In the world today, there are probably over fifty-thousand problems or more still in need of solutions and certainly some better ideas. Online there is an explosion of wonderful things, innovations, inventions, discoveries and small business start-ups seeking to solve some of these problems.
And then what happens to them? That is a good question. And in one of these posts, I’m going to try and answer that. But, before I get on a tangent about only 1.9% of women owned businesses getting any venture capital and how start-ups, especially women owned start-ups are ending up with loan packages at 40% interest rates and having to pay off investors at the two or three year mark when the business should be getting established, then taking a hit instead – I’ll cover some of the things still needing solutions.
But first, I found this article in my twitter feed and went over to read it –
It describes why the US may have missed out on millions of inventors. Their research indicates that –
WHY IT MATTERS
Innovation has slowed in the U.S., stymying economic growth. To get back on track, the U.S. needs more low-income children, women, and minorities to become inventors — but that won’t be easy.
The research also shows that innovation in the U.S. could quadruple if women, minorities, and children from low-income families became inventors at the same rate as men from high-income families.
Whatever policies are eventually adopted, policymakers need to think in terms of long-term solutions. “You want is to increase the pipeline of people on the supply side who are great inventors,” Van Reenen said. “You want to take the talent that is already in America and get those kids imagining themselves being an inventor or potential inventor. It is not a quick fix, but in the long run it is going to be a more effective policy.”
It is worth going and reading that article, however, I just about hit the ceiling when I read it and even now with a four bullet point list of what I want to say about it – well, angrier about it than I can even express.
There’s a Different Response & Support When A Man Creates Something
When a man, young man, or boy in white upper class America comes up with an invention – what happens next is tremendously different than what happens when someone from any other of those groups, gender or income levels invent or innovate something.
There is more than whether someone can believe themselves to be an inventor. It takes being able to have some help and support, protection from theft of the invention and massive amounts of money and networking to get the invention patented, prototyped and then into investor backing processes. Women and minorities don’t have that.
One of these 50,000 plus problems still in need of good solutions and inventions is a way to take mining tailings out of the water system once they’ve been allowed to get into it. Obviously, that continues to be a problem in the United States and around the world.
What Happens When A Woman Creates Something or Innovates Something
Let’s say I have designed something for this purpose and am a woman without any real support from friends and family to back my idea to fruition. How often that is the case for every woman, every person without a strong financial foundation and most minorities, people that are poor and people who have disabilities specifically.
There are no family members going to network an attorney friend or blueprint maker to any of us as they would if a white male from an upper class family has the idea. There are no instances of getting some family members to financially back having the prototype made or getting the patent process done or pitching it to other people for us as happens for those guys and their idea.
So, when the researchers in this MIT/Sloan study support putting in place programs to help people who are women, who are poor and who are minorities believe we can invent and be inventors, it is very disingenuous.
Women Do Create, Invent Solutions, Innovate and Make Inventions To Solve Problems
We do create, invent solutions, innovate and make inventions that solve real world problems, but without the other components that are obviously available to white men who do it – from family, from friends, from investors, from bankers, from the community at large, from attorneys, from skills in their family’s networks of acquaintances – our inventions are lost to mankind and to our country.
These inventions and innovations either don’t get brought to fruition, are stolen by those who have means as we try to do something with them, or are ignored by companies until the patent we do manage to get doesn’t have the fees paid or runs out – then takes it for nothing.
Families of middle class and below, economically disadvantaged, working poor and outright financially destitute individuals simply are denied the access and equal opportunity for processes of protecting the invention or innovation or idea from inception to realization to be available to us.
Inventing and inventions, innovations and concepts for an innovation that could be brought to the marketplaces are not treated with value in these arenas either because everyone has seen that there is no chance of realizing any rewards from those efforts and bringing it to the marketplace.
Even once the patent is made, prototype created and market analysis is done for some product or invention, there is no money to go forward from that point for people in these groups either. Investors want to see 2 -3 times their money back in short periods of time and see that it can be done without any risk to them whatsoever.
New Things Don’t Have An Existing Track Record and Appear More Risky So They Often Fail To Get Needed Support
No matter what invention or innovation it may be, there is typically no existing track record of what it will do in the marketplace because it is new or a new approach or has not been done that way already or would have to supplant something else in the market that is currently being used for whatever problem it approaches. That makes it appear to be unworthy of the risk involved of backers putting the money with it that the process would take to bring it into the market successfully.
Some investors, angel investors, venture capital investors, banks and sources intended to serve minority run businesses won’t even approach these new ideas without a track record. And, some loans to do it if not denied, have interest rates of 40% which rob the business potential of the idea at every stage. Then, about the time the business with this new invention or innovation are getting established, investors pull their money out – after 2 – 3 years, if anyone from any of these groups even get that far with it. Most often, the access for funding is simply non-existent no matter how many are approached.
This Is What A Male Experiences But Females Don’t – When They’ve Invented Something Or Have A Great Idea For Something
To show the picture a little clearer – if a white male in a family has an idea for an invention, the first thing that happens in his experience with it is to receive respect for his value and the value of whatever he has come up with. Next, family members hook him up with friends of theirs and from their networks of acquaintances, that can help the idea be fleshed out into drawings and plans or they pay for it to be done outright.
Then, family members and business friends hook that guy up with an attorney to write out a non-disclosure agreement so the innovation, invention or idea can be shown to potentially interested companies.
Then, they call their friends and extended family members and pitch the need for backing this idea financially FOR HIM, and line up funds to get the thing going so the patent can be filed and a prototype created.
They might even get drawings or computer work done from a friend or family member or hire it to be done, to show off the idea, invention or innovation so it looks slick when they take it to bankers and friends who have access to invest in it.
An Ad Hoc Army Comes Together From Friends of Family To Help Men Realize Their Invention or Business Idea To Fruition And Success
Then, rather than the person – the white male from an upper class income in this case, having to pitch the idea, invention or innovation through his own efforts, there is already a team of family members, friends of the family, extended family and business acquaintances of the family supporting him, supporting his efforts, supporting his idea or invention, protecting the invention with appropriate legally binding elements, but also pitching it for him, pitching it to funding sources and rounding up money for it – for him.
That is not what happens to women, people who are poor or even middle-class, minorities, disabled people, elderly people, and children of every other group that is not financially well-off.
But, we do hear a lot of “who do you think you are?” and “why should I give any money to you?” As well as, we do get a lot of ideas, inventions, innovations and fully fleshed out prototypes of inventions and marketable products stolen from us that we’ve invented or created, hijacked from us, diverted from us participating in any of the rewards of them despite having created them.
This Failure Of Our Nation To Support Women’s Inventions And Business Concepts Is Costing Our Future And Present Economic Well-Being As a Nation
The stories of that are far and wide, common in so many iterations that the experience of those around me without great financial means match my own in this area.
It is apparently been and continues to be a common practice, to not allow rewards of our inventions, labors, ideas, innovations, new characters, new processes, new possibilities for things to come to us. It must be intentional without those in our society doing it having any understanding of the cost to all of us and our nation’s potential when they do it that way.
About CricketDiane –
I’ve been creating nearly every day since I was a kid and that is over 50 years. I’ve created in numerous ways in a range that moves from art to problem-solving to inventing, creating music, sculpting and painting to writing and doing various computer / online based projects.
“It is better to make the effort to move forward and release the flow of ideas to work with them and do things creatively, create things and invent and write and make – I definitely know that by experience.” – cricketdiane, 2018
As teachers in several states have made walkouts recently, and now Oklahoma teachers are continuing to do so, and having seen video of schools in Oklahoma that look like they are from a third world country after Republicans have run the state so long, I thought of a few things. And, after getting to the bottom of this post – I discovered that Oklahoma has over $5 Billion of their treasury money in an investment portfolio, that in 2016 / 2017 they had revenues of $2.7 Billion for the first six months of the fiscal year up from the year before AND that they have information that suggests they are continuing to get rising revenues rather than lowering ones.
I’m just going to say what I think has happened to Oklahoma’s State Education Budget and to other states, as well – then try to find sources so you can see what I’m saying.
Back in 2007 – 2008, there were a lot of things that became obvious that most of us had not known about state budgets, education trusts, state treasury money and other large pools of money. It had been happening for years before that point, but it didn’t become obvious until those resources were in trouble from the financial crisis that was happening in credit markets, Wall Street and from toxic financial products they had sold to everybody.
Several school systems at the time had people who came out publicly about the education and state treasury budgets having bought financial products from Wall Street as investments using the pools of available money that was supposed to cover the needs of the state and its education system included.
That means, instead of cash resources sitting in the state treasury and safer security types, maybe T-bills or bonds, the treasurers were motivated to have bought other financial products at the overwhelming information they were given from Wall Street brokers about “no-risk” financial products they could use.
When the financial meltdown occurred, many of those “no-risk” financial products turned out to be extremely costly to the treasuries and others holding them. Payouts on those losses had to be made and then absorbed by the states and the state budgets. Some of that became obvious at the time and some of it continues to this day.
What most people don’t seem to know, is that in order to facilitate trading, buying, selling and managing those portfolios of state money in financial products, armies of broker / analysts in finance had to be hired into the state’s team of personnel and most of them are paid well over $150,000 a year salaries each.
So, not only were state budgets and education budgets decimated by the lost revenues which had to be paid out to satisfy the liabilities of those financial products they had bought from Wall Street, instead of paying to buy textbooks, keep up with school costs and teacher’s pay, those funds were used to pay financial teams to buy, sell and trade securities and other financial products using the state’s pooled funds.
This is from one of the cities / towns in Oklahoma describing their investing city funds and pools of money into securities and other Wall Street financial products – excerpt –
pg. 4 –
A. The authority for the investment of funds of the City is granted by the City Charter1 and Oklahoma State Statutes2, to the City Treasurer. The City Charter3
authorizes the City Treasurer to employ and supervise such employee or employees as may be necessary for the efficient discharge of his duties. In accordance with these provisions, the City Treasurer or his designee may buy, sell and trade investments in accordance with the goals, objectives and restrictions of this investment policy.
pg. 5 –
A. The City Finance Department shall keep a written record of all investments and shall forward information to the Accounting Division to be posted in the financial records.
Records of the Treasury Division and Accounting Division shall be reconciled on a
monthly basis and at the end of each fiscal year, under applicable accounting standards.
The City Treasurer shall provide summarized and/or detailed investment reports to the Finance and Audit Committee and the City Council on a monthly basis.
The City Treasurer should design the reporting to meet the needs and requests of the Finance and Audit Committee and the City Council.
There are also fees being paid to Wall Street every time these financial products are bought, sold and traded. Some cities, state treasuries and education budgets are paying for the securities to be held by a third party or Wall Street brokerage as well. Plus, paying massive interest payments being made to Wall Street for loan products and bonds when state treasuries, agencies, education funds, county and city budgets borrowed to make good on covering the losses from 2008 – 2010 and other times over the course of doing things this way.
In the various associations and conferences where state treasurers and their staff attend and participate at taxpayer’s expense, the sponsors of those events and often the speakers at those events for many years now have been straight out of Wall Street and the financial brokerages hoping to access those tax funds in large pools for new sales of their products and that includes strange exotic financial products that are still allowed.
Now, the revenues of our state budgets, city budgets, education budgets, education trusts and other large pools of tax money and state revenues are not liquid capital nor locked into safe asset types, Plus everywhere these financial products are having to be purchased, held, traded, sold and managed, financial analysts are being given the salaries of what would be four teachers but for only one person who isn’t doing any teaching.
The tax money / revenues no longer is available to pay teachers, hire teachers, buy supplies for schools, upgrade schools, do upkeep at schools – and the same is true for every agency, budget, city and department where this is being done this way.
Every time Republicans who have led Oklahoma to this point, talk about what is causing these education budget difficulties in the state, they point to everything else except the way the financial industry and Wall Street in particular has diverted the funds to their own profits. And, that includes hiring financial analysts to oversee the process rather than teachers while paying those analysts far more than any teacher is ever allowed to earn in the same state from the same resources.
From a June 2017 article –
Between 1994 and 2004, average per-pupil spending across the nation increased by nearly 24 percent. But after 2008, state revenues plummeted — some by as much as a quarter.
It would be my bet that using the Wall Street originated financial products to invest state revenues and education budget moneys began somewhere just before 2004. But, it would be a guess. And, it is a fact that for some time, every conference and convention attended by elected officials, state treasurers, legislators and their staffs, has been sponsored by and covered over with Wall Street sellers who, without regard for what could happen to those resources when financial products failed to be safe, secure or pay out in the black with some advantage sold away state’s and taxpayer’s rights to their own moneys.
That means, when a credit default swap was sold to the state education budget and a large pool of those financial resources were tapped to make that purchase – not only did it tie up the original funds intended for the education system to use since they were now a piece of paper describing the terms of the financial product, but also, because these often turned toxic – became a payout of tens of millions or hundreds of millions of dollars further from that same budget.
Therefore, the original money from taxes and revenues was no longer available because it was sunk into purchasing something that was risky, then that money used to purchase it was gone plus having to pay out hundreds of millions of dollars on top of that. Then, if they borrowed to satisfy paying out that much at once since the budget’s funds were tied up into all these other financial products, the loan service has to be paid, the interest, the management fees of the loan and paying it back at the same time absorbing the loss of the original investment.
It is more than just opinion that the process was used in Oklahoma and elsewhere which has resulted in these destructive forces in the revenues and taxpayer funds that should be sitting in the state treasuries and every other budget serving the public, but no longer are real and adequate funds in place.
Clicking on the National Association of State Treasurers above and looking at the 2018 Member and Conference Brochure – shows on the first few pages who the sponsors are –
• Bank of America
• JP Morgan Chase
• Natixis Global Asset
• RBC Global Asset
• Verus Financial
• Wells Fargo
• Fidelity Investments and
Fidelity Capital Markets
Bay State and Keynote
• Federated Investors
• BNY Mellon
• JP Morgan Chase
• MA Liquor Store Association
• PFM Group
• U.S. Bank
• Wells Fargo
• Bank of America
• BNY Mellon
• Capital Group
• Hilltop Securities
• JP Morgan Chase
• KeyBanc Capital
• The Nottingham
• People’s United
• State Street and
State Street Global
Annual Hotel Sponsor
• State Street and State Street Global Advisors
Minneapolis and Boston Sponsors
• Aon Hewitt
• Boston Common
• Broadridge Financial
• EnTrust Permal
• Intuition College
• The Nottingham
• AKF Consulting
• Audit Services
• Empower Retirement
• TD Bank
• UBS Global Asset
• Weston Patrick
Indeed, the recovery nationally has been slow, particularly for schools. Some state budgets still haven’t fully recovered when inflation is taken into account. Today, 23 states are providing less education formula funding — which typically accounts for half of elementary and secondary school budgets — than they did in 2008, according to the CBPP. Schools have restored just one-third of the 351,000 jobs cut in the aftermath of the downturn.
In April, for example, Oklahoma schools were notified that their monthly payments from the state would be shorted by an additional $17.4 million. That brought the total reductions since January to nearly $87 million.
Approximately $10 billion is deposited each year at the state treasurer’s office into the Oklahoma State Treasury. This includes state tax revenues, such as income tax and gross production tax receipts; federal funds, such as matching funds for highway construction; and other tax revenues, such as the motor fuel tax, which are collected by the state but then apportioned to the counties and cities.
The state treasurer has no power to impose taxes, set tax rates or collect taxes; only to make sure all public funds are properly accounted for once it has been collected or distributed by other executive branch entities. Also, the state treasurer doesn’t formulate the state’s annual budget nor does the office have any authority to impoundfunds allocated by the Oklahoma State Legislature.
To earn additional revenue for Oklahoma, the state treasurer invests money which is not immediately needed to fund government operations. The office has an average of $5 billion of taxpayers’ money in its investment portfolio. The Treasurer’s investments are strictly governed by Oklahoma statutes and the Treasurer’s investment policy.
The Office of the State Treasurer is the state agency which supports the state treasurer. The office provides banking and investment services for state agencies, reuniting individuals and businesses with their unclaimed property, and promoting economic development Statewide. The agency consists of the treasurer’s staff. Staffers work in the treasurer’s offices in the Oklahoma State Capitol in Oklahoma City.
As of 2013, the agency has an annual budget of approximately $8.4 million. The budget provides funding for approximately 49 full-time employees.
Chief deputy treasurer
Investment portfolio accounting and reporting
Finance and budget
Deputy treasurer for policy/chief of staff
Deputy treasurer for communications and program administration
TO: Oklahoma State Board of Education
FROM: Superintendent Joy Hofmeister
DATE: August 24, 2017
SUBJECT: FY 17 Adjusted Budget – Returned Funds
On February 21, 2017, the State Board of Equalization took action to declare a state General Revenue failure. This failure reduced General Revenue allocations by 0.7% for all state agencies.
For the State Department of Education, 0.7% resulted in a $11,125,889.31 cut. On July 20, 2017, the Office of Management and Enterprise Services (OMES) notified state agencies that these funds would be returned to the purpose for which they were originally appropriated.
As a result of these reductions, the attached FY 17 Adjusted Budget (Returned Funds) is
submitted for your approval.
• FY 17 Adjusted Budget
OKLAHOMA CITY — General Revenue Fund collections in December were $512.6 million and came in at $36.6 million, or 7.7 percent, above the monthly estimate. This amount is $93.1 million, or 22.2 percent above collections in December of 2016.
Total collections over the first six months of the fiscal year were $2.7 billion which is $75.2 million, or 2.9 percent, above the year-to-date estimate and $278.1 million, or 11.6 percent, over the year-to-date for 2016.
Total income tax collections were up by $29.7 million, or 15.9 percent for the month, with individual income tax collections coming in 21.8 percent above prior year collections. Corporate income tax again made no contribution to the General Revenue Fund due to erratic patterns.
Major tax categories in December contributed the following amounts to the GRF:
Total income tax collections of $216.9 million were $29.7million, or 15.9 percent, above the estimate and $38.8 million, or 21.8 percent, above the prior year.Individual income tax collections of $216.9 million were $29.7 million, or 15.9 percent, above the estimate and $38.8 million, or 21.8 percent, above the prior year.Corporate income tax collections made no contribution to the General Revenue Fund from December collections and none were estimated to be received due to previous years’ history.
Sales tax collections of $184.6 million were $8.1 million, or 4.6 percent, above the estimate and $24.8 million, or 15.5 percent, above the prior year.
Gross production tax collections of $24.5 million were $15.3 million, or 38.4 percent, below the estimate and $9.2 million, or 59.8 percent, above the prior year.Natural gas collections of $20.6 million were $4.9 million, or 19.1 percent, below the estimate and $7.2 million, or 54 percent, above the prior year.Oil collections of $4.0 million were $10.4 million, or 72.5 percent, below the estimate and $2.0 million, or 98.7 percent, above the prior year.
Motor vehicle tax collections of $16.0 million were $1.3 million, or 7.7 percent, below the estimate and $628,000, or 4.1 percent, above the prior year.
Other revenue collections of $70.5 million were $15.5 million, or 28.1 percent, above the estimate and $19.7 million, or 38.6 percent, above the prior year.
While the proposal would send an extra $30 million to the Department of Health during an investigation into financial mismanagement, the revised state budget would force the state auditor’s office, which is investigating, to trim more than $84,000 from its budget.
Oklahoma is one of 20 states that continued to cut education funding this year, even as the economy recovers, leaving per student spending $857 below pre-recession levels after inflation. Although the Legislature and Governor Fallin provided a $41 million increase to the school funding formula in this year’s budget, it was not enough to keep up with inflation and rising enrollment. This year Oklahoma’s state aid funding per student dropped another $21 after inflation. Total state appropriations for the support of schools is $172 million below what it was in fiscal year 2008, even before accounting for inflation.
But, today when I made my first google search I found this –
Deputy Treasurer for Debt Management
Department/Agency of position:
Oklahoma State Treasurer’s Office
Location of position:
Oklahoma City, OK
$125,000.00 – $165,000.00
Wednesday, August 9, 2017
Saturday, September 9, 2017
Serve as Deputy Treasurer for Debt Management within the Office of the State Treasurer (OST) and transition to the position of State Bond Advisor on November 1, 2017. Reports directly to the State Treasurer and the Council of Bond Oversight Responsible for the day-to-day operations of the Debt Management Division of the Oklahoma State Treasurer’s Office, including assignment of responsibilities of staff, which currently includes two (2) positions. Responsible for initiating and maintaining effective relationships with state agency officials and administrators, legislators and their staffs, bond counsel, bond holders, financial advisors, bond rating agencies, and the financial and bond communities within the state of Oklahoma. Responsible for providing state officers and legislators with advice and assistance on matters relating to capital planning, debt issuance and debt management. Responsible for reviewing applications for financing and providing summaries of the requests to the Council at its monthly meetings. . Responsible for coordination of State debt issuance Assists the Office of Management and Enterprise Services (OMES) with staff support for the Long-Range Capital Planning Commission Responsible for development, review, and issuance of the Oklahoma Debt Affordability Study. Responsible for development, review, and issuance of the State Bond Advisor’s Annual Report detailing state debt. Provides guidance and support services to State Governmental Entities in the planning, structuring, and issuance of debt. Serve as a member of the Oklahoma Commission on School and County Funds Management. Serve as a member of the Oklahoma Development Finance Authority’s (ODFA) Program Development and Credit Review Committee. Responsible for management of the Oklahoma Private Activity Bond Allocation Program.
Bachelor’s degree in finance, economics, business or related field. Advanced degree preferred. Minimum of ten (10) years’ experience in public finance.
Visit website for full job description and application instructions.
This chart shows the pay / salaries of the administrative part of the Treasury in Oklahoma State but not the finance geeks working for them as analysts who are brokering the $5 billion in investment portfolio the state has.
State government has four core responsibilities – education, health care, public safety and transportation. It is those fundamental services on which the people depend to have productive lives. For businesses, those services done right provide an environment in which they can thrive.
Analysis of data released this month by the U.S. Census Bureau, along with the most-recent data from the Bureau of Economic Analysis, Federal Highway Administration, and the Centers for Medicare and Medicaid Services, shows that, even when adjusted for Oklahoma’s relatively low cost of living, funding for core services still lags the region and the nation.
Oklahoma State Auditor unveils compromise plan to state’s budget woes
Thursday, February 15th 2018
State Auditor Gary Jones announced the compromise Feb. 15 alongside the House Democrats, who endorsed the plan. Jones’ plan includes an increase in the oil and gas gross production tax to five percent for the first 36 months, a 75 cent tax on cigarettes and little cigars, a three cent tax on gasoline and a six cent tax on diesel.
It is likely that every state treasury now is playing shell games with the revenues whereby huge pools of state revenues are plowed into financial products from Wall Street with large salaries going to financial teams to manage it and fees to trades, purchases and sales of those products depleting resources from where they were intended. And, the videos and pictures made of the Oklahoma schools above from teachers there are evidence of that process diverting resources from rather than making greater resources available to the things the revenues are supposed to be supporting.
– cricketdiane, 04-08-2018
January 5, 2018
Finance officer for state Health Department won’t testify yet
Chief Financial Officer Mike Romero won’t testify yet about what he learned at the Oklahoma State Department of Health, despite a subpoena to produce thousands of pages of documents detailing alleged financial mismanagement at the agency.
Romero was among the first state Health Department employees to speak with auditors about problems he discovered under the leadership of former top health officials Terry Cline and Julie Cox-Kain, who resigned in October.
Under state law, investments by the Treasurer’s Office are limited to full faith and credit obligations of the federal government, obligations of certain federal agencies or instrumentalities, repurchase agreements collateralized by those securities, collateralized or insured certificates of deposit and other evidences of deposit, negotiable certificates of deposit, Bankers’ acceptances, limited top-rated commercial paper, certain money market mutual funds, obligations of state and local governments, including obligations of Oklahoma state public trusts and bond notes, debentures or other similar obligations of a foreign government that meet specific requirements.
Just found this also – from 2017 – for Oklahoma City –
It is the policy of the City of Oklahoma City and the duty of the City Treasurer to invest the public funds in the custody of the City Treasurer to provide the highest investment return consistent with maximum security while meeting the daily cash flow demands of the City in conformance with the constitution and laws of the State of Oklahoma and the Charter of the City of Oklahoma City. In order to further ensure that these policy goals are accomplished, the City Council may hire independent professional investment consultants to advise the Council and the Treasurer.
Certain public trusts have formally adopted the City’s deposit and investment policies as a whole and the City Treasurer has been delegated the authority for managing the deposits and unrestricted investments of these trusts as reported in the City of Oklahoma City’s Comprehensive Annual Report.
They are as follows:
Oklahoma City Public Property Authority (OCPPA)
Oklahoma City Environmental Assistance Trust (OCEAT)
Oklahoma City Municipal Facilities Authority (OCMFA)
Oklahoma City Economic Development Trust(OCEDT)
Oklahoma City Metropolitan Area Public Schools (OCMAPS) Trust
Oklahoma City Riverfront Redevelopment Authority (OCRRA)
Any financial dealer and institution who desires to become an approved broker/dealer for investment transactions shall respond to a broker/dealer services solicitation questionnaire and certification approved by the City Treasurer. An evaluation committee and/or the City Treasurer or City Treasurer designee and/or the City’s independent professional investment consultant shall review the responses to the solicitation and questionnaire.
Based upon the evaluation, the City Treasurer and/or independent professional investment consultant will recommend a listing of eligible broker/dealer institutions to the City Council. By resolution of the Council, an eligible listing of broker/dealers shall be established for the purchase and sale of investment securities and further resolved that all prior resolutions establishing broker/dealers be rescinded. A list of broker/dealers will be established and approved at least annually.
The City Treasurer shall maintain a list of security broker/dealers approved by the City Council who is authorized to provide investment services for the City and registered to do business within the state. The approved broker/dealers may include a combination of primary, regional, and local dealers that qualify under the Securities and Exchange Commission Rule 15C3-1. A current audited financial statement shall be on file for each eligible broker/dealer with whom the City transacts investment services.
The investment strategy employed by the City Treasurer, with or without the assistance of an independent professional investment consultant, for the City’s portfolio shall be designed with the objective of obtaining a market rate of return throughout budgetary and economic cycles
In March, the legislature asked state agencies how they would deal with worst-case budget reductions of nearly 15 percent. A cut that deep at the Department of Tourism could cost Oklahoma half of its state parks.
Since 2009, the Oklahoma Tourism and Recreation Department has lost about 40 percent of its legislatively appropriated funding, agency officials say. The agency’s response, in part, has been to shed some of its state parks, angering park-goers and and rattling local economies that depend on dollars from visitors spent on goods and services at area businesses.
The $6.9 billion budget signed last week by Gov. Mary Fallin delivers 5 percent cuts to most state agencies. On paper, it looks like two environmental agencies received funding boosts, but a closer look at the numbers shows the increases aren’t what they appear.
The effect of this hidden cut will likely result in more staff reductions, and fewer people tasked with water quality monitoring and work with farmers and ranchers to keep water clean, Lam says.
So here is what I wrote a couple days ago after doing the research on why Toys R Us is being dismantled because of a private equity group who bought them in 2005 using “equity” from their portfolios of investing other people’s money and leveraging 80% of the price which was then charged to Toys R Us to pay off ultimately destroying them as they threw $400 million out the door every year to service loans which shouldn’t have belonged to them since they were made to purchase the company in the first place.
That is a long winded sentence and I was about to change it – but damn, that’s exactly what they did. It can’t be said in two or three word sentences.
So, rather than tell you all about how to make a great art business and share with you what all I’ve learned about it, from fine art to illustration, art publishing and surface design, showing in art festivals to showing in galleries, to the amazing online opportunities which are mostly work and not really opportunities – I’m going to share what I’ve learned about really making money – if you’re going to –
The Anatomy of Business in America –
Open a firm. Make it an LLC and get a nice address for it, even if it is shared.
Print a bunch of slick looking brochures and paperwork. Buy some nice desks and expensive chairs.
Hire some men and dress them in very expensive suits.
Get people to give you their money to invest. Borrow against the money they give you to invest more than you have available.
Charge them for investing their money and every time the investments are handled, traded, bought or sold.
Use their money and portfolios as collateral to buy up an existing company in the US – one that has been around for years.
Borrow 80% – 100% of the price the company purchase would be by using these other people’s money and portfolios as you “equity”collateral on the loan promising the company will payoff the loan from its cash earnings inflow
Pay yourself several million dollars for making the deal by taking it from the company you are buying.
Put the entire purchase price of the company you are buying into debt owed by that company and not you and not your company even though you did the borrowing to get ownership of it.
The collateral wasn’t yours, the equity stake put up never moved anywhere and is paid off by the company being bought plus paying for its own purchase by you without any of your money ever being used.
Rob all the cash resources and assets that you can possibly liquidate from the company you now own without ever having to pay anything to get it.
Charge management fees to the company you’ve bought while you dismantle its assets and cash diverting them into your pockets and those of your firm.
Force the company you now own to borrow from you and from your firm some of its new loan money that will satisfy paying off your debt for having bought it, so they are effectively paying you interest on the money you did not actually borrow to buy the company in the first place which is now owed by the company you “bought” who is paying for its purchase price.
After 2 – 5 years of bleeding all the cash possible from the company, either A.) sell it by taking it public and then finding a buyer for it to cash you out, or B.) going into bankruptcy as the company is then required to pay you again three times over in the bankruptcy process.
Get payouts again from any credit default swaps you took out on the loans your firm made to the company that you forced the company to take to pay the money off that you “borrowed” to “buy” them. Make sure you get hundreds of millions from the bankruptcy of the company while its vendors, landlords contractors and many other creditors get nothing.
Make sure executives are given big fat bonuses by the bankruptcy court because they are your friends and any pension funds or other employee benefit funds are depleted so they get nothing but a layoff notice, (or not even that.)
Enjoy the hundreds of millions of dollars that now are yours which you never built in the first place through hard work, gaining market share, challenging the competition or any other basic tenets of capitalism and market based economics.
Do the same thing to as many companies as you can while continuing to run your firm convincing people to give you their money to invest and charging them while using their money and not yours to be the “equity” / collateral to buy these companies and do the same thing to them to bleed them of all cash resources which you didn’t earn.
Tell everybody how great you are and how nobody else in the United States is worth anything unless they are like you.
Deny you put tens of thousands of families in economic hardship by taking their jobs away, destroying their communities by shutting down large employers and cutting the income from contractors and landlords who had provided real services and goods to the company. And, run for public office.
Well, that’s it – that is how money has been being made in America since the 80’s.
How would it EVER make sense for me as a company to be required to pay the price I’m charging you for buying me? And, pay the interest on that debt you used to buy me as a company – AND pay you management fees for destroying the company I’ve built that you’re charging me the price of buying – from me – so you can own it?
Why wouldn’t the borrowing that was done to buy Toys R Us belong to the private equity firms who bought it?
What happened to Toys R Us?
Apparently, the company was loaded with debt that came from three private equity firms forcing the company to pay for its own purchase by them back in 2005. Bain Capital, KKR and Vornado Trust Realty bought Toys R Us with the promise they would pay off the $2.3 billion in debt that Toys R Us already had at the time. Then, rather than doing that, these private equity firms added the debt they acquired buying the company and added it to what was already owed by the Toys R Us company.
That meant a debt of $7.2 billion has been owed by the company since that time and each year having to pay to roll it over by servicing the debt and never having paid it off.
Toys R Us was paying $400 million a year to simply service the debt plus paying management fees and making payouts to the private equity firms.
So, despite the toy industry seeing increases across the world in sales and the Babies R Us stores of the chain being profitable AND the 15% share of the entire toy market being enjoyed by Toys R Us which is phenomenal across its 1600 stores in 38 countries – it was forced into complete bankruptcy (Chapter 7 Bankruptcy now).
When Toys R Us sold to Bain, KKR and Vornado, 80 percent of its asking price of the $6.6 billion price tag was paid by Toys R Us and not those acquiring the company – which would be illegal in any other context of finance, loans and buying something.
Then, by putting this debt load on the company, it assured that money coming into the company could not be used in a vast array of other ways to upgrade and maintain their stores, increase their online presence, hire more sales people, or even to keep the sales staff they had that were already familiar with their stores and products, among other things.
Effectively, after buying KB toys which had been the second biggest toy retailer in the US, the same private equity group robbed that company of its cash resources to operate as well, even before the Toys R Us brand was bled dry of cash by the same pattern of destructive acquisition.
After buying KB Toys in 2000, Bain and its co-investors had the retailer borrow $85 million to pay the firm and its co-investors a dividend — a move that left the chain, which had been generating steady earnings, strapped for cash as deepening price cuts at Walmart lured more shoppers away from malls.
In that case, Bain’s cash grab left it with a profit on its investment, despite the fact that 86-year-old KB Toys got liquidated in 2008.
It looks like Toys R Us, that was built from 1948 into a mammoth successful and very profitable toy stores, wasn’t bought for $6.6 billion. It was bought for $1.3 billion in equity by the three firms, Bain Capital, Vornado Realty Trust and KKR.
This article said that the fees and interest on the debt from that buyout was costing Toys R Us $470 million a year in service. It also says that the price for the company during the buyout was $7.3 billion. Of which, the private equity firms put up what? Obviously, not cash. I’m going to look that up.
Bain, KKR, Vornado Suffer Wipeout in Toys ‘R’ Us Bankruptcy
The three firms and their co-investors sank $1.3 billion of equity into the takeover of the Wayne, New Jersey-based toy company, financing the rest with debt, according to company filings. The debt included senior loans in which they held a stake.
Partly offsetting the loss is more than $470 million in fees and interest payments that Toys “R” Us awarded the firms over time.
And from this article, it describes briefly, the typical method involved in these types of buyouts which follow a pattern of destroying the assets of the company’s operations while stealing resources (legally) at every point along the way.
It would be as if I gave someone $3 to own something that cost $2,000 and had someone else responsible for paying the entire amount, and giving me back several thousand dollars for having put up $3 in the first place.
I’d almost bet the $3 they used in the form of $1.3 billion wasn’t even cash or real assets.
Toys R Us and why the retail downturn is all about debt
“Leverage just means you’re using lots of debt,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research.
If a private equity firm wants to buy a company, it’ll put up a small portion of the money. Then it’ll go to the bank and borrow the rest.
The key? “They put the debt on the company they buy,” Appelbaum said.
In other words, the firms take out these loans, buy a company and then make that company pay the loans back.
Despite having 15% of toys sales in the marketplace and a heavier shopping season last Christmas with shoppers spending $800 billion during the holiday season, according to FT (see below for article), Toys R Us was facing massive loan payment costs that put it into liquidation status.
Toys ‘R’ Us Has 15% of the Toy Market And It’s Still Going Under. Here’s Why.
Fifteen percent of U.S. toy revenue. With that kind of market share, Toys ‘R’ Us should be in a comfortable position, not on the ropes.
The pattern followed by Toys “R” Us is typical in private equity takeovers. Management is bought off: John Eyler, CEO of Toys “R” Us, was compensated $65.3 million upon the buyout’s completion. Employees have no say in the matter. Then come the layoffs, debt transfers and shortsighted asset sales. Funds are earmarked to pay down debts—Toys “R” Us was spending more annually on debt payments than it was on its website and stores—even as cash reserves are depleted.
US retail’s turbulent relationship with private equity
DECEMBER 29, 2017
FT research shows many of the largest leveraged buyouts in the sector over the past decade have either defaulted, gone bankrupt or are in distress
At least 50 US retailers — including Toys R Us, children’s retailer Gymboree, shoe store Payless and jean maker True Religion — have filed for bankruptcy this year, the most in six years, with analysts describing it as a “day of reckoning”, for companies that rolled over their debt refinancing for years.
Observers warn that the distress is likely to accelerate in 2018 with nearly $6bn in high-yield retail debt set to mature.
The swift unraveling of the toy seller, at $6.9bn the third-largest retail bankruptcy in history, jolted vendors, who are critical to a retailer’s health.
There was some respite for bricks-and-mortar retailers this week with US shoppers spending more than $800bn in the holiday season, a 3.8 per cent rise from last year,
Looking at the article below, it occurred to me that possibly, the private equity firms own some of the debt made to the companies required to pay for their own buyouts by someone else.
Then the fees for those loans are also being paid to the private equity or investment firms holding them, on top of the management fees and other dividend payments, plus other payouts they’re are finagling from the company.
And, all of it providing a stream of resources to the investment funds that should legally belong to the company for its operation, sustenance, growth and as a prudent cash reserve against changes in the market.
The retail apocalypse is being fueled by private equity firms adding to debt loads
Nearly every retail chain caught up in the brick & mortar meltdown is an LBO queen – acquired in a leveraged buyout by a private equity firm either during the LBO boom before the Financial Crisis or in the years of ultra-cheap money following it. During a leveraged buyout, the PE firm uses little of its own capital. Much of the money needed to buy the retailer comes from debt the retailer itself has to issue to fund the buyout, which leaves the retailer highly leveraged.
The PE firm then makes the retailer issue even more junk bonds or leveraged loans to fund a special dividend back to the PE firm. Come hell or high water, the PE firm has extracted its money.
Then the PE firm charges the retailer hefty management fees on an ongoing basis.
A lot of times, these PE firms acquire part of the bonds before bankruptcy of their portfolio company for cents on the dollar. For example, Bain Capital bought significant amounts of Gymboree bonds. This gives PE firms more control during the bankruptcy proceedings, and they win again.
Why do institutional investors fund asset-stripping associated with LBOs and special dividends? Some of the answers are in Wall Street’s culture where fee extraction is everything, and one firm helps another. And too, they’re chasing yield in a world where central banks have repressed yield. Which turns out to be a costly chase.
Sports Authority is Another Loss to Our Country Caused By Leveraged Buyout Nightmare
A number of retailers have suffered this buyout process whereby the company being acquired is forced to pay for itself to be bought out by loading the profit making retailer (or other types of companies) with massive debt and extra costs to pay off cash to those who “bought” it.
But, since when do you or I get to buy something for nothing but a promise of 10% on the cost of it and then enslave the operation to pay off the rest for that purchase while streaming most of its available cash to us in fees and dividends?
From this article describing the process that took apart Sports Authority –
Leveraged buyouts saddle retailers with debts they can’t repay
April 29, 2016
But Englewood-based Sports Authority was loaded with at least $643 million in debt, a hangover from the $1.4 billion leveraged buyout in 2006 by investors led by Leonard Green & Partners.
Sports Authority’s bankruptcy plan initially included closing 140 of its 463 stores. But lawyers for the chain said in court last week that the company now is pursuing liquidation, leaving workers jobless and shopping centers across America anchorless.
In the fast-evolving world of retail, where the one constant is the need for investment, retailers laboring under heavy debt are at a disadvantage.
“Doing it right is very expensive,” said Raya Sokolyanska, an analyst with Moody’s Investor Service in New York. “Limited financial flexibility has been a reason why a lot of these retailers haven’t been able to fight back and position themselves correctly for growth.”
Private equity firms have been connected to a rash of retail bankruptcies in recent years, including Gymboree, Payless ShoeSource, The Limited Stores, True Religion Apparel, and most recently, Toys “R” Us.
(. . . )
But Toys “R” Us wasn’t pushed into court because of terrible sales — it recorded nearly $1 billion in online sales in 2016, according to a spokesperson, and had earnings before interest, taxes, depreciation, and amortization of $792 million. Rather, the company was struggling to pay down its staggering debt load — for which it could thank its 2005 leveraged buyout. Bain Capital Private Equity and KKR & Co. teamed up with real estate investment trust Vornado Realty Trust to acquire the company for approximately $6.6 billion, including $5.3 billion of debt secured by the company’s assets.
Why Private Equity Firms Like Bain Really Are the Worst of Capitalism
Here’s what private equity is really about: A firm like Bain obtains cheap credit and uses it to acquire a company in a “leveraged buyout.” “Leverage” refers to the fact that the company being purchased is forced to pay for about 70 percent of its own acquisition, by taking out loans. If this sounds like an odd arrangement, that’s because it is. Imagine a homebuyer purchasing a house and making the bank responsible for repaying its own loan, and you start to get the picture.
O.K., but what about this much more virtuous business of swooping in and restoring struggling companies to financial health? Well, that’s not a large part of what private equity firms do, either. In fact, they more typically target profitable, slow-growth market leaders. (Private equity firms presently own companies employing one of every 10 U.S. workers, or 10 million people.)
And that’s when the fun starts. Once the buyout is completed, the private equity guys start swinging the meat axe, aggressively cutting costs wherever they can – so that the company can start paying off its new debt – by laying off workers and cutting capital costs.
This process often boosts operating profit without a significant hit to the business, but only in the short term; in the long run, the austerity approach makes it difficult for companies to stay competitive, not least because money that would otherwise have been invested in expansion or product development – which might increase revenue down the line – is used to pay off the company’s debt.
It takes several years before the impacts of this predatory activity – reduced customer service, inferior products – become fully apparent, but by that time the private equity firm has generally resold the business at a profit and moved on.
The next article reminded me of how much is at stake for vendors, toy manufacturers, shippers, shopping malls and strip mall groups that have used Toys R Us to stock their shelves with products, rent large anchor properties and draw traffic to other stores nearby. All of these will be suffering hits, possibly causing layoffs beyond those being caused directly by the bankruptcy of Toys R Us as it closes 2600 stores.
How $5 billion of debt caught up with Toys ‘R’ Us
SEPTEMBER 20, 2017
But the company’s ability to kick the can down the road had been exhausted. The bankruptcy filing was the culmination of an unsuccessful seven-month effort by Toys “R” Us to find relief from its $5.2 billion debt pile, according to bankruptcy court filings and people familiar with the deliberations.
The advisers that Toys “R” Us hired to fix its capital structure explored at least two deals with some of its creditors to raise money that would have helped the company stave off bankruptcy before the key holiday shopping season, avoiding a supply chain disruption stemming from vendor fears about repayment, a bankruptcy filing shows.
Once the company realized that it could not secure financing to get through the holiday season, the objective became “let’s get it done as quick as possible so it does not interrupt the holidays,” Toys “R” Us Chief Executive Officer David Brandon told Reuters in an interview. Filing for bankruptcy allowed the company to secure financing to continue to operate its stores.
Given that “we successfully obtained our debtor-in-possession financing today, we can assure our lenders that we are in a good position to accept shipments on a normal basis and they have great assurance they will be paid,” Brandon said.
Like other retailers that own their stores, Toys “R” Us tried last month to tap its vast real estate portfolio to raise money in a sale-leaseback transaction, according to court filings. Sale-leaseback deals allow retailers to raise cash by selling real estate they own and then renting it back from the new owner. (which didn’t work, my note.)
More Layoffs for Retailers Already Having Massive Store Closings and Layoffs
Jobs everywhere! Except at stores
January 5, 2018
Record numbers of store closings and a surge in retail bankruptcies, as well as the shift to online shopping, have forced retailers to slash jobs even as other employers scramble to find qualified workers.
The sector lost a total of 66,500 jobs in 2017.
General merchandise stores, the segment that includes department stores, were hit the hardest, losing 90,300 jobs, according to the Friday’s December jobs report from the Labor Department. Clothing stores cut another 28,600 jobs. Drug stores lost 18,400.
So the job losses in the sector are likely to continue said Nicholas. In 2017, 7,000 store closings were announced, a record that was more than triple 2016’s number. And the trend will undoubtedly continue in 2018. Sears Holdings (SHLD), owner of both Sears and Kmart, said Thursday it plans to close more than 100 additional stores.
According to BLS data, the number of retail openings in February slumped to 541,000, down by 40,000, its worst performance since 2015. (U.S. News)
BLS data also showed retail layoffs and discharges climbed 37% in February and reached a total of 212,000 – its highest level in nearly two years. (U.S. News)
Unlike in 2008, Americans today are shopping more than ever.
While the last spike in retail bankruptcies during the Great Recession was clearly a byproduct of consumer stress, this time around consumers are actually spending more than ever. According to Gallup, February 2017 marked the highest average in consumer spending since 2008, with no signs of slowing.
The US retail industry is hemorrhaging jobs – and it’s hitting women hardest
January 13, 2018
As the retail landscape undergoes a dramatic transformation, analysis finds 129,000 women lost jobs last year while men actually gained positions.
Between November 2016 and November 2017, the sector fired 129,000 women (the largest loss for any industrial sector for either sex) while men gained 109,000 positions, according to an analysis by the Institute for Women’s Policy Research (IWPR). In the whole labour force women gained 985,000 jobs over the year, while men gained 1.08m jobs.
(also from this article – )
Major retailers shut shops across the US last year. A record 6,700 stores shut in 2017, according to Fung Global Retail & Technology, a retail thinktank. Macy’s alone closed 68 stores and shed 10,000 jobs. Drugstore chain Walgreens closed 600 locations.
A comment in this article says a lot of what I’ve been thinking. And, why is it that Bain, KKR and Vornado didn’t have to pay the loan payments they took out to buy Toys R Us? Shouldn’t that debt belong to the buyers, not the company they’ve bought? (This article also lists a number of the retail bankruptcies from 2017, including Radio Shack.)
Big Wall Street banks are not likely to blow the whistle on asset-stripping scams in the private equity world. They are frequently involved in collecting fees for advising on the LBOs. Then they reap more huge windfalls in fees when they underwrite the bond offerings that load up the company with debt it can’t service on a long term basis.
So the overarching question in all of this is: where is the Securities and Exchange Commission, the so-called cop on the beat that is supposed to be policing the publicly traded corporate bonds involved in these deals?
In April, Aisha Al-Muslim, a reporter for Newsday, the Long Island, New York newspaper, found the following after an in-depth review of court documents and data from top research firms like S&P Global Market Intelligence:
“…43 large retail or supermarket companies, which owned chains with 10 or more locations, have filed for bankruptcy in the United States since January 2015. The 43 companies controlled 52 brick-and-mortar chains.
“Of those 43 companies, 18 — more than 40 percent — were owned by private equity firms. The remainder were public or private companies or owned by a hedge fund.”
When 40 percent of insolvent large retail companies got this way at the hands of the so-called turnaround experts at private-equity firms while huge amounts of money moved from the coffers of the company to the pockets of the “experts,” it’s time for Federal regulators to get involved.
Private equity firms bled the company dry to turn a profit, and now mass layoffs are imminent.
Upon closer examination, however, this analysis doesn’t hold up. First, the global toy industry isn’t in decline. In fact, it’s been growing consistently over the past five years. Physical toys may be less popular in the United States than they once were, but internationally—particularly in Asian and Latin American countries—the play business is booming. And most of Toys “R” Us’s profits actually come from its Babies “R” Us affiliate which sells not just toys but also health, safety and educational tools for infant care.
Yet most importantly, this analysis fails to account for how Toys “R” Us wound up so deeply in debt in the first place. In 2005, as the company’s stock was regularly losing value due to mediocre sales, management decided to sell the company in a leveraged buyout to a trio of buyers, real-estate-investment trust Vornado Realty Trust and private equity firms KKR and Bain Capital.
This trio played a critical role in the downfall of Toys “R” Us, through imposing massive debt obligations on the company and requiring it to pay back its debts so that its buyers could turn a profit. Meanwhile, the finances of the company were thrown into disarray and employees were hit with wave after wave of layoffs.
Vornado Realty Trust, KKR and Bain Capital financed 80 percent of the purchase of Toys “R” Us, so while the company sold for $6.6 billion, the trio only contributed $1.3 billion. As part of the purchase agreement, the companies also agreed to take responsibility for all of Toys “R” Us’s long-term debt obligations, which at the time totaled $2.3 billion. Once Toys R Us was taken over, however, the debt Vornado Realty, KKR and Bain used to acquire it was pushed back onto the company, skyrocketing its debt obligations to $7.6 billion.
Toys “R” Us has been paying $400 million a year to service these debts. This money could have been used to lower prices or improve the company’s website—not to mention raising pay to its employees—but instead went to paying off creditors. Last year, the company reported a loss of $29 million. If it weren’t for these debt payments, Toys “R” Us would have run a substantial profit.
In both instances, critics say Bain and its private-equity partners left the chains vulnerable by saddling them with heavy debt loads as they took them private, crippling their capacity to compete in brutal price wars that have dogged the industry.
A leveraged buyout (LBO) is a financial transaction in which a company is purchased with a combination of equity and debt, such that the company’s cash flow is the collateral used to secure and repay the borrowed money.
(also – KKR appears in the history of corporate raiding during the 80’s and beyond – plus this, of interest)
The inability to repay debt in an LBO can be caused by initial overpricing of the target firm and/or its assets. Over-optimistic forecasts of the revenues of the target company may also lead to financial distress after acquisition. Some courts have found that in certain situations, LBO debt constitutes a fraudulent transfer under U.S. insolvency law if it is determined to be the cause of the acquired firm’s failure.
The outcome of litigation attacking a leveraged buyout as a fraudulent transfer will generally turn on the financial condition of the target at the time of the transaction – that is, whether the risk of failure was substantial and known at the time of the LBO, or whether subsequent unforeseeable events led to the failure. The analysis historically depended on “dueling” expert witnesses and was notoriously subjective, expensive, and unpredictable. However, courts are increasingly turning toward more objective, market-based measures.
Private equity typically refers to investment funds organized as limited partnerships that are not publicly traded and whose investors are typically large institutional investors, university endowments, or wealthy individuals. Private equity firms are known for their extensive use of debt financing to purchase companies, which they restructure and attempt to resell for a higher value. Debt financing reduces corporate taxation burdens and is one of the principal ways in which private equity firms make business more profitable for investors.
Leveraged buyout, LBO or Buyout refers to a strategy of making equity investments as part of a transaction in which a company, business unit or business assets is acquired from the current shareholders typically with the use of financial leverage. The companies involved in these transactions are typically mature and generate operating cash flows.
Private equity firms view target companies as either Platform companies which have sufficient scale and a successful business model to act as a stand-alone entity, or as add-on or tuck-in acquisitions, which would include companies with insufficient scale or other deficits.
Leveraged buyouts involve a financial sponsor agreeing to an acquisition without itself committing all the capital required for the acquisition. To do this, the financial sponsor will raise acquisition debt which ultimately looks to the cash flows of the acquisition target to make interest and principal payments.Acquisition debt in an LBO is often non-recourse to the financial sponsor and has no claim on other investments managed by the financial sponsor. Therefore, an LBO transaction’s financial structure is particularly attractive to a fund’s limited partners, allowing them the benefits of leverage but greatly limiting the degree of recourse of that leverage. This kind of financing structure leverage benefits an LBO’s financial sponsor in two ways: (1) the investor itself only needs to provide a fraction of the capital for the acquisition, and (2) the returns to the investor will be enhanced (as long as the return on assets exceeds the cost of the debt).
As a percentage of the purchase price for a leverage buyout target, the amount of debt used to finance a transaction varies according to the financial condition and history of the acquisition target, market conditions, the willingness of lenders to extend credit (both to the LBO’s financial sponsors and the company to be acquired) as well as the interest costs and the ability of the company to cover those costs. Historically the debt portion of a LBO will range from 60%–90% of the purchase price, although during certain periods the debt ratio can be higher or lower than the historical averages. Between 2000–2005 debt averaged between 59.4% and 67.9% of total purchase price for LBOs in the United States.
Simple example of leveraged buyout
A private equity fund say for example, ABC Capital II, borrows $9bn from a bank (or other lender). To this it adds $2bn of equity – money from its own partners and from limited partners (pension funds, rich individuals, etc.). With this $11bn it buys all the shares of an underperforming company, XYZ Industrial (after due diligence, i.e. checking the books). It replaces the senior management in XYZ Industrial, and they set out to streamline it. The workforce is reduced, some assets are sold off, etc. The objective is to increase the value of the company for an early sale.
The stock market is experiencing a bull market, and XYZ Industrial is sold two years after the buy-out for $13bn, yielding a profit of $2bn. The original loan can now be paid off with interest of, say, $0.5bn. The remaining profit of $1.5bn is shared among the partners. Taxation of such gains is at capital gains rates.
Note that part of that profit results from turning the company around, and part results from the general increase in share prices in a buoyant stock market, the latter often being the greater component.
Often the loan/equity ($11bn above) is not paid off after sale but left on the books of the company (XYZ Industrial) for it to pay off over time. This can be advantageous since the interest is typically offsettable against the profits of the company, thus reducing, or even eliminating, tax.
Most buyout deals are much smaller; the global average purchase in 2013 was $89m, for example.
The target company (XYZ Industrials here) does not have to be floated on the stockmarket; indeed most buyout exits are not IPOs.
Buy-out operations can go wrong and in such cases the loss is increased by leverage, just as the profit is if all goes well.
The application of the Freedom of Information Act (FOIA) in certain states in the United States has made certain performance data more readily available. Specifically, FOIA has required certain public agencies to disclose private equity performance data directly on their websites.
In the United Kingdom, the second largest market for private equity, more data has become available since the 2007 publication of the David Walker Guidelines for Disclosure and Transparency in Private Equity.
How would it EVER make sense for me as a company to be required to pay the price I’m charging you for buying me?
And, pay the interest on that debt you used to buy me as a company – AND pay you management fees for destroying the company I’ve built that you’re charging me the price of buying – from me – so you can own it?
In what world does any of that make sense as anything but theft and embezzlement whether legal or not?
Can you imagine what it would take to start a company today and garner 15% of the toy market? And yet, here is a company that already has that which is being decimated by a very corrupt business practice of Wall Street investment firms – to the detriment of America.
includes closing around 180 stores. That’s about one in five stores.
The large debts, including roughly $400 million that came due by the end of the year, mostly stem from “a $7.5 billion leveraged buyout in 2005 in which Bain Capital, KKR & Co. and Vornado Realty Trust loaded the company with debt to take it private,” according to Bloomberg.
Now in bankruptcy proceedings after paying massive bonuses of millions of dollars to top execs – didn’t include numbers of employees being laid off, but noted that massive layoffs had occurred early in 2017 as well.
This article listed the bonuses paid out to executives allowed by the bankruptcy court and those made before entering bankruptcy proceedings – despite huge layoffs, store closings and defaulting on some percentage of every debt.
Macy’s alone is responsible for more than 10,000 job cuts as the company finds itself displaced by online shopping. The Macy’s layoffs are coupled with massive Macy’s store closures, with 68 shuttering in 2017.
J C Penney has also become the victim of poor sales and has therefore added to the growing number of retail layoffs.
The company cut about 5,000 jobs and shuttered 138 stores across the U.S
HHGREGG FILES FOR BANKRUPTCY, CUTS 5,000 WORKERS NATIONWIDE AND CLOSES ALL STORES
STATE FARM TO CLOSE 11 OFFICES, MORE THAN 4,000 FACE JOB LOSS, DISPLACEMENT
L Brands Inc (NYSE:LB), owner of women’s apparel chain The Limited, shut down all of its 250 stores across the U.S. and slashing 4,000 jobs.
The Wet Seal closing will encompass the remaining 171 stores after it a had closed two-thirds of its locations and laid off 3,700 workers two years ago as it filed for Chapter 11 bankruptcy protection. The company is now defunct, with 3,000 workers without jobs.
Lowe’s Companies, Inc. (NYSE:LOW) found itself having to cut 2,400 workers as it struggles to keep up with the leader in the market,
HERSHEY LAYS OFF 2,700 AS A PART OF 2017 RESTRUCTURING PROGRAM
One of the largest mass U.S. IT layoffs in 2017, the 5,000 cuts coming out of HP amount to about 10% of the company’s total staff.
Eli Lilly and Co (NYSE:LLY) will be shedding 2,000 jobs in the U.S. as it seeks to save about $500.0 million annually.
Lots more great information in this article – worth reading. Explains why they had to layoff in these companies. Looking for numbers right now.
Kimberly-Clark plans to cut up to 5,500 jobs — about 13 percent of its workforce — and get rid of 10 manufacturing plants, releasing a restructuring plan along with its year-end results that showed net sales rose to $18.3 billion, up slightly from 2016.
The maker of popular brands such as Kleenex, Huggies and Kotex, Kimberly-Clark says its operating profit for the fourth quarter of 2017 was $812 million — a drop from $839 million in 2016. For all of 2017, the company is reporting nearly $3.3 billion in operating profit, down slightly from 2016.
As it announced financial results and layoff plans, Kimberly-Clark’s board of directors also approved a 3.1 percent increase in the company’s quarterly dividend for 2018, which it says is the 46th consecutive annual dividend increase for shareholders.
Falk noted that in 2017, Kimberly-Clark “returned $2.3 billion to shareholders through dividends and share repurchases.”
In the wake of Republican-backed changes to the U.S. tax code, several large corporations have given employees raises and increased benefits. But there has also been bad news. For instance, Walmart announced better pay for new employees on the same day that it said it would close 63 stores.
Providing some details about its taxes, Kimberly-Clark says, “The fourth quarter effective tax rate was 19.2 percent in 2017 and 35.7 percent in 2016. The rate in 2017 included a net benefit as a result of U.S. tax reform and related activities.”
Trump Promised to Protect Steel. Layoffs Are Coming Instead.
In September, ArcelorMittal, which owns the mill, announced that it would lay off 150 of the plant’s 207 workers next year.
Foreign steel makers have rushed to get their product into the United States before tariffs start. According to the American Iron and Steel Institute, which tracks shipments, steel imports were 19.4 percent higher in the first 10 months of 2017 than in the same period last year.
In 2008, before the financial crisis struck, the plant ran around the clock. Now, the mill coughs to life just five days a week, for eight hours at a time.
Toys ‘R’ Us Has Laid Off Up To 15% Of HQ Employees
This Friday, the company announced they had laid off between 10-15% of their home office employees out of Wayne, New Jersey — approximately 250 jobs were eliminated.
Toys “R” Us has been struggling financially for some time. In 2005, investors led by KKR & Co., Bain Capital and Vornado Realty Trust bought out the company for $6.6 billion. In 2016, the business refinanced its remaining $850 million debt load, allowing investors holding bonds maturing in 2017 and 2018 to swap their holdings for those maturing in 2021.
Harley-Davidson closing Kansas City plant as motorcycle sales fall
The Milwaukee-based company said its net income fell 82% in its fiscal fourth quarter to $8.3 million, compared with a year earlier. Earnings per share were 5 cents, down from 27 cents a year earlier. Revenue was $1.23 billion, up from $1.11 billion.
The earnings drop came in part because of a charge associated with President Trump’s tax cut and a $29.4 million charge for a voluntary product recall.
Harley-Davidson worldwide retail motorcycle sales fell 6.7% in 2017 compared to 2016. The company’s U.S. sales fell 8.5% and international sales were down 3.9%.
The company’s manufacturing consolidation includes plans to shift production from Kansas City, Mo. into its plant in York, Pa. About 800 jobs in Kansas City will be cut.
Harley’s foreign competitors have benefited from a strong U.S. dollar, as their overseas operations have made it more profitable to sell bikes in the U.S. at lower prices.
In some cases, Diedrich said, prices of Japanese motorcycles have come down 25% and discounts ranged up to $3,000 per bike.
Lots more in this article including what is expected to happen with other plants.
What’s Happening to U.S. Companies? A Look at 2017’s Mass Layoffs
Mass Layoffs in 2017 No. 2, Sears Holdings Corp. (Nasdaq: SHLD): After reporting dismal sales earnings, Sears announced on Jan. 6 it expects to shutter 180 stores by April – 108 Kmart locations and 42 Sears stores.
Mass Layoffs in 2017 No. 3, Wal-Mart Stores Inc. (NYSE: WMT): The “everyday low-price” store will be slashing over 1,000 jobs in January, as reported by USA Today on Jan. 11.
Mass Layoffs in 2017 No. 5, General Motors Co. (NYSE: GM): The car manufacturer told Fortune that it would be shutting down five of its plants in 2017 – eliminating some 1,300 jobs – primarily to cut oversupply of sedans, which have fallen out of favor among U.S. consumers.
These cuts are in addition to the 2,000 workers GM announced would be let go in November 2016, also to take place in January.
Mass Layoffs in 2017 No. 6, Pandora Media Inc. (NYSE: P): Today (Jan. 13) Pandora announced that it would be eliminating 7% of its workforce in a move to save nearly $40 million in operating costs. The music-streaming company had 2,219 employees as of Dec. 31, according to Benchmark Monitor.
Mass Layoffs in 2017 No. 7, Fitbit Inc. (NYSE: FIT): The wearable fitness tracker company announced in a press release on Jan. 30 it would be slashing 6% of its workforce, or 110 employees,
(and Hershey’s, Lowe’s, etc. mentioned elsewhere in this blog post.)
General Electric to cut 12,000 jobs in power business revamp
General Electric announced on Thursday it was axing 12,000 jobs at its global power business as the struggling industrial conglomerate responds to dwindling demand for fossil fuel power plants.
Demand for new thermal power plants dramatically dropped in all rich countries, GE said, while traditional utility customers have reduced their investments due to market deterioration and uncertainty about future climate policy measures.
Hardly any new power station projects had been commissioned in Germany in recent years, GE said. Heightened Asian competition had also increased price pressures.
GE rival Siemens is cutting about 6,900 jobs, or close to 2 percent of its global workforce, mainly at its power and gas division, which has been hit by the rapid growth of renewables.
(Reuters) – Union Pacific Corp (UNP.N) said on Wednesday it will cut roughly 500 management jobs and 250 railroad workers by mid-September as the No. 1 U.S. railroad continues broader cost-cutting.
The layoffs come as Union Pacific, like other major U.S. railroads, saw a resurgence in coal volumes this year but has been hit over the past two years by precipitous declines as utilities switched to burning cheaper natural gas and the strong U.S. dollar hurt coal exports.
SEOUL (Reuters) – When South Korea’s Samsung Electronics and LG Electronics last year announced plans to build home appliance factories in the United States, they hoped to sidestep any fallout from President Donald Trump’s “America First” manufacturing and jobs mantra.
Last week’s decision by the U.S. government to impose tariffs of up to 50 percent on imports of washing machines and key components showed that wasn’t to be.
The inclusion of hefty tariffs on components in particular had moved the goal posts in a long-running trade dispute, upending supply chains and threatening investment across other industries, officials from the companies and the South Korean government said.
Carrier plans final layoffs at plant Trump vowed to protect: report
BAKERSFIELD, Calif. – On Wednesday, Chevron announced to employees with the San Joaquin Valley Business Unit that it will implement a 26% reduction in the unit, applying across all field and office locations.
The layoffs, expected to take place in 2018, will affect locations in Kern, Fresno and Monterey Counties.
(Didn’t give numbers)
More Layoffs Hit National Geographic
Another wave of reductions since Fox bought the media properties.
WASHINGTON — Citing a long-term drought in satellite orders, Space Systems Loral has laid off a number of employees at its California satellite manufacturing facility, the company confirmed June 22.
In a statement to SpaceNews, SSL President John Celli said an “extended slowdown” in orders for geostationary orbit communications satellites led the company to this round of layoffs.
Company spokesperson Wendy Lewis said SSL was not disclosing the number of people laid off. A source familiar with the layoffs said about eight percent of the company’s workforce was affected, which would be on the order of 200 employees.
Other satellite manufacturers have also reported weak demand for commercial GEO satellites. “Last year, there were 14 new geosynchronous satellites purchased,” Dave Thompson, president and chief executive of Orbital ATK, said in a May 11 earnings call about the company’s quarterly financial results. “And at this point, my crystal ball for 2017 is somewhere in the 12 to 14 satellites, so not better than last year.” He added he hoped for a rebound in orders in 2018 or 2019.
As U.S. military budget soars, Boeing workers face layoffs
Even with an extra $52 billion for the world’s largest military in President Trump’s new budget — or the $60 billion Sen. John McCain, R-Ariz., is lobbying for — workers at Boeing Corp.’s war helicopter factory and division headquarters in Ridley Park, Delaware County aren’t sure they’ll all still be on the job next year.
“We’re hoping we get some money for the V-22 (Osprey) and the Chinook, our products here. But right now we’re in a little bit of a downturn,” said Mike Tolassi, president of United Aerospace Workers Local 1069, which represents around 1,370 of Boeing’s 4,500 workers at the complex, the largest industrial plant in the Philadelphia area.
“This past year we’ve been experiencing layoffs. I believe we’re gonna have another in April,” Tolassi added.
Teva Pharmaceutical set for major layoffs in Israel, U.S.: report
TEL AVIV (Reuters) – Teva Pharmaceutical Industries is expected to cut 20-25 percent of its workforce in Israel, where it employs 6,860 people, and a few thousand more jobs are to go in the United States, financial news website Calcalist said on Thursday.
The world’s largest generic drugmaker will send termination letters to “tens of percents” of its 10,000 employees in the United States in coming weeks, Calcalist said, citing people familiar with the matter.
Teva’s new Chief Executive Kare Schultz is working out the details with regional management in Israel and the United States, Calcalist said, adding that those set to be ousted include its chief scientific officer and president of research and development, Michael Hayden.
2017 was a record year for both store closings and retail bankruptcies. Dozens of retailers including Macy’s, Sears, and J.C. Penney shuttered an estimated 9,000 stores — far exceeding recessionary levels — and 50 chains filed for bankruptcy.
But there’s still a glut of retail space in the US, and the fallout is far from over.
The number of store closings in the US is expected to jump at least 33% to more than 12,000 in 2018, and another 25 major retailers could file for bankruptcy, according to estimates by the commercial real estate firm Cushman & Wakefield.
Nearly two dozen major chains including Walgreens, Gap, and Gymboree have already announced plans to close more than 3,600 stores this year.
When combined with last year’s record-high store closings, an even higher rate of closings in 2018 would push hundreds of low-performing shopping malls to the brink of death.
The commercial real estate firm CoStar has estimated that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor tenant.
That’s because the malls don’t only lose the income and shopper traffic from that store’s business; such closings often trigger clauses that allow the remaining mall tenants to exercise their right to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the vacant anchor space.
The reduction applies across all SJVBU field and office locations, including the field and office locations in Kern County, Fresno County and Monterey County, the company said. The position reductions will occur in a phased approach between now and the end of 2018.
It is estimated that approximately 300 employee positions across the three counties in which SJVBU operates will be eliminated over the course of 2018 as part of this reorganization.
On Thursday, 100 employees of Chevron will be notified of their termination. However, these positions will not be eliminated until January 2018, the company said.
The next round of cutbacks could come down in late November or early December, with 40-60 positions potentially being impacted, according to sources. The layoffs could hit both on-air TV/radio talent and behind-the-scenes production staffers.
Another source expects the flagship “SportsCenter” franchise to lose people in front of and behind the camera. “I see (ESPN) going down a path where they have less staff — and hire more production companies to provide programs and fill air time.”
Through Week 7 of the 2017 season, ESPN’s “Monday Night Football” was the lone NFL TV package up in ratings, according to Austin Karp of SportsBusiness Daily. In September, ESPN’s “First Take” with Stephen A. Smith, Max Kellerman and Molly Qerim tripled the TV audience of FS1’s rival “Undisputed” with Skip Bayless, Shannon Sharpe and Joy Taylor (461,000 vs. 150,000 average viewers). With 96.9 million digital users, ESPN had five times as many unique viewers in September as Fox Sports.
But ESPN is struggling from the triple-whammy of a shrinking subscriber base, expensive billion-dollar TV rights for the NFL, NBA and other sports, and bloated talent costs. The network pays $1.9 billion annually for “Monday Night Football” and another $1.4 billion for the NBA. Don’t forget ESPN is still paying millions of dollars in severance costs to many of the 100 anchors/reporters laid off in late April.
Despite promising Madison Avenue at its upfront presentation that Mike Greenberg’s new solo morning show would debut Jan. 1, ESPN has pushed back the start date to the spring because of construction delays at its expensive new studios at South Street Seaport in Manhattan.
The ESPN workforce in Bristol, Conn., and around the country is still recovering from the layoff of 100 colleagues in late April. Unlike the previous downsizing of 300 behind-the-scenes producers, directors and staffers in October 2015, this year’s layoffs took out high-salaried TV talent and reporters, many with multi-year contracts. Many are still looking for their next gig.
Already this year, 14 retailers have declared bankruptcy, including the companies behind Payless, The Limited, and BCBG. That’s not far from 18, the total number of retailers that declared bankruptcy in 2016, according to insights from S&P Global Market Intelligence released last week.
Just days after S&P’s report was released, Bebe, which sells women’s clothing, announced plans to close all 168 of its stores. It is unclear if the company will sell clothes online despite the store closures, but S&P predicts the company has a high chance of filing for bankruptcy.
Here’s S&P’s full list, including the likelihood the companies will default in the next year:
A number of J Crew stores closing by the end of January 2018 won’t make for happy holidays with those employees.
The J Crew stores closing news comes along with a poor third quarter for the retail company. This includes revenue for the period dropping 5% to $566.70 million. Comparable store sales for the quarter were also down 9%, which follows an 8% decline from the same time last year.
The company notes that the third quarter was particularly bad at its J Crew locations. This division saw sales in the quarter drop by 12% to $430.40 million. Comparable store sales were also down 12% after a 9% decrease in the third quarter of 2016.
J Crew also operates the Madewell brand of women’s clothing stores. This segment of its business actually performed well in the third quarter with revenue increasing 22% to $107.50 million. Its comparable stores sales for the third quarter of the year were also up 13% following a 4% increase during the same time last year.
Regardless of the industry, the two main reasons businesses laid off large numbers of employees were companies shutting down or making cost cuts.
Among the companies paring workforces last year were some of the great names in American business — Westinghouse, General Electric, Macy’s, and Hershey.
The public sector also implemented cost cuts that resulted in layoffs in education and government. Private defense contractors such as Boeing trimmed jobs in 2017.
24/7 Wall St. used data provided by Challenger, Gray & Christmas to compile a list of the 25 biggest layoff announcements in 2017. Challenger, Gray & Christmas’ sources for layoff announcements included filings with the Securities and Exchange Commission, WARN notices (Worker Adjustment and Retraining Notification Act), company press releases, and media reports.
These are the 25 employers who trimmed payrolls the most in 2017.
CHESAPEAKE ENERGY LAYOFFS: 400 JOB CUTS, 330 IN OKLAHOMA CITY, DUE TO $9.9-BILLION DEBT
The Chesapeake Energy job cuts are going to affect workers primarily in Oklahoma City. Of the 400 Chesapeake Energy layoffs, 330 of those cuts will come out of the Oklahoma City workforce.
“Over the last couple years, we have divested approximately 25% of our wells, primarily from non-core areas, as a key part of our strategy to reduce debt, enhance margins, and work within our cash flow.
Chesapeake Energy Stock Fell Nearly 44%, Debt Rises to $9.9 Billion in 3Q17
The recent quarterly result for the third quarter of 2017 showed a company that is taking on an increasing amount of debt, with the total amount having jumped to $9.9 billion in the quarter, compared to $9.7 billion the year before.
Updated: Banks Closed Record Amount of Branches in 2017
Increased Technology Spending Accelerating Pace of Closures
U.S. banks accelerated their pace of branch consolidation last year, closing a net 2,069 locations, an 18% increase over the net number closed in 2016.
That pace of closures could speed up even more in 2018 as a number of bank holding companies reported plans to deploy a significant portion of expected savings from tax reform legislation enacted last month into increased spending on technology, expected to support increasing reliance on digital and mobile technology by bank customers to conduct more of their banking activity.
Wells Fargo & Co. (NYSE:WFC) is the poster child of the movement. It closed a net of 194 branches last year – the highest among all U.S. banks — and it expects to close 250 branches or more in 2018, plus as many as 500 in each 2019 and 2020.
Banks closing the most branch locations (net) in 2017
Wells Fargo Bank, 194 (net closures)
JPMorgan Chase Bank, 137
The Huntington National Bank, 134
First-Citizens Bank & Trust Co., 127
Bank of America, 119
SunTrust Bank, 119
PNC Bank, 109
Branch Banking and Trust Co. (BB&T), 92
Capital One, 73
JPMorgan Chase this week announced that it intends to expand its branch network into new U.S. markets, opening up to 400 new branches over the next five years. These new branches will directly employ about 3,000 people.
Still, JPMorgan Chase like other major national and regional banking companies, has been consolidating branches. Last year they closed 137 more branches than they opened. And since 2008, they’ve closed 1,467 branches and opened 1,251.
In 2017, CSX railroad cuts amount to over 4,000 jobs and idled hundreds of locomotives, and now, CSX layoffs for 2018 are expected to involve an additional 2,000 employees.
Jacksonville, Florida-based CSX Corporation is one of the county’s leading transportation suppliers. The rail company operates more than 21,000 miles of track in 23 Eastern states and two Canadian provinces.
CSX’s layoffs for 2017 began in February, when it announced it was cutting 1,000 management positions, most of which were in Jacksonville. Later, CSX announced it was continuing its streamlining efforts by laying off another 1,300 employees across all 23 states where it operates.
Despite laying off 2,300 people and taking nearly 900 locomotives and 60,000 freight cars out of service, it wasn’t enough.
In July, CEO Hunter Harrison announced even more layoffs were on the horizon. According to company spokesperson Rob Doolittle, as many as 700 were expected to be out of work. This raised the number of layoffs in 2017 to around 3,000.
CSX is eliminating the infrastructure it doesn’t need and consolidating operations. That includes shutting down most of the railroad’s 12 railyards.
In fiscal 2017, CSX reported revenue of $11.4 billion, a three percent increase over the $11.0 billion recorded in fiscal 2016. Full-year 2017 net income was $5.4 billion, or $5.99 per share. In 2016, CSX reported net income of $1.7 billion, or $1.81 per share. Adjusted for the impacts of the new tax law and the company’s restructuring charge, adjusted earnings per share were $2.30.
1. Econ Dev Corp loans are high interest 8%-12% when Fed rates have been 0% for four years and they charge another percentage for initiation
2. All other resources available are contingent on both a credit score over 600 and sufficient credit plus collateral when their charter says these are for disadvantaged, not credit-worthy applicants
3. It creates a barrier to entry into the business startup arena for disadvantaged, minority and women-owned businesses rather than a barrier removal
4. No other grants, incentives, non-profit foundation backing, mentorship, or other resources are available if the loan packages aren’t approved.
5. They are literally given our tax money to do these loans and are breaking the charter under which these moneys are given to them by engaging in these practices.
The government funds business development corporations with the mission to provide low-interest financial products and help to people wanting to start a business or expand a business. Tax money makes up nearly all the funds these for-profit and non-profit organizations have to lend. They have the money based on helping people, women-owned businesses, minority owned businesses and under-served communities to have access to low-interest loans even with little, low, no or bad credit ratings.
Those conditions are NOT being honored. Most in NYC are requiring a credit score of 600 to even be considered, Accion accepts no less than 587, and many, if not all – won’t even consider helping with loans, grants or startup incentives for a business where there is insufficient credit.
That isn’t all. The Fed Rate is at 0% for its lending rate, recently having been raised slightly by .01% – and most banks offer more attractive rates than any of these supposedly “low interest rates” which currently are 8% – 12%. Over the last four years, as the Fed rate has been at 0% – none of these economic development loan groups and other startup resources set up with money from our government to help start small businesses have changed their percentage rates for interest to reflect the new reality. At 12%, there is nearly no way to consider these as low interest loans. Banks, bonds and other types of financial products are charging somewhere around 4% and less, but not the corporations designed to help start the under-served, disadvantaged communities with startup and operating capital.
So, not only could I personally never get a loan to startup a business and consequently will have to remain on welfare for the remainder of my life, as well as my grown children and their toddlers being on welfare to not be homeless, because we have insufficient credit and less than stellar credit, but even if we were to get those loans, they would eat up any company profits before ever seeing them. It isn’t only not fair, it isn’t right and it is far from legal for them to withhold these resources from us given their mission and the charter under which they are founded in order to operate..
We are qualified to start, run and accomplish the business we have set out to do. The community will have an asset for us doing it rather than the liability they currently have with all of our households running amuck in poverty and near homelessness with our only access to economic resources being welfare and welfare assisted programs and low paying jobs that don’t pay the rent.
The damage to us is obvious and I guarantee that if these funding opportunities were denied to us, they have been also denied to thousands of women and minority startup businesses. We could have qualified for several state and federal incentive programs by employing all of us at a viable business rather than continuing on public assistance, our communities could have been enhanced by the business we have designed, and the opportunities for three generations of our family, including my young grandchildren could have risen from poverty and welfare to entrepreneurship and equality of opportunities.
And, worst of all, I know that these companies, corporations and quasi-public/private development corporations were given our tax money and my community’s tax moneys in order to help us and people like us to start a business and to get it on a firm footing to be competitive from the outset with true low-interest, non credit rating dependent products, incentives and opportunities. That makes what they are doing, both illegal and in complete disregard of the policies which formed the foundations of their operations at every point in the process.
They have cheated me and my daughters this week and countless thousands of others like us who would’ve most certainly been summarily refused as well, along with stealing from those who they did loan money at interest rates which are four times higher than the national average for a mortgage or other loan product.
They should all be responsible for correcting that fact from the point the Fed rate was lowered to zero for every single business and business owner that was impacted by it and they certainly all have been. This is inexcusable.
And, considering that these financial business loan companies have the mandate to provide credit and loan products to economically disadvantaged and under-served populations, and those with credit scores less than stellar in order for them and us to build businesses – and they are, in fact, not doing it that way – this matter needs to be turned over to the Justice Department for consideration. It is fraudulent for their charters and rights to free access to our state treasuries’ moneys and our national federal dollars to state it is to promote one thing when they are refusing to do that as a matter of practice.
By the way, two other practices being used by these companies are also illegal and against the policy law providing for their charters – one is that they nearly all require collateral such as home equity in order to secure the loans, which means they may as well be a bank rather than what they are supposed to be and, second is that they nearly all require very short repayment schemes and many require at least a year in operation with records to show the business’ activities – even for startups who would simply not have that, but “it is their policy.”
These practices effectively removes the startup businesses from consideration for any of their loans, incentives, grants through their organization and any access to the multitude of other funding and information / mentorship resources in the community that have been put into their hands to help small, minority-owned, women-owned, under-served, economically and otherwise disadvantaged populations – owned businesses startup, expand, grow and succeed. (and be competitive against much better funded competitors across a global marketplace.)
Please fix this immediately – the national, regional and local economies need these small businesses and equal opportunities to employment, to jobs and to create businesses that can provide employment. This can’t be left as they’ve decided to manage and do this. It is unlawful, damaging to our communities and individually, barrier sustaining rather than removing those barriers to credit products to startup businesses and equal opportunities to fund those businesses appropriately.
These things represent unfair trade practices and are fraudulent to be portrayed as any real access to capital and resources for startups in disadvantaged communities or to disadvantaged populations, including women, and minorities. It is a form of loan sharking and completes a fully funded barrier to those populations for starting a business, in fact. The other incentives, resources, grants and access to programs to help the startup business under these policies are all contingent on the applicants being accepted for their credit products or otherwise – none of these other things are available either. It is completely and significantly a barrier to economic opportunities and equality to access them.
And yes, it is four times higher in interest rates than for traditional banking products, bonds and other commercial financial products because these companies are charging loan initiation fees of 1% on top of all that which is thoroughly illegal and represents nothing but the same loan sharking process that got our nation into this mess in the first place.
CNN just reported on their Live show that a report released today says the Federal Reserve loaned $7.7 Trillion dollars to the big banks and Wall Street firms during 2008. Aren’t those the same bankers that said the whole reason the mess happened was because of citizens across America who got into a financial hole with their own finances? And then, those same bankers borrowed all that money from the Fed because they had to in order to stay afloat?
Aren’t they the same ones that didn’t want to lend anyone any money thereafter unless a complicated system of credentials and perfect credit were held by individuals, small businesses and homeowners?
The report is apparently on CNN and Bloomberg.com. It includes the amounts loaned to these large banks and Wall Street firms. Worth seeing.
You just have to read this – Absolutely unbelievable –
So, not only does it take an obscene amount of jumping through hoops for most Americans to get any money borrowed from these banks or the SBA or to prevent foreclosure or to get the small business loans offered through banks – or to get government help through any program available from foodstamps to WIC to TANF to help with not being homeless any longer, when it is the Wall Street financial products, bankers and their gambling debts that are in trouble, they are handed the keys to our Treasury and Federal Reserve and told to get what they need, however many billions of dollars it may be. Obviously, they couldn’t pay their original notes and creditors or they wouldn’t have even needed the money. Obviously – that would make them a group of companies with the worst credit scores, the worst at being overextended in their borrowing and gambling with it, and the very worst at what they are doing in order to have put themselves (and us) in this financial disaster in the first place.
But, no –
Freely give them whatever amount of money they need and then print money to make the rest of us absorb their losses whether we agree to it or not. They are the worst violaters of good financial management known to the history of mankind (evidenced by the fact that it took $7.77 Trillion dollars plus $700 Billion in TARP funds and another $134 Billion for AIG and another 15 programs of interest free money systems plus the US taxpayers buying all their bad debt products in order to get them solvent.)
But, if I went to ask for $30 – what do you think would happen?
Oh no – they couldn’t loan me that because I don’t have the “track record” they do . . .
I’d hate to ask for $300 – they would just laugh while sitting on their pile of our money to the tune of hundreds of billions of dollars each of them have taken.
Even existing small businesses with good, even perfect repayment histories have been denied loans all over the United States in every state, county, district and city by these same banking institutions and their government backpocket “keepers”. I’m not sure which one is the worst – the banks that did it and their Wall Street counterparts, or the government players who facilitated it. Obviously, the only real enemy of the US today, exists in the concept of capitalism which denies the free market principles when it has to do with banking, financial products, Wall Street brokerages, financial institutions, financial investment firms, hedge funds, banks, insurance companies, credit default swaps and other toxic exotic fincancial vehicles, large corporate players in Wall Street and a handful of very wealthy players – but leaves everyone else in the nation strapped with not only suffering those personal failures in the free market capitalist system but covering the big players’ losses, as well.
To say it is unfair is the understatement of the century. To say the situation is untenable and unviable in this form will likely be closer to the truth of it. It’s just a matter of time.
Enacted into law as part of the Small Business Jobs Act of 2010 (the Jobs Act), the Small Business Lending Fund (SBLF) is a $30 billion fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion. Through the Small Business Lending Fund, Main Street banks and small businesses can work together to help create jobs and promote economic growth in local communities across the nation.
First, people in America are educated. There has been over a hundred years of public schooling paid for and participated in – by the adults alive in America today.
Second, people in America can read and are able to write, to do math, and believe it or not, are good at science. There would absolutely have to be facts that support this because otherwise people wouldn’t be able to cook a meal without poisoning themselves or others. That proves they can do all of those things. It takes knowledge of science and chemistry to even cook a box of Kraft macaroni and cheese, make a couple hotdogs and do it without getting poisoned or hurt from the process. That is so commonplace that people think they aren’t good at chemistry, or at reading for that matter – when obviously they are using these skill sets every day.
Third, people in America have some common sense whether they use it or not. It isn’t rocket science to know that a car needs gas in order to go and that occasionally, water and oil have to be checked and topped off. But, no – to hear it said by some, there is nothing but rampant ignorance in America. That is bullshit.
Fourth, what people like for its entertainment value, may or may not be an indication of the level of intelligence held by the audience. Mindless duff is always more entertaining because it makes people remember our common human failings, humiliations, antagonisms, & frailties.
And, Fifth, people can not be trusted to sort out truth from fiction regardless of the level of intelligence, education, lack of education, common sense or lack thereof, reasoning, or knowledge because of the nature of intellectual constructions inherent in either one when used for the motives and agendas of those who would use truth, lies, fiction and people as well – to further their own purposes.
So, the point of this is to say – a couple things.
One, is that people are far more capable in America than they are letting on which has become so taken for granted that maybe they don’t realize it.
Two, is that people in America have lied to themselves about their abilities to perceive the truths or lies of what they are told about things in the United States – regardless of the source where they find it.
The fact is, churches have distorted some things to support political positions of party politics and political parties have sorted some things out in twisted ways, merchandisers have done the same thing in order to help people make buying decisions that favor their products and services, lobbyists have done the same thing in the name of the industries that are paying them, as have some studies also done which were otherwise made by academic and supposedly, independent knowledgeable sources.
It was just an interesting thought about it all.
When the economic gurus and financial analysts along with the multitude of Harvard economists working at the helm of analyst and consulting positions told Congress and the American people that there would not be one of those “R” word things happening in this country in 2008, and that even if there were a little downturn, it wouldn’t last but a few months (less than six maybe), they weren’t telling the truth and they had to have known it. Were they not capable of reading? Did they really think that what goes up cannot possibly go down, as they later claimed about property prices and other things like financial products and exotic types of securities products? Surely not.
So what really happened and what is happening now? Why do so many of the conservative news opinion perveyors insist that people are to believe America’s people are too stupid, too ignorant, too uneducated, too incapable of reading or understanding information, to do anything to help themselves in the midst of this economic disaster in America? Do they really believe that or are they laughing in their sleeve as they mock people’s inability to know which is the lie and which is not?
And, does it really surprise investors and financial industry members that the “R” word event – the Recession / Depression of 2007-2008 actually had happened whether the word was ever used or not – and started long before they were willing to recognize the problem that existed – and still exists in the economy? Are they really being caught by surprise today, that the Recession which has the components much closer to that of an economic Depression – is still unfolding massively, expansively across the world and in every single state and industry in the US, individually and collectively? Or do they believe that people would not know the difference as long as fancy, high-paid financial analysts paraded across the tv screens, online blogs and news outlets are saying that everything was fine and would be fine and was getting finer by the moment every day – when in fact, it was not?
How could that be?
People can look up the facts themselves. They are smart enough to read them from a multitude of sources with enough skills to compare those things with facts from the real world around them to see if those things are true or not. Why didn’t they do that? Why would anyone believe that people are not smart enough in America to do that when there has been over a hundred years of public education in this country? Amazing.
I don’t get it.
People can see the empty houses around them. They know the fifty people in their own family and circle of friends that don’t have a job, can’t find a job, need a job, or are having to work for nearly nothing with no more than twenty hours a week part-time offered them to do four people”s worth of work every hour they are at work.
They know what that means. They know people who went and tried to get a loan, or to get investors, or backing or grants to start a small business in order to support themselves and while banks took tons of our money from the US Treasury and taxpayer’s money to give grants and loans to small businesses – people can see that’s exactly where it stopped – and those loans didn’t get out to the people in their family, among their friends and in their community to start those businesses as was promised. It just didn’t.
And, they also watched businesses close because those dollars for loans were not given to them either, small businesses long established were bankrupted, and commercial properties stood empty for years while their owners were insisting that rents and purchase prices of those properties had to be the same as they were in 2006, despite years – month after month, of being empty and derelict.
People can also see as they drive through communities that were once prosperous which now stand empty like a wasteland. Occasionally, when new businesses have opened in the last few years – they quickly fail, because homeowners nearby are being thrown into the streets, their equity stolen, foreclosures encouraged, and community resources, like churches and scout troops and schools and other great things have been destroyed. Those are the customers which would have been naturally supporting those businesses with revenues and repeat sales and good word of mouth advertising to bring in other customers. Without jobs, without money and without revenues generated by some business activities, without homes nor access to the equity already paid into owning the homes they had – people aren’t going to buy things. That is a dead given.
The only people who could’ve possibly been surprised that the Recession is still tearing up the US economy and the economies in every nation in Europe would have to be those in Washington making over $300,000 a year to dick around with our lives and those in NY and London involved in the Wall Street banking / financial services industry making $3 million a year or more to dick around with our futures.
And, the time when this jackass should’ve been telling this was in 2008 January – that would’ve actually been helpful and honest.
When she heard someone was giving away backpacks full of food and other supplies at the Westminster dog park on Saturday, she was among the first to show up.The sturdy black backpacks, which volunteers from the Giving Spirit like to call “survival kits,” contain about three dozen items essential to surviving the streets in Los Angeles County, including a baseball cap, socks, soap, sunglasses, a toothbrush, toothpaste, a hairbrush, sunscreen, lotion, a first aid kit, deodorant and bottled water.
About 225 volunteers packed and distributed 350 backpacks on foot in Venice, downtown Los Angeles, Hollywood, North Hollywood and Culver City on Saturday. They delivered about 650 additional backpacks to seven local homeless outreach groups.
Volunteers made a special effort to reach women and children, distributing about 15 diaper bags full of feminine napkins, sippy cups, diapers, diaper-rash cream, baby wipes, baby sun block, children’s vitamins, formula and bottles. In Venice they partnered with Stand Up For Kids, a Los Angeles nonprofit that serves homeless youth. (etc.)
This makes good sense and is a good start. It is humane, it is decent, it is caring and has been using sensible thinking about the things to include that would actually be of help to people, especially women and children, teens and teen girls that are homeless.
Yes, it is a good start.
Note – now is the time to start donating fans and small air conditioners to city homeless shelters, to elderly community centers, to city resource points for people in the community who are in need – and will be in dire straits this summer.
These fans can be given to the people who need them through community emergency resource centers and family social service agencies, senior community centers and homeless resource centers.
This is especially important in big cities like New York, Atlanta, New Orleans, Chicago, and other places where every summer, the elderly and working poor are found with heat stroke in their apartments and homes that don’t have any air circulation nor air conditioning.
Nearly every city and state has cut the funds to the poor, elderly, disabled, homeless program and other things that can help families, children, single mothers and pregnant women, toddlers, babies and the most vulnerable in our society. This is the time to help make up some of the difference. If your church is giving to a central pool fund with other churches, someone needs to check and make sure that money is actually getting into the community and not into the pockets of CEOs, stock fund portfolios for the group, think tanks and other similar administrative “discretionary choices.