May 25, 2010
House Financial Services Chairman Barney Frank (D-MA), not Senate leadership that fought for swipe fee provisions, has received a nod to lead a committee crafting the final version of financial reform now that the Senate passed its proposal late last week.
On May 20, the Senate passed 59-39 down largely partisan lines its version of sweeping financial reform, the Restoring American Financial Stability Act of 2010 (S.3217). The proposal addresses everything from a consumer advisory/advocacy panel to swipe fees to transparent derivatives trading mandates. Senate Banking Committee Chairman Christopher Dodd (D-CT) and Frank, who helped spearhead a similar version out of the House months ago, said they should be able to craft final legislation from the two versions of reform within a month. Both expect the president to sign the reform legislation into law by July.
However, the House version shepherded by Frank late last year did not call for the same reforms against swipe fees that were included in the Senate version. On May 13, the Senate passed an amendment, sponsored by Senate Majority Whip Richard Durbin (D-IL), to S.3217 designed to help address what the lawmaker and scores of small businesses characterize as "excessive" fees and underlying "anti-competitive" practices on the part of credit card companies. The proposal would give the Federal Reserve authority to regulate interchange fees, or swipe fees, and ensure such fees are administered to small businesses in "reasonable" proportions. Whether it survives negotiations in a House-Senate committee charged with crafting a final reform package from the two differing reform packages remains to be seen.
Durbin, backed by about 134 trade associations, endorsed proposed improvements to the regulation of credit card companies, citing that interchange fees have become a way for creditors to circumvent many of the intended reforms in previous credit card legislation. The group of trade associations contended that more than 80% of these interchange fees in recent months have been collected by the 10 largest banks operating in the United States. Another group in opposition of the escalating swipe fees, the Merchants Payment Coalition, applauded the Senate vote in the hours following the May 13 session, saying senators "did the right thing by voting in favor of merchants and consumers."
"Swipe fees have spiraled out of control in recent years, and this amendment is necessary to rein in these excessive fees and ensure that Main Street receives a fair shake," the Merchants Payment Coalition said in a statement following the vote. "These fees are harmful across the board—from large businesses to small retailers to American consumers."
Though seemingly assured of heading to the White House for signage this summer, the reform legislation still has plenty of detractors who claim tighter regulation on the banking industry will lead to drastically reduced credit availability, especially to already hard-hit small businesses. And, of course, there's always partisan gamesmanship to keep an eye on.
"How do you justify new costs and regulations on small businesses struggling to dig themselves out of a recession while the biggest banks, the ones that caused it, don't seem to mind them? Look: the only thing you need to know about this bill is that a bill that was meant to rein in Wall Street is now being endorsed by Goldman Sachs and is opposed by America's small businesses owners, community banks, credit unions and auto dealers," said Senate Minority Leader Mitch McConnell (R-KY).
Brian Shappell, NACM staff writer
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A Virginia case in which a judge shockingly allowed removable items to be included in a mechanic's lien has been reversed and remanded after being considered by another District Court judge.
In the U.S. District Court for the Western District of Virginia: Harrisonburg Division, Judge Glen Conrad has reversed a November decision that allowed a variety of non-attached items to be included in a mechanic's lien in the case of Summit Community Bank v. Blue Ridge Shadows Hotel & Conference Center LLC, et al. The case was featured in the May edition of Business Credit Magazine.
In the suit (Blue Ridge Shadows), Bankruptcy Court Judge Ross Krumm upheld the lien filing rights of Corporate & Franchise Interiors (CFI) and Executive Protection Systems (EPS) in a case involving the development of a Virginia hotel. CFI's claims totaled $228,761.33 for items including sleeper sofas, chairs, desk lamps, pillows, game tables, desks, artwork and lamps. EPS' claims totaled $56,034.43 for items including flat panel LCD monitors, coaxial cable, microphones, projectors, speakers and amplifiers. Such items generally would not have been considered lienable based on a wealth of mechanic's lien case law.
In the original ruling, Krumm noted that existing Virginia statutes did not include "an exhaustive or exclusive list" of materials qualifying for a mechanic's liens and that some unattached materials were critical in creating improvements to a building without being permanently annexed. The ruling surprised several attorneys contacted by NACM and a line of experts, including NACM Mechanic's Lien & Bond Services Director (MLBS) Greg Powelson. The prevailing opinion was that the judge's ruling went against the essence of a mechanic's lien, not to mention a couple centuries of case law, and was inherently flawed.
Conrad essentially rendered the same opinion in April in reversing the previous decision. The judge chalked up the Krumm decision to a failure to recognize that a significant connection, which typically must be physical and permanent, is needed between materials and a structure to qualify as improvement:
"It is not sufficient for materials to simply add value to a building by their mere presence without any further connection to the building."
Conrad also reviewed the previous court's reliance on a 1997 case involving cabinets that had been delivered, accepted and installed in a building, but later removed after a dispute (Moore & Moore General Contractors Inc. v. Basepoint Inc.), in justification of the November ruling. Conrad ruled the lower court erred in focusing solely on the "removability of materials, as opposed to their connection to the encumbered property."
The November decision did raise concern that a host of vendors who previously wouldn't have tried to include their claims in a mechanic's lien would begin to do so. Additionally, attorneys worried the original decision could be used as a persuasive, though not binding, argument in states where mechanic's lien law language was similar to that of Virginia. Conrad's ruling now largely renders such concerns moot and keeps Pandora's Box shut for all intents and purposes.
Brian Shappell, NACM staff writer
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Each year at NACM's Credit Congress the association takes the time to honor those who have worked tirelessly to reach the pinnacles of achievement in credit management, whether it's through outstanding service to the organization or a strikingly strong commitment to credit education. This year's honorees epitomize these values!
Award winners, honored during the General Session, were:
Dave Beckel, CCE of MiTek Industries - National Credit Executive of the Year
Barbara Condit, CCE of SPS Companies - CCE Designation of Excellence
Michele Cleaver, CBF of Omron Health Care - CBF Designation of Excellence Award
Mary Reschke, CBA of Elkay Manufacturing - CBA Designation of Excellence Award
Shane Inglesby, CCE of Geneva Rock Products - Mentor of the Year
John Zummo, CCE of BP Products North America & Ron Sereika, CCE, of Cooper Vision - Robert Half International Instructors of the Year
Beth Voecks, CBA of Briggs & Stratton - Robert Half International Student of the Year
Dawn Wallace Cook, CCE of Newton Manufacturing Co. - Alice M. H. McGregor Award
Other honors, including membership growth awards, were given out at the Super Session. This year's membership winners were:
Southwest Business Credit Services
NACM East Tennessee
NACM Upstate New York
The Federation of Credit & Financial Professionals
The NACM Graduate School of Credit & Financial Management's class of 2009 Best Student Award was also awarded at the Super Session to Geert Jan Van Haastrecht, CCE, CICP of Cisco Systems International B.V.
Congratulations to all this year's award winners!
For more Credit Congress coverage, visit the NACM blog.
Jacob Barron, NACM staff writer
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
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- 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
Contact your local NACM Affiliate to learn more about NACM credit groups and find the group for your industry.
Is the glass half-full or half-empty? For business professionals participating in a recent webcast sponsored by Deloitte Financial Advisory Services LLP (Deloitte FAS), the glass is most certainly on the empty side. Eighty-four percent of those surveyed are concerned that a "double dip" in the economy may be on its way. Those very concerned that a W-shaped recovery is in the works constituted 27%, or nearly one-third, of respondents.
Given today's economic landscape, both domestic and global, it's no surprise that a patina of pessimism is influencing the general business outlook. "Many of our clients are optimistic about the economic recovery but have lingering concerns. They are worried about job growth as well as continued uncertainty within the financial and governmental sectors," said David Williams, Deloitte FAS chief executive officer. "The economic growth we experienced at the end of 2009 and the momentum that continues today has resulted in increased optimism; however, until the job picture stabilizes and the credit markets firm up, concerns will remain."
Current events in Europe have added to the jitters as the eurozone struggles to tame the Greek credit crisis and avoid a devastating domino effect. Still, the intricate web of connections among global economies is ever-present; with the euro in potential freefall, even China is affected as its currency, the yuan (renminbi), loses ground and a competitive edge in Europe. This situation, in turn, may affect efforts to "break" the yuan's peg to the U.S. dollar, a move that is much anticipated stateside in order to make U.S. products more competitive against their Chinese counterparts.
Domestically, businesses are bracing for the potential fallout from various pieces of legislation winding their way through Washington. Financial reform is the latest piñata being batted about in Congress, and all concerned parties await the actual rules, regulations, regulatory bodies and so forth that will emerge from the agreed-upon bills.
It's no wonder then that Deloitte respondents are feeling a little pessimistic. Thirty-one percent believe their companies will not emerge from the recession's grips until at least 2011, if not later.
In response to the ongoing uncertainty, 63% believe their companies will continue to enforce some cost-cutting measures even during the upturn. An additional 19% noted that their companies will keep in place all cost-cutting measures during the upturn.
With economic indicators tepidly improving, it's wise to keep in mind a quip from NACM Economic Advisor Chris Kuehl, who noted during FCIB's April 2010 I.C.E. Conference, "It's not exactly champagne cork-popping time. It's more like wine box-opening time."
Let's hope our glasses remain half-full with wine, if not champagne.
During the Deloitte webcast "Recession and Recovery: Great Challenges, Greater Opportunities," more than 1,280 business professionals representing a wide array of industries (including banking and securities, consumer and industrial products, consumer business, energy and resources, financial services, health care providers, health sciences and government, insurance, investment management, life sciences and health care, manufacturing, retail, wholesale, and distribution, technology, media & telecommunications) responded to online polling questions.
Laura Redcay, NACM staff writer
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Following requests from the Perini Building division of Tutor Perini Corp. and outcry from hundreds of subcontractors owed up to $400 million for work on a massive mixed-use Las Vegas Strip development venture, Nevada's governor has launched an attempt to convince the warring parties to settle differences out of court...or at least pay the subs in the meantime.
Nevada Gov. Jim Gibbons met with Perini officials last week in what appears to be an unofficial intervention between the contractor and MGM Mirage over the $492 million mechanic's lien filed in relation to the massive CityCenter project on the Las Vegas Strip. Gibbons, concerned about already elevated unemployment levels in the state and Las Vegas, said he hopes the sides can come to terms on the expensive dispute outside of court so that the several hundred subcontractors who worked under Perini, which served as the general contractor on the $8.5 billion venture, can get paid quicker. Perini, for its part, has publicly called for MGM Mirage to at least pay subcontractors, who are said to be owed 80% of the lien's value. However, MGM Mirage officials, who did not attend the meeting between state and Perini officials despite invitation, claim the general contractor's massive disorganization is impeding its ability to get moneys owed to said subcontractors.
Many companies have been peppering state and federal lawmakers, including Gibbons and even Senate Majority Leader Harry Reid (D-NV), who is running for reelection in November, with requests for help. Between delays in payment and a local economic downturn that outpaced most cities in the nation, many subcontractors face financial peril, and even extinction, should a lengthy court battle develop between Perini and MGM.
Even Gibbons admitted he is unclear how much authority the state can impose regarding CityCenter, which includes hotels, a resort-style casino, high-end retail and luxury condominium housing.
Perini, named Nevada's top contractor in recent years by publications Southwest Contractor and In Business Las Vegas, alleges MGM Mirage abruptly stopped paying for work already completed earlier this year, specifically at the Harmon Hotel portion of the mixed-use CityCenter. The suit also contains Perini's allegations that MGM Mirage made thousands of change orders on the project's design well after an agreed-upon deadline. For its part, MGM Mirage has publicly threatened its own suit against Perini, which served as general contractor, amid allegations of numerous design and construction defects. Representatives from both sides have declined numerous requests for comment issued by NACM.
In a written communication between Perini and subcontractors obtained by NACM, the contractor says it was notified by MGM Mirage on March 17th that "no further payments were going to be made" to the general contractor and all subcontractors associated with the CityCenter project. Perini disputes claims of unacceptable work and noted that it could make no payments to the many subcontractors that worked on CityCenter "until these issues are resolved and Perini is paid by MGM."
The legal spat is the latest in a series of trouble signs for the epic venture, the most expensive private development in U.S. history at its inception. Though the opening of its CityCenter's casino (Aria Resort & Casino) and various retail offerings was hailed as a victory for the previously struggling MGM Mirage, the project had to deal with a national economic meltdown shortly after construction began, a housing and commercial real estate downturn that forced a surge in Las Vegas vacancy rates and a freefall in values, a controversy surrounding the perceived high number of worker deaths in the construction of the development and the downsizing of the Harmon Hotel to 26 stories from original plans to build nearly 50 stories.
Although the amount of the mechanic's lien represents less than 10% of the total project, it still stands among the most expensive filings in U.S. history.
Brian Shappell, NACM staff writer
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