Category: Corporate America

The recent moves by the Obama Administration and the Federal Reserve to "examine" what they believe is excessive pay to bank executives is yet another example of contemporary policymakers not learning the lessons of the Great Depression. Putting aside the question of whether bailed out banks have any right to complain about their sugar daddy now wanting to call the tunes, the bigger issue is whether this move will have any positive effect on the economy. A look back at the 1930s suggests that not only won't it help, it may well make matters worse.

One of the notable features of the entire decade of the 1930s was the abysmally low level of private investment. The economic historian Robert Higgs has argued that investors were hesitant because they simply were not clear what the rules of the game were. The inconsistent policy moves by the Hoover and Roosevelt Administration as well as FDR's increasingly anti-business rhetoric and policies through the mid-30s led people to not want to take chances on longer-run investments.

We live in a world today where technology, trade, and travel bring the world to our front doors. But, most of us are still more interested in what's going on in our back yards. That idea is what has made Shaw Newspapers so successful.

For 158 years the Shaw family has been reporting the news of the day in small communities like Dixon, Illinois and Osceola, Iowa. Those papers carry national wire stories about the effort in Washington to pass health care legislation. But, they also carry stories about local festivals, city council meetings, and local crime.

The Shaws have a keen sense of the communities they serve and what their readers crave. Tom Shaw runs the family firm out of a converted home in Dixon, Illinois. It's not far from the offices of the Dixon Evening Telegraph which his great-great grandfather bought in 1851. Shaw frequently visits his numerous publications. His staff knows him, and he knows his staff.

After a very long earnings recession (defined as consecutive quarters of declining/negative earnings growth), there is finally an end in sight. So far Q3 results, while still negative, look decidedly better. While market pros are happy about the improved profits, they are mostly jazzed that the numbers are beating expectations. This is one of those funny inside Wall Street nuances. Its not so important what the company earned as it is what everyone thinks it will earn. In other words it's all about "expectations." In Q3 companies are surpassing those expectations....and in some cases by a lot.

Not too long ago, few people worried about financial firms being "too big to fail," but with hundreds of billions of taxpayer dollars going to bail out Wall Street, that's changed.

House Financial Services Committee Chairman Barney Frank (D-Mass.) is working with Treasury officials on a new proposal to give the government more authority to take over troubled financial firms. The proposal is still being worked on, but what we know so far is that it would give the government powers to seize troubled financial firms, throw out their management, change terms of existing loans and wipe out shareholder stakes.

When you've covered the real-estate markets as long as I have, you begin to notice certain things. One thing I watch for in a down economy is what I like to call the "give up" phase. That's the point in an already-plunging marketplace where earlier buyers finally say "I give up" (or my likely "Get me out!!!"). And it's only after the "give up" phase that a market has truly bottomed.

Some think that "bottom" may now be in place for the nation's glutted condominium markets.

Many of the markets around the country all have one thing in common - a huge condo lender by the name of Corus Bank. Early in the decade, the Chicago bank plunged headlong into lending to condo developers and never looked back... until "the Boom" went "Ka-Boom." Corus became insolvent in September and was taken over by the FDIC. A bank named MB Financial got all the deposit accounts, while the FDIC figured out what to do with the portfolio of condo loans. Early this month, Barry Sternlicht's Starwood Capital Group won a 40-percent stake of that portfolio (the FDIC is keeping the rest), for the grand price of $550 million. The portfolio was once valued at up to $5.5 billion during the real estate boom.

Small businesses have always been a major engine of growth for the American economy. But as the recession continues, many of these businesses are unable to make profits, to expand or open new operations, and in some cases, they've been forced to close their doors. Yesterday, the administration unveiled a plan to shift TARP money away from too-big-to fail firms and into the arms of struggling small businesses.

Under the administration proposal, funds from the TARP will be made available to community banks at 3% annual interest rates (down from 5%). The funds then can be used to make loans to small firms. President Obama also requested that Congress increase limits for Small Business Administration loans.

As someone who covers health care a lot, I've wondered whether it might be easier to write my stories if I could have the phrase "rapidly rising cost of health insurance" assigned to the F-1 or F-2 button at the top of my computer keyboard. After experiencing several decades in which the cost of health insurance rose faster than the rate of inflation, Americans have come to grudgingly expect that health insurance (if you're lucky enough to have it) will be significantly more expensive each year.

But is the "rapidly rising cost of health insurance" (there it is again!) truly a fait accompli? There's some evidence that it is possible to buck the trend. How? Well, in the past, companies typically looked at managing the cost of health benefits. Fair enough. But the companies which "buck the trend" take a different approach: instead of focusing on the health plan, they focus on the health of their workforce, and how to improve it.

The first phase of the Credit CARD Act of 2009 goes into effect, Thursday.

Technically, the "CARD" part of the legislation, signed by President Obama in May, is an acronym for "Card Accountability Responsibility and Disclosure." The law means a host of consumer-friendly protections for card users, involving things like regulating retroactive interest rate hikes on old balances, controlling over the limit fees and offering longer advance disclosure periods for rate changes.

Mark Darren Walker hasn't owned an American vehicle since his '86 Ford Mustang. He's never owned a GM product. Lauren Weiner's parents owned GM cars, but she never has. She's preferred BMW, Honda, and Land Rover. These are the kinds of consumers GM desperately needs to attract and they could.

Both Walker and Weiner were among the 100 consumers who test drove vehicles this week at GM's Milford Proving Grounds. Walker was a tough sell. He had test driven a Chevy Tahoe in Los Angeles and didn't like it. So, he fired off an email to CEO Fritz Henderson who responded with an invitation to test drive other GM products at the company's test track. Walker loved the Cadillac CTS and was also impressed with the Buick LaCrosse. Will he switch from BMW to Cadillac when it's time for a trade? He's not sure, but he's now open to the idea.

News of the U.S. auto industry's demise is greatly exaggerated. That was the message I got today when I interviewed Ford Motor Company CEO Alan Mulally. While Mulally can't comment on the future of GM and Chrysler, he's confident in the future of his firm.

Mulally expects vehicle sales to pick up, so much so that Ford is stepping up production. The company has also been scaling back on incentives. That is helping boost margins. The government is also getting ready to launch its "Cash for Clunkers" program. A number of Chicago area dealers says that program is generating a lot of showroom traffic, so that could also mean better sales for Ford.