Category Archives: CRE


Average Consumer Credit Scores Are Rising

By Charles H. Green

American consumers are managing their obligations better these days, as the NYTimes reports that average scores have reached new highs and delinquent credit payments have dropped. The national average FICO® score is now 695 — the highest it has been in at least a decade, according to the latest analysis from Fair Isaac Corporation, the score’s creator. Nearly 20 percent of consumers now have scores above 800.

While the national FICO® score distribution continues to improve, Fair Isaac reports that FICO-April-2015-Average-FICO-Scorethey see evidence—both in terms of average scores and with delinquency measures—of a leveling off in credit quality. And that leveling could represent either a pause in the continued US financial recovery or possible cracks starting to show at the edges of several years of a relatively low-risk underwriting environment.

The higher scores are led by tangible reductions in delinquent real estate loans, however, there has been little change in the level of delinquent credit cards, and actually an increase in delinquent auto loans.

FICO® scores are determined by using loan and other vital information information reported through the three major credit reporting agencies. The score is widely used by commercial banks and non-bank lenders to assess credit risk in lending that ranges from credit cards, auto loans, and home mortgages to small business loans and equipment leases. The FICO® score, which ranges from 300 to 850, directly affects access to credit for millions of people as well as determining the credit terms offered.

There are plenty of reasons that the average credit score could be rising, not all of which are pointed out by FICO’s rosy news release. Obviously, as lenders worked through the financial crisis/housing bust, the volume of seriously delinquent loans impacted millions of borrowers. But through a combination of eventual repayment,  borrower deleveraging, or write-offs, virtually all lenders still standing have experienced a drop in these delinquent accounts, as average portfolios have improved.

So, the passage of time is also an important factor and older accounts help increase scores. Bad credit performance discourages most lenders to avoid granting credit to certain applicants, but as the years go by, that negative information starts dropping off credit reports. So it’s natural that the impact of all those delinquencies that weighed on credit scores during the recession (2007-2009) are most likely starting to erode.

Other contributors to these statistics may not be such a positive. Since the Great Recession, we’ve seen a rise in the fintech credit marketplace, many of whom offer consumer as well as business credit. Many borrowers have dropped out of the traditional credit market, and no longer get graded by FICO, since the consumer lenders in that channel (payday lenders) usually do not report credit results.

Another impact related to this average score improvement, particularly on the lowest score ranges, may have been the adoption of FICO 9 last year, which was a change in their algorithm where FICO finally deleted medical bills and other non-credit items from their analytics. These factors dragged down scores on many consumers who were unaware of unpaid obligations or were in a legitimate dispute with a creditor.

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With Brief Pause, SBA 7(a) Loan Approvals Continue to Soar

By Charles H. Green

After the SBA 7(a) program was suspended for several days in July due to the exhaustion of the program’s authorization level, which peaked at the full $18.75 billion, the 7(a) program was back in business about a week later. And as has been the story all year, the loan approval rate continued climbing faster and higher than ever.

SBA publishes a monthly “Lending Statistics for Major Programs, and as of August 1st, Climbing higherthe results reflected the end of the tenth month of FY 2015. This report provides rolling year-over-year loan approval statistics for the 7(a) and CDC/504 loan programs broken down by the respective categories of policy-targeted penetration. The overall SBA lending program volumes and related 504/CDC program senior debt year-to-date, reaching almost the $24 billion mark with two months remaining in the fiscal year.

The 7(a) program continued its strong showing in FY 2015 with total loan approvals in $20.3 billion, a 32 percent jump over the same period at 7/31/14 ($15.3 billion). In FY 2014, all SBA financing programs started slowly after the federal government’s shutdown, but these results are about 40 percent higher than FY 2013 as well.

The number of approved 7(a) loans were 53,394 through July, 27 percent ahead of the number in YTD FY 2014, and 41 percent ahead the same period in FY 2013. The average loan size through July was $379,839, which  is about $15,000 higher than it was this month last year.

A graphical illustration of all SBA monthly loan approvals is found in Capital Views.

The spiked growth in approved loans for less than $150,000 continued in July, climbing to 28 percent over the same dollars approved in FY 2014 to $1.92 billion, with the average loan size holding steady at $61,353. This year is the second year SBA is waiving guaranty and lender fees on loans less than $150,000.

Meanwhile the total volume of approved CDC/504 loans rose in July to $3.4 billion for the fourth consecutive month of besting the FY 2014 lending level, and finished the month more than 2% ahead of the same period in FY 2014, reflecting continued improvement. That volume is about 19 percent behind the program’s YTD mark in FY 2013 at $4.3 billion.

The total number of approved CDC/504 debentures was 4,767 through July, which is about -.50% behind the number of debentures at this point last year.

The CDC/504 program’s average debenture size held steady this month, growing against previous years, with an average debenture at $729,889, which is almost three percent higher than last year’s average and almost eight percent higher than the average in FY 2013.

Total YTD approved SBA program dollars are $23.7 billion through 58,161 loans. The average loan size overall is $408,530, which is slightly higher than FY 2014 and smaller than the year before, given the growth in smaller loans. See total program approval rates here.

Read more results at SBA.

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Court Ruling Raises Threat to Fintech Lenders

By Charles H. Green

As reported by the American Banker, a recent court ruling rejecting an appeal by a Bank of America subsidiary could have negative consequenses for some fintech lenders who issue loans through banks in an effort to not be bound by state usery laws.

The decision involved the sale of charged-off credit-card debt by the BOA subsidiary, and Oops!was issued  by a three-judge appeals panel in New York who found that the bank’s legal authority to charge an interest rate that exceeds state usury caps did not transfer to the debt buyer.

The defendants in the lawsuit petitioned the full appeals court to reconsider the ruling, and were joined by industry trade groups including the American Bankers Association, the Consumer Bankers Association, and the Financial Services Roundtable. In late June, the Second Circuit Court of Appeals denied the petition. It remains to be seen whether ruling will be appealed to the Supreme Court.

The broad ruling raises questions whether or not fintech lenders can issue loans through banks like WebBank, a $236 million bank based in Utah, which has no caps on interest rates, which are extended to borrowers in other states that may apply usury laws apply. WebBank can do so freely, since their standing as a chartered bank allows them to provide financing anywhere so long as it is consistent with it’s own state laws.

But fintech companies, such as Lending Club, Prosper and PayPal and others have relied on this capacity to fund loans in dozens of states with restrictions, with the full intention of repurchasing the loans afterwards for their own portfolio. This workaround meant that the fintech did not have to register to lend in many states nor comply with many restrictions implied by individual state laws.

According to the American Banker, during an August 4 earnings call, Lending Club’s CEO Renaud Laplanche disclosed that approximately 12.5% of Lending Club’s consumer loan volume would exceed state interest rate limits if the company were forced to obtain state licenses.

Lending Club, a peer-to-peer marketplace lender, serves to connect borrowers seeking to lower borrowing costs to lenders that generally buy into small portions of multiple loans. Their loans are facilitated with the borrower’s opt-in after acknowledging the effective cost of the loan ahead of agreeing to accept it.

The impact on these lenders will possibly be the requirement to register as a lender in the many states they currently lend in for future business, which is expensive and carries the burden of applying individual local limitations for all applicants that originate in the individual states.

This decision could also affect the sale of charged-off debt by banks, the private-label credit card industry and other nonbank lenders such as PayPal, which partners with Comenity Capital Bank on its PayPal Credit product.


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Hacked News Release + Early Trading = $100M Illegal Profit

By Charles H. Green

The Securities and Exchange Commission (SEC) recently announced fraud charges against 32 defendants for taking part in a scheme to profit from stolen nonpublic information about corporate earnings announcements.  Those charged include two Ukrainian men who allegedly hacked into U.S. newswire services to obtain the information and 30 other defendants in and outside the U.S. who allegedly traded on it, generating more than $100 million in illegal profits.

The SEC’s complaint was unsealed in U.S. District Court in Newark, N.J., and the court Fingerprintentered an asset freeze and other preliminary relief that day. This international scheme is unprecedented in terms of the scope of the hacking, the number of traders, the number of securities traded and profits generated,” said SEC Chair Mary Jo White.

The SEC alleges that over a five-year period, Ivan Turchynov and Oleksandr Ieremenko spearheaded the scheme, using advanced techniques to hack into two or more newswire services and steal hundreds of corporate earnings announcements before the newswires released them publicly.  The SEC further charges that the pair created a secret web-based location to transmit the stolen data to traders in Russia, Ukraine, Malta, Cyprus, France, and three U.S. states (Georgia, New York, and Pennsylvania).

The nonpublic information was use during a short window of opportunity to place illicit trades in stocks, options, and other securities, sometimes purportedly funneling a portion of their illegal profits to the hackers.

Law enforcement officials said the companies — Business Wire, PR Newswire and Marketwired — often detected the overseas hackers and kicked them out, but the hackers returned time and time again.

The NYTimes offers minute details of how the scheme operated with one company, Panera Bread, from information gleaned from court documents.

While crime may not pay–at least for those we know who get caught–what we don’t know is what we don’t know. Accordingly, remember our feature story a few days ago about cybersecurity and commercial lenders (“Is it Safe? Cybersecurity Threat to Lending is Real”)? Might be a good idea to read it again and give some proactive thinking about how to make sure your company–and clients–aren’t the next victim to some seemingly preventable theft of information that’s harmful to someone.

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混乱-How Chinese Currency Affects Main Street Lenders

By Charles H. Green

Chaos, or said on the other side of the planet, 混乱, is defined as a state of utter confusion or disorder; a total lack of organization or order. Between the withering summer heat, anticipation of a pending Federal Reserve rate hike and the rumbling of the Fall football season, hearing about China’s devaluation of its currency may, in fact, have American bankers, wondering whether we‘re turning back to chaos again, just as expectations for ramping back up to economic normalcy were at hand. It’s a fair question.

What does this news from China mean and how does it affect Main Street lenders?

China’s decision to devalue its currency this week is part of a long effort to be seen as a Chaosmajor player in financial markets. But the move carries some risk for the world’s economy. Even as the second-biggest economy in the world, China is a powerhouse of trade and manufacturing that yearns to be more. They want prestige in the global financial markets like the United States, Japan and England. That is believed to partially have been behind their efforts earlier this year to establish the Asian Development Bank, which will lend money for regional infrastructure projects.

Likewise, their decision earlier this week to let the Renminbi (commonly call the ‘yuan’)  to fluctuate more freely is another part of China’s effort to become a financial player on the world stage. Their ultimate ambition is to have China’s currency to be a globally accepted reserve currency, meaning that the yuan would become one of the small, elite group of currencies used by the International Monetary Fund (IMF) to determine exchange rates.

But the IMF won’t do that as long as the yuan’s value is tightly controlled by the government. So China’s central bank has been pushing the government to let the yuan fluctuate a bit.

And part of the government does think that by allowing interest rates and currency values to move more freely will help iron out some of the structural problems that now threaten the Chinese economy, and which have led to slower growth than targeted. And as such, the high levels of debt that have accumulated domestically cloud the intermediate horizon.

China has eased the value of the yuan about four percent against the dollar, which is very good for the Chinese economy, but not so good for the U.S. or the rest of the world’s economy. When the yuan loses value, Chinese goods become less expensive to import, which makes it harder for companies in other countries to compete to sell goods–their imports become more expensive and Chinese goods are more competitive.

To be sure, a lot of China’s trading partners may be tempted to devalue their own currencies, which theoretically could end up causing countries to compete with each other to see who can drive their exchange rates down the most. That would bring more  instability to the world’s economy at a time when most regions are still struggling to recover.

Moving China toward an open market economy

According to coverage by the NYTimes, the timetable set by the Peoples Bank of China (PBOC), China’s central bank, is year-end to open up the country’s markets, and as the year passes, questions are emerging about whether their creaking financial system, and the people who run it, are up to the task. Allowing market forces to assert more influence over the exchange rate, as demonstrated this week, is only one step on the road to tearing down the barriers that keep money from flowing across China’s borders.

While President Xi Jinping has promoted the idea of market forces playing a decisive role in China’s economic priorities, the PBOC has led the push to liberalize capital markets.

But China’s stock market meltdown exposed significant holes in the country’s financial regulations that regulators are now trying to plug. That leaves political leaders and the technocrats who run the government with little capacity or appetite to oversee a system where investors worldwide have the ability to easily move money in and out of China.

According to economist and NYTimes columnist Paul Krugman, “China is ruled by a party that calls itself Communist, but its economic reality is one of rapacious crony capitalism. Yet their zigzagging policies over the past few months have been worrying. Is it possible that after all these years Beijing still doesn’t get how this “markets” thing works?”

China’s economy is “wildly unbalanced,” with a very low share of GDP devoted to consumption and a very high share devoted to investment. This imbalance was sustainable so long as the country was able to maintain extremely rapid growth; but that growth has inevitably slowed, as China’s labor surplus dwindled. As a result, returns on investment are dropping fast.

Continued Krugman, “The solution is to invest less and consume more. But getting there will take reforms that distribute the fruits of growth more widely and provide families with greater security. And while China has taken some steps in that direction, there’s still a long way to go.”

Ripple effects that may be felt on Main Street

To travel to Beijing from the American midland is about a thirteen hour flight. Given that the average airspeed on those flights are around 500 mph, you can figure out that it’s another world away, right? So why does a currency devaluation there have anything to do with a small business in Southern Illinois, Florida or New Mexico? That would be because we are all connected–at least through the global economy.

China is one of the world’s largest buyers of petroleum and many other commodities. A massive infrastructure building program and serving the biggest population on the globe requires lots of materials, as it does to churn out a broad assortment of manufactured goods for the planet.

It’s no coincidence that U. S. oil prices slid to a more-than six-year low Friday on escalating concerns about the mismatch between global supply and demand. The WSJ reported that oil futures on the New York Mercantile Exchange hit a low of $41.35 a barrel, a level seen last on March 4, 2009, when the U.S. economy was still mired in a deep recession. Oil was recently trading at $41.88 a barrel, down 0.7% from Thursday’s settlement.

This problem is not solely due to China’s devaluation of the yuan, but is mainly caused by the rapid growth of U.S. domestic oil production, thanks to fracking technology, and the OPEC cartel’s decision to maintain full production in the face of lowering global demand. And now investors are worried about China’s oil demand following its surprise currency devaluation. A weaker yuan makes imports of dollar-priced commodities, such as crude, more expensive.

For America’s Main Street businesses and their lenders, the immediate impact will be felt depending exactly on what their business they’re in (or who they lend to). For companies dependent on importing Chinese manufactured goods, or who can substitute these goods for what they purchase today, the lower currency is an improvement. But if companies are competing against Chinese goods, this move is bad.

Likewise for anyone whose business relies on petroleum or other raw commodities, or similarly concerned about our low inflation rate and the risk of slipping back toward deflation, this move is a concern. The rising tension scenario that turns into anything resembling a competition among global currencies toward steep devaluations turned into a full scale currency war should keep everyone awake at night.

Moving on

China’s currency stabilized on Friday, ending a three-day plunge that shook markets globally amid the Renminbi’s steepest devaluation in decades, as the PBOC set the official exchange rate higher — though only slightly — against the dollar, for the first time since Tuesday.

As reported by the NYTimes, the Renminbi responded by strengthening 0.1 percent, ending the week at 6.392 per dollar. Still, that meant the Chinese central bank had effectively devalued the currency by 4.4 percent over the course of the week, the steepest drop since the country’s modern exchange rate system was set up in 1994.

The sudden decline added fuel to a global debate about currency wars. It also raised new concerns about whether Chinese leaders could manage the country’s huge, but the slowing economy as they pursue a market-driven overhaul to their financial system, which remains broadly under state control.

For years, China looked like the principled non-combatant. As other countries sought to secure an economic advantage by letting the value of their currencies slide on international markets, China held firm on the value of its money. But by sharply devaluing its currency this week, China jumped into the fray.

The abrupt move opens a new phase in what some analysts see as a long-raging global currency war, a development that could leave the United States exposed and undermine efforts to pull the world economy out of the doldrums.

The yen, the euro and several other major currencies have fallen in recent years against the dollar as the Federal Reserve has cut back its stimulus and policy makers elsewhere have sought to obtain gains for their sluggish national economies.

China’s stock markets are still struggling after a sell-off that started in mid-June. The government took extraordinary measures to support share prices, including barring major shareholders from selling stocks and ordering state agencies to buy, with backing from state banks. But they had little lasting effect.

There’s a couple informative charts offered by the NYTimes that track China’s corresponding currency and equity market, which illuminate the effects of their latest policy moves here.

Geopolitical considerations

All of this comes with the backdrop of rising regional tensions in East Asia, largely stoked by a more intentional Chinese assertion of aggressive behavior. The Economist reports that in early in September, President Xi Jinping will take the salute at a military parade in Beijing, his first public appearance at such a display of missiles, tanks and goose-stepping troops.

Officially the event will be about commemorating the end of WWII in 1945 and remembering the 15 million Chinese who died in the Japanese invasion and occupation of China of from 1937-45, suffering more lost people than any other country except the Soviet Union.

But next month’s parade is not just about remembrance; it’s about the future, too. It will be the first time that China is commemorating the war with a military show, rather than with solemn ceremony. The symbolism will not be lost on its neighbors and will unsettle them, because China,  today’s rising, disruptive, undemocratic power is no longer a string of islands presided over by a god-emperor.

Instead it’s the world’s most populous nation, led by a man whose vision for the future (a richer country with a stronger military arm) sounds a bit like one of Japan’s early imperial slogans.

And now what?

It remains to be seen what will happen in the next few days and weeks, but just about as universal consensus agreed that the Federal Reserve was likely to announce an interest rate hike at the September meeting of the Federal Open Market Committee (FOMC), there is pause to consider the possibility of another delay. No one, probably including the voting members of the FOMC know how the Fed will respond.

China has been on their watch list for some time due to concerns about the slowing of their GDP and recent stock market fluctuations, which have given U.S. policy makers a substantial reason to hesitate. Given other concerning trends, like lagging U.S. consumer spending in the face of significant reductions in gasoline prices, might cause the FOMC to once again leave 0% interest rates in place.

What should commercial lenders do to respond to these changes or possible threats that these events represent? Think about how the economic horizon might affect the particular industry of companies in your portfolio, and carefully monitor those who may be vulnerable. Screen new loan applications that are exposed to more competitive imports from China, or involved in the manufacture or distribution of the commodities that are suddenly falling in price.

Most of all, keep your eyes on more news ahead to stay ahead of changes that impact your existing book of business and the loan volume in your budget.

Did you know SBFI offers commercial lender training–learn more here.

Read more stories of interest to commercial lenders here.

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More Lenders Sign on to Borrower’s Bill of Rights

By Charles H. Green

Last week this page reported about the Aspen Institute assembling a group of online, ‘fintech’ lenders and leaders in Washington, labeled as the ‘Responsible Business Lending Coalition,’ to announce the creation of the ‘Small Business Borrowers’ Bill of Rights.’ These rights are principals of fair play that these participating parties agreed to adopt for clients.

Originally, five fintech lenders (ACCION, Fundera, Funding Circle, Lending Club and the Got EthicsOpportunity Fund) and one business loan broker (Multifunding) signed onto the pledge, along with the endorsement of two advocacy organizations (Aspen Institute and the Small Business Majority). At the time of the announcement, they collectively challenged other peer competitors to recognize these rights as well, and publicly sign on to adopt and adhere to the rights as industry standards for dealing with small business borrowers.

As of the publication time of this article, the number of lenders signing on has tripled to 15, with ten additional lenders having signed on to the pledge in the past seven days. Other organizations are endorsing the idea (including Small Business Finance Institute) as a means of adding visible support around the ideals and common goals of creating a more competitive and beneficial financial environment for all participants.

If you haven’t already read them, the Small Business Borrowers’ Bill of Rights outlines six key rights that the coalition believes all small business borrowers deserve as a matter of both best practices of the financial service industry, and fair play so far as dealing with people that do not regularly engage in financial matters day-to-day. These rights are:

  1. The Right to Transparent Pricing and Terms, including a right to see an annualized interest rate and all fees
  2. The Right to Non-Abusive Products, so that borrowers don’t get trapped in a vicious cycle of expensive re-borrowing.
  3. The Right to Responsible Underwriting, so that borrowers are not placed in loans they are unable to repay.
  4. The Right to Fair Treatment from Brokers, so that borrowers are not steered into the most expensive loans.
  5. The Right to Inclusive Credit Access, without discrimination.
  6. The Right to Fair Collection Practices, to prevent harassment and unfair treatment.

Read more about the bill of rights and the coalition here.

The new lenders signing on include Dealstruck, The Intersect Fund, Streetshares, 1 Main Street Capital, Borrowize, Justine Petersen, Credibility Capital, Business Center for New Americans, Akouba Credit, and Market Street Funders.

Just to be clear, there’s no requirement that the lender be in the fintech channel, nor that loan brokers only refer loans in that sector. So why not take a closer look and step up to making the pledge on behalf of your lending company?

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How to Fix the American Economy?

By Charles H. Green

The first step to solving any problem is to recognize there is one.” (from character Will McAvoy, Newsroom-HBO).

Gallup reports on an extensive study of American attitudes of various ideas and proposals to “fix the economy,” among dozens of topics that have been promulgated and proposed by a flock of politicians–meaning the dozens running for president–as wells economists, academics and pundits. After compiling an extensive list of 47 specific ideas, they polled these with the people in charge of electing leaders and paying the bill: American citizens.

Cataloging American attitudes toward these issues might seem to be a strange way to try to Ideasolve them, but remember, it’s the shared values and beliefs that attract people to support particular political candidates, who they rely on to enact those values into action once elected. After all, truth is relative, right? If your world view is taught to you to believe a certain set of ideas and everyone around you believes it too, it’s likely that you believe you know the truth.

The Gallup results are pretty interesting and might be counterintuitive to many commercial lenders. Here’s a quick test:

Which of the two competing ideas compared below were ranked highest in the survey, as ranked “very effective” by the highest number of respondents, as proposals that would improve the American economy?

A. Increasing the minimum wage or reducing the capital gains tax?

B. Simplifying the tax code or providing more government loans to small businesses?

C. Spending more money on education or reforming immigration laws?

If you chose the first option, you were in agreement with a higher number of those surveyed for question A & C, and the same for the second option in question B.

Why should commercial lenders care?

What resonated the most, with the largest number of respondents suggesting would contribute to improve our economy? “Ensuring women receive equal pay for the same work,” which was ranked “very effective” by 64 percent of those polled. After all, women are 53 percent of the population, and paying them equally would provide an immediate stimulus to improve economic conditions.

What about “increasing the power of labor unions?” Only 19 percent of the respondents ranked this idea high, but before you make any broad interpretations of that number, know that there was only marginally higher belief in strengthening ‘right to work’ laws (23 percent). Both were trumped by responses to the idea that “increasing  the minimum wage” would improve the economy (44 percent).

All of these policy ideas, if enacted, would carry consequences to change economic conditions that impact all of us. A healthy economy means that your loan portfolio performs better–and your company is more profitable–as well as a more robust environment to develop more future business.

We all get to vote, and responsibly should base our personal choices on a range of issues that are important to each of us individually, according to our personal values. But it’s always a good idea to understand what electing the leaders you support will mean for you–along with knowing who else is supporting them and what they want.

I recall my own elation at the election of the Republican revolution in the House of Representatives in 1994, led by Newt Gingrich of Georgia, who would rise to be speaker. I watched the election results from a Reno, NV hotel, where the next day I would attend the Fall meeting of the National Association of Government Guaranteed Lenders (NAGGL) for SBA participants.

Imagine how that pleasure turned sullen when the very next morning, every media  interview with the presumed new speaker Gingrich was filled with his words about “getting rid of wasteful government agencies, like the EPA, Department of Education, and U.S. Small Business Administration.”

It’s a good read to peruse the Gallup list of these ideas and see how your ranking stacks up to the other Americans around you. After all, your next president will be getting this same information. Read more at Gallup.

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Should Employment Gains Spur Interest Rate Hike?

By Amaresh Gautam

One of the jobs of the Federal Reserve is to maintain the short term interest rate at its proper level, to balance the money supply as a valve to managing inflation. The tricky part is that no one knows what the proper level is, since economic conditions are constantly changing.

The short term interest rate has been close to zero for the past seven years. Few people Diceargue that there is something fundamentally wrong about that condition. However no one was arguing for a interest rate hike during the sub-prime mortgage crisis and the months following it because during that period, everyone was worried that the economy may stop functioning.

While there was near-unanimous agreement (or acceptance) that a greater money supply was required to keep the American economy running, some did argue that the extended low rates and many other measures adopted by the Fed were the financial equivalent to injecting economic steroids–predicted to be good in the short run, but poisonous in the long run-their predicted dire consequences have not appeared on the horizon yet.

The argument for a short-term interest rate hike is little stronger today, since there are sprouts of economic recovery. In the past two years, employers have added a robust average of 235,000 jobs each month. Businesses have added jobs for 65 consecutive months, the longest such streak on records dating to 1939.

This trend continues presently, with last Friday’s reported job gains numbering 215,000 in July, as reported by the NYTimes. The steady job gains have helped reduce the jobless rate from 10 percent in 2009 and 6.2 percent a year ago to 5.3 percent, where it still rests.

At that level, unemployment is near the 5 to 5.2 percent range that the Fed says constitutes a normal job market. Most economists expect that rate to fall even further. The proportion of adults who have a job or are looking for one has stabilized. That suggests that stronger hiring has been the main reason why unemployment has continued to fall.

Perhaps the strongest argument in favor of an interest rate hike is that if the Fed does not increase interest rates when they have a chance, they will deprive themselves of a potent policy measure to use when hoping to kick start the economy in case another slump happens in the future.

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Walk a Mile in Your Client’s Shoe–Work in the Real World

By Charles H. Green

In the earlier years of my career, I recall having an extraordinary degree of confidence in my own insightful understanding of ‘business,’ so much so, that I was pretty sure I could tackle and succeed at just about anything. And why not? I was a banker.

And not just any banker: a commercial loan officer. At 24 years old, I had a degree in Real Jobfinance, two years of on the job experience, and people that came to me for advice (rarely) and capital (loans, that is, with my unsecured $5,000 (!) loan authority). With all that degree of knowledge, I should have been running Citibank.

An Atlanta university president recently wrote about his brief part-time tenure as an Uber driver. Lawrence M. Schall, President of Oglethorpe University, began driving for Uber on weekends and after office hours to broaden his perspective of today’s sharing economy. Not surprisingly, he learned that all of his perceptions of those who use Uber turned out to be wrong. Read about his adventure in Huffington Post here.

One important point of Schall’s pursuit of understanding was that he didn’t choose to just merely read someone else’s statistical data, or conduct a ‘focus group’ of Uber riders. He actually got behind the wheel of his car and drove out to do his own research–he learned by doing. In my own career, many more years of lending experience, hundreds of clients and a few economic knocks slowly started educating me more about all that I didn’t really know at age 24.

In fact, I realized that there was much more I didn’t know about business. Admitting that fact, though, made me a much better lender after all. How? I stopped presuming I knew everything and began asking more questions. As importantly, I stopped talking so much and really began listening to the answers to my questions.

Over my career, I left the employment of a bank three times to try something different and utilize all those skills on the other side of the business world. Would it surprise you to learn that on that other side, there’s not a lot of respect for what we bankers might be able to bring to the other side? And after handing in my uniform to go work for a former client, I was surprised at how quickly my former bank employer began treating me with suspicion when discussing the loan account for my new employer.

From my own experience, I know some commercial lenders can let a little loan authority and the official position of ‘gatekeeper’ to another decision-maker sort of go to their head sometimes, and in the process, tend to belittle some clients or the client’s loan request. Often this act is due to a lack of real understanding of what the borrower needs or why they are in the situation they face.

Starting a business is pretty tough work–I know that because I’ve done it a couple of times. Working for months unpaid and alone, developing an idea while documenting it for others, administering all the records involved, tracking the ongoing financial transactions and the perpetual search for clients can be exhausting, physically and mentally. Then to have your work or goals dismissed by a young salaried “Vice President,” who really didn’t invest the time to grasp the information, is discouraging. “Business plan?” Many small business owners live it every day, while bankers demand a roadmap they’ll never actually read.

Commercial lenders should be better than that kind of performance, which is as bad for their employer as it is for their career. One way might be to put yourself in your borrower’s shoes and get to know a little more about the kingdom you think you reign over.

What am I saying? Work on their side of the fence sometime.

I’m not suggesting that you send your client on vacation while you sit in their office, barking out orders (and running it into the ground). But I am suggesting the idea of you getting a temporary part-time job working for a small business, and try to learn what challenges they face, from the bottom of their organization looking up.

Doing what? Why not wait on tables or wash dishes at a restaurant? Operate a press brake for a small manufacturer, or change tires at the tire store. Run the counter at a dry cleaner or be the gopher at a new home construction site. Maybe the best one: spend a few days in a child care center being paid to watch someone else’s little ‘Eddie Monster.’

The point would not be for you to pick up extra skills or a few extra dollars–in fact, you would undoubtedly find the actual work extremely boring, less than satisfactory or even brutally physical. But your reason for being there would be to observe what your clients actually have to deal with:

a) Squeezing productivity out of other people just as bored as you with the work;

b) People that have children who get sick, and don’t show up for work with little notice;

c) People who are tempted to take money that’s not theirs; or

d) People who are wasteful with supplies or materials that they don’t have to pay for.

You might be surprised at what you could learn spending a few minutes on the other side of business in this economy, and understand all the moving parts that your loan applicant faces that they’re not putting in the business plan. These kinds of insights would be applicable to a lot of future clients.

In fact, it might be some of the most valuable training you ever got.

What do you think? Comment on this page or write me at .

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University Professor Nominated to Federal Reserve Board

By Ravinder Kapur

Kathryn M. Dominguez, who has been with the University of Michigan since 1997 and is an expert on the behavior of currency markets, may become a member of the seven-seat Federal Reserve Board, if confirmed for the position by the Senate. The White House has indicated that her knowledge of global markets would be invaluable as the Fed needs to understand the international impact of its actions and the effect of weak growth in other developed nations on the American economy.

A recent New York Times report stated that Ms. Dominguez’s prospects for confirmation Kathryn Dominguezare uncertain as Republicans, who control the Senate, have yet to confirm Allan R. Landon, a banker who Mr. Obama nominated to the Federal Reserve Board in January.

Referring to her nomination, President Obama said, “Dr. Dominguez has the proven experience, judgement, and deep knowledge of the financial system, monetary policy, and international capital markets to serve at the Federal Reserve during this important time for our economy.”

In a paper published in February, 2013, on the subject, “Forecasting the Recovery From the Great Recession: Is This Time Different?” Ms. Dominguez attributed the slow pace of economic growth after the 2008 recession to “self-inflicted wounds from the political stalemate over the US fiscal situation.”

The Fed’s seven-member board sets the country’s monetary policy in coordination with its 12 regional banks. If Ms. Dominguez and Mr. Landon are confirmed, the board will have a full contingent for the first time since August, 2013. In fact, since 1980, there has been a full board only 45% of the time.

The Wall Street Journal reported that Sen. Richard Shelby (R., Ala.), chairman of the Senate Banking Committee, suggested that he may hold up the two Fed nominations as the White House has yet to nominate a person for another central bank position, the vice chairman of supervision.

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