Street Execs Give Pols Earful on Financial Reform ...added 4-13-10
By Charles Gasparino courtesy of Fox News
As a financial reform bill starts to take shape in Washington, two key lawmakers came to New York City last week to explain what it means for Wall Street, and how financial executives might help prevent some of its least market-friendly aspects from becoming law by electing more Republicans, FOX Business Network has learned.
About 25 Wall Street executives, many of them hedge fund managers, sat down for a private meeting Thursday afternoon with two of the most powerful Republican lawmakers in Congress: Senate minority leader Mitch McConnell of Kentucky, and John Cornyn, the senior senator from Texas who runs the National Republican Senatorial Committee, one of the primary fundraising arms of the Republican Party.
The stated topic of the meeting: The Financial reform bill being sponsored by Senator Chris Dodd, the Democrat and chairman of the senate banking committee. Both McConnell and Cornyn listened to numerous complaints the executives have with the bill. These included complaints about provisions that allow the government to continue to prop up financial institutions that are “too big to fail.”
The undercurrent of the gathering, however, was undeniably political. It came on the heels of President Obama and Democrats in Congress passing health-care reform by a narrow margin, and who are now turning their attention to passing financial services reform a little more than a year after the Wall Street meltdown.
The Senators explained they can’t just oppose the Dodd bill — they need to come up with a reform plan of their own, as they fight its least free-market components, such as the notion that the government can determine which banks are “too big to fail.”
In the meantime, they need to increase numbers of Republicans in both the House and the Senate if they are going to make an impact on not just this bill, but other measures to increase Washington’s control of the financial business. To do that they need the support of the financial community. At one point McConnell quoted something he attributed to Democrat Barney Frank, the chairman of the House Financial Services Committee.
McConnell, according to a person who was present, said “Barney likes to say ‘Wall Street used to say we have Washington by the (neck), and we’re going to change that.’”
Spokespeople for McConnell and Cornyn didn’t return calls for comment.
During the meetings, both predicted that the Republicans will likely add at least six senate seats to their current total of 41, meaning they would come up just shy of control of the Senate. They predicted victories in Nevada, unseating the unpopular Senator Majority Leader Harry Reid, and said Republican Pat Toomey has a great shot at unseating Republican-turned-Democrat Arlen Specter in Pennsylvania.
They also said that they have a shot at taking control of the House by adding 40 additional seats to their current total. In New York State alone, the senators predicted a six-seat pickup.
But in order to assure those gains, and add even more, McConnell and Cornyn made it clear they need Wall Street's help. “There was no arm twisting but they did say that we should feel uncomfortable living in any country where one party has unfettered ability to pass anything including health care and anything else President Obama dreams up,” said another executive who was present.
In addition to Too Big To Fail, other parts of the bill that drew concern included what one executive from JP Morgan (JPM: 46.18, 0, 0%) said is a provision that would give authority to government to override bankruptcy laws, and determine which class of bondholders should get paid off first. During liquidation, bonds that have a higher priority and are considered “senior” are paid off first, thus they trade higher in the markets.
“I wouldn’t say this around the office,” said the executive, according to two people who were present, “but if that aspect survives, it will kill the market for distressed debt.”
As a financial reform bill starts to take shape in Washington, two key lawmakers came to New York City last week to explain what it means for Wall Street, and how financial executives might help prevent some of its least market-friendly aspects from becoming law by electing more Republicans, FOX Business Network has learned.
About 25 Wall Street executives, many of them hedge fund managers, sat down for a private meeting Thursday afternoon with two of the most powerful Republican lawmakers in Congress: Senate minority leader Mitch McConnell of Kentucky, and John Cornyn, the senior senator from Texas who runs the National Republican Senatorial Committee, one of the primary fundraising arms of the Republican Party.
The stated topic of the meeting: The Financial reform bill being sponsored by Senator Chris Dodd, the Democrat and chairman of the senate banking committee. Both McConnell and Cornyn listened to numerous complaints the executives have with the bill. These included complaints about provisions that allow the government to continue to prop up financial institutions that are “too big to fail.”
The undercurrent of the gathering, however, was undeniably political. It came on the heels of President Obama and Democrats in Congress passing health-care reform by a narrow margin, and who are now turning their attention to passing financial services reform a little more than a year after the Wall Street meltdown.
The Senators explained they can’t just oppose the Dodd bill — they need to come up with a reform plan of their own, as they fight its least free-market components, such as the notion that the government can determine which banks are “too big to fail.”
In the meantime, they need to increase numbers of Republicans in both the House and the Senate if they are going to make an impact on not just this bill, but other measures to increase Washington’s control of the financial business. To do that they need the support of the financial community. At one point McConnell quoted something he attributed to Democrat Barney Frank, the chairman of the House Financial Services Committee.
McConnell, according to a person who was present, said “Barney likes to say ‘Wall Street used to say we have Washington by the (neck), and we’re going to change that.’”
Spokespeople for McConnell and Cornyn didn’t return calls for comment.
During the meetings, both predicted that the Republicans will likely add at least six senate seats to their current total of 41, meaning they would come up just shy of control of the Senate. They predicted victories in Nevada, unseating the unpopular Senator Majority Leader Harry Reid, and said Republican Pat Toomey has a great shot at unseating Republican-turned-Democrat Arlen Specter in Pennsylvania.
They also said that they have a shot at taking control of the House by adding 40 additional seats to their current total. In New York State alone, the senators predicted a six-seat pickup.
But in order to assure those gains, and add even more, McConnell and Cornyn made it clear they need Wall Street's help. “There was no arm twisting but they did say that we should feel uncomfortable living in any country where one party has unfettered ability to pass anything including health care and anything else President Obama dreams up,” said another executive who was present.
In addition to Too Big To Fail, other parts of the bill that drew concern included what one executive from JP Morgan (JPM: 46.18, 0, 0%) said is a provision that would give authority to government to override bankruptcy laws, and determine which class of bondholders should get paid off first. During liquidation, bonds that have a higher priority and are considered “senior” are paid off first, thus they trade higher in the markets.
“I wouldn’t say this around the office,” said the executive, according to two people who were present, “but if that aspect survives, it will kill the market for distressed debt.”
Hit the Brakes: State Governments Raise Traffic Fees ...added 3-22-10
Cash-strapped cities and states consider measures ranging from expansion of red-light camera systems to charging drivers for cleanup after accidents.
Courtesy of Fox News
AP LOS ANGELES – Shomari Jennings was willing to pay the $70 ticket he received for driving without a seatbelt, but not the slew of tacked-on fees and penalties that ballooned the cost more than tenfold.
Every $10 of his base fine triggered a $26 "penalty assessment" for courthouse construction, a DNA identification program, emergency medical services and other programs. Other fees ranged from $1 to $35.
"It's the new tax," Jennings, 30, complained while waiting in traffic court to contest a staggering bill compounded by a $500 fine for missing a court date.
And motorists can only expect more of the same as cash-strapped cities and states consider measures ranging from expansion of red-light camera systems to charging drivers for cleanup after accidents.
In Iowa, lawmakers grappling with shortfalls in the state's public safety budget are exploring ways to increase fines for traffic violations. There's a proposal in Maryland to add a $7.50 charge to traffic fines to help pay for law enforcement and fire protection equipment.
Cash-strapped California, however, is seeing some of the most aggressive efforts to squeeze money out of motorists.
Last year, lawmakers agreed to a budget deal that nearly doubled the vehicle license fee that owners pay when they register their cars every year. The fee rose from .65 percent of a vehicle's value to 1.15 percent. A significant portion of the revenue goes to the state's general fund, and the rest to local crime prevention programs.
This year, Gov. Arnold Schwarzenegger suggested retrofitting 500 city and county traffic cameras to cite not only drivers who blow through red lights but speeders, too. The state, facing a $20 billion deficit, would collect 85 percent of the money, using the projected $338 million to help pay for courts and court security.
An estimated 60 local governments, including fire protection districts and municipalities, have in place or are considering plans to send accident cleanup bills to drivers involved in a crash, according to the Association of California Insurance Companies.
"It's really victimizing people twice," said Samuel Sorich, the association's president.
Many insurance companies do not cover cleanup fees, he added, and if the practice becomes widespread it could lead to higher premiums.
In Los Angeles, city officials are thinking about doubling red-light cameras to 64 intersections. Last year, 44,000 red-light camera tickets were issued in the city, netting more than $6 million.
The fine for running a red light is nearly $500 when city and county fees combined with various penalty assessments, which are set by the Legislature, and traffic school are factored in. The majority of the red-light camera citations, however, were for making right turns without a full stop, a $381 violation.
Steve Finnegan, government affairs manager for the Automobile Club of Southern California, said the cameras are justified when they're intended to stop drivers from running red lights, but when they're used for citing less dangerous right-turn violations motorists can get cynical about their purpose.
"One has to question if finance isn't a part of the motivating factor for putting in these cameras," Finnegan said.
He noted that Schwarzenegger's red-light camera idea was included in a budget proposal.
"This is clearly a financial proposal," he said. "It's not being driven by safety consideration."
The importance of revenue from traffic fines is evident in the competition among governments to control it.
A Los Angeles city councilman who is critical of the high cost of red-light tickets thinks it can be reduced if the city starts to process the citations. Dennis Zine contends that the switch would increase revenue for the city and take some of the burden off the county courts.
State Sen. Jenny Oropeza, however, has introduced legislation prohibiting local governments from collecting and keeping traffic fines.
Zine argues that the city pays for the cameras as well as training and equipping police.
"The state collects a majority of the fine for doing nothing when we're burdened with all the responsibilities," he said.
Los Angeles, which is facing a $212 million budget gap this fiscal year, is also lobbying to change the state vehicle code to allow placement of immobilizing "boots" on cars with as few as three unpaid parking tickets. Currently, the law allows booting after five accumulated parking tickets.
The change could help the city collect up to $61 million in overdue parking citations, according to a transportation department analysis.
Drivers, meanwhile, already face a greater likelihood of being hit with fines under existing laws. Citations for traffic infractions across Los Angeles County in the last fiscal year jumped more than 150,000 above the previous year's 1.67 million, indicating stepped-up enforcement.
In the midst of recession, that means more people coming to court to fight tickets or to admit fault and ask to perform community service instead of paying fines.
Coupled with reduced hours and furlough days due to state budget cuts, the result is long lines of people snaking out the door of the county's biggest traffic court.
"That's not surprising if your red light ticket is now $500," said Judge Gail Ruderman Feuer, who supervises theMetropolitan courthouse. "You have more people coming into court in hopes of getting a break."
But even a break can have too high a price.
Lupe Ocaranza, 20, said she was assigned 60 hours of service in lieu of a $500 fine for driving with an expired license. After doing 27 hours of janitorial duties at a school she decided to pay a reduced $270 fine.
"I can't afford to miss work for this," she said.
Courtesy of Fox News
AP LOS ANGELES – Shomari Jennings was willing to pay the $70 ticket he received for driving without a seatbelt, but not the slew of tacked-on fees and penalties that ballooned the cost more than tenfold.
Every $10 of his base fine triggered a $26 "penalty assessment" for courthouse construction, a DNA identification program, emergency medical services and other programs. Other fees ranged from $1 to $35.
"It's the new tax," Jennings, 30, complained while waiting in traffic court to contest a staggering bill compounded by a $500 fine for missing a court date.
And motorists can only expect more of the same as cash-strapped cities and states consider measures ranging from expansion of red-light camera systems to charging drivers for cleanup after accidents.
In Iowa, lawmakers grappling with shortfalls in the state's public safety budget are exploring ways to increase fines for traffic violations. There's a proposal in Maryland to add a $7.50 charge to traffic fines to help pay for law enforcement and fire protection equipment.
Cash-strapped California, however, is seeing some of the most aggressive efforts to squeeze money out of motorists.
Last year, lawmakers agreed to a budget deal that nearly doubled the vehicle license fee that owners pay when they register their cars every year. The fee rose from .65 percent of a vehicle's value to 1.15 percent. A significant portion of the revenue goes to the state's general fund, and the rest to local crime prevention programs.
This year, Gov. Arnold Schwarzenegger suggested retrofitting 500 city and county traffic cameras to cite not only drivers who blow through red lights but speeders, too. The state, facing a $20 billion deficit, would collect 85 percent of the money, using the projected $338 million to help pay for courts and court security.
An estimated 60 local governments, including fire protection districts and municipalities, have in place or are considering plans to send accident cleanup bills to drivers involved in a crash, according to the Association of California Insurance Companies.
"It's really victimizing people twice," said Samuel Sorich, the association's president.
Many insurance companies do not cover cleanup fees, he added, and if the practice becomes widespread it could lead to higher premiums.
In Los Angeles, city officials are thinking about doubling red-light cameras to 64 intersections. Last year, 44,000 red-light camera tickets were issued in the city, netting more than $6 million.
The fine for running a red light is nearly $500 when city and county fees combined with various penalty assessments, which are set by the Legislature, and traffic school are factored in. The majority of the red-light camera citations, however, were for making right turns without a full stop, a $381 violation.
Steve Finnegan, government affairs manager for the Automobile Club of Southern California, said the cameras are justified when they're intended to stop drivers from running red lights, but when they're used for citing less dangerous right-turn violations motorists can get cynical about their purpose.
"One has to question if finance isn't a part of the motivating factor for putting in these cameras," Finnegan said.
He noted that Schwarzenegger's red-light camera idea was included in a budget proposal.
"This is clearly a financial proposal," he said. "It's not being driven by safety consideration."
The importance of revenue from traffic fines is evident in the competition among governments to control it.
A Los Angeles city councilman who is critical of the high cost of red-light tickets thinks it can be reduced if the city starts to process the citations. Dennis Zine contends that the switch would increase revenue for the city and take some of the burden off the county courts.
State Sen. Jenny Oropeza, however, has introduced legislation prohibiting local governments from collecting and keeping traffic fines.
Zine argues that the city pays for the cameras as well as training and equipping police.
"The state collects a majority of the fine for doing nothing when we're burdened with all the responsibilities," he said.
Los Angeles, which is facing a $212 million budget gap this fiscal year, is also lobbying to change the state vehicle code to allow placement of immobilizing "boots" on cars with as few as three unpaid parking tickets. Currently, the law allows booting after five accumulated parking tickets.
The change could help the city collect up to $61 million in overdue parking citations, according to a transportation department analysis.
Drivers, meanwhile, already face a greater likelihood of being hit with fines under existing laws. Citations for traffic infractions across Los Angeles County in the last fiscal year jumped more than 150,000 above the previous year's 1.67 million, indicating stepped-up enforcement.
In the midst of recession, that means more people coming to court to fight tickets or to admit fault and ask to perform community service instead of paying fines.
Coupled with reduced hours and furlough days due to state budget cuts, the result is long lines of people snaking out the door of the county's biggest traffic court.
"That's not surprising if your red light ticket is now $500," said Judge Gail Ruderman Feuer, who supervises theMetropolitan courthouse. "You have more people coming into court in hopes of getting a break."
But even a break can have too high a price.
Lupe Ocaranza, 20, said she was assigned 60 hours of service in lieu of a $500 fine for driving with an expired license. After doing 27 hours of janitorial duties at a school she decided to pay a reduced $270 fine.
"I can't afford to miss work for this," she said.
Dodd Bill Empowers Regulators to Limit Size of Financial Firms ...added 3-15-10
By Alison Vekshin Courtesy of Business Week Magazine
March 15 (Bloomberg) -- Senator Christopher Dodd unveiled legislation that empowers regulators to break up large financial firms, ban proprietary trading, and oversee hedge funds and derivatives, aiming to enact the most sweeping rules overhaul since the 1930s.
Dodd would let the Federal Reserve authority force firms to divest holdings if they pose a “grave threat” to the economy, make hedge funds overseeing more than $100 million register with regulators and require central clearing for derivatives, according to a summary released today.
“Companies simply shouldn’t be that big or that complex,” Dodd, a Connecticut Democrat who leads the Senate Banking Committee, said at a Washington news conference. “And we will discourage that through the new capital requirements and other strong supervisory protections.”
Dodd’s bill, released 18 months after the collapse of Lehman Brothers Holdings Inc., attempts to implement President Barack Obama’s call for financial reform. Skeptics said it’s a watered-down version of Dodd’s earlier bill that gives Obama’s proposed consumer protection agency too little independence and gives the Fed too big a role after the central bank failed to adequately regulate Wall Street before the credit crisis.
“We’re making up solutions for problems that don’t exist to avoid the challenges that we don’t want to address,” Peter Morici, an economist at the University of Maryland in College Park, said in an interview. “This proposal doesn’t solve problems on derivatives, on too-big-to-fail or anything else that led to the crisis.”
Council of Regulators
Dodd’s plan creates a nine-member council of regulators led by the Treasury secretary to identify and respond to risks in the financial system. Large bank holding companies that received funds from the $700 billion Troubled Asset Relief Program, including Goldman Sachs Group Inc. and Morgan Stanley, won’t be able to avoid Fed supervision by getting rid of their banks.
The bill would give shareholders of publicly traded companies a non-binding vote on executive pay, grant investors more power to nominate board members and allow pay to be recouped if it was based on inaccurate financial information.
It also includes a version of the Obama’s so-called Volcker Rule to restrict proprietary trading, and involvement with hedge funds and private equity funds, according to the summary.
‘Last Resort’
The Fed, with a two-thirds vote by the proposed Financial Stability Oversight Council, would be able to require companies to divest holdings “only as a last resort,” the summary said.
The council can make recommendations to the Fed to impose “strict” rules for capital, leverage, liquidity and risk management to make it difficult for firms to grow so big and complex that they endanger the financial system. It could require the Fed to regulate non-bank financial firms that threaten financial stability, ensuring that “the next AIG would be regulated” by the Fed, the summary said.
It gives the Securities and Exchange Commission and Commodity Futures Trading Commission authority to regulate over- the-counter derivatives and requires those agencies to approve contracts before clearinghouses can clear them.
Dodd’s plan also requires hedge funds to register with the SEC as investment advisers and provide information about their trades and portfolios to assess systemic risk.
Consumer Protection
The proposal creates a consumer protection agency at the Fed to police firms for lending abuses. The bureau will be led by a director appointed by the president and confirmed by the Senate. It would have its own budget, write rules for banks and non-banks, and examine and enforce rules for banks and credit unions with at least $10 billion in assets.
The proposal aims at strengthening Wall Street oversight after a credit crisis stemming from the collapse of the U.S. subprime mortgage market led to the failures of Lehman Brothers Holdings Inc. and Bear Stearns Cos. and $182.3 billion in bailouts for American International Group Inc.
Obama released a statement today saying he “will fight against efforts to weaken” the legislation.
“I will oppose any loopholes that could harm consumers or investors, or that allow institutions to avoid oversight that is important to financial stability,” the president said.
Dodd’s plan is a revision of a November draft that he withdrew amid Republican opposition. That draft called for creating an independent consumer agency and a single bank regulator formed by merging the oversight powers of the Fed, Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
The new measure eliminates the OTS, while reducing the Fed’s bank oversight powers by shrinking the number of holding companies under its watch and shifting authority over state banks to the FDIC. The Fed will regulate bank and thrift holding companies with more than $50 billion in assets, while the FDIC would regulate state banks and thrifts of all sizes and holding companies of state banks with less than $50 billion in assets.
March 15 (Bloomberg) -- Senator Christopher Dodd unveiled legislation that empowers regulators to break up large financial firms, ban proprietary trading, and oversee hedge funds and derivatives, aiming to enact the most sweeping rules overhaul since the 1930s.
Dodd would let the Federal Reserve authority force firms to divest holdings if they pose a “grave threat” to the economy, make hedge funds overseeing more than $100 million register with regulators and require central clearing for derivatives, according to a summary released today.
“Companies simply shouldn’t be that big or that complex,” Dodd, a Connecticut Democrat who leads the Senate Banking Committee, said at a Washington news conference. “And we will discourage that through the new capital requirements and other strong supervisory protections.”
Dodd’s bill, released 18 months after the collapse of Lehman Brothers Holdings Inc., attempts to implement President Barack Obama’s call for financial reform. Skeptics said it’s a watered-down version of Dodd’s earlier bill that gives Obama’s proposed consumer protection agency too little independence and gives the Fed too big a role after the central bank failed to adequately regulate Wall Street before the credit crisis.
“We’re making up solutions for problems that don’t exist to avoid the challenges that we don’t want to address,” Peter Morici, an economist at the University of Maryland in College Park, said in an interview. “This proposal doesn’t solve problems on derivatives, on too-big-to-fail or anything else that led to the crisis.”
Council of Regulators
Dodd’s plan creates a nine-member council of regulators led by the Treasury secretary to identify and respond to risks in the financial system. Large bank holding companies that received funds from the $700 billion Troubled Asset Relief Program, including Goldman Sachs Group Inc. and Morgan Stanley, won’t be able to avoid Fed supervision by getting rid of their banks.
The bill would give shareholders of publicly traded companies a non-binding vote on executive pay, grant investors more power to nominate board members and allow pay to be recouped if it was based on inaccurate financial information.
It also includes a version of the Obama’s so-called Volcker Rule to restrict proprietary trading, and involvement with hedge funds and private equity funds, according to the summary.
‘Last Resort’
The Fed, with a two-thirds vote by the proposed Financial Stability Oversight Council, would be able to require companies to divest holdings “only as a last resort,” the summary said.
The council can make recommendations to the Fed to impose “strict” rules for capital, leverage, liquidity and risk management to make it difficult for firms to grow so big and complex that they endanger the financial system. It could require the Fed to regulate non-bank financial firms that threaten financial stability, ensuring that “the next AIG would be regulated” by the Fed, the summary said.
It gives the Securities and Exchange Commission and Commodity Futures Trading Commission authority to regulate over- the-counter derivatives and requires those agencies to approve contracts before clearinghouses can clear them.
Dodd’s plan also requires hedge funds to register with the SEC as investment advisers and provide information about their trades and portfolios to assess systemic risk.
Consumer Protection
The proposal creates a consumer protection agency at the Fed to police firms for lending abuses. The bureau will be led by a director appointed by the president and confirmed by the Senate. It would have its own budget, write rules for banks and non-banks, and examine and enforce rules for banks and credit unions with at least $10 billion in assets.
The proposal aims at strengthening Wall Street oversight after a credit crisis stemming from the collapse of the U.S. subprime mortgage market led to the failures of Lehman Brothers Holdings Inc. and Bear Stearns Cos. and $182.3 billion in bailouts for American International Group Inc.
Obama released a statement today saying he “will fight against efforts to weaken” the legislation.
“I will oppose any loopholes that could harm consumers or investors, or that allow institutions to avoid oversight that is important to financial stability,” the president said.
Dodd’s plan is a revision of a November draft that he withdrew amid Republican opposition. That draft called for creating an independent consumer agency and a single bank regulator formed by merging the oversight powers of the Fed, Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision.
The new measure eliminates the OTS, while reducing the Fed’s bank oversight powers by shrinking the number of holding companies under its watch and shifting authority over state banks to the FDIC. The Fed will regulate bank and thrift holding companies with more than $50 billion in assets, while the FDIC would regulate state banks and thrifts of all sizes and holding companies of state banks with less than $50 billion in assets.
Small businesses pounded by payroll taxes ...added 3-11-10
CHICAGO (Reuters.com) - Indiana small business owner Mike Hutson is facing a wakeup call when payroll taxes come due in April. Hutson's bill is set to triple as record-high numbers of unemployed workers claim benefits from the state's bankrupt unemployment trust fund.
"The economy is knocking us on one side of the head and our friends at the state house are taking care of the other side," said Hutson, owner of Westfield Lighting Co., a residential lighting company located in the northern Indianapolis suburbs.
Hutson says the annual state unemployment insurance tax bill for his 16 employees will rise to $7,219 in 2010, or $451 per worker. Two years ago, before two rounds of layoffs, the total was $2,387 for 31 employees, or $77 each. That's a per-worker increase of nearly 500 percent.
Increased property taxes and a downturn in residential construction have contributed to Westfield's revenues falling from a high of $5.3 million in 2007 to $3.5 million last year, he said. To preserve cash, Hutson's wife suspended her salary last year and he hasn't drawn a paycheck since Christmas.
"It's pretty expensive for us," Hutson said.
Lawmakers in Indiana, which has borrowed $1.7 billion from the federal government to keep paying unemployment claims, have been pulling out the stops to try to blunt the impact on employers like Hutson.
Across the country, similar relief measures were working their way through state legislatures ahead of first-quarter tax payments. Some 35 states were set to boost unemployment taxes on businesses this year, with increases ranging from 2.5 to 600 percent. The median projected increase was 27.5 percent, according to NASWA, the National Association of State Workforce Agencies, which polled states late last year.
At the high end, Hawaii was bracing for a 2010 increase of 600 percent; Idaho, Kansas, Nebraska, New Hampshire and South Dakota were all staring down hikes of 100 percent or more. Twenty-five state unemployment programs were insolvent and had tapped $27 billion in federal funds. Ten other states, including California, Connecticut and Michigan, have tax-rate hikes already set at the upper limits, NASWA said. Those states would require additional legislation to increase their rates.
"This recession is worse than any recession the system has experienced since its inception during the Great Depression," said Rich Hobbie, NASWA executive director, who added the unemployment insurance system is cyclical and the situation right now is not as bad as it was in the early 1980s.
Most state unemployment rate increases are automatic; they go up when state reserves dip below preset levels required to finance unemployment payouts. But individual businesses also experience rate increases after they lay off workers; the bill goes up in part to help replenish the employers' accounts. And when state coffers get too low or become insolvent, states can also trigger a solvency tax.
Depending on the state, the taxable wage base ranges from $7,000 to $37,800. Companies in states such as Hawaii, at the upper end, see their payments spread throughout the year. But those in states with low taxable wage bases tend to get hit hardest in the first quarter, as workers' earnings reach the base level.
This tax hit is compounded by what is normally a slow period for many seasonal industries.
That's the case for Blaine Aldrich, owner of Comfort Service Inc., a 30-year-old heating and air-conditioning installation and repair business based in DeLand, Florida, west of Daytona Beach. Florida's taxable wage base was set to rise from $7,000 to $8,500 this year, but the state recently passed a bill to delay the increase until 2012.
"Our problem is we've got so many people unemployed. I'm trying to keep everybody working," said Aldrich, whose company employs 15 workers, referring to Florida's jobless rate of 11.8 percent - one of the highest in the country. "We're just trying to keep going month to month down here."
Douglas J. Holmes, the president of trade group Strategic Services on Unemployment & Workers' Compensation (UWC), said this year marks the beginning of what will likely be a sustained trend.
"What we can expect over the next ten years is that we'll have a significant ramp up in state unemployment tax," said Holmes, who has lobbied Congress to push for a reduction in federal unemployment taxes to help offset rising state rates and for more programs that emphasize job retraining and creation.
"There will be higher taxes and more sensitivity to benefit payouts - that will continue all the way to 2020."
"The economy is knocking us on one side of the head and our friends at the state house are taking care of the other side," said Hutson, owner of Westfield Lighting Co., a residential lighting company located in the northern Indianapolis suburbs.
Hutson says the annual state unemployment insurance tax bill for his 16 employees will rise to $7,219 in 2010, or $451 per worker. Two years ago, before two rounds of layoffs, the total was $2,387 for 31 employees, or $77 each. That's a per-worker increase of nearly 500 percent.
Increased property taxes and a downturn in residential construction have contributed to Westfield's revenues falling from a high of $5.3 million in 2007 to $3.5 million last year, he said. To preserve cash, Hutson's wife suspended her salary last year and he hasn't drawn a paycheck since Christmas.
"It's pretty expensive for us," Hutson said.
Lawmakers in Indiana, which has borrowed $1.7 billion from the federal government to keep paying unemployment claims, have been pulling out the stops to try to blunt the impact on employers like Hutson.
Across the country, similar relief measures were working their way through state legislatures ahead of first-quarter tax payments. Some 35 states were set to boost unemployment taxes on businesses this year, with increases ranging from 2.5 to 600 percent. The median projected increase was 27.5 percent, according to NASWA, the National Association of State Workforce Agencies, which polled states late last year.
At the high end, Hawaii was bracing for a 2010 increase of 600 percent; Idaho, Kansas, Nebraska, New Hampshire and South Dakota were all staring down hikes of 100 percent or more. Twenty-five state unemployment programs were insolvent and had tapped $27 billion in federal funds. Ten other states, including California, Connecticut and Michigan, have tax-rate hikes already set at the upper limits, NASWA said. Those states would require additional legislation to increase their rates.
"This recession is worse than any recession the system has experienced since its inception during the Great Depression," said Rich Hobbie, NASWA executive director, who added the unemployment insurance system is cyclical and the situation right now is not as bad as it was in the early 1980s.
Most state unemployment rate increases are automatic; they go up when state reserves dip below preset levels required to finance unemployment payouts. But individual businesses also experience rate increases after they lay off workers; the bill goes up in part to help replenish the employers' accounts. And when state coffers get too low or become insolvent, states can also trigger a solvency tax.
Depending on the state, the taxable wage base ranges from $7,000 to $37,800. Companies in states such as Hawaii, at the upper end, see their payments spread throughout the year. But those in states with low taxable wage bases tend to get hit hardest in the first quarter, as workers' earnings reach the base level.
This tax hit is compounded by what is normally a slow period for many seasonal industries.
That's the case for Blaine Aldrich, owner of Comfort Service Inc., a 30-year-old heating and air-conditioning installation and repair business based in DeLand, Florida, west of Daytona Beach. Florida's taxable wage base was set to rise from $7,000 to $8,500 this year, but the state recently passed a bill to delay the increase until 2012.
"Our problem is we've got so many people unemployed. I'm trying to keep everybody working," said Aldrich, whose company employs 15 workers, referring to Florida's jobless rate of 11.8 percent - one of the highest in the country. "We're just trying to keep going month to month down here."
Douglas J. Holmes, the president of trade group Strategic Services on Unemployment & Workers' Compensation (UWC), said this year marks the beginning of what will likely be a sustained trend.
"What we can expect over the next ten years is that we'll have a significant ramp up in state unemployment tax," said Holmes, who has lobbied Congress to push for a reduction in federal unemployment taxes to help offset rising state rates and for more programs that emphasize job retraining and creation.
"There will be higher taxes and more sensitivity to benefit payouts - that will continue all the way to 2020."
IRS Extends Moratorium on Tax Penalty Fought by Small Business ...added 3-8-10
By Margaret Collins Courtesy of Bloomberg
March 4 (Bloomberg) -- The U.S. Internal Revenue Service will extend a moratorium on penalties until June 1 for failing to report transactions considered tax shelters.
The rule applies to individuals or other taxpayers that fail to disclose transactions the IRS deems as potentially tax evading, such as employer contributions to post-retirement benefit funds. The levy is as high as $100,000 a year for individuals and $200,000 for all other taxpayers, according to the IRS.
It is assessed each year a transaction is not reported and may be charged to both a business and its owner. The department will also “hold off” filing new lien notices on amounts owed, IRS Commissioner Doug Shulman told Congress yesterday.
“The penalty has ended up snagging small businesses that weren’t advised of their responsibility to disclose,” Senator Ben Nelson, a Nebraska Democrat, said in a statement last month.
The provision was designed to crack down on tax shelters for big corporations and wealthy individuals, and has been applied to small-business owners who’ve paid into retirement accounts for themselves and their employees without following IRS disclosure requirements, said Kathleen Pakenham, a New York- based partner at White & Case LLP, who represents 30 such clients.
“Some of these businesses were assessed tax penalties as high as $300,000 per year but received a tax benefit for as little as $15,000 from the transaction,” Senator Charles Grassley, an Iowa Republican, said in a statement on Dec. 23.
There were about 30 million businesses with fewer than 500 employees in 2008, according to the U.S. Small Business Administration’s Office of Advocacy.
Bandage
“It’s a Band-Aid,” said Pakenham of the moratorium. “It’s not addressing the underlying problem.”
The Senate passed legislation on Feb. 9 that would make the fee assessed proportional to the tax benefit received. The House of Representatives has not yet passed a similar bill.
The IRS’s moratorium suspends penalties on individuals who received less than $100,000 in savings from unreported transactions and under $200,000 for other taxpayers.
The U.S. tax code assesses more than 150 penalties, according to a June report by the Government Accountability Office. In fiscal year 2007, the IRS levied more than 37.6 million civil penalties, totaling more than $29.5 billion, according to the GAO.
--With assistance from Alexis Leondis. Editors: Rick Levinson, Rob Williams.
March 4 (Bloomberg) -- The U.S. Internal Revenue Service will extend a moratorium on penalties until June 1 for failing to report transactions considered tax shelters.
The rule applies to individuals or other taxpayers that fail to disclose transactions the IRS deems as potentially tax evading, such as employer contributions to post-retirement benefit funds. The levy is as high as $100,000 a year for individuals and $200,000 for all other taxpayers, according to the IRS.
It is assessed each year a transaction is not reported and may be charged to both a business and its owner. The department will also “hold off” filing new lien notices on amounts owed, IRS Commissioner Doug Shulman told Congress yesterday.
“The penalty has ended up snagging small businesses that weren’t advised of their responsibility to disclose,” Senator Ben Nelson, a Nebraska Democrat, said in a statement last month.
The provision was designed to crack down on tax shelters for big corporations and wealthy individuals, and has been applied to small-business owners who’ve paid into retirement accounts for themselves and their employees without following IRS disclosure requirements, said Kathleen Pakenham, a New York- based partner at White & Case LLP, who represents 30 such clients.
“Some of these businesses were assessed tax penalties as high as $300,000 per year but received a tax benefit for as little as $15,000 from the transaction,” Senator Charles Grassley, an Iowa Republican, said in a statement on Dec. 23.
There were about 30 million businesses with fewer than 500 employees in 2008, according to the U.S. Small Business Administration’s Office of Advocacy.
Bandage
“It’s a Band-Aid,” said Pakenham of the moratorium. “It’s not addressing the underlying problem.”
The Senate passed legislation on Feb. 9 that would make the fee assessed proportional to the tax benefit received. The House of Representatives has not yet passed a similar bill.
The IRS’s moratorium suspends penalties on individuals who received less than $100,000 in savings from unreported transactions and under $200,000 for other taxpayers.
The U.S. tax code assesses more than 150 penalties, according to a June report by the Government Accountability Office. In fiscal year 2007, the IRS levied more than 37.6 million civil penalties, totaling more than $29.5 billion, according to the GAO.
--With assistance from Alexis Leondis. Editors: Rick Levinson, Rob Williams.
A Federal Tax Credit for Startup Investors ...added 3-1-10
By Kay Koplovitz Courtesy of Business Week
Private investors are crucial to the success of high-growth startups that create jobs and tax revenue. Kay Koplovitz describes a new way to encourage them.
While Washington wrestles with a jobs bill and a bill to nurture small businesses with tax credits, hiring incentives, and the like, it is neglecting to address the fundamental engine for economic growth: private investment in early-stage companies with big potential.
I propose that the federal government tag along on the tax incentive programs already in place in 30 states meant to stimulate this kind of investment. These programs' purpose is to encourage the development of high-growth business, create jobs, and ultimately return greater tax revenues to the states. The federal version would do the same but increase the scale.
There are 225,000 angel and seed-capital investors in this country, according to Angel Capital Assn. They, not government, will drive the creation of innovative industries that need capital before revenue and certainly before profitability. No bank will lend to these pioneering entrepreneurs, no proposed tax-credit program will help them, as these early-stage companies have losses on the bottom line and no profitability on which to take the small business incentives now proposed.
In my experience during the first decade running the nonprofit venture catalyst group Springboard Enterprises, angel and seed investors were critical to the success of our 407 companies. Without those investors who took a risk, I don't know how much of our companies' $4 billion-plus in revenue or how many of their 10,000 jobs would have been created.
Not Enough of a Boost Don't get me wrong. I am not disparaging the recent initiatives to stimulate small businesses by providing credit through community banks or plans to lessen their tax burden, leaving them with more capital for growth. In fact, I support them, but I believe they are too little, and unfortunately for the tens of thousands who have had to shut their doors, too late.
We need a different solution for a different type of small business. My vision of the federal tag-along version doesn't require a burdensome federal program to administer. It can simply match the state programs dollar for dollar without creating a new program. It would amount to a public/private partnership with limited risk to public funds.
The book does not have to be rewritten to accomplish this. In February 2008, The National Governors Assn. published a report entitled "State Strategies to Promote Angel Investment for Economic Growth." While the report does highlight the need for standards for qualifying investments and measuring results of granting tax credits to angels, it concludes that "the benefits of supporting and encouraging angel investing can be great."
Template for Success There is other evidence that state tax incentives for angel investing can be productive but must be well-designed, clear, targeted, and well-monitored. The National Association of Seed & Venture Funds published a report in May 2006 titled "Seed and Venture Capital State Experiences and Options" that offers a guideline for state tax incentive programs. It includes a suggested template for successful state programs, which should have the following characteristics: Tax credits should be 1) financially fair to the state; 2) sizable enough to be effective; and 3) managed at the discretion of experienced professionals in the private sector.
A July 2008 research report by Belmont University's Jeffrey Williams examined early adopters of tax incentive programs in four states and concluded that investor incentives stimulated business development important to each state.
Wisconsin, which initiated its tax credit program in 2003, was one of the states profiled in the report, and its execution and success is worth noting. The program works like this: Wisconsin's Commerce Dept. qualifies companies that can participate; investors in those companies then receive their tax credits as a pass-through from the companies. This is Wisconsin's way of allowing angel investors to remain anonymous to public records. The state's private-sector partner, Wisconsin Angel Network, provides education and deal flow and measures results. Angel early-stage investments rose from a little more than $1.7 million invested in 11 companies in 2003 to $15 million invested in 53 companies in 2008. Wisconsin is so encouraged that it has more than tripled its pool of tax credits starting in 2011.
Let's not reinvent the wheel here. Let's implement a tag-along federal tax program that stimulates growth, provides private risk capital for early-stage companies, and creates jobs and the skilled workforce this country needs.
Our future depends on it.
Private investors are crucial to the success of high-growth startups that create jobs and tax revenue. Kay Koplovitz describes a new way to encourage them.
While Washington wrestles with a jobs bill and a bill to nurture small businesses with tax credits, hiring incentives, and the like, it is neglecting to address the fundamental engine for economic growth: private investment in early-stage companies with big potential.
I propose that the federal government tag along on the tax incentive programs already in place in 30 states meant to stimulate this kind of investment. These programs' purpose is to encourage the development of high-growth business, create jobs, and ultimately return greater tax revenues to the states. The federal version would do the same but increase the scale.
There are 225,000 angel and seed-capital investors in this country, according to Angel Capital Assn. They, not government, will drive the creation of innovative industries that need capital before revenue and certainly before profitability. No bank will lend to these pioneering entrepreneurs, no proposed tax-credit program will help them, as these early-stage companies have losses on the bottom line and no profitability on which to take the small business incentives now proposed.
In my experience during the first decade running the nonprofit venture catalyst group Springboard Enterprises, angel and seed investors were critical to the success of our 407 companies. Without those investors who took a risk, I don't know how much of our companies' $4 billion-plus in revenue or how many of their 10,000 jobs would have been created.
Not Enough of a Boost Don't get me wrong. I am not disparaging the recent initiatives to stimulate small businesses by providing credit through community banks or plans to lessen their tax burden, leaving them with more capital for growth. In fact, I support them, but I believe they are too little, and unfortunately for the tens of thousands who have had to shut their doors, too late.
We need a different solution for a different type of small business. My vision of the federal tag-along version doesn't require a burdensome federal program to administer. It can simply match the state programs dollar for dollar without creating a new program. It would amount to a public/private partnership with limited risk to public funds.
The book does not have to be rewritten to accomplish this. In February 2008, The National Governors Assn. published a report entitled "State Strategies to Promote Angel Investment for Economic Growth." While the report does highlight the need for standards for qualifying investments and measuring results of granting tax credits to angels, it concludes that "the benefits of supporting and encouraging angel investing can be great."
Template for Success There is other evidence that state tax incentives for angel investing can be productive but must be well-designed, clear, targeted, and well-monitored. The National Association of Seed & Venture Funds published a report in May 2006 titled "Seed and Venture Capital State Experiences and Options" that offers a guideline for state tax incentive programs. It includes a suggested template for successful state programs, which should have the following characteristics: Tax credits should be 1) financially fair to the state; 2) sizable enough to be effective; and 3) managed at the discretion of experienced professionals in the private sector.
A July 2008 research report by Belmont University's Jeffrey Williams examined early adopters of tax incentive programs in four states and concluded that investor incentives stimulated business development important to each state.
Wisconsin, which initiated its tax credit program in 2003, was one of the states profiled in the report, and its execution and success is worth noting. The program works like this: Wisconsin's Commerce Dept. qualifies companies that can participate; investors in those companies then receive their tax credits as a pass-through from the companies. This is Wisconsin's way of allowing angel investors to remain anonymous to public records. The state's private-sector partner, Wisconsin Angel Network, provides education and deal flow and measures results. Angel early-stage investments rose from a little more than $1.7 million invested in 11 companies in 2003 to $15 million invested in 53 companies in 2008. Wisconsin is so encouraged that it has more than tripled its pool of tax credits starting in 2011.
Let's not reinvent the wheel here. Let's implement a tag-along federal tax program that stimulates growth, provides private risk capital for early-stage companies, and creates jobs and the skilled workforce this country needs.
Our future depends on it.
Stocks Flatten as Market Digests Fed Move ...added 2-19-10
By Matt Egan FOXBusiness
There's No Business Like FOX Business
Stocks flat-lined Friday afternoon as Wall Street attempts a chance of a fourth day of gains despite earlier jitters over the Federal Reserve's first babysteps towards removing the easy-money punchbowl in the financial system.
Today’s Markets
As of 2:11 p.m. EST, the Dow Jones Industrial Average rose 1.35 points, or 0.01%, to 10394.04, the Standard & Poor's 500 added 1.59 points, or 0.14%, to 1108.34 and the Nasdaq Composite picked up 1.37 points, or 0.06%, to 2243.14. The FOX 50 fell 1.67 points, or 0.16%, to 801.14.
While the markets recently turned green, the futures markets had signaled a deep loss after the Fed surprised the markets by cutting the discount rate after Thursday’s close. But the selling proved to be fleeting as the commodities complex benefited from a weaker U.S. dollar. The Dow -- in the midst of its best three-day rally since early November -- could extend its three-day win streak.
“I suspect that Tiger’s news conference today will get more attention than the Fed move on rates last night,” Peter Kenny, managing director at Knight Capital Group, wrote in a note. “Not just because the Fed move was inevitable but because the futures have already priced in yesterday’s rate hike – it’s yesterday’s news already. Tiger is so today.”
Most of the Dow's 30 components were in positive territory by midday, led by Pfizer (PFE: 18.01, 0.29, 1.64%) and DuPont (DD: 34.08, 0.45, 1.34%). The index's biggest losers were its financial members, including American Express (AXP: 39.06, -0.08, -0.2%) and JPMorgan Chase (JPM: 40.02, -0.38, -0.94%).
In its first step toward normalizing its easy-money policies that were implemented to boost the economy, the Fed said it is raising its discount rate by 0.25 percentage points to 0.75% -- its first boost since June 2006. The discount window is considered a lender of last resort for banks and the central bank had previously signaled its intent to raise the rate before the federal-funds rate, its main monetary tool.
"While the timing is somewhat of a surprise, the fact that it occurred is not," Dan Greenhaus, chief economic strategist at Miller Tabak, said in a note to clients.
Even though it had been telegraphed, the markets took the action as a shot across the bow that the Fed is ready to start hiking in rates in coming months. Financial stocks initially fell on the news and the U.S. dollar gained against rivals as higher rates would be healthy for the currency. The markets also increased their odds that the central bank will boost the fed funds rate in the next six months.
Worries about the Fed taking away the easy-money punch bowl were offset by a surprisingly good report on consumer inflation that suggests the central bank won’t be under pressure soon to raise rates. The Labor Department said its consumer price index rose 0.2% in January, while core inflation fell 0.1% -- the first decline since 1982. Both indicators were cooler than economists had forecasted.
In the commodity markets, crude oil rose 36 cents a barrel, or 0.44%, to $79.77. Gold overcame an initial selloff and was recently up $2 a troy ounce, or 0.02%, to $1120.90.
Corporate Movers
Schlumberger (SLB: 63.5499, -2.2101, -3.36%) is eyeing a takeover of rival oil services company Smith International (SII: 37.9, 4.53, 13.58%) and could announce a deal in the coming days, The Wall Street Journal reported. It’s not clear how much the deal would be worth but Smith has a market capitalization of about $7.5 billion, meaning a deal with a 20% premium would total $9 billion.
J.C. Penney’s (JCP: 27.53, 1.57, 6.05%) fourth-quarter profits fell 5.2% and its non-GAAP EPS rose to $1.02, beating the Street’s view of 82 cents. The department store operator sees 2010 EPS of roughly $1.55, exceeding estimates for $1.45.
Global Markets
The U.K.'s FTSE 100 fell 0.07% to 5321.38, France's CAC 40 slipped 0.34% to 3735.20 and Germany's DAX lost 0.15% to 5672.05.
In Asia, Tokyo's Nikkei 225 slipped 2.05% to 10123.58, Hong Kong's Hang Seng dropped 2.6% to 19894.02 and China's Shanghai Composite remains closed for a national holiday.
There's No Business Like FOX Business
Stocks flat-lined Friday afternoon as Wall Street attempts a chance of a fourth day of gains despite earlier jitters over the Federal Reserve's first babysteps towards removing the easy-money punchbowl in the financial system.
Today’s Markets
As of 2:11 p.m. EST, the Dow Jones Industrial Average rose 1.35 points, or 0.01%, to 10394.04, the Standard & Poor's 500 added 1.59 points, or 0.14%, to 1108.34 and the Nasdaq Composite picked up 1.37 points, or 0.06%, to 2243.14. The FOX 50 fell 1.67 points, or 0.16%, to 801.14.
While the markets recently turned green, the futures markets had signaled a deep loss after the Fed surprised the markets by cutting the discount rate after Thursday’s close. But the selling proved to be fleeting as the commodities complex benefited from a weaker U.S. dollar. The Dow -- in the midst of its best three-day rally since early November -- could extend its three-day win streak.
“I suspect that Tiger’s news conference today will get more attention than the Fed move on rates last night,” Peter Kenny, managing director at Knight Capital Group, wrote in a note. “Not just because the Fed move was inevitable but because the futures have already priced in yesterday’s rate hike – it’s yesterday’s news already. Tiger is so today.”
Most of the Dow's 30 components were in positive territory by midday, led by Pfizer (PFE: 18.01, 0.29, 1.64%) and DuPont (DD: 34.08, 0.45, 1.34%). The index's biggest losers were its financial members, including American Express (AXP: 39.06, -0.08, -0.2%) and JPMorgan Chase (JPM: 40.02, -0.38, -0.94%).
In its first step toward normalizing its easy-money policies that were implemented to boost the economy, the Fed said it is raising its discount rate by 0.25 percentage points to 0.75% -- its first boost since June 2006. The discount window is considered a lender of last resort for banks and the central bank had previously signaled its intent to raise the rate before the federal-funds rate, its main monetary tool.
"While the timing is somewhat of a surprise, the fact that it occurred is not," Dan Greenhaus, chief economic strategist at Miller Tabak, said in a note to clients.
Even though it had been telegraphed, the markets took the action as a shot across the bow that the Fed is ready to start hiking in rates in coming months. Financial stocks initially fell on the news and the U.S. dollar gained against rivals as higher rates would be healthy for the currency. The markets also increased their odds that the central bank will boost the fed funds rate in the next six months.
Worries about the Fed taking away the easy-money punch bowl were offset by a surprisingly good report on consumer inflation that suggests the central bank won’t be under pressure soon to raise rates. The Labor Department said its consumer price index rose 0.2% in January, while core inflation fell 0.1% -- the first decline since 1982. Both indicators were cooler than economists had forecasted.
In the commodity markets, crude oil rose 36 cents a barrel, or 0.44%, to $79.77. Gold overcame an initial selloff and was recently up $2 a troy ounce, or 0.02%, to $1120.90.
Corporate Movers
Schlumberger (SLB: 63.5499, -2.2101, -3.36%) is eyeing a takeover of rival oil services company Smith International (SII: 37.9, 4.53, 13.58%) and could announce a deal in the coming days, The Wall Street Journal reported. It’s not clear how much the deal would be worth but Smith has a market capitalization of about $7.5 billion, meaning a deal with a 20% premium would total $9 billion.
J.C. Penney’s (JCP: 27.53, 1.57, 6.05%) fourth-quarter profits fell 5.2% and its non-GAAP EPS rose to $1.02, beating the Street’s view of 82 cents. The department store operator sees 2010 EPS of roughly $1.55, exceeding estimates for $1.45.
Global Markets
The U.K.'s FTSE 100 fell 0.07% to 5321.38, France's CAC 40 slipped 0.34% to 3735.20 and Germany's DAX lost 0.15% to 5672.05.
In Asia, Tokyo's Nikkei 225 slipped 2.05% to 10123.58, Hong Kong's Hang Seng dropped 2.6% to 19894.02 and China's Shanghai Composite remains closed for a national holiday.
Reid Bypasses Bipartisan Senate Finance Bill, Introduces His Own added 2-11-10
By Rich Edson FOXBusiness
In releasing a proposal this afternoon designed to create jobs, Senate Majority Leader Harry Reid has drawn strong objections from Republicans and bypassed a powerful committee chairman in his own party.
Thursday morning, Senate Finance Committee Chairman Max Baucus (D-Mont.) and his Republican counterpart, Senator Chuck Grassley (R-Iowa), unveiled an $85-billion bipartisan bill with spending on roadways, the extension and creation of business tax credits, and other popular items.
Hours later, Reid announced a much smaller version, though he could easily bring up the popular provisions he cut from the bipartisan proposal as part of different bills.
“Senator Reid’s announcement sends a message that he wants to go partisan and blame Republicans,” said Jill Kozeny, a spokesperson for Senator Chuck Grassley, the Finance Committee’s top Republican. “The Majority Leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis.”
Reid labeled his proposal an “initial version.” It features an exemption of Social Security taxes for employers who hire workers who have been unemployed for at least 60 days, a measure to allow small businesses to write off more expenditures, and funding to build roads and bridges.
Senate Democrat aides said Reid’s proposal would cost about $15 billion.
“This is a simplified, focused bill that addresses our core priority: putting millions of Americans back to work by helping our business community thrive again,” said Reid in a statement released to reporters. “Each piece of this bill enjoys bipartisan support, and I look forward to swift action on this measure that will create and save dependable jobs.”
A spokesperson for Finance Committee Chairman Max Baucus did not return a request for comment.
Reid subjected priorities from both parties to his drastic jobs bill cuts. Democrats lost an extension of unemployment insurance, federal funding to pay for health benefits for the unemployed and money for flood insurance.
Republicans lost a provision that would prevent the estate tax from increasing dramatically next year and a renewal of the Patriot Act.
“One word - wow!” said one committee Republican aide. “I would say that we are deeply disappointed that after so much work on a bipartisan basis - and only hours after the Finance Committee unveiled their draft proposal - that Senator Reid would chose to torpedo this deal.”
“After seeing how Democrat leaders handled the partisan health care debate of last year, today’s bombshell shouldn’t be a surprise,” said Antonia Ferrier, a spokesperson for Senator Orrin Hatch (R-Utah), the second-ranking committee Republican. “Senator Hatch hopes Leader Reid listens the collective voice of the American people, changes his mind and abandons this partisan course.”
In releasing a proposal this afternoon designed to create jobs, Senate Majority Leader Harry Reid has drawn strong objections from Republicans and bypassed a powerful committee chairman in his own party.
Thursday morning, Senate Finance Committee Chairman Max Baucus (D-Mont.) and his Republican counterpart, Senator Chuck Grassley (R-Iowa), unveiled an $85-billion bipartisan bill with spending on roadways, the extension and creation of business tax credits, and other popular items.
Hours later, Reid announced a much smaller version, though he could easily bring up the popular provisions he cut from the bipartisan proposal as part of different bills.
“Senator Reid’s announcement sends a message that he wants to go partisan and blame Republicans,” said Jill Kozeny, a spokesperson for Senator Chuck Grassley, the Finance Committee’s top Republican. “The Majority Leader pulled the rug out from work to build broad-based support for tax relief and other efforts to help the private sector recover from the economic crisis.”
Reid labeled his proposal an “initial version.” It features an exemption of Social Security taxes for employers who hire workers who have been unemployed for at least 60 days, a measure to allow small businesses to write off more expenditures, and funding to build roads and bridges.
Senate Democrat aides said Reid’s proposal would cost about $15 billion.
“This is a simplified, focused bill that addresses our core priority: putting millions of Americans back to work by helping our business community thrive again,” said Reid in a statement released to reporters. “Each piece of this bill enjoys bipartisan support, and I look forward to swift action on this measure that will create and save dependable jobs.”
A spokesperson for Finance Committee Chairman Max Baucus did not return a request for comment.
Reid subjected priorities from both parties to his drastic jobs bill cuts. Democrats lost an extension of unemployment insurance, federal funding to pay for health benefits for the unemployed and money for flood insurance.
Republicans lost a provision that would prevent the estate tax from increasing dramatically next year and a renewal of the Patriot Act.
“One word - wow!” said one committee Republican aide. “I would say that we are deeply disappointed that after so much work on a bipartisan basis - and only hours after the Finance Committee unveiled their draft proposal - that Senator Reid would chose to torpedo this deal.”
“After seeing how Democrat leaders handled the partisan health care debate of last year, today’s bombshell shouldn’t be a surprise,” said Antonia Ferrier, a spokesperson for Senator Orrin Hatch (R-Utah), the second-ranking committee Republican. “Senator Hatch hopes Leader Reid listens the collective voice of the American people, changes his mind and abandons this partisan course.”
Bank Regulators Again Urge Small Business Loans added 2-8-10
By Reuters...courtesy of FoxBusiness
Banks have argued that they are getting mixed messages with supervisors telling them to build their capital positions and policymakers telling them to increase lending.
WASHINGTON (Reuters) - U.S. regulators on Friday again reminded banks that they should extend loans to creditworthy small businesses.
In an interagency statement, regulators said supervisors will not criticize banks for extending such loans, as long as they have done a thorough review of the small business's financial condition.
Banks have argued that they are getting mixed messages with supervisors telling them to build their capital positions and policymakers telling them to increase lending.
"Regulators are mindful of the harmful economic effects of an excessive tightening of credit availability in a downturn and are working...to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers," the statement said.
President Barack Obama, looking for ways to drive down high U.S. unemployment, has been zeroing in on expanding credit for small businesses, a main source of job creation in the United States.
Obama is meeting with small business owners in suburban Maryland on Friday and later will announce plans to ask Congress to temporarily expand credit through two Small Business Administration programs, a White House official said.
Banks have argued that they are getting mixed messages with supervisors telling them to build their capital positions and policymakers telling them to increase lending.
WASHINGTON (Reuters) - U.S. regulators on Friday again reminded banks that they should extend loans to creditworthy small businesses.
In an interagency statement, regulators said supervisors will not criticize banks for extending such loans, as long as they have done a thorough review of the small business's financial condition.
Banks have argued that they are getting mixed messages with supervisors telling them to build their capital positions and policymakers telling them to increase lending.
"Regulators are mindful of the harmful economic effects of an excessive tightening of credit availability in a downturn and are working...to ensure that supervisory policies and actions do not inadvertently curtail the availability of credit to sound small business borrowers," the statement said.
President Barack Obama, looking for ways to drive down high U.S. unemployment, has been zeroing in on expanding credit for small businesses, a main source of job creation in the United States.
Obama is meeting with small business owners in suburban Maryland on Friday and later will announce plans to ask Congress to temporarily expand credit through two Small Business Administration programs, a White House official said.
Obama to Announce $30B Small Business Lending Program - Sources added 2-3-10
By Peter Barnes Eve Zibel - FOXBusiness
Administration officials said the program would be financed with untapped spending authority in the $700 billion TARP bailout program and would be separate and distinct from TARP.
President Obama will announce details of a new $30 billion small business lending initiative at a town hall meeting on jobs and the economy in New Hampshire today.
The initiative, called the Small Business Lending Fund, is targeted at 8,000 community banks with assets of less than $10 billion and, according to one financial industry source, could generate up to $240 billion to $300 billion in new small business loans, based on current government bank capital and leverage rules.
“These are the small, local banks that work most closely with our small businesses – that provide them their first loan, and watch them grow through good times and bad,” the President will say in his opening remarks at the event in Nashua, NH, according to excerpts released by the White House.
The Administration is counting on entrepreneurs and small company owners to help jumpstart job creation – economists generally credit small businesses with creating about two-third of all new jobs—but many small firms need new capital to do it. Senior Administration officials said they hope Congress will approve legislation for the new fund quickly; the measure could be included in a jobs package Senate Democratic leaders are assembling.
”This will help small banks do even more of what our economy needs – ensure that small businesses are once again the engine of job growth in America,” the President will tell New Hampshire voters, according to the excerpts.
Administration officials said the program would be financed with untapped spending authority in the $700 billion TARP bailout program and would be separate and distinct from TARP. The fund would provide new capital to smaller banks on a sliding cost scale – the dividend rate on fund investments from the Treasury Department would be set at 5% initially, but decline to as low as 1% for banks that increase their small business lending by 10% or more.
“The more loans these banks provide to creditworthy small businesses, the better a deal we’ll give them on capital from this fund,” the President plans to say in Nashua.
The Administration will ask Congress to exempt participating banks from tough TARP restrictions, including limits on executive compensation and dividend payments, as well as from requirements that TARP banks give stock warrants to the Treasury.
“We wanted something that would get the maximum participation,” an Administration official said. Community banks that might be interested in government capital to help them land more to small companies “were hesitant to take it--not only out of fear of the TARP restrictions,” he said, but because of the stigma of TARP – many healthier banks worry that taking TARP funds could wrongly signal a bank is weak or failing -- and the potential for retroactive legislation curbing TARP banks further.
While some community banks have taken TARP funds, the official said that the Treasury received applications for TARP investments from 600 smaller banks that decided to back out of the program over such concerns.
“We realized that to have the strongest possible effect on small business lending…we needed to create a new program,” the official said.
In his State of the Union Address last week, the President announced his intention to divert $30 billion of TARP funds for small business lending but had provided details of his plan.
If approved, the program would supplement other Administration initiatives to jumpstart small business lending. It has declined because of tougher loan standards adopted by banks as a result of the financial crisis; capital reserving by banks worried about future losses on loans of all kinds; falling values of real estate and other assets small companies use for loan collateral, and tighter liquidity in small business financing markets in general. Among other things, Congress last year approved measures to boost loans to small companies through the Small Business Administration.
But another reason for the drop in small business lending, Administration officials acknowledged, is that many small business owners worry about taking in debt in a weak economy.
“Many (banks) absolutely mentioned that demand was the big issue,” one official said. “But many also said that they were being conservative--that based on looking at the past 12 months, looking at the losses they’d taken, that of course…(they) are pulling back on whole categories of lending…That means that a lot of credit-worthy small business are going to left on the sidelines” without additional bank capital, he said.
Community bankers welcomed the initiative.
"Every dollar of capital that goes into a community bank can potentially be leveraged eight to ten times into loans to small businesses,” said Camden Fine, president and CEO of Independent Community Bankers of America. “ICBA will work closely with both Congress and the Administration on these and other initiatives that can benefit community banks and Main Street America."
Administration officials said the program would be financed with untapped spending authority in the $700 billion TARP bailout program and would be separate and distinct from TARP.
President Obama will announce details of a new $30 billion small business lending initiative at a town hall meeting on jobs and the economy in New Hampshire today.
The initiative, called the Small Business Lending Fund, is targeted at 8,000 community banks with assets of less than $10 billion and, according to one financial industry source, could generate up to $240 billion to $300 billion in new small business loans, based on current government bank capital and leverage rules.
“These are the small, local banks that work most closely with our small businesses – that provide them their first loan, and watch them grow through good times and bad,” the President will say in his opening remarks at the event in Nashua, NH, according to excerpts released by the White House.
The Administration is counting on entrepreneurs and small company owners to help jumpstart job creation – economists generally credit small businesses with creating about two-third of all new jobs—but many small firms need new capital to do it. Senior Administration officials said they hope Congress will approve legislation for the new fund quickly; the measure could be included in a jobs package Senate Democratic leaders are assembling.
”This will help small banks do even more of what our economy needs – ensure that small businesses are once again the engine of job growth in America,” the President will tell New Hampshire voters, according to the excerpts.
Administration officials said the program would be financed with untapped spending authority in the $700 billion TARP bailout program and would be separate and distinct from TARP. The fund would provide new capital to smaller banks on a sliding cost scale – the dividend rate on fund investments from the Treasury Department would be set at 5% initially, but decline to as low as 1% for banks that increase their small business lending by 10% or more.
“The more loans these banks provide to creditworthy small businesses, the better a deal we’ll give them on capital from this fund,” the President plans to say in Nashua.
The Administration will ask Congress to exempt participating banks from tough TARP restrictions, including limits on executive compensation and dividend payments, as well as from requirements that TARP banks give stock warrants to the Treasury.
“We wanted something that would get the maximum participation,” an Administration official said. Community banks that might be interested in government capital to help them land more to small companies “were hesitant to take it--not only out of fear of the TARP restrictions,” he said, but because of the stigma of TARP – many healthier banks worry that taking TARP funds could wrongly signal a bank is weak or failing -- and the potential for retroactive legislation curbing TARP banks further.
While some community banks have taken TARP funds, the official said that the Treasury received applications for TARP investments from 600 smaller banks that decided to back out of the program over such concerns.
“We realized that to have the strongest possible effect on small business lending…we needed to create a new program,” the official said.
In his State of the Union Address last week, the President announced his intention to divert $30 billion of TARP funds for small business lending but had provided details of his plan.
If approved, the program would supplement other Administration initiatives to jumpstart small business lending. It has declined because of tougher loan standards adopted by banks as a result of the financial crisis; capital reserving by banks worried about future losses on loans of all kinds; falling values of real estate and other assets small companies use for loan collateral, and tighter liquidity in small business financing markets in general. Among other things, Congress last year approved measures to boost loans to small companies through the Small Business Administration.
But another reason for the drop in small business lending, Administration officials acknowledged, is that many small business owners worry about taking in debt in a weak economy.
“Many (banks) absolutely mentioned that demand was the big issue,” one official said. “But many also said that they were being conservative--that based on looking at the past 12 months, looking at the losses they’d taken, that of course…(they) are pulling back on whole categories of lending…That means that a lot of credit-worthy small business are going to left on the sidelines” without additional bank capital, he said.
Community bankers welcomed the initiative.
"Every dollar of capital that goes into a community bank can potentially be leveraged eight to ten times into loans to small businesses,” said Camden Fine, president and CEO of Independent Community Bankers of America. “ICBA will work closely with both Congress and the Administration on these and other initiatives that can benefit community banks and Main Street America."
7 Holiday Marketing Mistakes to Avoid Brought to you by Fox Business.
The holidays have arrived, and you still don't have a plan for marketing to your current customers or reaching out to new markets. Why do the holidays seem to sneak up on us every single year? As much as we try to prepare ourselves for family, shopping, gift giving and travel, it's no wonder we often forget about our businesses marketing during all the holiday mayhem.
It's quite common for business owners to freeze their marketing efforts over the holiday season with the notion that they're going to start strong in the new year; little do they know, however, just how many opportunities have passed them by.
The holidays can be the best time to bring in new business and reconnect with current clients and customers. The holiday rush is not just for brick-and-mortar department stores; it can also help your business by boosting revenue and customer loyalty before the end of the year.
Here are the top seven marketing mistakes businesses make during the holidays:
It's quite common for business owners to freeze their marketing efforts over the holiday season with the notion that they're going to start strong in the new year; little do they know, however, just how many opportunities have passed them by.
The holidays can be the best time to bring in new business and reconnect with current clients and customers. The holiday rush is not just for brick-and-mortar department stores; it can also help your business by boosting revenue and customer loyalty before the end of the year.
Here are the top seven marketing mistakes businesses make during the holidays:
- No marketing plan going into the holiday season. Your holiday marketing should have been planned in the summertime, but now it's the holiday season, so what do you do? Take some time today to decide what you are going to do and offer for the rest of the holiday season. If it's just too late, then start with a New Year focus. For 2010, set a marketing calendar at the beginning of the year that can serve as a blueprint for your marketing plans year round.
- No communications. Many business owners mistakenly think that offices are closed or people are too busy to be bothered. If you choose not to follow up with leads or customers because it's a busy time of year, you're making excuses. Although the holiday season is hectic for most, for some businesses it's actually the slowest and the best time to pick up the phone and make a call for their business. If it's not the holidays, it'll be the New Year, or Spring break, then summer. Now is the best time to market precisely because so many people don't.
- No holiday offers. People, for the most part, love the holiday season; they like to focus on gift giving, vacations and family time. So if you don't provide a holiday special or offer that helps them with those goals, you are doing them--and your business--a grave disservice. Any product or service can be repackaged with a holiday offer or theme. Search online to see what other companies are offering; it might spark an idea or two for your business.
- Not sending holiday greetings to customers. These are people that have been loyal, bought from you and supported your business year round; you need to let them know that you are not only thinking about them over the holidays but that you are grateful for their business. Take a few hours out of your day and hand write a holiday greeting card. There are automated systems where you can design your own card (to add a personal touch) and you can even send a gift with the card. In addition, these services will put the postage on the card and send it for you, saving you a trip to the post office.
- Forgetting to ask how clients are doing. This is something that most businesses completely miss the boat on; they do not survey clients and customers from the current year to see how they can improve in the future. How are you going to know what worked and didn't if you don't ask? If you keep doing what you have always done, you'll keep getting what you've always gotten. Find out what worked and what didn't, look at your systems and your marketing, and then make improvements and enhance your current offerings. Offer a free gift or holiday discount to customers who take the time to complete your survey.
- Shirkingyourpublic relations. Many businesses don't reach out to the media during the holidays because the owners are under the impression that media outlets shut their doors or are too busy to bother with new story ideas. This couldn't be farther from the truth. The media is always open and looking for the next great story or feature. If you can tie your story in with the season, all the better. If you missed the holiday calendar, you can still plant a seed for a feature in the new year. A great way to connect with the media during this time of year is to contact the media using LinkedIn, which will usually go right to their inbox.
- Nottapping into year-end budgets. There are thousands of companies that earmark holiday and year-end budgets--that money must be spent. These budgets are usually set prior to the holidays and focus on staff or client gifts and employee training as well as planning for the new year. What service or product can you offer to help them meet their budget and year-end goals? If you do a keyword search that applies to your industry or topic on social sites such as Twitter, you can see what people are looking for and talking about. This can help you plan and approach contacts with holiday offers.