Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Archive for April, 2009

U.S. Economy Shrinks In First Quarter But Consumer Spending Rises

Posted by Hopeton on April 30, 2009

By Dr. Christian E. Weller

It’s a rare occasion when the economy declines by 6 percent or more in any given quarter. This has only happened four times before this recession since 1947, when the Bureau of Economic Analysis started to collect these data. And, this is the first time that the U.S. economy has shrunk by more than 6 percent for two consecutive quarters since the Bureau of Economic Analysis began collecting these data. Yet that is exactly where we are today. According to estimates released by the Bureau of Economic Analysis, the economy shrank by an annual rate of 6.1 percent in the first quarter of 2009, after falling 6.3 percent in the fourth quarter of 2008.

Christian Weller

Christian Weller

Using absolute figures helps to illustrate this point. In the first quarter of 2009, the U.S. economy generated $84 billion less in economic resources than in the third quarter of 2008, before the latest contractions of the Bush recession started and before the impact of inflation is accounted for. This is a deep hole that needs to be filled before an expanding economy can once again generate enough jobs to reduce the highest unemployment rate in more than a quarter century.

It’s hard to find a silver lining amid this tale of economic woe, but one does exist. Consumers started to increase their consumption again in the first quarter of 2009, largely before the American Recovery and Reinvestment Act became law. In that period, consumption expanded at an annual rate of 2.2 percent. This is even more surprising since Americans also increased their personal saving rate to 4.2 percent at the same time, up from 3.2 percent at the end of 2008 and the highest personal saving rate in more than a decade, since the third quarter of 1998.

This silver lining may become brighter in the next few months and quarters, since the economic stimulus was largely aimed at getting consumers back on their feet. Specifically, lower taxes and more government transfers helped to boost personal after-tax incomes and consumption spending in the first quarter of 2009. Lower taxes for families and more transfer spending in the form of higher unemployment benefits, among other factors, are also at the heart of the American Recovery and Reinvestment Act of 2009. Consequently, consumer spending could see further gains in the coming months and quarters and thus help to stabilize growth and jobs.

I could twist the numbers further to show that there is another silver lining, but this next indicator falls into the category of “bad news disguised as good news.” The U.S. trade deficit fell precipitously in the first quarter of 2009 to 2.4 percent of gross domestic product, down from 3.8 percent in the fourth quarter of 2008 and its lowest level in exactly 10 years.

This sharp decline, though, should not be cause for celebration. It simply means that U.S. imports dropped much more sharply—by 34.1 percent in the first quarter of 2009 due to the very weak U.S. economy—than U.S. exports, which dropped by 30.0 percent at the same time. In fact, this was the largest decline in U.S. exports in exactly 40 years, since the first quarter of 1969. Much of the decline in imports was due to lower oil prices, which hovered around $40 per barrel for much of the first quarter of 2009, but which have also increased to an average near $50 per barrel in April 2009. Not only is the shrinking trade deficit actually a sign of a very weak U.S. economy, it may also be short lived.

The rest of the new figures are outright bad news. All sectors, including the federal government, which until now had been expanding, contracted in the first quarter of 2009. Business investment fell by 37.9 percent in the first quarter of 2009, the largest decline on record. In particular, commercial construction dropped by 44.2 percent, far exceeding the previous record contraction of 33.2 percent in the fourth quarter of 2001, when business investment suffered from the double onslaught of a recession and terrorist attacks.

The staple of bad news, the residential housing sector, also provided yet another disappointing quarter. It contracted by 38.0 percent, its largest drop in this housing market decline so far and its unprecedented 13th decline in a row. In inflation-adjusted terms, spending on residential real estate was at its lowest level since the end of 1991.

Finally, there is government spending. Federal, state, and local governments all reduced their consumption and investment spending in the first quarter of 2009. Federal government spending fell by 4.0 percent, while state and local government spending dropped by 3.9 percent in the first quarter. Again, these figures reflect a period before the economic stimulus from the American Recovery and Reinvestment Act of 2009 had become a reality. The government sector will likely see a quick turnaround, since state and local governments are already getting some money to maintain or even increase their spending, especially in health care and education.

The need for government intervention to help stabilize the economy should be apparent by now. The mixture of tax cuts and spending increases in the American Recovery and Reinvestment Act should help to maintain the resurgence in consumer spending and provide a turnaround on government spending at the local, state, and federal level. With more consumption and government spending, businesses may ultimately have an incentive again to increase their investments, too. Yet given the severity of the crisis, it will take some time until growth will be strong enough to support a sustained reduction in unemployment

Christian Weller is a Senior Fellow with the Center for American Progress and an Associate Professor for Public Policy at the University of Massachusetts-Boston. The Center for American Progress is a nonpartisan research and educational institute dedicated to promoting a strong, just and free America that ensures opportunity for all.

Posted in Economy | Tagged: , , , | Leave a Comment »

President Obama Outlines Core Principles for Protecting Consumers from Credit Card Industry Abuses

Posted by Hopeton on April 24, 2009

President Barack Obama met with representatives from the credit card industry on April 23 to address the need for greater consumer protection from abusive industry practices.  In the meeting he outlined his core principles for improving consumer protection.  The following are remarks he made to the press after the meeting.

Well, I just had a constructive meeting with the heads of many of the leading credit card issuers here in the country. Obviously we’re at a time where issues of credit and how businesses and families are able to finance everything from a car loan to a student loan to just paying their bills every day is on a lot of people’s minds. And Secretary Geithner and our economic team has worked diligently to try to restore confidence in the credit markets, to assure that the non-bank financial sector is stronger, to ensure that banks have the capital they need, and that that money is getting out the door to the ultimate end user — the American businessperson and individual.

We’re still seeing some problems, although we think that we’ve begun to make progress.

One of the areas, as we move forward and look at financial regulation, how do we create a framework where this kind of crisis doesn’t happen again, and how do we create a sustainable model for economic growth and debt that is not based on bubbles and overleveraging on the part of businesses and consumers is the issue of credit cards and how they’re used and how we can create a more stable, more effective, more consumer-friendly system.

President Obama in meeting with credit card executives on April 23: photo by Pete Souza

President Obama in meeting with credit card executives on April 23: photo by Pete Souza

We had a discussion with some of the top issuers here, and what I communicated to them is that I think credit cards are an important convenience for a lot of people. They are a source of unsecured debt for a lot of individuals and small businesses who are creating jobs; a lot of startups may use credit cards for that purpose. We think that’s important, and so we want to preserve the credit card market.

But we also want to do so in a way that eliminates some of the abuses and some of the problems that a lot of people are familiar with — people finding themselves starting off with a low rate and the next thing they know their interest rates have doubled; fees that they didn’t know about that are suddenly tacked on to their bills; a whole lack of clarity and transparency in terms of the terms and conditions of their credit cards.

And so there’s going to be action in Congress. Our administration is going to be pushing for reform in this area. We think it’s important that we get input from the credit card issuers as we shape this reform, but there — and I’m going to leave it up to my economic team to work with Congress to evaluate all the various proposals and to get some very definitive language in place.

There are going to be some core principles, though, that I want to adhere to, and I mentioned these to all the credit card issuers involved.

First of all, I think that there has to be strong and reliable protections for consumers — protections that ban unfair rate increases and forbid abusive fees and penalties. The days of any time, any reason rate hikes and late fee traps have to end.

Number two, all the forms and statements that credit card companies send out have to be written in plain language and be in plain sight. No more fine print, no more confusing terms and conditions. We want clarity and transparency from here on out.

Number three, we have to make sure that people can comparison shop when it comes to credit cards without being afraid that they’re going to be taken advantage of. So we believe that it’s important to require firms to make all their contract terms easily accessible online in a fashion that allows people to shop for the best deal for their needs.

Not every consumer is going to have the same needs. And some may want to take on a higher interest rate because it provides them more convenience or it provides them with a higher credit line. But we want to make sure that they can make those comparisons themselves easily. And we think that one of the things that needs to be explored is the possibility that every credit card issuer has to issue a plain vanilla, easy to understand, simplest terms possible credit card as a default credit card that the average user can feel comfortable with.

Finally, we think we need more accountability in the system. And that means more effective oversight and more effective enforcement so that people who are issuing credit cards but violate law, they will feel the full weight of the law.

So we are confident that we can arrive at something that is commonsensical, something that allows the industry to continue to provide loans and to run a stable business model that’s not dependent on bubbles, that’s not dependent on people getting over-extended or finding themselves in over their heads. I trust that those in the industry who want to act responsibly will engage with us in a constructive fashion and that we’re going to be able to get this done in short order.

Please share your ideas on how to protect consumers from credit card abuse by commenting on this post.

Posted in Credit, Finance | Tagged: , , | 1 Comment »

Top Ten Basics for Controlling Your Financial Future

Posted by Hopeton on April 24, 2009

The following tips were provided by the National Foundation for Credit Counseling:

1. I open my bills the day they arrive. This may seem like common sense, but everyday people walk into an NFCC Member Agency with grocery bags filled with unopened bills. Ignoring the problem won’t change anything, but facing the facts and developing a plan will.

2. I review my monthly creditor statement thoroughly. Consumers not only need to be aware of the amount they owe and payment due date, but should check their statement for unauthorized charges which could indicate ID theft, rate changes, credit limit changes, and any additional fees that might have been added on. Contact the issuer immediately if you observe anything out of the ordinary on your statement, or if the terms have changed.

3. I pay my bills on time. Late fees can be in the $40 range, and one late payment can ding your credit score by as much as 100 points. If you’re a procrastinator, travel, or are just plain unorganized, set up automatic bill paying to make sure you’re never late with a payment.

4. I record each check I write, along with any ATM withdrawals. Overlimit and Non-sufficient Fund fees can be as high as credit card late fees. Even if your financial institution allows you to exceed your balance, you’ll pay a hefty price for that courtesy. Record all transactions and know where you stand at all times.

5. I do not max out my credit card limits. Utilizing all of your available credit will likely backfire on you. Creditors like to see people responsibly manage their credit by using only 30 percent or less of what’s available. Maxing out your cards could indicate that you’re in financial distress and move you over into the risk category in the creditor’s eyes. That could equal higher rates and lower credit lines moving forward.

6. I track my spending and know where my money goes. You are relinquishing control of your financial future unless you have a keen awareness of your spending habits. Many people feel that having a budget would restrict them, but in reality a spending plan frees you to use your hard earned money exactly as you deem best. Track your spending for 30 days, organizing the results by category. Once you see your spending in black and white, it will put you in the financial driver’s seat where you belong.

7. I have at least one month’s income earmarked for emergencies. Unanticipated expenses have been known to wreck the best of budgets. Without a rainy day fund, when the emergency arises, you have to either pay for it by charging, often adding to an already burdensome debt load, or grab cash from another area, thus neglecting that payment. Start by putting 10 percent of each paycheck into an emergency account. At the end of a year, you’ll have a little more than one month’s income stashed away, which will be a welcome safety net.

8. I have three to six month’s income saved in the event I lose my job. Job losses have affected almost every employment sector, thus no one is immune from the pink slip. The time to prepare is now. Without a paycheck, cash is indeed king. Accumulating this much money can seem like a daunting task. However, no one has ever regretted having significant savings to fall back on during hard times. Recognize that you’re on a slippery slope if this element is not a part of your overall financial picture.

9. I have an annual insurance check-up. No one should be over-insured or under-insured. The way to avoid this is to review your policies once each year with your insurance agent. Make sure that you understand exactly what is covered and what isn’t, as the last thing you need in an emergency is a bad surprise. If you don’t understand the lingo, ask for further explanation. Inquire about ways to save on your overall insurance costs without sacrificing coverage.

10. I have a well thought through plan for tomorrow, and am executing it. People have short-term and long-term goals, and we need to plan for each. An example of a short-term goal is a summer vacation. Long-terms goals are things such as a college education for your children and your retirement. Such financial realities cannot be ignored, nor will they take care of themselves.

The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation’s largest and longest serving national nonprofit credit counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior and build capacity for its members to deliver the highest quality financial education and counseling services. NFCC Members annually help more than three million consumers through close to 850 community-based offices nationwide. For free and affordable confidential advice through a reputable NFCC Member, call 1-800-388-2227, (en Español 1-800-682-9832) or visit www.nfcc.org.

Posted in Credit, Finance | Tagged: , | Leave a Comment »

OCC Consumer Tips for Avoiding Mortgage Modification Scams and Foreclosure Rescue Scams

Posted by Hopeton on April 21, 2009

Scams that promise to “rescue” you from foreclosure are popping up at an alarming rate nationwide, and you need to protect yourself and your home.

If you’re falling behind on your mortgage, others may know it, too — including con artists and scam artists. They know that people in these situations are vulnerable and often desperate. Potential victims are easy to find: mortgage lenders publish notices before foreclosing on homes. Private firms frequently compile and sell lists of these foreclosed properties and distressed borrowers. After reading these notices, con artists approach their targets in person, by mail, over the telephone, or by e-mail. They often advertise their services on television, radio, or the Web, and in newspapers, describing themselves as “foreclosure consultants” or “mortgage consultants,” offering “foreclosure prevention” or “foreclosure rescue” services. And they are only too happy to take advantage of homeowners who want to save their homes.

If someone offers to negotiate a loan modification for you or to stop or delay foreclosure for a fee, carefully check his or her credentials, reputation, and experience, watch out for warning signs of a scam, and always maintain personal contact with your lender and mortgage servicer. Your mortgage lender can help you find real options to avoid foreclosure. It is important to contact your mortgage lender early to preserve all your options. There are legitimate consumer financial counseling agencies that can help you work with your lender.

This Consumer Advisory, issued by the Office of the Comptroller of the Currency (OCC), describes common scams, suggests ways to protect yourself, provides information on U.S. government loan programs and counseling resources, and lists 10 warning signs of a mortgage modification scam.  To read the complete consumer advisory issued by the OCC click here.

Posted in Credit, Finance | Tagged: , , | 3 Comments »

Causes of Finanical Crisis Focus of April 20 Economic Perspectives

Posted by Hopeton on April 18, 2009

bad_money1Kevin Phillips, author of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, will be the April 20 guest on Economic Perspectives.  In the preface to Bad Money, Phillips writes, “My book locks in on how over the last two decades, speculative finance rose to a counterproductive economic and political dominance in the United States.  As we will see, the lessons of modern history-the successive declines of leading world economic powers-suggests that financialization was dangerous in itself.  Then, after riding a long and huge wave of borrowing and liquidity, a grossly overinflated U.S. financial sector-the increasingly commingled excesses of banking, securities, insurance and real estate-failed the nation’s trust through extreme greed, inexcusable speculative leverage, and a streak of sheer incompetence.

Phillips has over 40 years experience as a political commentator and consultant.  His past experience includes working for the 1968 Republican presidential campaign, serving as a political consultant to two major Wall Street firms, and serving on the staff of a U.S. Congressman.  A 1964 graduate of Harvard Law School, Phillips has authored 13 books including Wealth and Democacy: A Political History of the American Rich, and Arrogant Capital: Washington, Wall Street, and the Frustration of American Politics.

Posted in Books, Business, Credit, Economy, Finance, Interview, Radio | Tagged: , | Leave a Comment »

Top Credit Card Issuers Provide Payment Relief to Consumers

Posted by Hopeton on April 15, 2009

Responding to the “Call to Action” of the National Foundation for Credit Counseling (NFCC), the nation’s top 10 credit card issuers have agreed to provide additional relief to consumers struggling to repay their debts. credit-cards2

 

“This represents a significant action on the part of the creditors to take additional steps to help consumers, which is our collective mission,” said Susan C. Keating, president and CEO of the NFCC.  “This will provide those in debt with more options to stabilize and rebuild their economic lives.” 

 

For more than 40 years, consumers have avoided bankruptcy and benefited from repayment programs commonly referred to as “debt management plans” (DMPs) through which creditors provided some repayment concessions, including waiving late and over the limit fees and a reduction in interest rates.  However, in these tough economic times, fewer consumers have sufficient income to be eligible for, or the ability to maintain, a traditional DMP, often leaving bankruptcy as the only option. 

 

In response to a need to make better alternatives available to struggling consumers, the NFCC issued its “Call to Action” last fall, calling on more creditors to take additional steps to make DMPs more affordable for people in troubled financial circumstances.  The NFCC also expressed its appreciation on behalf of struggling consumers to those card issuers already providing significant concessions aligned with the “Call to Action.”  The “Call to Action” set the end of the first quarter of 2009 as the target date for adoption and implementation.  Together with the “Call to Action,” the NFCC created a strategic partnership of NFCC Agencies and Association of Independent Consumer Credit Counseling Agencies (AICCCA) to work with the top 10 credit card issuers. 

 

As of March 31, the top 10 credit card issuers have agreed to implement the changes necessary to provide both a more affordable “Standard” DMP and a “Hardship” DMP (together, the “Call to Action” DMPs) for consumers who are seeking to avoid bankruptcy, but who do not have sufficient income to qualify for a traditional DMP.  The key elements of these two new DMPs will allow consumers to maintain a reasonable monthly budget, establish a savings account for economic emergencies, make fixed monthly payments more affordable, and be out of debt within 60 months.

 

Those creditors supporting the “Call to Action” are American Express, Bank of America, Capital One, Chase Card Services, Citi, Discover Financial Services, GE Money, HSBC Card Services, U.S. Bank and Wells Fargo Card Services.  The NFCC urges all other consumer lenders to follow suit.

 

 “Many consumers are facing serious financial problems, and they should be given every opportunity to qualify for an affordable program that meets their individual circumstances and that puts them back on the road to financial stability,” said Keating.  “We applaud these creditors for recognizing the need to do more for consumers who are trying to avoid bankruptcy, and need some additional help with interest rate and fee waiver concessions so they can repay their debt.”

 

Consumers seeking more information about or eligibility for a “Call to Action” DMP should contact the NFCC Member nonprofit credit counseling agency in their area by calling (800) 388-2227 (en Español (800) 682-9832) or visit www.nfcc.org.

Posted in Credit, Finance | Tagged: , , , | 1 Comment »

40 Year History of U.S. Minority Business Development Agency Focus of Economic Perspectives on April 13

Posted by Hopeton on April 10, 2009

Federal official John Iglehart will discuss the historical impact of the U.S. Department of Commerce Minority Business Development Agency (MBDA) in helping to educate, grow, and develop minority-owned businesses for 40 years on the April 13 edition of Economic Perspectives.  John Iglehart is Dallas Regional Director of the MBDA.mbda_40thanniversary_logov31

Established in 1969 by former President Richard Nixon, MBDA is the only federal agency tasked with advancing the competitiveness of minority businesses, and with the recently passed American Recovery and Reinvestment Plan, the MBDA will be working to connect minority firms with newly available resources that will help put Americans back to work.

In 1969, there were approximately 322,000 minority-owned firms generating less than $11 billion in annual gross receipts. Today, there are more than 4 million minority-owned firms generating approximately $660 billion in gross receipts. These firms have not just grown in number and in revenues, but they employ approximately 4.7 million workers. 

While the growth of minority firms over the last 40 years has been remarkable, it has not kept pace with the growth of the minority population. If the growth of minority firms actually reflected the minority population growth, it would mean an additional 2.4 million firms and gross receipts of $2.5 trillion – nearly four times the current amount of gross receipts. In addition, 16.1 million more workers would have jobs. According to the U.S. Census Bureau, by 2042, there will be a remarkable shift in American demographics to a majority minority. Based on this population shift, the future of the American economy is directly linked to the success of minority-owned firms. Minority entrepreneurs are in the unique position to generate long-term employment and economic sustainability in their communities and for the United States.

John Iglehart

John Iglehart

A regional director,  Iglehart is responsible for the administration and direction of all MBDA programs in the 11-state Dallas Region which includes Arkansas, Colorado, Louisiana, Montana, New Mexico, North Dakota, South Dakota, Oklahoma, Texas, Utah, and Wyoming.  The MBDA programs that he oversees are accomplished through competitive awards for the purpose of providing management and technical assistance to minority businesses in order to assist with their survival, expansion and start-up. 

Iglehart has over 30 years experience working for MBDA.  He has received numerous awards attesting to his unmatched dedication, talent, professionalism and untiring efforts in the course of helping to foster minority business development including the U.S. Department of Commerce’s Gold Medal Award for Leadership which he was awarded in November 2008.

Posted in Business, Interview, Radio | Tagged: , | 1 Comment »

African American Unemployment Rates in February & March Highest Since 1993, Overall Unemployment Rises to Highest Since 1983

Posted by Hopeton on April 7, 2009

NOTE: For the latest post on African American unemployment click the following link: African American Recession Job Losses Surpasses 1 million, Obama Announces Training Initiative for Unemployed

By Hopeton Hay

African American unemployment declined slightly from 13.4 percent in February to 13.3 percent in March according to the latest data relased by the U.S. Bureau of Labor Statistics.  The African American unemploymment rates for February and March are the highest seen since June of 1993 when it was 13.4 percent.

Overall unemployment reached 8.5 percent in March, the highest overall unemployment rate in the U.S. since November of 1983.  Since the recession began in December 2007, 5.1 million jobs have been lost, with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months.  In March, job losses were large and widespread across the major industry sectors.

unemployment1

Industry Employment Losses By Sector

Manufacturing employment fell by 161,000 in March, with widespread job losses occurring among the component industries.  Factory employment has declined by 1.0 million over the past 6 months.  In March, the largest decreases occurred in fabricated metal products (-28,000), machinery
(-27,000), and transportation equipment (-26,000).
   
The construction industry lost 126,000 jobs in March, with declines occurring throughout the industry.  Employment in construction has fallen by 1.3 million since peaking in January 2007; nearly half of that decline occurred over the last 5 months.  In March, employment fell in specialty trade contractors (-83,000) and construction of buildings (-33,000).  These declines were split about evenly between the residential and nonresidential portions of these industries.  Heavy and civil engineering construction also lost 10,000 jobs.  Employment in mining and logging declined by 18,000 in March.

Employment in professional and business services fell by 133,000 in March, with declines throughout most of the sector.  More than half of the loss occurred in temporary help services, which cut 72,000 jobs in March and 767,000 since December 2007.  In March, architectural and engineering services lost 16,000 jobs.
   
Retail trade employment fell by 48,000 over the month.  Since peaking in November 2007, employment in the industry has declined by an average of 44,000 per month.  In March, employment decreased in building material and garden supply stores (-13,000), automobile dealerships (-12,000), and electronics and appliance stores (-10,000).  Employment in wholesale trade fell by 31,000 in March, with nearly all of the decline occurring in durable goods.
   
Employment in financial activities continued to decline in March (-43,000). The number of jobs in this industry has dropped by 495,000 since an employment peak in December 2006.  More than half of this loss occurred in the past 7 months.  In March, job losses occurred in credit intermediation (-15,000); real estate (-12,000); and securities, commodity contracts, and investments (-7,000).
   
Leisure and hospitality shed 40,000 jobs in March, with most of the decrease in the accommodation industry (-23,000).  The leisure and hospitality industry has lost 351,000 jobs since an employment peak in December 2007.
   
Transportation and warehousing lost 34,000 jobs in March, raising total job losses to 265,000 since employment peaked in December 2007.  In March, employment declined in truck transportation (-15,000), support activities for transportation (-7,000), and couriers and messengers (-5,000).  Health care employment continued to trend up in March (14,000); however, monthly job growth in the first quarter averaged 17,000 compared with 30,000 per month in 2008.

Posted in African American, Economy | Tagged: , , | 1 Comment »

New Leader of U.S. Small Business Administration Testifies Before Senate Small Business Committee

Posted by Hopeton on April 4, 2009

L-R: Karen Mills and Senator Mary Landieu

L-R: Karen Mills and Senator Mary Landieu

Karen Mills was confirmed by the U.S. Senate by unanimous consent as the 23rd Administrator of the U.S. Small Business Administration on April 1.  Enclosed below is an excerpt from her statement to the Senate Small Business Committee on the day of her confirmation.  The Senate Small Business Committee is chaired by Louisiana Democratic Senator Mary Landrieu and its ranking member is Maine Republican Senator Olympia Snow.

Small business is the heart of the American economy. There are over twenty-six million small businesses in this country and they create 70 percent of the new jobs. This means that to find our way out of the current economic crisis, we have to find ways to help small businesses stay in operation and even expand.

There are at least two kinds of small businesses that are served by the Small Business Administration. The first are the small businesses on Main Street – the restaurants, the drycleaners, and the car repair operations –that are a part of our daily lives. These businesses depend on credit from the SBA’s 7a and 504 programs and advice from more than 14,000 SBA affiliated counseling centers.

The second type are the high growth, high impact businesses which have the potential to grow into the next American giants.

Did you know that Federal Express, Apple and Intel all were at one time supported by the SBA? Others include AOL, Ben and Jerry’s Ice Cream and UnderArmor – a company that makes high-performance sports clothing which my family purchases a great quantity of this time of year during lacrosse season – it was started not far from here in a basement in Georgetown.

These businesses all started out getting an SBA loan, a government contract or an SBIC investment. For all of these enterprises, from Main Street shops to the next potential Intel, we know one thing: if the SBA can help these small businesses grow and prosper, jobs will be created, and America will be able to compete anywhere in the world.

Today, however, small businesses face an uncertain future.  The recession has reduced demand for their goods and services. With the credit crisis, it is increasingly difficult for them to find financing for normal business activities and expansions.

Currently, loan guarantees from the SBA are down by over 50% from their levels a year ago. There are several causes of this decline—and they are inter-related: lower creditworthiness of borrowers, tighter lending standards, lack of liquidity in bank balance sheets, and a frozen secondary market for SBA guaranteed loans.

The Congress and this Committee deserve great praise for recognizing these problems and for incorporating important proactive measures for small business in the Recovery Act. This Act reduces fees to both borrowers and lenders, increases the guarantee percentage on SBA loans and works to unfreeze the secondary markets. In addition, many viable but struggling businesses will get a $35,000 lifeline to bridge them for 6 months of interest and principal payments—which the SBA will fully guarantee.

As you all know, on March 16th, the President committed $15 billion from the Troubled Asset Relief Program to be available to purchase SBA guaranteed paper in the secondary markets. This effort in conjunction with the SBA 90% guarantees and the fee reductions will go a long way to unlocking the credit small businesses need.

If confirmed, I pledge to work as a partner with this Committee to fully implement these important recovery programs.

Senators, today small businesses are suffering and the SBA has lacked the leadership and the resources to help them. These are problems we can fix.

If confirmed I will work on three important fronts:

First, the SBA must continue executing the plans in the Recovery Act and get capital flowing again through the core SBA loan programs.

Second, we must reinvigorate the Agency by attracting a strong and passionate leadership team and investing in the information technology the agency needs to operate.

Finally, we must – and I will – act as an advocate for small business across the administration. As Chair Landrieu and Ranking Member Snowe have suggested, I will coordinate with other Agencies, including Commerce, Labor and Energy, whose programs also affect small businesses.

To listen to Karen Mills’ tesimony before the U.S. Senate Small Business Committee click the following link: Karen Mills Testimony

Posted in Finance, small business, Small Business Loans | Tagged: , , | 1 Comment »

Author of Free Market Madness Will Be Guest on April 27 Economic Perspectives

Posted by Hopeton on April 3, 2009

Dr. Peter Ubel, author of Free Market Madness: Why Human Nature Is At Odds Withubel-cover Economics-And Why It Matters will be the April 27 guest on Economic Perspectives on KAZI 88.7 FM.  In his book, physician and behavioral scientist Ubel argues that the combination of human nature and free markets can be downright dangerous for our health and well-being.  He believes that government must step in and further regulate the markets that reward those who exploit of our weakness.

“…freedom to choose is accompanied by the freedom to make bad choices.  And in the current marketplace, filled with companies that make a habit of studying human behavior, freedom too often leads to harm and misery,” writes Ubel.  “We might think that we are impervious to television ads or supermarket sales schemes.  But marketers and sales experts know more about our behavior than we do, and they know how to influence us without our awareness.”

Ubel is a physcian at the University of Michigan, where he directs the Center for Behavioral and Decision Sciences in Medicine.  A founding member of the World Economic Forum’s Global Health Forum, he has written for numerous science publications as well as the New York Times and the Huffington Post.

Dr. Dwight Stewart, an Austin economist and president of EmployStats, will co-host the interview.

Posted in Books, Business, Economy, Interview, Radio | Tagged: , | Leave a Comment »