Posts Tagged ‘banks’

Synovus Decides to Accept Fed Assistance

November 15, 2008

  Synovus is no longer “looking” at the prospect of participating in the federal government’s financial business bailout; the decision has been made to do it.  Tony Adams writes for the Ledger-Enquirer that Synovus recieved preliminary approval from the U.S. Treasury to sell $973 million of its preferred stock.

  When I broke the story on October 15th that Synovus was “looking” at the fed’s offer, I reported that I suggested to Synovus Chairman and Chief Executive Officer Richard Anthony that the sale would mean the federal government would own part of Synovus. He agreed that it would, but it would not be able to vote the stock because it would be preferrred and not common stock. 

  Richard Anthony, Chairman and CEO, Synovus    

Richard Anthony, Chairman and CEO, Synovus

  Anthony told Adams, “What this capital does for the system and the individual banks is during this period of weakness and instability, it provides a new dimension of strength that I think we can use to our advantage from an investment standpoint, from a customer standpoint.” 

  Over the long haul. this development could even help the federal government. There is a good chance that it will make a profit when it sells the stock later.

  You can read the Ledger-Enquirer story by clicking on this link.

Is the Money Going to the Wrong Place?

October 18, 2008

  This is not 1932, you might say when we compare today’s financial disaster with the Great Depression. No, it’s not.  But, there are similarities. You know, things like the stock market crashing and banks failing.

  This time is also different in that the government is pumping money into the banking system to keep it viable. However, there are those who say that’s the wrong way to go.

Franklin D. Roosevlet Library)

Pres. Franklin D. Roosevelt, 1932, Whistlestop Campaign, New Albany, IN (Courtesy: Franklin D. Roosevelt (Library)

  They are not opposed to the government intervening in the crisis, but they think the intervention needs to give relief to the average American, not just the banks. They point out that this is a good time to rebuild the nation’s infrastructure. That harkens back to President Franklin D. Roosevelt’s public works programs.

   “There is no way a modern economy can function without good roads, telecommunication, rail transport and an educated labour force,” Allan Mendelowitz told , a member and former chairman of the Federal Housing Finance Board, told  Adrianne Appel of Inter Press Service.

  Using money for those things provides jobs, which means that people will have money to spend, and since our economy depends heavily on consumer spending, it makes sense to target working Americans when deciding on where to prop up the economy.

  Appel’s article reports that critics of the Bush administration say he waited until he could wait no longer to do something to stop the economic bleeding. They don’t believe he really wanted to do it because it flies in the face of the ideology he has been espousing. But, he really has no choice if he wants to prevent another Great Depression.  But, the way he is doing it follows his philosophy of giving to the wealthy and hoping it will trickle down to the rest of us.

  “Just think if we used those billions directly on jobs,” said Lewis Pitts, a public interest attorney in North Carolina.

  “In the developed world we have the worst income distribution of any country. A smaller and smaller portion of our population has a larger claim on wealth. This manifests in that the working poor have less and less income and have a harder time making ends meet,” Mendelowitz said.

  So, in that sense, we are back to 1932.

  Congressional Democrats plan to start working on help for the average American, planning to allot $150 billion for roads and other infrastructure programs.  But, Senate Republicans would probably filibuster any attempt to do that, or, if they didn’t, President Bush would probably veto the bill. That would mean a delay, but he’ll be gone in January and, if Sen. Obama is president, it will probably become law. McCain? It’s hard to tell. He did buy into the Bush economic program, but he is not, as he says, Bush, and he does have a habit of changing his mind.

Synovus Looks at Government Offer to Buy Shares

October 15, 2008

   While the nation’s nine largest banks have signed an agreement to sell shares in their banks to the government, smaller banks will also be a part of the action. Richard Anthony, Chairman and CEO of Synovus told me today that his company is “looking at” the offer.

Richard Anthony, Chairman and CEO, Synovus

Richard Anthony, Chairman and CEO, Synovus

  “Do you need it?” I asked,.

  “Well, not right now, but, looking to the future, we can never not be interested in capital sources.”

   He likes the idea of the government buying equity as opposed to pouring tax dollars into toxic mortgage securities, which is what it appeared would happen when Congress first agreed to the $700 billion banking bailout. 

  “So the government is going to have some ownership in banks,” I said.

  “Well, yes, but it will not be voting stock. It will be preferred stock.”

Stephen A. Melton, CB&T President and CEO

Stephen A. Melton, CB&T President and CEO

   And how has this financial crisis affected business at Synovus’ Columbus Bank and Trust Company? President and CEO Stephen Melton says business is slower, but it’s not because CB&T has changed or tightened its loan policy. That hasn’t changed, he said. “We are making fewer loans simply because demand is lower.”   

  Anthony said that the biggest problem is in the housing industry. He said that once that gets back up and running again things will get better. He was inducted into the Rotary Club of Columbus as a new member today.

Sign of Our Times

October 13, 2008
Sign in front of SunTrust branch at Publix on Schomburg Road

Sign in front of SunTrust branch at Publix on Schomburg Road

   All of the virtures in this sign were something that we took for granted for as long as I can remember.  But then, I don’t remember anything like the crisis of confidence in financial institutions that we are experiencing now.

Barnes Effort to Prevent this Financial Crisis was Overturned by Sonny Perdue

September 29, 2008

  Former Governor Roy Barnes saw this financial debacle coming and had the Georgia legislature pass a law to prevent it happening in Georgia. It held lenders accountable for their lending policies. Bill Shipp reports that K Street lobbyists in Washington tried to get Barnes not to do it, but they failed. In order to stop what Barnes was doing because it could have spread to other states, Wall Street bankers and K Street lobbyists poured money into the Sonny Perdue campaign. Once Perdue won the election, he saw that the Barnes’ law was dismantled.

  You can get the details by reading Shipp’s column. Just click on this link.

The Fruits of Ignoring the Economic Lessons of the Past

September 18, 2008

    Now we are staring the big green monster in the eye and seeing what Mr. Greed can do to us…again. Mr. Greed has been very successful in transferring billions of our tax dollars into his coffers, and he continues to get away with it.

  He took big lending risks in order to rake in big profits, and he did. Now his risky practices have come a cropper and he is being bailed out with our tax dollars. Some of his mammoth financial institutions are now nationalized, but what does he care? He’s already transferred the billions he has made, including golden parachute millions, into Swiss bank accounts.

  How did this happen? Simple. Deregulation. He was able to change the government’s rules in order to take big chances with other people’s money.

  Yes, history does repeat itself, mainly because some do not take heed of what happened in the past. What happened in 1929 is happening right now. Easy credit and risky loans encouraged consumers to go deeply into debt.  When consumers stopped buying in order to make payments on their loans, demand plumeted, businesses failed, out of work consumers defaulted on debts and financial  institutions went under.

  This Great Depression caused a rebirth of government regulations to prevent this disaster from happening again. But, the deregulators took  power again, and here we go again.

  I said the rebirth of regulations because they really started in earnest in 1906 when Republican President Teddy Roosevelt decided to take on big business, breaking up a lot of monopolies. The pro-monoply crowd regained power and we’ve had a lot of mergers in the last few decades. So, in that area, here we go again, also.

  The powers that  be are now trying to prevent another depression by having the  government step in and bail out the banks and those who insure loans. Let’s hope it works. This didn’t have to happen, though. Poper regulation could have prevented it.

  Santayana and Anonymous got it right when they said:

  “Those who cannot learn from history are doomed to repeat it.”
George Santayana 

  “History repeats itself  because no one was listening the first time.”

What Got Us in This Economic Mess We Are In?

July 12, 2008

When I started this blog, I stated that it would mainly focus on local and state issues. That focus gives me a lot of leeway because so much of what happens in other places affects us here.

For instance, when I heard the national news that the mortgage giants Freddie Mac and Fannie Mae could fail, I didn’t call anyone in Washington; I called my local stock broker to get filled in. He did a good job of it and as a result I don’t feel any better about it.

Freddie and Fannie may have to be bailed out by the federal government. If so, I’m for it. Their going under would be an international economic disaster. They hold five trillion dollars in mortgages. That’s more than half the national debt.

All of the lousy economic things that have been happening lately naturally make us want to find someone to blame. Well, that isn’t hard to do. Somebody screwed up big time. One of the big screw ups was to privatize Freddie and Fanny. It started out in 1938 as a government agency designed to help Americans get home mortgages. It worked. But, Congress couldn’t leave well enough alone, deciding to let it be taken over by two private companies, but gave them special treatment, for one thing, implying that the loans would be backed by the government. I just read a story on that said the firms took advantage of that special treatment, deciding to use it to increase profits for its stock holders. That desire for constantly increasing profits led to risky loan practices which contributed to the situation the country is in right now.

Columbus is traditionally not like the rest of the country when recessions strike. Fort Benning is the reason for that. The money from the post keeps flowing into Columbus no matter what the state of the national economy. However, the foreclosure rate has been high in the area so it is not totally immune from national economic trends. And, if what I have been reading is true, if Fannie and Freddie collapse, the home real estate market will come to a screeching halt everywhere in the country, including Columbus.

What are my credentials for making the economic observations? Not impressive, but everything I wrote is based on something that my stock broker told me, or what some financial expert said on TV and radio and wrote online. If I am wrong about any of this, feel free to correct me. Just click the “comments” link below and write away.

If the fed does bail out Freddie and Fannie, it will cost billions in tax dollars. Since our taxes come nowhere near paying for what the government spends, it will have to borrow more from China and Japan. Just think of the tax dollars we have to spend paying the interest rates on those loans.

The federal government simply has to become more responsible with our tax dollars. The pork that Congress doles out every year to keep getting reelected has to stop. What makes us think that we can continue to be Santa Claus to the rest of the world? Why are we spending so incredibly much on maintaining troop presence is so many places in the world? Why are they still in Germany and Japan? World War Two was over in 1945 and both countries have been thriving democracies for about 60 years. They are allies now, good ones. Can we really afford to be the world’s police force? We should limit our military action to that which truly is in our national interest, such as Afghanistan, where we need to increase our presence.

What about Social Security, Medicaid and Medicare? All three are in trouble. And what do some want to do to solve the problem? Privatize. That’s just not always the solution. Think Fannie Mae and Freddie Mac.