Making the Transition from Employee to Entrepreneur Focus of July 20 Economic Perspectives

Pamela Slim, author of Escape from Cubicle Nation: From Corporate Prisoner to Thriving Entrepreneur, will be the July 20 guest on Economic Perspectives.  Pamela’s book provides a wide variety of information for those dreaming about making the transition from employee to entrepreneur.  It covers not just the nuts and bolts of starting a business, but a full discussion of the emotional issues involved.

Pamela Slim spent a decade traveling all over the country as a self-employed trainer for large corporations. She was surprised to find that many of the most successful employees at these companies harbored secret dreams of breaking out to start their own business. They would pull her aside after a meeting and whisper, “I would love to work for myself, but have no idea how to get started. How did you do it?”

So Pamela started a blog—Escape from Cubicle Nation—to share her experience and advice. Soon, questions and stories poured in from corporate prisoners around the world. As her blog gained popularity, she also interviewed some of the brightest experts in entrepreneurship on topics from finance to branding to marketing via social networks.

Pamela’s expertise in personal and business exchange was developed through consulting for corporations such as Cisco Systems, Hewlett-Packard, and Charles Scwab.

Increased Equity and Venture Capital Funding Available For Small Businesses through SBA

From the press office of the U.S. Small Business Administration

Small businesses that would otherwise have difficulty securing private equity or venture capital may find funding easier to get as a result of changes made as part of the American Recovery and Reinvestment Act to the U.S. Small Business Administration’s Small Business Investment Company program.

“The Recovery Act expands SBA’s venture capital program to increase the pool of investment funding available to the Small Business Investment Companies licensed by SBA,” said SBA Administrator Karen G. Mills. “We believe those companies will be better equipped by these changes to help sustain and grow small businesses for their next important growth steps.”

Karen Mills

SBICs are privately owned and managed venture capital firms which are licensed and regulated by SBA. SBICs use a combination of funds raised from private sources and money raised through the use of SBA guarantees to make equity and mezzanine capital investments in small businesses. There are approximately 338 SBICs with $17.4 billion in capital under management.

The changes made as part of the Recovery Act are:

• The Recovery Act makes SBICs eligible for greater SBA guaranteed funding and requires SBICs to invest 25 percent of their investment dollars into “smaller” businesses. Also, the amount of funding an SBIC may invest in a single small business is set at 10 percent of an SBIC’s total capital rather than the previous limit of 20 percent of an SBIC’s private capital only. This translates to an effective 50 percent increase in funding available to a single business by an SBIC.
• Maximum SBA funding levels to SBICs will increase up to three times the private capital raised by the SBIC, up to a maximum of $150 million for single SBICs, or up to $225 million for multiple SBICs that are under common control. The cap for all licensees was set at $137.1 million before the Recovery Act.
• These limits are even higher for SBICs that are licensed after October 1, 2009, that certify that at least 50 percent of their investments will be made in small businesses located in low-income areas, up to $175 million for single licensees and up to $250 million for jointly controlled multiple licensees.
• Changes made to the SBIC program under the Recovery Act are permanent.

Industry associations have commended SBA for these changes and SBA continues to encourage new SBICs to apply for licensing and actively participate in the program.

The SBIC program was created to stimulate the growth of America’s small businesses by supplementing the long-term debt and private-equity capital available to them. Since the SBIC program’s formation in 1958 through April 2009, it has invested approximately $56 billion in more than 106,000 small businesses in the United States. For more information about the SBA’s Investment Division and SBIC program, go to www.sba.gov/INV or call 1-800-U ASK SBA.

Alternative Business Financing Focus of July 13 Economic Perspectives

Carlos Weil will discuss the alternative financing his company provides for small businesses on the July 13 edition of Economic Perspectives.  Weil is CEO of Capital Solutions Bancorp, a financial services company with operations in North America, South America, Europe and Asia.  TO LISTEN TO THIS INTERVIEW CLICK HERE: Carlos Weil Interview

Carlos Weil

Founded in 1996 by Weil and Paul Simko, Capital Solutions is an independent offshoot of a 43-year-old South American financial services firm. Capital Solutions focuses on providing flexible and affordable working capital to small and mid-size business that are looking to grow. The financial products provided by Capiatl Solutions include:

• Accounts Receivable Financing
• Purchase Order Financing
• Purchase Order Guaranty
• Financing to Purchase Businesses

The firm was established to offer reasonably-priced financing options for businesses that are frustrated by traditional banks that do not recognize their borrower’s ability to grow.

African Americans and Hispanics Have Lower Participation Rates in 401(k)Plans

The following was provided by the press office of Ariel Investments and Hewitt Associates.

Significant differences can be found across race and ethnicity in the way U.S. employees save and invest in their 401(k) plans, according to 401(k) Plans in Living Color: A Study of 401(k) Savings Disparities Across Racial and Ethnic Groups — The Ariel/Hewitt Study. This pioneering report — the largest, most comprehensive examination of 401(k) saving and investing behaviors of African-American, Hispanic, Asian and white employees — found that regardless of age or income, African-American and Hispanic workers have lower participation rates and contribute less to their 401(k) plans than their white and Asian counterparts. As a result, their 401(k) account balances are negatively impacted and chances for a comfortable retirement significantly compromised.

The Ariel/Hewitt Study analyzed 401(k) information for nearly 3 million employees across 57 large, primarily FORTUNE 500 companies in the U.S. It was conducted by the Ariel Education Initiative, the nonprofit affiliate of Ariel Investments, and Hewitt Associates, a global human resources consulting and outsourcing company. The Chicago Urban League, the Joint Center for Political and Economic Studies, the National Council of La Raza, the National Urban League, and The Raben Group also participated. The study was funded with a grant from The Rockefeller Foundation.

In response to the study, Mellody Hobson, president of Ariel Investments, remarked, “401(k) plans are now the primary way Americans save for their golden years. Most are unaware there are significant savings disparities in 401(k) plans across racial and ethnic groups. This study reveals important differences that must be addressed if retirement security is to be a reality for all Americans.

Mellody Hobson

The results of the study show that African-American and Hispanic workers are less likely than their Asian and white counterparts to participate in their 401(k) plans. Two-thirds (66 percent) of African-American employees and 65 percent of Hispanic employees participate in their company’s defined contribution plans, compared to 77 percent of white workers and 76 percent of Asian workers. Even after adjusting for factors such as age and income, the disparity remains.
Additionally, African-Americans and Hispanics contribute to their 401(k) plans at much lower levels than their white or Asian counterparts. Among those who save, white employees contributed 7.9 percent of income, compared to Hispanic and African-American workers, who contributed 6.3 percent and 6.0 percent, respectively. At 9.4 percent, Asian workers had the highest contribution rate of all groups.

Not surprisingly, lower participation and contribution rates lead to smaller average account balances for African-American and Hispanic workers. The Ariel/Hewitt study illustrates this point dramatically. For example, employees who earn between $30,000 and $59,999 show a significant difference in 401(k) account balances: African-Americans ($21,224), Hispanics ($22,017), Asians ($32,590), and whites ($35,551). This disparity exists even at higher pay levels. For instance, African-American employees who earn $120,000 or more have saved $154,902 in their 401(k) plans compared to $223,408 for white workers in the same pay range. While other factors influence account balances, the variation exists even after these adjustments.

In addition to participation and contribution rates, The Ariel/Hewitt study examined three other factors that can further impact an employee’s 401(k) plan balance — equity exposure, loans and withdrawals.

The findings revealed that African-American workers are less likely than Hispanics, whites and Asians to invest in equities. African-Americans had two-thirds (66 percent) of their 401(k) assets invested in the stock market. By comparison, whites and Asians had 72 percent and 73 percent, respectively, of their 401(k) plan assets invested in equities. Hispanics had 70 percent of their assets invested in equities. These findings are compelling because the stock market has historically outperformed all other investment options over the long term. It is generally understood among investment experts that employees with long-term time horizons should have a significant amount of their assets invested in equities.

Barbara Hogg

African-Americans are also more likely than the study population overall to have a loan and are more than twice as likely to take a hardship withdrawal from their 401(k) plans. Nearly two of every five African-American workers and almost a third of Hispanic workers borrowed from their retirement accounts compared to just one in five white workers. By contrast, Asian workers were the least likely to take a loan against their 401(k) plans, with less than one in five doing so. “These statistics are troubling because loans and withdrawals jeopardize long-term financial security to satisfy immediate needs. The impact is heightened during an economic downturn, when unemployment rises and withdrawals and loan defaults increase. We now realize this risk is magnified for African-American and Hispanic workers based on the results of our study,” said Barbara Hogg, principal at Hewitt Associates and co-leader of The Ariel/Hewitt Study.

“Without a significant effort to improve savings and investing behaviors, African-American and Hispanic workers are in danger of retiring into poverty,” states Hobson.

The Ariel/Hewitt Study outlines five decisive recommendations for policymakers and employers. These recommendations include:

• Encouraging employers to voluntarily collect and report 401(k) plan data by race and ethnicity. Knowledge is power, and collecting and reporting data about 401(k) plan participants would enable employers to know and manage where gaps exist among their workers.

• Modifying loan requirements to decrease the likelihood of default. Extending the amount of time a terminating employee has to pay off a loan may improve overall retirement savings, particularly during challenging economic times such as these. Other options could include allowing loan repayments after termination or exploring new options for allowing loans to roll over from one employer to another.

• Mandating financial education at all levels in both private and public schools to boost financial literacy. A financial literacy curriculum would provide generations of future employees a comprehensive understanding of both the mechanics and importance of sound money management, saving and investing.

• Designing 401(k) plans in a way that benefits a broad, diverse employee base. Features like automatic enrollment with high default contribution rates and periodic contribution increases can go a long way, effectively driving strong, robust participation across all demographics.

• Communicating and educating employees in a way that helps them make wise choices. Creating user-friendly and easily understood communication enables workers to learn more about how to effectively manage and grow their savings. This communication should incorporate different cultural perspectives that resonate with diverse groups of employees.

“By taking immediate action, employers, government and employees can make a big impact in helping all Americans achieve a comfortable standard of living in their retirement years,” concludes Hogg.

African American Unemployment Declines for 2nd Consecutive Month

The U.S. Bureau of Labor Statistics reported an African American unemployment rate of 14.7 percent in June in its Monthly Employment Situation Report, a decline from the May unemployment rate of 14.9 percent and the second consecutive drop in the monthly unemployment rate.  The African American unemployment rate during the recession reached its highest point in April with a 15.0 percent rate and 2,673,000 unemployed. Since then the number of unemployed African American has declined to 2,597,000.  Overall unemployment was 9.5 percent in June, a slight increase from 9.4 percent in May.  The number of unemployed was 14,729,000, an increase of  218,000 over May.

Since the recession began in December 2007, the African American unemployment rate has risen by 5.7 percentage points and the number of unemployed has increased by slightly over 1 million persons.   During this same time frame, the overall unemployment rate has risen by 4.6 percentages and the number of unemployed has increased by 7.2 million persons.

Industry Payroll Employment (Establishment Survey Data)

Total nonfarm payroll employment continued to decline in June (-467,000). Job losses from April to June averaged 436,000 per month, compared with losses averaging 670,000 per month from November to March.

Employment in manufacturing fell by 136,000 over the month and has declined by 1.9 million during the recession. Within the durable goods industry, motor vehicles and parts (-27,000), fabricated metal products (-18,000), computer and electronic products (-16,000), and
machinery (-14,000) continued to lose jobs in June. Since the recession began, employment in motor vehicles and parts has declined by 335,000, or about one-third.

In June, employment in construction fell by 79,000, with losses spread throughout the industry. Since the start of the recession, construction employment has fallen by 1.3 million. Mining employ-
ment fell by 8,000 in June, about in line with the average monthly decline since its recent peak in October 2008.

Employment in the professional and business services industry declined by 118,000 in June. This industry has shed 1.5 million jobs since an employment peak in December 2007. Within this sector, employment in temporary help services fell by 38,000 in June; this industry
has lost 848,000 jobs since the start of the recession.

Retail trade employment edged down in June (-21,000); job losses in retail trade have moderated in the past 3 months. Over the month, job losses continued in automobile dealerships (-9,000). Employment continued to fall in wholesale trade (-16,000).

In June, financial activities employment continued to decline (-27,000). Since the start of the recession, this industry has lost 489,000 jobs. In June, employment declined in credit intermediation and related activities (-10,000) and in securities, commodity contracts,
and investments (-6,000).

The information industry lost 21,000 jobs over the month and 187,000 since the start of the recession. Publishing accounted for about half of the employment decline in the information industry during the recession.

Health care employment increased by 21,000 in June. Job gains in health care have averaged 21,000 per month thus far in 2009, down from an average of 30,000 per month during 2008.

Employment in federal government fell by 49,000 in June, largely due to the layoff of work-
ers temporarily hired to prepare for Census 2010.

Innovative Strategies for Business Survival During Recession Focus of July 6 Economic Perspectives

Scott Anthony, author of The Silver Lining: An Innovative Playbook for Uncertain Times is the July 6 guest on Economic Perspectives on KAZI 88.7 FM.  TO LISTEN TO THIS INTERVIEW CLICK HERE: Scott Anthony Interview

In The Silver Lining Anthony argues that while the economic shock of 2008 constitutes the new normal, too many managers are slashing costs indiscriminately.  He says smart managers continue innovating during tough times by stopping ineffective initiatives, changing key business practices, and starting more productive behavior.  The result is the smart managers’ companies emerge from downturns stronger than ever.  Providing a wealth of ideas, tools, and examples from diverse industries, Anthony explains how to safeguard your company’s profitability even during the toughest recessions.

Anthony is President of Innosight, a management consulting firms focused on innovation. Anthony has worked with Fortune 500 and start-up companies in industries such as media (print and broadcast), consumer products, investment banking, transportation and logistics, healthcare, medical devices, software, petrochemicals, and communications equipment. In 2005-2006 he spearheaded a year-long project to help the newspaper industry grapple with industry transformation (Newspaper Next), and in 2003-2004 led a multi-month project to help the government of Singapore understand how to create an environment that fosters entrepreneurialism and innovation.

Treasury Official Updates Congressional Oversight Panel on the Nation’s Financial System

On June 24 Herbert Allison, Jr., the U.S. Department of the Treasury’s Assistant Secretary for Financial Stability, updated the Congressional Oversight Panel on the department’s efforts to repair the nations financial system. The Congressional Oversight Panel was established by Congress to review the current state of financial markets and the regulatory system

Chair Warren, Representative Hensarling, Senator Sununu and members Neiman and Silvers, Last October, Congress established the Troubled Assets Relief Program (TARP), and gave Treasury the necessary tools to help break a downward spiral in our financial system that was causing tremendous  harm, not only to financial firms of all sizes, but also to ordinary families and businesses across the country.

Herbert Allison

Our mandate is two-fold: Stabilize the system while protecting the financial interests of the taxpayer.

Although our work is far from finished, Treasury has accomplished a great deal in a short amount of time. It has:

• Invested nearly $200 billion in 633 financial institutions through the Capital Purchase Program.
• Helped to re-start securitization markets, which are vital in enabling consumers and businesses to borrow.
• Helped begin the difficult, but necessary process of re-making our nation’s auto industry, which is at the heart of our industrial base.
• Helped tens of thousands Americans stay in their homes by securing modifications of their at-risk loans to lower their monthly mortgage payments and making their mortgages more affordable.

To manage these complex efforts, Treasury has built the Office of Financial Stability from the ground up. Last October, the OFS staff was zero. As of Monday, it numbered 166.

There are tentative signs that the financial system is beginning to stabilize, and that our efforts made an important contribution. Key indicators of credit market risk, while still elevated, have dropped substantially.

More than 30 firms have repaid $70 billion in CPP investments. In addition, the taxpayer has received an estimated $5.2 billion in dividend payments from CPP investments.

There are also some signs that the economy is beginning to mend. Consumer confidence rose to its highest level in eight months in May. Housing starts rose at an annual rate of 17% in May, and house purchases have begun to pick up in some parts of the country.

But our financial system and our economy remain vulnerable, with unemployment still rising, house prices falling and pressure on commercial real estate continuing to build.

This is why we must remain vigilant. We must press ahead with our financial stabilization and our economic recovery efforts.

At the same time that Congress established the TARP, it established the Congressional Oversight Panel, an independent group drawn from both major political parties, Congress, the states and public interest groups to ensure that in every step we take, we keep firmly in mind the best interests of the American people.  I applaud the Panel for its work to date, and look forward to a continued strong relationship.

Let me briefly describe my own background and offer a few thoughts that will guide me in my new assignment.  I believe that my views on finance, management and governance, which have not always been stylish, square with what the crisis has taught us is necessary for a financial system that’s both stable and innovative.

I began my career as an officer in the U.S. Navy, spending four years on active duty, including one year in Vietnam. After business school, I joined Merrill Lynch and spent 28 years there, leaving as president in 1999.

I learned from my experiences at Merrill that the long-term success of financial institutions depends on sound corporate governance, including independent checks and balances, tight control over risk, and executive compensation geared to long-term performance on behalf of clients, as well as shareholders. I believe that I contributed to strengthening Merrill’s governance practices in the 1990s.

Since leaving the firm a decade ago, I’ve led two other major financial institutions through transitions necessary for their long-term success.

In 2002, I became chairman and C.E.O. of TIAA-CREF, a leading provider of retirement and asset management services. We adapted the company to changing markets, created independent risk management and doubled the company’s capital so we could withstand a harsh investment climate. As a result, TIAA-CREF is now one of very few financial companies that carry triple-A ratings. And during my tenure, TIAA-CREF became the first company in the Fortune 100 to allow its stakeholders an advisory role on executive compensation. Last September, I was named C.E.O. of the Federal National Mortgage Association as that company was placed into government conservatorship.

The work of OFS, which I now head, is essential to President Obama’s and Secretary Geithner’s plans for recovery.

Our economy declined sharply last year, in substantial measure, because credit stopped flowing. Without access to credit, small businesses cannot buy the new equipment, raw materials and inventory that they need to expand. Larger businesses cannot make the continuous adjustments required to function in a changing global marketplace.

In overseeing the office, I will keep in mind that ending the financial crisis isn’t chiefly about helping banks. It’s about alleviating the real hardships that Americans face every day. I will strive to be a prudent investor on behalf of the American people; to protect the taxpayers who’ve entrusted us with so much of their money.

In pursuing the goal of being a prudent investor for the public, my top priorities will be the following:

First, I will carefully review the controls over taxpayers’ money, giving special attention to compliance with laws and directives, managing risks and internal audits. I will work closely with your panel and all other oversight bodies.

Second, I will strive to maximize the effectiveness of financial stability programs, restoring soundness to financial institutions and liquidity to our markets.

Finally, I will emphasize transparency and interaction with Congress so that the American people will know what we’re doing with their money; why we’re doing it, and how it’s helping the financial system, the economy and their lives.

Thank you. I look forward to your questions.

As Assistant Secretary for Financial Stability, Allison is responsible for developing and coordinating Treasury’s policies on legislative and regulatory issues affecting financial stability, including overseeing the Troubled Assets Relief Program (TARP).

Consumer Alert: What’s really behind that tempting CD rate?

The following consumer alert was provided by the Federal Deposit Insurance Corporation (FDIC).

The FDIC has received inquiries and complaints about certain companies advertising above-market interest rates for FDIC-insured Certificates of Deposit (CDs). Some of these ads display the FDIC logo or state “FDIC Insured.” Many of these companies are not FDIC-insured banks. Rather, they are insurance or financial service companies that sell non-insured financial products. The small print in the ads may state that the company is not an FDIC-insured financial institution.

The advertised CDs generally offer above-market interest rates for only a short term, require a minimum amount, and insist that the customer visit a company office. The advertisement’s goal is to attract consumers for the company’s non-deposit products or services. If a customer asks to purchase the advertised CD, the company will direct the customer to a computer terminal in the company’s office to purchase a CD from an FDIC-insured financial institution that accepts Internet deposits. The CD will be offered at a rate lower than advertised. The company typically writes a separate check to the financial institution for the difference between the bank’s rate and the advertised rate for the term of the CD. Both checks are mailed to the bank, and the bank then issues the CD for the increased amount, but at the bank’s lower interest rate.

Things to consider:

• Consumers should carefully consider whether non-insured products are appropriate for their personal financial situation.
• Consumers should understand the terms of any CD they purchase.
• Consumers can research deposit interest rates at Web sites, such as http://www.bankrate.com.
• Consumers can verify whether identified financial institutions are FDIC-insured at http://www2.fdic.gov/idasp/main_bankfind.asp.
• Consumers can find information about FDIC deposit insurance coverage at http://www.fdic.gov/deposit/deposits/index.html.

Web Marketing Strategies Focus of June 29 Economic Perspectives

Ian Lurie, President and Elizabeth Marsten, Pay-Per-Click (PPC) Manager of Portent Interactive and co-authors of Web Marketing, All-in-One for Dummies will be the June 29 guests on Economic Perspectives.  TO LISTEN TO THIS INTERVIEW CLICK HERE: Ian Lurie/Elizabeth Marsten Interview

Lurie and Marsten will discuss:

• How to use online tools to spread your marketing message,
• How to establish a strong Web presence,
• How to promote your site with e-mail marketing,
• Search engine optimization,
• Pay-per-click,
• Social networking

Lurie founded Portent Interactive in 1995, a full service internet marketing agency. His diverse background includes degrees in History and Law, experience as an information designer, graphic designer, marketing copywriter and programmer, two years working in a bicycle shop, and a brief stint as a political hack. As a child he used a TRS-80 Model One to print out fliers advertising his lawn mowing business. The rest is history.

As the Pay-Per-Click (PPC) Manager at Portent Interactive, Marsten oversees all the PPC operations and staff.  She is a regular contributor of PPC best practices on the Portent Interactive blog, along with the worst practices on the PPC spoof blog www.ppcvillain.com.

NY Times Economics Reporter to Discuss Life Inside the Great Mortgage Meltdown on KAZI News Magazine June 28

Edmund Andrews, economics reporter for the New York Times and author of Busted: Life Inside the Great Mortgage Meltdown will be interviewed on KAZI News Magazine Sunday on June 28, 1 p.m. – 1:30 p.m. on KAZI 88.7 FM.  Busted weaves together the author’s own ride to the edge of bankruptcy with the tragicomic stories of his lenders, the Wall Street pros behind them, and the policymakers in Washington who were oblivious until it was too late.  TO LISTEN TO THIS INTERVIEW CLICK HERE: Edmund Andrews Interview

In a startling confession in his book, Andrews admits that while in the midst of an interview with former Federal Reserve System chairman Alan Greenspan about the causes of the mortgage meltdown, he felt “an irresistible urge to spill my guts.”

The story takes Andrews to the offices of Alan Greenspan, the mansions of subprime-mortgage millionaires in southern California, a despondent deal makers’ convention in Las Vegas, and Wall Street.

Andrews has been a reporter for the Hew York Times for 16 years.