December 29, 2009
On Christmas Eve, in addition to approving a health care bill, the Senate also raised the nation's statutory debt limit, increasing the existing legal ceiling of $12.1 trillion by an additional $290 billion.
The Senate vote fell strictly along party lines in a 60-39 vote, and the debt limit bill was quickly signed into law by President Barack Obama. The increase was approved by the House of Representatives earlier in December.
Making the measure all the more sobering is the fact that the $290 billion increase is considered a short-term fix for the debt limit. The change is only expected to fund government operations until February 2010. Democrats had originally sought a much larger debt increase that would've funded operations through the entirety of 2010 and, additionally, kept the issue off the radar for the forthcoming 2010 elections.
Those voting for the measure considered it a necessity. "If we do not pass this bill, then at least two very bad things will happen," said Senator Max Baucus (D-MT), chairman of the Senate Finance Committee. "First, the United States would default on the interest payments on its debt for the first time in the history of this country. And second, the federal government would be unable to borrow the money that it will need to pay all of the Social Security benefits that beneficiaries are entitled to receive."
"So the bottom line is: We have no choice. We have to approve it," he added.
Baucus and others were quick to point out that the original $12.1 trillion limit could not have been reached without years of spending during the prior administration. Between 2002 and 2008, the U.S. debt limit was raised seven times, starting at $6.4 trillion in June 2002 and ending at $11.3 trillion in October 2008. This is the second time the debt limit has been raised under Obama in his first year of office; the first increase occurred in February 2009, from $11.3 trillion to $12.1 trillion, as part of the American Recovery and Reinvestment Act (ARRA).
Jacob Barron, NACM staff writer
The 2010 NACM-National Honors & Awards Program
Do you know someone who...
» inspires, challenges and teaches you?
» sets a standard for excellence and integrity?
» deserves recognition for exceptional contributions and commitment?
Nominations are being accepted in the following categories:
* National Credit Executive
* CBA, CBF and CCE Designation of Excellence Awards
* Mentor of the Year
* Student and Instructor of the Year Awards
The nominations deadline is January 8, 2010. Visit NACM's Honors & Awards web page for details on nominating a remarkable credit professional for a national award.
Industry experts are predicting continued problems for the already struggling commercial real estate market, with some claiming that the collapse will be even worse than that of the residential housing market earlier in the decade.
According to Guardian Solutions, various research on the subject shows that delinquency rates have steadily increased and are expected to do so through 2010 and peak in 2011. Research provider Trepp found that delinquent loans in commercial mortgage securities jumped 85 basis points to 5.65% at the end of November 2009, up from 4.8% a month prior. "In addition, the Mortgage Bankers Association's (MBA) Commercial/Multifamily Delinquency Report showed that between the second and third quarters of 2009, the 30-plus day delinquency rate on loans held in commercial mortgage-backed securities rose to 4.06%. The 60-plus day delinquency rate on loans held in life company portfolios rose to 0.23%," said Guardian in a release. "And according to Credit Suisse analysts, installments on $22.4 billion of mortgages were 60 days late."
Additionally, there is an estimated $300 billion in negative equity overhang that will need refinancing in 2010 and 2011, a number that is expected only to increase as another nearly $2 trillion worth of commercial mortgages are scheduled to come due in the next five years.
"What we are seeing now is the perfect recipe for disaster in the commercial real estate market in 2010," said Jeramie Concklin, chief executive officer of Guardian Solutions, a commercial loan restructuring company. "A huge number of balloon payments for commercial property loans are coming due in 2010 and 2011. With vacancy rates at high levels, unemployment soaring and commercial property values plummeting, commercial property owners are not going to be able to service their debt without serious restructuring of their loans and business. Property owners need to prepare now in order to avoid default."
The U.S. government has already moved to stem the effect of an impending commercial real estate meltdown, with the Internal Revenue Service removing adverse tax consequences to investors that grant commercial loan modifications to owners and the Federal Reserve pushing new guidance on commercial real estate loan restructuring. However, these moves and the motivations behind them have yet to be embraced by the nation's banks.
"We applaud the government's efforts to help commercial property owners facing foreclosure secure loan restructuring," said Ira Friedman, chief operating officer of Guardian Solutions. "Unfortunately the banks are not following suit. Credit remains tight and market conditions remain dismal, so refinancing is often off the table. Loan restructuring provides a viable alternative, but to successfully secure a restructured loan requires intimate knowledge of banking, business, law and finance that most property owners do not have."
Jacob Barron, NACM staff writer
The Latest on 503(b)(9)
The passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 created a safety net for unsecured goods sellers in the form of the 503(b)(9) 20-day administrative priority claim. However, since its addition to the Bankruptcy Code, various court cases and judges nationwide have redefined exactly what it means to hold one of these claims. To learn more about the competing ideologies and interpretations of this important section of the Code, join Deborah Thorne, Esq. for the next NACM teleconference, "The Latest on 503(b)(9)," on January 11, 2010 at 3:00pm EST. Thorne will discuss how creditors can best document their claim and how the claim relates to drop shipping, preference exposure and other items.
To learn more, or to register, click here.
The Senate recently granted a one-year extension to the Generalized System of Preferences (GSP) and Andean Trade Preference Act (ATPA). Both programs provide U.S. market access to developing and least-developed countries.
Congress passed the extension by unanimous consent, ensuring that the programs will continue to operate even as lawmakers undertake the process of reforming the trade preference programs in 2010. The extension had already passed the House earlier in December.
"I support Senate passage of this legislation," said Chuck Grassley (R-IA), ranking member of the Senate Finance Committee. "It's a compromise among the chairmen and ranking members of the Senate Finance and House Ways and Means committees. The extension will allow enough time for Congress to enact preference reform legislation next year. Also, the legislation ensures that the administration will report to Congress on whether the government of Ecuador's actions are inconsistent with the eligibility criteria under the Andean Trade Preference Act."
Ecuador has run into problems of program eligibility due to some of its tariff policies on U.S. imports into the country as well as some worker's rights issues.
Originally created in 1974, the GSP provides duty-free access to the U.S. for an array of products from more than 130 countries, accounting for $31.7 billion in duty-free imports entering the U.S. in 2008. The ATPA was established in 1991 in order to urge Andean countries to move their companies away from illicit drug production. Colombia, Peru and Ecuador are currently the only countries involved in the program, which accounted for over $17.2 billion in duty-free imports in 2008.
Bolivia formerly was included in ATPA, but was removed due to its lack of cooperation on counternarcotics programs.
Jacob Barron, NACM staff writer
MLBS Offers Complete Lien and Bond Services and More
NACM's Mechanic's Lien and Bond Services (MLBS) brings best-in-class service options to today's construction credit professional.
MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.
MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program, and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.
For more information on NACM's MLBS, click here.
Experian® recently announced the results of its monthly Business Benchmark Report. During the month of November, the majority of measurements in the report show that payment performance is continuing to deteriorate nationwide across most industries, geographies and businesses of all sizes. Still, businesses with 100 to 1,000 employees began showing improvement in overall dollars delinquent, indicating there may be some stability in that important business segment. In addition, businesses with no employees (or nonemployer firms) continue to perform better than most of their counterparts, with the exception of dollars delinquent over 90 days.
Other key findings from this month's Business Benchmark Report include:
- The national average commercial risk score for November was 60.54*. Based on a rolling six-month average, this score has declined by 1.4%, indicating higher risk of severe payment delinquency over the next 12 months.
- Businesses of more than 1,000 employees continue to show the highest rate of projected severe delinquency.
- Utilities companies still have the best risk score average of all industries (70.67), and Hospitality has the worst (56.05).
- The Northeast region has the lowest risk score (56.46) and saw the largest decline in the period at 1.8%.
*Based on a 100-point scale
Average Days Beyond Terms (DBT)
- The national average DBT for November was 5.16. This number has increased by 4%, indicating overall payment behavior is continuing to slow.
- Health Services has the best average DBT at 4.02, while Construction has shown the worst payment performance, coming in at an average of 9.09 DBT.
- The Mountain States region has the worst payment performance, with an average of 8.1 DBT.
Percent of Dollars Delinquent
- A bright spot perhaps: For midsize to large businesses (100 to 1,000 employees), the percent of dollars delinquent is improving. However, the percent of dollars 91-plus days delinquent is only improving in businesses with 500 to 1,000 employees.
- The average percent of dollars delinquent for November was 14.7% (a 2% deterioration), and the percent of dollars now 91-plus days delinquent is 5.9% (a 7% deterioration). The continued growth in severe delinquency reinforces the continued deterioration in payment performance nationwide.
- Construction has the worst percent of dollars delinquent (25.34% and continues to deteriorate in both percent of dollars delinquent and in the percent of dollars that are 91-plus days delinquent.
To see a visual representation of this data and other information broken down by state in an interactive map of the United States, go to http://www.BusinessCreditFacts.com/map.
Industry Credit Groups
Credit groups are an effective management tool. They permit credit professionals of different companies servicing the same customer, regardless of industry or trade, to compare information on collection history and provide a forum for the exchange of data as to the most recent payment practices. The purpose of exchanging information is to help group members segregate fiction from fact, so competent and realistic credit decisions about a customer can be made.
Managed and operated by NACM Affiliates nationwide, NACM-Canada and FCIB internationally, credit groups:
- Provide unparalleled networking opportunities
- Assist in the exchange of credit information on common customers
- Facilitate the receipt and analysis of information to make unilateral credit decisions
- Provide a forum to discuss the latest developments on credit department procedures,
equipment and other credit management functions
- Support the discussion of account information and delinquent account reports
- Adhere to federal antitrust guidelines
Click here to learn more about NACM credit groups and find the group for your industry.
Extended Jobless Recovery Likely for the Back Office; 1.4 Million Jobs in IT, Finance, Other Areas Face Elimination by 2010
Nearly 1.4 million back office jobs will be lost at the world's largest companies between 2008-2010, according to a new study from The Hackett Group. These losses are just part of a longer-term trend that started in 2001 and will result in nearly 3.6 million general & administrative (G&A) jobs being eliminated by 2014.
According to Hackett, more than 630,000 G&A jobs are expected to be lost in 2009 alone, over three times the average number of jobs lost annually from 2000 to 2007. This dramatic spike is likely to lead to an extended jobless recovery in IT, Finance, Procurement, HR and other G&A areas. Hackett's research found that the increase in job losses is being driven by a number of factors, including the lack of economic growth, deep cuts in response to budget pressures, improvements in productivity and automation, and the increased use of offshore labor resources.
The scope of this Hackett study included 4,000 global companies in North America and Europe, all with over $1 billion in revenue. Hackett found they have made significant G&A cost reductions since 2000. These cost reductions have had a positive impact on bottom line performance, but they have also involved the elimination of jobs.
Hackett's research recommends that companies take action now to avoid allowing G&A costs to rise as economic conditions improve. Companies should rethink the delivery model of their G&A services, focus on process redesign and adoption of best practices that eliminate and streamline their operations, improving productivity through workflow automation and executing activities in low-cost/high skill regions. Hackett believes that companies which fail to do so risk losing any efficiencies they gained through downsizing their G&A staff during the economic downturn.
"Unemployment rates are now at their highest levels in 26 years and may continue to rise. But several factors have come together to increase the likelihood of a jobless recovery across the corporate back office," said Hackett Chief Research Officer Michel Janssen. "The economic growth we've seen since 2000 has vanished, and will be slow to resume. At the same time, we're seeing acceleration in offshoring of services combined with continued productivity improvements."
"Moving forward, it's also clear that for many companies, a substantial part of top-line revenue growth will come from emerging markets," said Mr. Janssen. "Hackett believes that for most companies, if and when they do start to restaff in IT, finance and other functions coming out of this recession, the large majority of the jobs they create will be in India and other low-cost labor markets. Companies need to understand this, and adapt their strategies accordingly."
Source: The Hackett Group
Look for the "A" Players
You need the "A" players. They're the most qualified—the most productive people—in your organization. And, for any open positions you have, you need them fast because any interruptions in staffing can mean missed deadlines, a breakdown in operations and loss of productivity—consequences you can't afford.
You'll find the "A" players at Careers in Commercial Credit, Collections & Finance (C4F), the online resource for the people who are educated and experienced in your related field, and who are looking for the opportunities you can provide.
Click here to get started!
C4F: Employment Connections for the Business Credit Community
It's not unusual today for an employment search to take much longer than expected. When this happens, enthusiasm can begin to wane. While it's understandably frustrating to send resume after resume to no avail, letting your motivation sink will only make things worse. Following are three tips for enhancing your search and overcoming the job-hunt blues:
Don't Go It Alone
There's no doubt about it: Looking for work can be isolating. You can only stay on the computer and scan job sites and LinkedIn for so many hours a day. That's why it's important to remember that face-to-face interaction remains pivotal. Schedule weekly lunch or coffee meetings with well-connected members of your professional network.
In addition, join (or remain active in) associations and go to industry training or networking events. You also might look into attending a local "job club" meeting, where out-of-work professionals gather to share employment leads and job-hunting war stories, and provide each other with support and encouragement.
Constructive criticism can be extremely valuable. If you interviewed for a job but didn't receive the offer, consider following up to ask why. Contact the hiring manager and ask for his or her thoughts on the interview. Make sure your approach is completely professional and you don't give the impression that you're complaining or attempting to change the manager's mind. This will only cause the person to become uncomfortable.
Just explain that you'd value his or her opinion on your candidacy in general as you approach other companies. Questions might include, "What can I do to be a more competitive candidate for this type of role?" or "Are there ways I could better convey my skills in person?" Learning how you're perceived will undoubtedly help you in future interviews and networking situations.
If you haven't done so already, reach out to a recruiter or career counselor to gain a fresh perspective and discuss ways you can fine-tune your job-hunting tactics. These professionals can offer interviewing tips and suggestions on making improvements to your resume and cover letter. Frequently, they also have information on unadvertised job leads in your area.
Moreover, an experienced specialized staffing expert can help you locate temporary assignments that will keep you productive and provide you with income and visibility in the payroll profession while you continue looking for permanent employment.
To view past eNews issues or to visit the NACM Archives, click here.