Treasury To Buy SBA Backed Loans

by Jeff on March 16, 2009

Timmy and Bam!

After US banks have received several hundred billion dollars of taxpayer money they still aren’t lending at an acceptable rate, according to President Obama.

The solution, further nationalization of the financial industry via the Treasury’s purchase of SBA backed debt. So at the end of the day, the Federal government is convincing commercial banks to facilitate credit expansion by purchasing the securities shortly after they’re created. Sounds like the MBS market (Bear Sterns?). 

These actions are commencing under the Emergency Economic Stabilization Act – whereby the US Treasury has the power to purchase this class of loans (partially guaranteed by the SBS) through the 31st of December. 

According to the Department of the Treasury:

“By making this pledge, Treasury provides assurances to community banks and other lenders that they can sell the new 7(a) loans they make, providing them with cash they can use to extend even more credit.”

Hmmm…I wonder why nobody is willing to purchase small business loans? Could it be horrible macroeconomic fundamentals? Is this merely an expectations game where everyone is waiting on each other to make a move…or are we really in worse shape than we know? Considering that small business is the engine of economic growth and activity in the Unites States (and the loans are already partially guaranteed by the SBA), this is a terrible acknowledgement and a desperate act, at best. 

A related analysis  - approximately $300,000,000,000 of non financial corporate debt will be maturing over the next 3 years. The likely scenario will involve refunding at higher rates, as credit ratings continue to slide across the spectrum of investment grade corporate debt. Looks like corporate America may be forced to tighten its belt a bit more…cutting back , it’s not just for the small business!

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Anatomy of A Government Grant Scam

by Jeff on March 15, 2009

Take a look around the net – ads promising $12,000+ stimulus checks in exchange for a small fee, as a result of the American Recovery and Investment Act of 2009 abound nearly everywhere. 

Not surprising – human nature is such that when it comes to finances, it’s inevitable that positive opportunity results in exploitaive behavior. Given the average citizen’s perception of macroeconomics and even their own personal finances, this seems like a golden opportunity for scammers. 

Let’s take a look at the anatomy of a Government grant scam:

First of all, I’ll note that the link to the 400+ page pdf is not readily interpretable by even most attorneys. Check out this link:

Govt Grant Scam

Govt Grant Scam Landing Page

You’ll notice the shrewd headline – …”use with caution…web site was created for people who actually want money..” Clearly this isn’t for the casual inquiry about how they might attain someone else’s tax money. 

Another critical element which provides “social proof” is the CNN and CNBC logos. This company has never been featured (at least in a positive fashion) in either of these media sources. This is an extremely shrewd sourcing of fake testimonials, which scammers rely on since they’ll likely have no positive testimonials.  When you see press logos, see if they were actually featured! In most cases, the reference is merely providing some general statement which is being used to craft validity for the service or offer. 

Scrolling further down the page we happen upon a statement:

Our FREE SOFTWARE contains everything you need to know about how and where to access your grant money and can be shipped directly to your home or office within a matter of days. Not only will you learn how to find the grant that’s right for you if you do in fact qualify, but you’ll also have all the tools and resources you need to apply for this money with all the clutter cut out.

Free software! What a deal…soon you’ll be a college graduate, your neighbors will have paid off your mortgage and you’ll finally have that zero interest loan for the charter fishing boat you’ve always dreamed of!

Nearing the end of the page, I see a cost…wait a second, what happened to free?  Yep, $2.29 S&H for the CD. Between me you and the wall, it’s much easier to provide free access a relatively small software program via a download link. 

You might be wondering if it’s worth it…that I cannot tell you. What I can tell you is that if YOU can get someone to pay $2.29, this site will pay you $27.00 — you do the math. This I’m sure, is where  the scam comes in. 

Happy Grant Hunting!

p.s. – When you get to the page, you only have 10 minutes to find out whether you qualify! But, if you reload the page the clock starts again…but you have to deal with the video again…use caution ;-)

 

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Household Net Worth Posts Record Decline

by Jeff on February 10, 2009

bernanke2

The Federal Reserve has reported the steepest decline in household net worth in the last half century. The gory details follow:

  • 2007 net worth – 64.3 Trillion
  • Q4 2008 net worth – 51.5 Trillion

Nearly 20% of household net worth has been destroyed. The statistic takes into account assests such as homes, savings, time shares, specialized equipment and a variety of other items. On the liability side – mortgages, consumer credit (credit cards), bank loans and other items.

With the unemployment rate at a 25 year high (8.1% as of February) and sharp upward revisions each release, it’s easy to assume that things will never get better. 

The US economy has  technically been in a recession since December 2006 and subsequent actions take by the Federal Government to thwart further economic destruction include a $700 billion stimulus package along with $75 billion in mortgage relief funds. 

A more thoughtful analysis might lead to a slightly more cheerful conclusion. The recent residential and commercial real estate bubble, which can be attributed in part to low interest rates and easy foreign money to finance increased military spending, is likely responsible for the record asset values which contributed to household net worth’s dramatic rise in the recent past. Had this not transpired, there would be no precipitous decline. 

About 20/65 trillion of total Household assets consists of real estate. Looking for a free credit report in these trying financial times? Get yours now! Simply click on the free offer below and you’ll have access to your credit scores almost right away!

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