by | ARTICLES, BUSINESS, NEW YORK
How come this bank gets propped up, but others don’t? Crain’s New York has the news here:
The Harlem bank raises $55 million from an investment group that includes titans Goldman Sachs Group Inc and Morgan Stanley; feds had ordered the cash infusion to save the institution.
Carver Federal Savings, the nation’s largest bank founded and run by African-Americans, has staved off possible collapse by raising $55 million in fresh capital.
The investors include Goldman Sachs Group Inc. and Morgan Stanley, which have agreed to invest $15 million each, while Citigroup Inc. and Prudential Financial have agreed to put in $10 million, according to an announcement from Carver’s parent, Carver Bancorp. American Express and three other firms are investing smaller amounts. Chief Executive Deborah Wright, who has led the bank since 1999, will remain at her post.
“I haven’t had a day this good in some time,” said a relieved Ms. Wright, who added she was “terribly grateful” for the financial community’s vote of confidence in her bank. “We have a lot of hard work ahead.”
The Harlem-based bank was ordered by federal regulators earlier this year to raise additional cash as it staggered under a hefty load of delinquent real estate loans. Under Ms. Wright’s leadership, the bank had moved from its traditional business of lending to one- to- four-family homes and into larger commercial real estate projects. That strategy backfired when the real estate market hit the skids and mortgages for low-income borrowers dried up.
Earlier this year, 12.3% of the bank’s loan portfolio was more than 90 days delinquent. The industry average is 4.9%, according to Federal Deposit Insurance Corp. data. In addition, although $74 million of its loans were well overdue, Carver had just $21 million in reserves to cover loan losses.
In February, the U.S. Office of Thrift Supervision ordered Carver to raise additional capital by the end of April or face being seized and sold to another institution—or simply dissolved. The amount Carver raised exceeds the amount demanded by regulators, Ms. Wright said.
Last month, the bank named a new chief financial officer—its fourth in the past three years—and said it hired an recruiter to find a new president and chief operating officer who would oversee lending, retail, marketing and human resources. Ms. Wright said the new executive would allow her to devote the bulk of her time to drumming up new business, adding that Carver will soon step up its marketing.
The Harlem business community galvanized to help rescue Carver, a fixture of the city since 1948. Lloyd Williams, CEO of the Greater Harlem Chamber of Commerce, said a private breakfast was held in late April at Sylvia’s Restaurant in which Ms. Wright and senior Carver officials met with former state Comptroller Carl McCall, former city Comptroller Bill Thompson, U.S. Rep. Charles Rangel and other Harlem business and political leaders to discuss ways to turn around Carver.
“It is exciting, and the community is now stepping up to the plate,” Mr. Williams said shortly after that meeting, “because they have been asked to do so in a meaningful manner.”
by | OBAMACARE, POLITICS
During the health care debates last year, there had been much talk and support on the Left for the concept of a “public option” in the bill. The rationale behind this, according to the federal government, was that there is not a sufficient free market for health insurance in some parts of our country.
Accordingly, they deemed it their job to get consumers the best coverage at the best price, by offering a competing a public option, seemingly on par with private insurers.
I believe the promulgation of the public option was deceitful. There was never going to be an equal footing, as the Government would severely limit the range of allowable insurance and then use its financial and political muscle to gain customers, as acknowleged by Senator Chuck Schume, among others. Nevertheless, it had so much support that it was included in most of the drafts of the health care bill.
Reflecting on the merits of the public option argument as we debate how to reign in our excessive government spending, my question is this: if this “public option” was viewed as a necessity in terms of competition and cost, why should there not be a “private option” in every area that the Government – federal, state, local – has staked out an unnecessary monopoly for itself?
Other than National Defense and the Criminal Court Systems, there appears to be no reason – other than creation of a power base to enable the bloated government salaries that we see today – that the private sector should not be given an opportunity to compete on a level playing field.
Based on the government’s rationale, there should be a “private option” in virtually every area of public service.
by | ECONOMY, TAXES
As citizens have the capacity to invest, so do small businesses, the backbone of our country. Yet the proposal to raise the debt ceiling will only continue the weaken our already fragile business climate. More economic uncertainty is looming and capital spending among businesses at a 35 year low according to the National Federation of Independent Businesses. While some business may spend, most will retain their cash until greater fiscal stability is realized — instead of investing. Businesses are currently not able to count on our administration to get serious about deficit reduction.
When our country is being led by a President who insists on continued borrowing without fiscal restraint — such as a debt ceiling — then our country is in truly in deep financial trouble. We heard in his spring speech about his proposed “triggers” to decrease spending and increase taxes if deficit targets are not met. This would merely incentivize the liberals to intentionally avoid the targets to force otherwise unpalatable tax increases. Of course, the best and easiest solution for lowering the deficit is to not allow any more debt.
Current administration plans to raise the debt ceiling without strict spending cuts only confirm the abrogation of their fiduciary responsibility in order to play politics for reelection. By refusing to reduce the deficit through spending restraint, entitlement reform and program cutting, I submit that in the coming months, Obama will proclaim the Republican efforts to reshape Medicare to be a ploy for funding continued tax cuts for the top 2% income earners. Instead of tackling our budget crisis to allow citizens and businesses the ability to spend and invest their way to back to prosperity, our President’s proposals and politicking tremendously paralyze our economic recovery effort. It is truly embarrassing to have a President who makes such economically incompetent statements.
by | BUSINESS, ECONOMY, GOVERNMENT
The most misunderstood and misused phrase in economics and politics is that “small businesses are responsible for 2/3 of all new jobs”. This sentiment, uttered by President Obama last August, was gleaned from data produced by the SBA, which reported that small businesses “generated 65 percent of net new jobs over the past 17 years”. Since then scores of pundits, analysts, economists, and politicians have regurgitated the sound bite to meet their own specific agenda.
The problem, however, is that the definition of small business is misunderstood – and has different definitions – to different people. Obama maintains that “small businesses with fewer than 50 employees…are the businesses that usually create most of the jobs in this country”. Unfortunately, he uses this line to justify credits for small business (health care, etc). That makes for good political speech, but those businesses doesn’t make jobs. His assertion is patently untrue.
The SBA is the group who sets the legal definition of a “small business” which is one with fewer than 500 employees . Going back and using the data from them – and cited by Obama – it is clear that his threshold about small businesses – under 50 employees – is incorrect. SBA data shows that “much of the job growth (of the 65% net new jobs) is from fast-growing high-impact firms, which represents about 5-6 percent of all firms and are on average 25 years old”. Clearly then, the majority of these are not businesses with fewer than 50 employees.
Small businesses under Obama’s definition tend to share similar characteristics: they typically have a more localized market, lack of abundant and available credit and capital, and lower volume of sales than their larger small business counterparts. As such, these businesses lack the necessary qualities to create the type of job growth that Obama references.
Even more frustrating is the fact that Obama wants to raise taxes on those earning 250K or more. To the average household, 250K sounds like a high-income threshold. What he doesn’t tell you is that this effectively also raises taxes on small businesses, the very group he purports to want to help. Most small businesses file as sole proprietorships, LLCs, and Scorps, and by doing so, pay taxes at individual rates. In the realm of business, 250K is not a lot. Raising the margin for those earning over that amount will raise tax rates on small business owners, thereby reducing their profit margin to reinvest in their company or create new jobs.
Either Obama is clueless about small businesses and job creation, or he is lying. Either way, one thing that is not misunderstood is his incompetence.
by | ARTICLES, GOVERNMENT, NEW YORK, TAXES
Catching up on articles over at the WSJ, I came across this gem last month from Barbara Martinez. It describes how the teachers unions in NY are suing again to stop the closure of failing schools. This article illustrates the power of the teachers unions and the powerlessness of the taxpayers, who continue to subsidize failure and are asked to continue to shoulder the burden of educational costs. The article is reposted below.
The fate of tens of thousands of students was thrown into question Wednesday after the United Federation of Teachers and the NAACP sued to block the city’s plans to shut down 22 failing schools, a move that threatened to derail a major Bloomberg education initiative for a second year in a row.
The lawsuit echoes another the UFT filed last year that successfully halted the administration’s plans to close 19 schools. Two courts sided with the UFT last year. The lawsuit goes to the heart of a national philosophical divide about failing schools. In general, teachers unions believe that districts have an obligation to fix schools, while others, like Mayor Michael Bloomberg, hold that some schools are so troubled that the only choice is to shut them down and replace them with potentially better schools.
At a press conference, schools Chancellor Dennis Walcott blasted the lawsuit as “outrageous” and said the action will “hold hostage” thousands of students who are set to attend certain schools.
“Students now have to wait and wonder” whether they can attend the school they chose or were assigned to, Mr. Walcott said. “It’s unacceptable, and we’re not going to tolerate that. We’re going to fight. Right now the UFT and the NAACP are denying our students quality options.”
About 70,000 students have already been matched to city high schools, and thousands more have gone through the charter lottery process to determine their schools.
Hours earlier, Michael Mulgrew, the UFT’s president, said at a press conference that the DOE “has not learned its lesson.” He said the lawsuit is based on the DOE’s failure to satisfy an agreement it reached with the UFT to support failing schools before deciding to close them. The suit also charges that charter schools are getting better access to facilities than the traditional schools in the same buildings, which would be contrary to state law that mandates equal treatment among schools.
Those on the side of the teachers union, which includes a number of City Council members who attended the UFT press conference, community advocates and parents, said the city’s process of phasing out schools one grade at a time is disruptive to the students that are left behind. In addition, the lawsuit charges that charter schools that are placed in traditional school buildings get better access to amenities such as libraries, cafeterias and gyms.
Mr. Mulgrew said that after losing the legal fight to close schools last year, the DOE agreed to support the failing schools with more staff and other assistance, but he said that never materialized.
The DOE “is depriving students of tools and resources to achieve academically,” said Ken Cohen, regional director of the New York State Conference of the NAACP. Mr. Cohen said that at Jamaica High School, for instance, the new schools have smart boards while the students at the school being phased out have “broken blackboards.”
Mr. Walcott rejected all of the lawsuit’s allegations, saying the motivation was to protect jobs, not students. He said he was particularly disappointed in the role that the NAACP has played in the new lawsuit and last year’s, saying the group “is defending schools that are failing our children.”
Mr. Walcott cited the performance numbers of the schools on the closure list. For the elementary and middle schools, he said average English-language proficiency is 16%, compared to 42% citywide. In math, it is 19% versus 53%. The average graduation rate of the closing high schools is 49%, compared with the city’s average of 63%, the DOE said.
“These figures are not something to brag about,” Mr. Walcott said. “They should be with us,” he said, referring to the union.
Write to Barbara Martinez at Barbara.Martinez@wsj.com
by | ARTICLES, ECONOMY, GOVERNMENT, NEW YORK
Crains New York had a good piece on the living wage legislation currently being debated in NY. “The Bronx lawmaker said the bill, which would compel employers at projects that receive city subsidies to pay $10 an hour plus benefits, or $11.50 without benefits, is designed to “build a stronger economy,”.
I’ve spoken in earlier posts about the need for economic impact studies in NY with regard to financial legislation — just as construction projects necessitate an environmental impact study in order to assess the pros and cons and to find out the true cost, the same process should be applied to economic legislation. A bill such as this perfect fodder for this type of assessment.
LIVING WAGE BILL GETS WATERED DOWN
Councilman Oliver Koppell, the primary sponsor of the City Council’s controversial living wage bill, has been writing to its opponents in recent weeks to explain its “core rationale” and to propose ways to narrow its scope.
The Bronx lawmaker said the bill, which would compel employers at projects that receive city subsidies to pay $10 an hour plus benefits, or $11.50 without benefits, is designed to “build a stronger economy,” and that it was never intended to apply to nonprofits, small businesses and residential projects.
He said he’s considering broadening an exemption to carve out small businesses with annual revenues of $1 million or less; raising the subsidy threshold that triggers the bill to above $100,000; clarifying that certain subsidies like the Industrial and Commercial Abatement and J-51 incentives are exempt; and reducing the record-keeping requirement to six years from 30.
A source close to the Council said the subsidy threshold could be bumped up to as high as $1 million and the small business exemption could be raised to as much as $5 million.
In an interview, Mr. Koppell said the proposed amendments stem from testimony provided by opponents at a City Council hearing on the bill last month. “We don’t want to do anything that will discourage economic activity,” he said. “There are some clear issues raised at the hearing that should be taken care of.”
Proponents of the bill say the city should not subsidize projects that create “poverty-wage” jobs. They argue that stores benefit indirectly from subsidies granted to their landlords, and thus it is fair to ask them to pay more than the state minimum wage.
Opponents, however, contend the bill is flawed beyond repair and say amending it will not satisfy them.
“Koppell is trying to change the bill primarily because there has been broad opposition voiced to the legislation from across all five boroughs,” said Nancy Ploeger, president of the Manhattan Chamber of Commerce, a member of the Five Boro Chamber Alliance, which is leading opposition to the bill. “Wage mandates, regardless of amendments from the City Council, are a nonstarter from the perspective of the business community.”
Ms. Ploeger said she has written to Mr. Koppell on behalf of the coalition offering to meet with him to “discuss ways to promote job creation” in the city. “This bill is not one of them,” she said.
Proponents of the bill said they consent to Mr. Koppell’s proposed changes. “We’re trying to get a bill passed,” said a spokesman for the Living Wage NYC coalition, which is led by the Retail, Wholesale and Department Store Union. “These changes actually strengthen the bill while keeping its core focus the same.”
The bill has 30 sponsors in the City Council, four shy of the number needed to overcome a veto by Mayor Michael Bloomberg, who has expressed disdain for wage mandates.
But City Council Speaker Christine Quinn, who decides whether the bill comes to a vote, has yet to take a stance on the measure. She did meet with Mr. Koppell to discuss the revisions and expressed appreciation for his willingness to compromise. But she is focused on crafting a city budget for the fiscal year that begins next month, not on living-wage legislation.
“Basically, I think the speaker’s view on the bill is ‘let’s get the budget done,’ Mr. Koppell said.
by | ECONOMY
It occurred to me recently that new spending bills in NY city should require an “economic impact study”. Just as construction projects necessitate an environmental impact study in order to assess the pros and cons and to find out the true cost, the same process should be applied to economic legislation.
To illustrate my point: Mayor Bloomberg passed an ordinance in NYC outlawing smoking in bars. He enacted this so people would not have to work in a smoking environment, but his constituents should have the right to know what the economic cost was in terms of reduced tax revenue! If there had been an economic impact study on this or any similar legislation, the taxpayer would have had the opportunity to see any fiscal advantages and disadvantages of such a feel-good proposal before it was made into law.
An another example, domestic household help in New York State has recently become subject to virtually the same employer rules as large companies are, and many people do not get employed because of this obstacle. The unemployment rate among low-wage earners is disproportionately high due to legislation that strangles our economy under the guise of “regulation”, “fairness” or other similar government disingenuous justification.
A final example, my favorite, involves the little discussed change of the name of the Triborough Bridge to the Robert F. Kennedy Bridge. Might the taxpayers of NYC have gone up in arms if they had been told of the tens of millions of dollars of cost incurred for that change to take place — from a name that described the purpose of the bridge to a name that has had no meaningful history with the city?
Conducting an economic impact study on potential law would provide a way to keep taxpayers informed, politicians accountable and reckless spending under control.
by | ARTICLES, ECONOMY, NEW YORK
Having solved all other fiscal problems in NY, our legislators are working to kill more businesses with this bill. Below is an article from Cranes New York
Advocates for a law requiring city businesses to offer their employees paid sick days step up their efforts as similar measures advance in Connecticut and Philadelphia.
Connecticut legislators are about to pass a bill to make their state the first in the nation to require employers to provide workers with paid sick time. And City Council members in Philadelphia are expected to vote Thursday on a bill mandating up to seven paid sick days per year for workers.
With that momentum, advocates in New York City are stepping up efforts to revive a sick-pay bill shelved last year by City Council Speaker Christine Quinn over concerns that it would harm small businesses.
“Making sure New Yorkers can take a day off when they are sick or need to care for their children—without having to miss a paycheck or worry about losing their job—is the right thing for workers,” said Councilwoman Gale Brewer, the bill’s lead sponsor. “Our neighbors [Connecticut and Philadelphia] recognize the same logic and know it’s the right thing for businesses, too. The time has come for paid sick days in New York City.”
The Council bill is being pushed by the New York State Paid Family Leave Coalition, an alliance of more than 400 labor, community, business and women’s groups. As in Connecticut, where lawmakers could vote Friday or Saturday on sick pay, the local chapter of the Working Families Party is an active member of the group. Members are meeting regularly and expect to soon re-launch a public campaign geared towards bringing the bill to a vote this fall.
Ms. Brewer said she will be meeting with fellow Council members to let them know about the developments on sick pay around the country.
Her bill would require businesses with 20 or more employees to offer nine sick days a year and smaller businesses to give five. It has 35 sponsors in the Council, one more than needed to overcome a potential veto by Mayor Michael Bloomberg.
Despite her members’ sponsorship, Ms. Quinn did not let the bill get to a vote last year, contending it would have a crushing impact on small businesses in a down economy. She promised to revisit the issue every two months, assessing whether economic conditions had improved.
The city’s economic recovery has outpaced that of the nation, with the five boroughs adding nearly 40,000 jobs in the first four months of the year, according to real estate services firm Eastern Consolidated. In the past 19 months, the city has recovered more than half of the jobs lost in the downturn, while the nation has recovered only about 20% of its losses.
“Even though the city’s fared better, we’re far from seeing the light at the end of the tunnel, especially when you’re looking at small businesses,” said Linda Baran, president of the Staten Island Chamber of Commerce, part of a coalition of chambers that led opposition to the bill last year. “Locally, I don’t know any small businesses that are hiring. They’re concerned about making their payroll.”
Carl Hum, president of the Brooklyn Chamber of Commerce, said that one only need to look at Friday’s weak national jobs report to know that the economy is “still pretty fragile.” He said that the Connecticut bill appears to be moving forward “over the objection of business groups” and that “the difference here in New York is that we have a speaker that brought the business community in to talk about the bill.”
A spokesman for Ms. Quinn said that conversations with Ms. Brewer about paid sick days are ongoing. Ms. Brewer said that the speaker has asked about the upcoming vote in Philadelphia. It’s unclear if she will be swayed by efforts in other states, which are being led primarily by the 15-state consortium Family Values @ Work.
In addition to the votes in Connecticut and Philadelphia, the Seattle City Council is set to introduce a sick-pay bill on Wednesday; a bi-partisan group of state legislators in Georgia led by five Republicans is supporting a measure to allow workers to use sick time to care for children and other family members; and a coalition in Denver is pressing for a ballot initiative on sick days in November. San Francisco and Washington already require paid sick days.
The White House has also entered the fray, hosting a series of workplace flexibility forums—including one in New York City this week—designed to help American workers meet the demands of their jobs without sacrificing the needs of their families.
“We know New York is different, and we’re willing to work towards what would make sense for everybody,” Ms. Brewer said. “But I’m hoping that the national momentum pushes us here.”
