Archive for July, 2010
U.S. Recovery Isn’t Recovering Fast Enough Says Wells Fargo’s (NYSE: WFC) Silvia
Posted by: | CommentsThe U.S. economy isn’t recovering fast enough to restore the level of jobs seen before the recession started in December 2007, said John Silvia, chief economist at Wells Fargo & Company (WFC).
In an interview with Tom Keene on “Bloomberg Surveillance,” Silvia spoke from Charlotte North Carolina about the second quarter GDP numbers released earlier in the day.
“This is an economic recovery that doesn’t measure up to the traditional standards of the traditional post-World War II recovery,” remarked Silvia. “We don’t have the rebound in manufacturing jobs or domestic jobs, especially in the service sector, that we traditionally have.”
Total non-farm private employment stood at a seasonally adjusted 107.7 million in June, down 7.9 million from December 2007, according to the Bureau of Labor Statistics.
Growth in the U.S. slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending, the Commerce Department reported today in Washington.
“Even at 2.5 percent growth, that’s not a fast enough pace of growth to generate the jobs or generate the new housing or to pay off all these entitlements that people have come to expect as the quote, ‘old normal,’ for the U.S.,” said Silvia, 61, who works at the company’s Wells Fargo Securities unit.
There have been gains in spending on business equipment and software, Silvia said, and consumer activity has improved though the market for commercial real estate remains weak.
Entrepreneurs and small businesses are increasingly seeing the potential for higher rates of return on ventures outside of the U.S., Silvia said. “America’s still growing and still a great country but in terms of opportunities, we can look elsewhere,” he said.
Silva’s remarks echo the latest survey released by Wells Fargo/Gallup Small Business Index that shows, although their concerns about credit availability have stabilized, fewer U.S. small business owners expect revenues, cash flow, capital spending and hiring to increase over the next 12 months.
“The weakened economy has been particularly hard on small businesses and our bankers are making every effort to help them through this period with financial solutions and guidance,” said Marc Bernstein, executive vice president and Wells Fargo’s head of Small Business. “We grew small business lending by 30 percent over the previous quarter and — in an effort to increase approvals — took a ‘second look’ at declined applications, while continuing to apply our disciplined credit and underwriting principles.”
“Slower consumer spending growth appears to be weighing on small business confidence,” added Dr. Scott Anderson, Wells Fargo senior economist. “Small businesses are scaling back on hiring and capital spending plans in the third quarter and remain concerned about the overall financial health of their companies.”
The Index is the sum of “present situation” and “future expectations” of small business owners for six key measures, including financial situation, cash flow, revenues, capital allocation spending, job hiring and credit availability.
Bank of America Corp. (BAC) has announced a $10 million grant commitment to nonprofit organizations that lend to small and rural businesses.
The grants, for use as loan loss reserves, may unlock as much as $100 million in low-cost, long-term capital for small business microloans nationwide over the next 12 months.
A host of nonprofit lenders, such as Community Development Financial Institutions, or CDFIs, have been struggling to make loans throughout U.S. communities. These grants will allow the CDFIs to leverage funds from the U.S. Small Business Administration (SBA) and the U.S. Department of Agriculture (USDA), which have faced funding restraints that have limited their ability to lend.
Bank of America’s Global Commercial Banking President David Darnell announced the funding at a National Urban League conference Thursday.
“Helping strengthen small businesses and new start-up companies stimulates job creation and is critical to our nation’s economic recovery. Bank of America is empowering these entrepreneurs by directing private sector capital to unlock exponentially greater amounts of federal dollars for their businesses,” said Darnell. “Even the smallest grant enables a CDFI to leverage as much as ten times that amount to lend to small businesses, which helps initiate a ripple effect impacting job growth, spending and overall economic expansion.”
Mr. Darnell said the financial crisis has left small business in a tougher position than in previous downturns. “We’re seeing something unique in this cycle,” Mr. Darnell said, noting that many entrepreneurs have typically accessed home equity to fund start-ups but declines in personal wealth have limited that as an option.
SBA and USDA microloans are made through local nonprofit lenders, which also provide business training and technical assistance. To access the capital, nonprofit lenders participating in these federal loan programs must set aside loan loss reserves at levels of up to 15 percent of the capital provided by the agencies. However, due to the economic recession, most of these lenders have been unable to meet the reserve requirements, limiting their access to loan capital at a time when small businesses most need this support.
The average SBA microloan size is $13,000 per business. Through these programs, CDFIs can borrow for 10 to 20 years at rates less than two percent – twice as long and half the cost of other CDFI lending programs currently available. There are currently more than 175 nonprofit lenders participating in these programs.
Bank of America is the nation’s largest investor into CDFIs, with more than $1 billion in loans and investments to 120 CDFIs in 37 states. This work with CDFIs is part of the company’s broad support for small businesses, which includes a pledge to increase lending to small and medium-sized businesses by $5 billion in 2010. In the first half of 2010, Bank of America has provided $45.4 billion to small and medium-sized companies.
The banking giant’s grant commitment comes after Federal Reserve Chairman Ben Bernanke expressed concern earlier this month that large financial firms aren’t doing enough to help small businesses.
Other companies are also promising action. Wells Fargo & Co. (WFC) Executive Vice President Marc Bernstein’s said his bank, in addition to providing funds for community lending entities, has undertaken a new “second look” program geared toward finding credible ways to approve small business loan applications that have been rejected.
J.P. Morgan Chase & Co. (JPM) has also rolled out in-house initiatives such as offering business customers reduced interest rates for hiring workers.
Both Chase and Bank of America have second-look programs as well.
USDA Rural Housing Bill Passes; Low-Income Rental Legislation Advances
Posted by: | CommentsPosted To: MND NewsWire
One government housing program that had run out of funds months ago was revived by Congress yesterday, and another bill targeted at low-income rental housing moved a step closer to approval. The Senate yesterday passed HR 4899 to reestablish the popular U.S. Department of Agriculture Single-Family Housing Guaranteed Loan Program (Section 502 Housing) as a self-sustaining program. Also, the House Financial Services Committee approved H.R.4868 , the Housing Preservation and Tenant Protection Act of 2010 which aims to stem the loss of affordable rental housing units and prevent the displacement of low-income tenants. The Rural Housing program had run through its $13.1 billion funding by early this year and many buyers hoping to finance home purchases using Homebuyer Tax Credits were unable to…(read more)