September 29, 2011
Will talk of the debt struggles and spreading contagion in four of the five so-called European "PIIGS Nations" be a distant memory within one to two years? One of the foremost international macroeconomic minds said that positive possibility looms when speaking at last week's FCIB New York International Round Table. Still, of the five and most debt-saddled of the PIIGS, Greece isn't likely going anywhere soon in either its financial standing or its affiliation with the rest of the euro zone.
Matthew Higgins, vice president of the Federal Reserve Bank of New York, said he believes there was reason to be hopeful for significant improvements in four of the five PIIGS economies, which could take some of the hot spotlight in the mainstream media away from them. To wit, Italy and Spain are demonstrating they're each on a "credible track" as far as austerity goes, and even Ireland and Portugal have hit most of their targets post-bailout. The only "real" concern, Higgins speculated, was Greece.
"Europe easily has the capacity to roll off Greece from the others. There's a reasonable chance we won't be talking about this two years from now or, with luck, maybe one year," he told FCIB attendees. "But, clearly, Greece itself is a real challenge. They're going through a very large fiscal austerity process that dwarfs that of the U.S."
Still, the euro zone nations carrying the Greeks financially, as well as others more in the middle economically, may have little punitive recourse going forward. Higgins suggested that cutting Greece out of the European Union entirely would amount to an "enormously disruptive mess."
"The legal infrastructure to do so doesn't even exist," said Higgins. "And all the contracts would have to be rewritten."
Higgins believes it would go a long way toward stabilizing or improving all-important market confidence if the EU were to take steps such as firmly establishing a bailout mechanism that is more flexible as well as providing clarity about banking exposure and the related backstop system. Clearly, simply cutting the Greeks out of the equation in no way resembles a cure-all or even feasible option in the short and mid-term.
Brian Shappell, NACM staff writer
Sneak Peak...Credit Managers' Index for September Says There's Life in the Economy!
If you can't wait until next week's release of the September CMI data in eNews, check it out as early as tomorrow, September 30 on the NACM website.
The Senate Judiciary Committee approved a trio of data security bills last week. While each is its own unique piece of legislation, the goal of all three is to standardize data breach notification laws that dictate when and how a business or data broker must notify consumers that their information has been compromised.
At least one of the bills, S. 1151 (the Personal Data Privacy and Security Act), introduced by Judiciary Chairman Patrick Leahy (D-VT), would implement criminal penalties for anyone that intentionally and willfully seeks to conceal a data breach. Leahy has introduced the bill four times in as many Congresses, and although it has been approved by his committee each time, enactment has remained elusive, and it might stay that way.
In addition to Leahy's bill, the committee also approved S. 1535, (the Personal Data Protection and Breach Accountability Act), introduced by Sen. Richard Blumenthal (D-CT), and S. 1408, (the Data Breach Notification Act), introduced by Sen. Dianne Feinstein (D-CA). Republicans on the Judiciary Committee have vocally opposed all three, making full approval of any data security bill uncertain at best.
"I believe that in its current form, S. 1408 will overburden large and small businesses with more regulations," said Sen. Chuck Grassley (R-IA), in a statement before the bills were approved. "A small business, which over the years can easily acquire enough information to qualify under the bill, will have the same notification requirements as a large business. This means dealing with bureaucrats at the Federal Trade Commission (FTC), which will be a costly and timely affair."
Grassley saved his sharpest criticism for Blumenthal's bill, S. 1535, which, he argued, "will result in the closing of smaller businesses that are subject to its costly requirements."
"There's a real danger that this bill could produce a lawsuit explosion against all businesses, big and small," said Grassley. "This bill provides for enforcement actions to be prosecuted by (1) the Department of Justice, (2) State Attorneys General and (3) individuals. All three of these groups could file lawsuits against the same business for the same conduct."
"We must not forget that these businesses that will be sued may have been the victims of a crime. After being victimized by criminals, if these businesses make a mistake in complying with the law, they'll face multiple lawsuits and high penalties," he added.
All three bills are eventually expected to be rolled into one comprehensive piece of legislation before being presented to the entire Senate. They overlap in many instances, with Leahy and Blumenthal's bills both requiring businesses to maintain minimum security standards for safeguarding any sensitive personally identifiable information. All three also require prompt notification of consumers in the wake of a data breach.
Stay tuned to NACM's blog and eNews for further updates.
Jacob Barron, CICP, NACM staff writer
FCIB's 22nd Annual Global Conference
Nov. 13-15 2011
FCIB invites you and your team to gain cutting-edge information on global trade issues, trends and cause-effect relationships that are impacting businesses every day. Even if your company is not selling globally yet, this conference is a "must attend" for every credit professional or executive.
Here's a look at one of this year's sessions:
Economics That Influence Foreign Exchange
Speaker: Kevin Hebner, Senior FX Strategist, JPMorgan Chase
Get an expert view of how economics affect the market and contribute to increased FX volatility and risk. Review currency forecasts, strategies and risk management approaches.
Other topics include:
• Implications of the US and European debt crises
• Is the RMB a one-way bet?
• Are commodity currencies an accident waiting to happen?
View full program here.
For more information or to register, call 410-423-1840, ext. 1044 or visit www.fcibglobal.com.
Jefferson County, AL. Jefferson County Commissioners approved a tentative agreement that should keep the county from becoming the largest municipal bankruptcy in U.S. history, as has been expected for months.
Jefferson County officials have struck a preliminary deal with the creditors the municipality owes for a sewer renovation project that left it with crushing debt. It is estimated that more than $3 billion in the county's debt is tied to a sewer rehab project there several years ago. The deal would include more than $1 billion in concessions from the creditors and significant increases in residents' sewer rates. Alabama Gov. Robert Bentley notably mentioned this summer that Chapter 9—already used by about a half-dozen municipalities this year including Central Falls, RI—was "a very strong possibility" for the county.
Washington Mutual (WaMu). Stakeholders in the lengthy WaMu Chapter 11 bankruptcy are appealing U.S. Bankruptcy Judge Mary F. Walrath's recent decision that intimated there was legitimacy to claims of insider trading.
A group of four hedge fund operators is seeking to fast-track an appeal to Walrath's rejection, her second, of WaMu's $7 billion reorganization plan. They argue in the appeal that the judge's decision creates bankruptcy law standards never before invoked. Opponents had successfully argued the second settlement proposal WaMu forged with a group of hedge funds undermined the fairness of the bankruptcy process on allegations of insider trading. The case, the second largest Chapter 11 in U.S. history, has dragged on for more than three years.
Solyndra LLC. Despite objections from lower-level creditors who fear the potential for significant lost value, bankrupt solar products firm Solyndra LLC won approval to hold an expedited auction of assets on Oct. 27. The committee representing creditors owed upwards of $40 million called the process rushed and sought to have the auction at least four weeks later in hopes that a better buyer option would emerge.
Solyndra has been in the spotlight, more so than several other solar companies that filed for bankruptcy or shut down U.S. plant operations this year, because of the large federal government grants it received, its ties to the Obama administration and an FBI raid on their offices in the days following their Chapter 11 filing. The company's high-tech solar product offerings become "noncompetitive" as Asian manufacturers continued to deeply undercut the firm on pricing and overhead. It's part of the solar industry's massive problems along with the economic downturn, slow recovery and market over-saturation regarding the number of firms that emerged in the end days of the last economic boom.
Brian Shappell, NACM staff writer
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The Senate approved an extension of the Trade Adjustment Assistance (TAA) program last week, which trains American workers affected by global competition.
While the program's renewal is notable, given that it also streamlines previous changes made to the TAA in 2009 and represents a rare instance of compromise in a sharply divided Congress, its passage is perhaps even more important for exporters because it paves the way for action on the nation's three pending free trade agreements (FTAs) with Panama, South Korea and Colombia. President Barack Obama had considered TAA renewal a condition that had to be met before those FTAs were sent to Congress for approval.
Now that an agreement has been reached, little stands between the agreements and their entrance into force.
"Today's long-awaited Senate action should clear the path for consideration of our pending trade agreements," said Rep. Dave Camp (R-MI), chairman of the House Committee on Ways & Means. "The next step is for the president to promptly submit the pending free trade agreements with Colombia, Panama and South Korea, which also enjoy bipartisan, bicameral support, to the House and bring us one step closer to passage."
While President Obama set TAA passage as a precondition for the FTAs, Republican leaders demanded the opposite, that the FTAs be submitted prior to their approval of the TAA bill. Now that the Senate has approved the TAA extension, the GOP hopes that the president will relent, and submit the FTAs to the House, trusting that TAA approval would follow shortly after their arrival.
"The Senate today will have acted on trust in passing TAA even before we received the agreements," said Senate Minority Leader Mitch McConnell (R-KY) after the vote. "But the White House has refused to show the same trust in Congressional Republicans who've assured them that TAA will move along with the FTAs."
"I kept my promise that I would allow TAA to move forward in the Senate as long as Republicans had a chance to amend it. It is time for the administration to deliver on theirs. It's time for the president to send up these long-pending FTAs without delay," he added.
Jacob Barron, CICP, NACM staff writer
NACM's Mechanic's Lien and Bond Services (MLBS): Best-in-Class Service for Today's Construction Credit Professional
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Want to get on a judge's good side or at least streamline the bankruptcy reorganization process to possibly save some of the money in the final pool from which creditors can draw? Judges hint it's all about making sure there aren't competing plans on the table to muddy the process.
At the American Bankruptcy Institute's "Views from the Bench" conference at Georgetown University Law Center, a panel of judges noted that they've found more to be remaining in the pool of available money in situations where there was one reorganization plan, even one with various amendments, presented to the respective presiding judge as opposed to competing plans. Shelley Chapman, U.S. Bankruptcy Court Judge from the Southern District of New York, said a better alternative to presenting plans that compete with those of other creditors is trying harder to work out an amenable compromise and/or seeking amendments to the plan during confirmation. Otherwise, "it's a real challenge to streamline the process—I always prefer one plan," Chapman noted. And, remember, time equals money in such proceedings.
One example of competing plans was that of the Lehman Brothers case in the U.S. Bankruptcy Court for the Southern District of New York, one in which at least three plans were submitted to U.S. Bankruptcy Court Judge James Peck. That case, representing the largest U.S. bankruptcy on record, is limping to the finish line after raging on through more than three contentious years. Peck approved the former financial pacesetter's latest payment plan late this summer. Stakeholders must vote on the proposed payment plan in November, and a confirmation hearing is tentatively scheduled for Dec. 6. That is, of course, if yet another group of stakeholders doesn't throw a wrench into things, which can never be ruled out with such a case.
"Competing plans represent a level of complication," Peck told attendees. "It proliferates the number of possible outcomes. Just from a case-management perspective, I've seen it as a major problem in cases."
Brian Shappell, NACM staff writer
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Though Congress approved it last year, 2011 has really been the year of the Small Business Jobs Act.
As part of another program under the legislation's considerable purview, the Small Business Administration (SBA) recently announced that it would provide $30 million to states, territories and the District of Columbia to help increase exporting by small businesses during the next 12 months. The grants were officially authorized under the Small Business Jobs Act's State Trade and Export Promotion (STEP) program.
Launched in March, STEP is a feather in the cap of President Barack Obama's National Export Initiative (NEI), which has worked to double U.S. exports in five years. The program provides federal funding for 65-75% of program costs, with the states supplying the remainder.
"Strengthening the nation's economy through a substantial increase of U.S. exports is a top priority for the administration and the agency," said SBA Administrator Karen Mills. "This is a unique partnership between the federal government and the states. Sharing responsibilities and resources will help new small exporters across the country enter and succeed in the global market."
While $30 million doesn't sound like a lot of funding in the grand scheme of federal stimulus efforts, the grants are designed to handle the nuts-and-bolts tasks associated with exporting. Specifically, the funding will support participation in foreign trade missions, foreign market sales trips, subscriptions to services provided by the Department of Commerce, website translations fees, design of international marketing media, trade show exhibitions, participation in training workshops and other critical exporting initiatives.
Previously, the Small Business Jobs Act's Small Business Lending Fund (SBLF) has aimed to help small businesses on a more domestic basis, by providing small community banks with funding that's tied to their efforts to increase lending to the nation's smaller firms. The funding becomes cheaper for the bank when it increases the percentage of its portfolio dedicated to small businesses. To date the Treasury Department has made more than $2.4 billion worth of disbursements to nearly 200 community banks under the program.
Jacob Barron, CICP, NACM staff writer
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