Archive for October, 2010
President Obama has signed a new mini-stimulus package that would provide small businesses with $12 billion in tax breaks and access to a $30 billion lending fund.
“It was critical that we cut taxes and make more loans available to entrepreneurs,” Obama said as he signed the long-stalled measure into law. “Today, after a long and tough fight, I am signing a small business jobs bill that does exactly that.”
The action came after the Senate voted 61-38 to beat back a Republican filibuster and pass the package. Two Republicans — Sen. George LeMieux of Florida and Sen. George Voinovich of Ohio –joined the Democrats in backing the measure.
Small businesses, often cited as a key engine in spurring economic recovery, have been especially hard hit by the economic downturn. The sector’s recovery and renewed hiring are seen as critical next steps in America’s economic rebirth.
“While I am grateful for this progress, it should not have taken this long to pass this bill,” Obama said as the Senate moved toward passage.
“It’s going to make a difference in millions of small business owners across the country, who are going to benefit from tax breaks and additional lending, so companies have capital to grow and hire, and this is really welcome news,” he added.
Republicans opposed the measure as a second coming of the unpopular bank bailout plan the Troubled Assets Relief Program (TARP).
“It had the mini-TARP in there, with no real help to small businesses, as far as I’m concerned,” said Sen. Orrin Hatch (R-Utah).
The $30 billion lending fund, which would be administered by the Treasury Department, would provide capital to small banks that would make loans available to cash-starved small businesses.
The bill’s $12 billion in tax breaks are designed to spur small business investment and hiring. The tax breaks would allow new write-offs for the cost of equipment and other business improvements and health care costs for the self-employed would also be deductable. In addition, some Small Business Administration loan fees would continue to be waived.
Democrats have said the measure could result in the creation of 700,000 new jobs nationwide in the near term. Opponents of the measure dismiss that estimate, saying small businesses are being hurt as much by diminished consumer spending as by limited access to credit.
The bill enjoyed early bipartisan support, but Republicans balked at the addition of the $30 billion lending fund as too costly. The measure was the target of a summer filibuster that prompted frustrated House members to stage a quiet demonstration on the Senate floor.Read Full Post | Make a Comment ( None so far )
More than a decade after it was first authorized, the Small Business Administration’s Women’s Procurement Program is being fully implemented giving women-owned firms access to an estimated $25 billion in government business, which represents 5 percent of the federal procurement budget.
Under the program federal agencies will set aside contracts specifically for female-owned businesses in 83 industries where they have been traditionally under-represented.Read Full Post | Make a Comment ( None so far )
The Federal Deposit Insurance Corporation (FDIC) has been taking over failed banks under a program that was supposed to provide renewed stimulus to the economy, but for some commercial real estate developers the result has been anything but stimulating.
In several cases the FDIC’s actions have caused development projects to stop, idling hundreds of workers and harming local economies at a time when signs of economic recovery are being seen. Oversight, it seems, is desperately needed.
“Big bailouts of Merrill Lynch, Bank of America and AIG get the press attention. Far more corrosive are thousands of unpublicized, self-dealing transactions overseen by bureaucrats,” says Halsey Minor, the founder of the Internet news giant CNET and a commercial real estate developer.
Minor was building a hotel in Charlottesville, financed by Silverton Bank of Atlanta, which cut off financing when its own balance sheet began to tip. The bank was taken over by the FDIC which sold Minor’s loan to eight banks, leaving the hotel project as a see-through concrete-and-steel skeleton.
In another case, work on the Concerto, a major residential-retail project in downtown Los Angeles, was halted, idling hundreds of construction workers, blocking the sale of new residential units and pushing subcontractors close to bankruptcy.
In that case, developer Sonny Astani took out a $190 million construction loan from Chicago’s Corus Bank to build the first phase of the project. When Corus Bank failed last year, it was taken over by the FDIC, which auctioned off the bank’s portfolio of loans on 102 high-end properties across the country including Concerto.
The Concerto loan was sold to Starwood Capital for just 60 cents on the dollar. Much of the purchase price came from the FDIC, which provided Starwood with financing at zero percent interest. With its loan in limbo, work on the nearly completed Concerto was halted.
In a report to the Commercial Real Estate Development Association, Mark G. Dotzour, Chief Economist and Director of Research at the Real Estate Center at Texas A&M University, called the process “cocooning.” It works like this:
• A bad bank can’t sell off troubled commercial real estate loans because they don’t have sufficient capital to absorb the losses.
• A bad bank is sold to a good bank. The good bank acquires troubled commercial real estate loans with an 80-95% loss guarantee that can last 8 to 10 years.
• The FDIC has virtually a zero cost of capital so it cannot be outbid for troubled assets, meaning purchase rates stay low.
Still, Dotzour had some positive news for commercial real estate developers, predicting a recovery in the sector beginning this year as new projects started before the economic downturn are completed, employment rises, rents increase and property values increase.Read Full Post | Make a Comment ( None so far )
The emergence of the Tea Party as a full-on political player has confused the calculus for this fall’s midterm election, setting the stage for dramatic gains by the GOP. While Republicans are poised to celebrate, Democrats are hoping their end zone dance will be short-lived.
While there is little doubt that lingering economic turmoil will keep the Democrats on the defensive, there also are signs the electorate is cooling in its zeal for the Tea Partiers and their message of extreme cuts in federal spending and government regulation.
Conservatives say the polls are meaningless in an election that has been dominated by the Tea Party wild card.
Ginni Thomas, the CEO of the conservative group Liberty Central, said on Good Morning America, that she sees the election transcending traditional two-party politics and, therefore, traditional polling practices. “I don’t think it’s a partisan thing going on, I think it’s a principle thing. I think it’s an American thing. I think people are rebelling and there is a big tidal wave coming,” she said.
Thomas, the wife of Supreme Court Justice Clarence Thomas, could be right, as the polls themselves yield anything but clear trends.
Take, for example, the latest polls from the Washington Post/ABC News and Gallup.
The Post/ABC poll had the Republicans ahead by 49 percent to 43 percent among likely voters. That lead is half what it was in the same poll in early September. At the same time, voters give Democrats a significant edge as the party that would do a better job in helping the middle class. And after hitting an all-time low of 46 percent in September, President Obama’s approval rating rebounded to 50 percent in October.
Gallup, meanwhile, looked at various scenarios, with likely voters favoring the Republicans 56-38 percent in an election with low voter turnout, as is expected this month. Gallup, for the first time, issued poll results looking at both high and low voter turnout.
Then there’s the question of the touchstone issue of the economy, where despite boisterous frustration about the state of things, Americans still trusted Democrats more than Republicans to handle the economy 44 percent to 37 percent in the ABC News-Washington Post poll.
So what are voters going to do? Most experts predict Republicans will likely take control of the House and make gains in the Senate. At the same time, however, the findings could bode well for the Democrats in 2012 when turnout is certain to be stronger.
A big success by Republicans this fall does not necessarily presage victory in 2012 when the electorate will be more engaged, particular moderates who are not likely to favor a GOP that has tethered itself to its conservative edges.
David Plouffe, Obama’s strategic guru in 2008, says the Tea Party’s pull on the GOP could have a boomerang effect two years hence: “The formula they’re using for victory this year – fire up the base, forget the moderates – may work for a midterm election, but it’s not likely to be particularly sustainable in a Presidential year.”
But, for now at least, the tea leaves continue to give a sharp edge to the Republicans and their Tea Party friends.Read Full Post | Make a Comment ( None so far )