers so as to offer SMEs a comprehensive set of services.

APPENDIX: REFERENCES

U.S. Needs to Return to Its Manufacturing Base
http://seekingalpha.com/article/119136-u-s-needs-to-return-to-its-manufacturing-base

Securing America’s Future: The Case for a Strong Manufacturing Base, A Study by Joel Popkin and Company, Washington, D.C. June 2003, Prepared for the NAM Council of Manufacturing Associations

http://www.pmihome.org/Popkin_Study_3-03.pdf

President predicts it will take decades to revive declining U.S. manufacturing base?

http://www.sodahead.com/united-states/president-predicts-it-will-take-decades-to-revive-declining-us-manufacturing-base/question-637119/

Manufacturing & Investment Around The World: An International Survey Of Factors Affecting Growth & Performance, ISR Publications, revised 2nd edition, 2002. ISBN 978-0-906321-25-6.

Economy Watch: Economy, Investment & Finance Report

http://www.economywatch.com/world_economy/usa/export-import.html

USA Manufacturing output continues to increase (over the long run), Curious cat, Investing and economics blog

http://investing.curiouscatblog.net/2008/12/02/usa-manufacturing-output-continues-to-increase-over-the-long-term/

Alliance for American Manufacturers http://www.americanmanufacturing.org/issues/manufacturing/the-us-manufacturing-crisis-and-its-disproportionate-effects-on-minorities/

Can the future be built in America? http://proquest.umi.com.remote.baruch.cuny.edu/pqdweb?index=28&did=1860761601&SrchMode=1&sid=2&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1259505905&clientId=8851

TO SAVE AMERICAN MANUFACTURING: USBIC’S PLAN FOR AMERICAN INDUSTRIAL RENEWAL BY Kevin L. Kearns, Alan Tonelson, and William Hawkins

http://americaneconomicalert.org/USBIC_Save_American_Manufacturing_Jobs_Plan.pdf

Goldman Sachs Launches 10,000 Small Businesses Initiative

http://www2.goldmansachs.com/our-firm/press/press-releases/current/10-k-business.html

Goldman Sachs as Social Entrepreneur https://sum2llc.wordpress.com/

Hamilton Plan by Sum2llc https://sum2llc.wordpress.com/2008/09/03/sme-development-bank/

You Tube Video: Isley Brothers, Work to Do

Risk: SME, manufacturing, economic revitalization, social wealth

February 3, 2010 Posted by | business, commerce, credit crisis, economics, Hamilton Plan, manufacturing, recession, SME, Sum2 | , , , , , , , , , , , , , , | 1 Comment

NFIB Reports Decline in Small Business Optimism

The National Federation of Independent Business (NFIB) has just released the Small Business Economic Trends Report for January 2010.  The report published since 1973 measures small business sentiment on numerous economic and business factors that confront small businesses.

This months report indicates a decline in business optimism.  The NFIB index fell 0.3 points in December to 88. That’s up from the lows of March 2009, but has been below 90 for 15 months. “Optimism has clearly stalled in spite of the improvements in the economy,” the NFIB said.

Highlights Reported by Forbes Digital:

  • Jobs: 10% of the owners increased employment (the highest reading of 2009), but 22% reduced employment (seasonally adjusted). Over the next three months, 15% plan to reduce employment (down two points), and 8% plan to create new jobs (up one point), yielding a seasonally adjusted net-negative 2% of owners planning to create new jobs, a one-point improvement from November.
  • Credit: Regular borrowers (accessing capital markets at least once a quarter) continued to report difficulties in arranging credit at the highest frequency since 1983. A net 15% reported loans harder to get than in their last attempt, unchanged from November. Although “that is not nearly as severe as the financial distress reported in the pre-1983 period, 24 months of recession have sapped the financial strength of many small firms,” Dunkelberg said. Eight percent of all owners reported that their borrowing needs were not satisfied, down two points from November. The remaining 92% of all owners either obtained the credit they wanted or were not interested in borrowing.  Only 4% of the owners reported finance as their number one business problem (down one point).
  • Profits: 54% reported lower earnings compared to the previous three months. Of those, 65% cited weaker sales, 4% each blamed rising labor costs, higher materials costs and higher insurance costs, while 6% blamed lower selling prices. Poor real sales and price cuts are responsible for much of the weakness in profits.
  • Prices: 10% of the owners reported raising average selling prices, but 33% reported price reductions yielding a net-negative 22% (seasonally adjusted) of owners who cut prices in December. Plans to raise prices fell one point to a seasonally adjusted net 3% of owners, 35 points below the July 2008 reading. “The weak economy continued to put downward pressure on prices,” said Dunkelberg. “Widespread price cutting contributed to the reports of lower nominal sales.”
  • Costs: On the cost side, the percent of owners citing inflation as their number one problem (e.g. costs coming in the “back door” of the business) fell two points to 2%, and only 3% cited the cost of labor.

Components of the Optimism Index include: Labor Markets, Capital Spending, Inventory and Sales, Inflation, Profits and Wages, Credit Markets

The NFIB Report can be downloaded from the Sum2 website.  NFIB Optimism Index

The NFIB Research Foundation has collected Small Business Economic Trends Data with Quarterly surveys since 1973 and monthly surveys since1986. The sample is drawn from the membership files of the NFIB.

You Tube Music Video: Louis Armstrong, Sunny Side of the Street

January 12, 2010 Posted by | business, commerce, credit, credit crisis, recession, SME | , , , , , , , | Leave a comment

The Profitability of Patriotism: SME Lending

What a  difference a year makes.  A year ago the banks came crawling to Washington begging for a massive capital infusion to avoid an Armageddon of the global financial system.  They sent out an urgent SOS for a $750 billion life preserver of tax payers money to keep the banking system liquid.  Our country’s chief bursar Hank Paulson, designed a craft that would help the banks remain afloat.  Into the market maelstrom Mr. Paulson launched the USS TARP as the vehicle to save our  distressed ship of state.  The TARP would prove itself to be our arc of national economic salvation.  The success of the TARP has allowed the banks to generate profits in one of the most prolific turnarounds since Rocky Balboa’s heartbreaking split decision loss to Apollo Creed.  Some of the banks have repaid the TARP loans to the Fed.  Now as Christmas approaches and this incredible year closes bankers have visions of sugar plum fairies dancing in their heads as they dream about how they will spend this years bonus payments based on record breaking profitability.   President Obama wants the banks to show some love and return the favor by sharing more of their recapitalized balance sheets by lending money to small and mid-size enterprises (SME).

Yesterday President Obama held a banking summit in Washington DC.  Mr. Obama wanted to use the occasion to shame the “fat cat bankers” to expand their lending activities to SMEs.  A few of the bigger cats were no shows.  They got fogged in at Kennedy Airport.  They called in to attend the summit by phone.    Clearly shame was not the correct motivational devise to encourage the bankers to begin lending to  SMEs.    Perhaps the President should have appealed to the bankers sense of patriotism; because now is the time that all good bankers must come to the aid of their country.  Failing that, perhaps Mr. Obama should make a business case that SME lending  is good for profits.   A vibrant SME sector is a powerful driver for wealth creation and economic recovery.    A beneficial and perhaps unintended consequence of this endeavor is  the economic security and political stability of the nation.  These  are the  worthy concerns of all true patriots and form a common ground where bankers and government can engage the issues that undermine our national security.

The President had a full agenda to cover with the bank executives.  Executive compensation, residential mortgage defaults, TARP repayment plans, bank capitalization and small business lending were some of the key topics.  Mr. Obama was intent on chastising the reprobate bankers about their penny pinching credit policies toward small businesses.  Mr. Obama conveyed to bankers that the country was still confronted with major economic problems.  Now that the banks capital  base has been stabilized with Treasury supplied funding they must get some skin into the game and belly up to the bar by making more loans to SMEs.

According to the FDIC, lending by U.S. banks fell by 2.8 percent in the third quarter.  This is the largest drop since 1984 and the fifth consecutive quarter in which banks have reduced lending.   The decline in lending is a serious  barrier to economic recovery.  Banks reduced the amount of money extended to their customers by $210.4 billion between July and September, cutting back in almost every category, from mortgage lending to funding for corporations.  The TARP was intended to spur new lending and the FDIC observed that the largest recipients of aid  were responsible for a disproportionate share of the decline in lending. FDIC Chairman Sheila C. Bair stated,   “We need to see banks making more loans to their business customers.”

The withdrawal of $210 billion in credit from the market is a major impediment for economic growth.  The trend to delever credit exposures is a consequence of the credit bubble and is a sign of prudent management of credit risk.  But the reduction of lending activity impedes economic activity and poses barriers to SME capital formation.  If the third quarter reduction in credit withdrawal were annualized the amount of capital removed from the credit markets is about 7% of GDP.  This coupled with the declining business revenues due to recession creates a huge headwind for SMEs.  It is believed that 14% of SMEs are in distress and without expanded access to credit, defaults and  bankruptcies will continue to rise.  Massive business failures by SMEs shrinks market opportunities for banks and threatens their financial health  and long term sustainability.

The number one reason why financial institutions turn down a SME for business loans is due to risk assessment. A bank will look at a number of factors to determine how likely a business will or will not be able to return the money it has borrowed.

SME business managers must conduct a thorough risk assessment if it wishes to attract loan capital from banks.  Uncovering the risks and opportunities associated with products and markets, business functions, macroeconomic risks and understanding the critical success factors and measurements that create competitive advantage are cornerstones of effective risk management.  Bankers need assurances that managers understand the market dynamics and risk factors present in their business and how they will be managed to repay credit providers. Bankers need confidence that managers have identified the key initiatives that maintain profitability.  Bankers will gladly extend credit to SMEs that can validate that credit capital is being deployed effectively by astute managers.  Bankers will approve loans when they are confident that SME managers are making prudent capital allocation decisions that are based on a diligent risk/reward assessment.

Sum2 offers products that combine qualitative risk assessment applications with Z-Score quantitative metrics to assess the risk profile and financial health of SMEs.   The Profit|Optimizer calibrates qualitative and quantitative risk scoring  tools; placing a powerful business management tool into the hands of SME  managers.   SME managers  can  demonstrate  to bankers that their requests for credit capital is based on a thorough risk assessment and opportunity discovery exercise and will be effective stewards of loan capital.

On a macro level SME managers must vastly improve their risk management and corporate governance cultures to attract the credit capital of banks.  Through programs like the Profit|Optimizer,  SME’s can position themselves to participate in credit markets with the full faith of friendly bankers.  SME lending is a critical pillar to a sustained economic recovery and stability of our banking system.  Now is the time for all bankers  to come to the aid of their country by opening up credit channels to SMEs to restore  economic growth and the wealth of our  nation.

You Tube Music Video: Bruce Springsteen, Seeger Sessions, Pay Me My Money Down

Risk: banking, credit, SME

December 15, 2009 Posted by | banking, credit crisis, economics, FDIC, government, SME, TARP | , , , , , , , , , , , , , , , , , , , , , | Leave a comment

A Growing Contagion: One in Seven Companies Are a Credit Risk

contagion1-450The H1N1 Swine flu threat may be the big topic on CNN but a growing contagion of financial distress is widely infecting small and mid-sized enterprises (SME) with potentially fatal consequences.

CFO magazine reports that 14% of companies are struggling to pay their bills or are at risk for bankruptcy. These findings are the result of a study CFO conducted on 1500 Midcap companies. The 2009 Credit Risk Benchmarking Report indicated that 550 companies of the 1500 made the credit watch list and over 200 of the names were in or are entering a distressed financial condition.

The report measures each company on three factors: cash as a percent of revenue, days payable outstanding (DPO), and DPO relative to the DPO of that company’s industry. The last of these measures is intended to expose which companies are under performing regardless of the economic condition of their industry as a whole. A company scoring low in all three areas is rated a potential credit risk.

The strain of a two-year recession and limited credit access is taking its toll on small and mid-sized businesses. This development is not surprising. The recession has hurt sales growth across all market segments. Banks, still reeling from the credit crisis are still concerned about troubled assets on their balance sheets. Bankers can’t afford more write downs on non-performing loans. Banks remain highly risk adverse to credit default exposures and have drastically reduced credit risk to SMEs by shutting down new lending activity.

Reduced revenue, protracted softness in the business cycle and closed credit channels are creating perfect storm conditions for SME’s. Bank’s reluctance to lend and the high cost of capital from other alternative credit channels coupled with weak cash flows from declining sales are creating liquidity problems for many SMEs. As a defensive maneuver, SMEs are extending payment cycles to vendors to preserve cash. This same cash management practice is also being employed by their clients resulting in an agonizing daisy chain of liquidity pain. SME’s that have concentrated exposures to large accounts are at the mercy of the financial soundness of few or in some instances  a single source of revenue.

The growing contagion of financial distress is also a major threat to supply chains. Buyers might prize their ability to drive hard bargains with their suppliers but the concessions won may be the straw that breaks the camels back driving a supplier into insolvency.

It is critical that managers understand all risks associated with clients and suppliers. It is critical that managers assess risks associated with client relationships and key suppliers. In this market, enhanced due diligence is clearly called for. The financial soundness of suppliers and clients must be determined and scored so as to minimize default exposures to your business.

CreditAides is a company that delivers  SaaS based financial health assessments on SMEs.  CreditAides reports that their clients are becoming more vigilant and thorough  in their due diligence of customers and suppliers.  They have noted a particular emphasis on the growing practice of reviewing the financial health of suppliers.  Supply chain risk is a heightened risk factor for SME’s due to their over dependence on single source.  Conducting a financial health assessment on key suppliers and other enhanced due diligence practices mitigates a risk factor that could have potentially devastating consequences.  SME manager’s need to button down their due diligence practices  to prevent the sickness from infecting their business.

CreditAides SaaS can be accessed here: www.CreditAides.com

You Tube Music Video: Bing Crosby and Rosemary Clooney,  Button Up Your Over Coat

Risk: contagion, credit risk, counter-party, supply chain, client, recession, banking

October 9, 2009 Posted by | banking, business, commerce, credit, credit crisis, economics, recession, risk management, SME, supply chain, sustainability | , , , , , , , , , , , , , , , , , , , , , , | 4 Comments

Regulators Shut Doors on Three More Banks

BankClosuresRegulators have shut Warren Bank in Michigan and and two small banks in Colorado and Minnesota.  These closures bring the total to 98 banks closed this year.

The FDIC took over Warren Bank with about $538 million in assets.  The Huntington National Bank agreed to assume the deposits and some of the assets of the assets of the failed bank.  The FDIC will retain the remaining assets for later disposition.  The failure of Warren Bank is expected to cost the deposit insurance fund an estimated $275 million.

Regulators also moved to shut the much smaller Jennings State Bank, in Minnesota.  Central Bank agreed to assume the bank’s $52.4 million in deposits and essentially all the bank’s assets.  The FDIC estimates the closing of Jennings State Bank will cost the deposit insurance fund about $11.7 million.   A third bank, the Southern Colorado National Bank in Colorado was also clsoed.  Legacy Bank  agreed to assume the deposits and essentially all the assets of Southern Colorado National Bank. The FDIC said the closing will cost the deposit insurance fund about $6.6 million.

Ninety-eight banks have failed so far this year due to mounting losses on mortgages, commercial real estate and small business loans.    The failures have cost the FDIC Insurance fund about $25 billion and the fund needs to raise cash to remain solvent.

Risk: FDIC, banks, credit, SME

October 3, 2009 Posted by | banking, credit crisis, FDIC, recession, risk management, SME, Treasury | , , , , , , , , | Leave a comment

Banking is Getting Expensive

screamThe severity of the banking crisis is evident in the 95 banks the FDIC has closed during 2009.  The inordinate amount of bank failures has placed a significant strain on the FDIC insurance fund.  The FDIC insurance fund protects bank customers from losing their deposits when the FDIC closes an insolvent bank.

The depletion of the FDIC Insurance fund is accelerating at an alarming rate.  At the close of the first quarter, the FDIC bank rescue fund had a balance of $13 billion.    Since that time three major bank failures, BankUnited Financial Corp, Colonial BancGroup and Guaranty Financial Group depleted the fund by almost $11 billion.   In addition to these three large failures over 50 banks have been closed during the past six months.   Total assets in the fund are at its lowest level since the close of the S&L Crisis in 1992.   Bank analysts research suggests that FDIC may require $100 billion from the insurance fund to cover the expense of an additional 150 to 200 bank failures they estimate will occur through 2013.  This will require massive capital infusions into the FDIC insurance fund.  The FDIC’s goal of maintaining confidence in functioning credit markets and a sound banking system may yet face its sternest test.

FDIC Chairwoman  Sheila Bair is considering a number of options to recapitalize the fund.  The US Treasury has a $100 billion line of credit available to the fund.    Ms. Bair is also considering a special assessment on bank capital and may ask banks to prepay FDIC premiums through 2012.  The prepay option would raise about $45 billion.  The FDIC is also exploring capital infusions from foreign banking institutions, Sovereign Wealth Funds and traditional private equity channels.

Requiring banks to prepay its FDIC insurance premiums will drain economic capital from the industry.  The removal of $45 billion dollars may not seem like a large amount but it is a considerable amount of capital that banks will need to withdraw from the credit markets with the prepay option.  Think of the impact a targeted lending program of $45 billion to SME’s could achieve to incubate and restore economic growth.  Sum2 advocates the establishment of an SME Development Bank to encourage capital formation for SMEs to achieve economic growth.

Adding stress to the industry, banks remain obligated to repay TARP funds they received when the program was enacted last year.  To date only a fraction of TARP funds have been repaid.  Banks also remain under enormous pressure to curtail overdraft, late payment fees and reduce usurious credit card interest rates.  All these factors will place added pressures on banks financial performance.  Though historic low interest rates and cost of capital will help to buttress bank profitability, high write offs for bad debt, lower fee income and decreased loan origination will test the patience of bank shareholders.   Management will surely respond with a new pallet of transaction and penalty fees to maintain a positive P&L  statement.  Its like a double taxation for citizens.  Consumers saddled with additional tax liabilities to maintain a solvent banking system will also incur higher fees by their banks so they can repay the loans extended by the US Treasury to assure a well functioning financial system for the republic’s citizenry.

Risk: bank failures, regulatory, profitability, political, recession, economic recovery, SME

September 29, 2009 Posted by | banking, commerce, compliance, credit crisis, economics, FDIC, government, regulatory, risk management, SME, sovereign wealth funds, TARP, Treasury | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments