New York, New York, United States (AHN) – The American International Group announced Wednesday it will repay the U.S. Federal Reserve $21 billion credit line. AIG will fund the repayment from the sales of two life insurers from outside the U.S.

After paying back what AIG borrowed from the regulator in 2008 at the onset of the financial crisis, the insurance giant will focus on retiring its obligations to the U.S. Treasury Department. The Treasury invested $48 billion in AIG and owns 80 percent of the company.

The Treasury said it plans to convert its AIG preferred shares into 1.66 billion shares of common stock by March 15.

The Treasury, according to reports, is planning to sell up to 20 percent of its AIG shares in the first quarter of 2011 as part of its unloading its stake in the insurance giant.

The stock offering is expected to raise at least $15 billion. The securities will be sold to private investors, similar to what the Treasury did with its Citigroup and General Motors holdings.

Since January, AIG shares gained 41 percent on the New York Stock Exchange to $42.22. If the Treasury sells its AIG stocks at $29 per share, finance experts said the Treasury will break even on its investment.

A Treasury official said the AIG action dovetails with Washington’s strategy to exit investments in private companies as soon as practical, while protecting taxpayers’ money.

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Washington, D.C., United States (AHN) – The services already are off to a good start, with both active and reserve components meeting or exceeding their year-to-date accession goals, Curtis Gilroy, the Pentagon’s accession policy director, said.

“The improved situation in Iraq and continued support from Congress also greatly enhance recruiting efforts,” he said. “Patriotism is one of the contributing factors to recruiting success as well, as 4 out of 10 new Army recruits cite ‘service to country’ for their reason for enlisting.”

Within the active duty, the Army, the Navy, the Marine Corps and the Air Force all made 100% of their goals with 6,643; 2,291; 2,457 and 1,511 recruits respectively.

The Army, Navy, Marine Corps and Air Force retentions are near or above the fiscal year-to-date goals through October, officials said.

Within the reserve components, the Army National Guard, the Army Reserve, the Navy Reserve, the Marine Corps Reserve, the Air National Guard and the Air Force Reserve all were successful with more than 100% of their set goals to their credit.

As for attrition rates, losses in all reserve components were within acceptable limits, officials said.

Services may purposely come in under short-term goals with the big-picture numbers in mind, Gilroy noted, a practice that can be misinterpreted when looked at on a month-to-month basis.

“In the past, the services have, on occasion, intentionally ‘missed’ their monthly recruiting goals to ensure they don’t come in over end strength,” he explained. “This gives the false impression that recruiting goals are not being met, when in fact, for the year, the services are meeting or exceeding their goals.

“By reporting against year-to-date goals, the public is provided a more comprehensive picture of military recruiting,” he said. 


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Washington, DC, United States (AHN) – The House Ethics Committee continued its hearing Monday on alleged violations committed by Rep. Charles Rangel (D-NY), who had asked to delay the trial so he could set up a legal defense fund.

Rangel, a 21-term lawmaker and the former chair of the powerful Ways and Means Committee, is accused of more than a dozen ethics violations including failing to report income in his financial disclosure forms.

The congressman left the hearing after telling the committee he needed time to raise money for a new lawyer. The firm that had represented Rangel during the panel’s two-year investigation withdrew last month. He has already spent $2 million and needs $1 million to obtain counsel.

In his remarks during the hearing, Rangel emphatically accused the committee of denying him due process. He said he had been asking for more time since his lawyer withdrew, and that the committee informed him he could set up a legal defense fund only two weeks ago.

“I have been asking for this matter to be heard,” Rangel said. “My family has gone through hell. I have not been able to explain my position ever because of rules of confidentiality. Each time I’ve asked for a hearing, did any of you believe I was asking for a hearing without counsel?”

“I had hoped that you would do it before the Democratic primary. It would have been helpful if you did it before the general election,” added the lawmaker, who won re-election by a landslide.

Rangel criticized the panel for taking too long in their probe and then telling him there was not time to postpone proceedings so he could obtain a lawyer. He said his fellow Democrats want his hearing held before the end of the session.

The committee members, led by Rep. Zoe Lofgren (D-CA), met behind closed doors to discuss Rangel’s request but later decided to move forward with the public trial.

Lofgren explained that Rangel had repeatedly sought and received guidance from the committee on how he could pay for legal fees.

Rangel is not allowed to receive pro bono representation and the committee is not authorized to force the congressman’s lawyer to return and defend him during the hearing.

“We are prepared to proceed today, we understand that Mr. Rangel has indicated he does not intend to participate,” said Lofgren, also chair of the adjudicatory subcommittee. “No conclusions can be drawn by the fact that Mr. Rangel has decided not to participate in this meeting.”

Rangel, 80, stepped down as chair of the Ways and Means Committee in March amid continued calls for his resignation and the ethics panel’s probe on allegations against him.

He is accused of using congressional letterhead to solicit businesses and foundations for donations to the Rangel Center at City College in New York. Lawmakers are allowed to solicit funds but without using any public resources, including the congressional letterhead.

He failed to declare income from a villa in the Dominican Republic in his tax returns, a mistake he has said was unintentional. He is charged with using four rent-controlled apartments, including one for campaign work, in one building, in violation of the building code and zoning regulations.

Rangel has paid the Internal Revenue Service at least $10,800 in back taxes. In late 2008, he hired a forensic accountant to fix other irregularities in his tax returns. He also amended his 2007 financial statements to include an account worth $250,000 at the Congressional Federal Credit Union and a portfolio fund worth at least $250,000.

Rangel’s alleged violations of disclosure rules are particularly serious, having been the longtime chairman of the House committee responsible for writing the nation’s tax laws. Among the evidence on exhibit is a document showing a wire transfer to him from the Punta Cana Yacht Club as far back as 2002.

Rep. Michael McCaul (R-TX), who early in the hearing said Rangel and Republican lawmakers had been one in asking the panel this summer that the trial be held, pointed out that Rangel should be held to a higher standard.

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Washington, D.C., United States (AHN) – Real gross domestic product (GDP) grew at an annual rate of 2 percent during the third quarter of 2010, according to the first estimate released Friday by the U.S. Commerce Department’s Bureau of Economic Analysis.

This compared to private sector expectations of 2.1 percent, BEA officials said.

Economic growth so far this year has averaged a moderate 2.8 percent.

“Today’s data show that the economy grew for the fifth consecutive quarter and the recovery continues with strong business investment, U.S. exports and consumer spending,” U.S. Commerce Secretary Gary Locke said. “Business spending on equipment and software has grown 17.8 percent over the past year, and foreign demand for U.S. products also remained strong, with U.S. exports increasing 12.2 percent over the past four quarters. Consumer spending is another encouraging sign in today’s data, representing the fifth consecutive increase in consumer spending, which has been accelerating over the past three quarters.

“Initiatives by President Obama and this administration, like the recently passed Small Business Jobs Act, along with improvement in the business investment climate and credit markets, support economic growth likely to continue into the fourth quarter and 2011. Our commitment to strengthening America’s economy is steadfast and our mission will not be complete until more Americans can find jobs that provide them with a sense of security and hope for the future,” Locke added.

Growth in business inventories accounted for about two-thirds of the growth although consumer spending also rose despite continued high unemployment.

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Washington, D,C., United States (AHN) – Financial analysts told a special congressional panel Thursday that corporate executives should have their pay tied more closely to the investment risks of their companies.

Congress is investigating claims that excessive executive compensation contributed to the housing crisis and recession that started in December 2007.

They also are trying to determine how government can intervene to prevent the bad decisions of executives from dragging down the rest of the economy.

“Risk is not a factor in compensation,” Rose Marie Orens, a senior partner at Compensation Advisory Partners consulting firm in New York, told the congressional panel.

Currently, most executives are paid a percentage of a company’s earnings, which can reach into the tens of millions of dollars per year at some large corporations.

However, they do not risk losing their own money when they make decisions that hurt a company or its customers.

The pay system also encourages them to invest money in ways designed to earn a quick profit, according to witnesses before the Congressional Troubled Asset Relief Program Oversight Panel.

An example mentioned during the hearing involved Countrywide Financial Corp., a company that provides mortgages to homebuyers.

Its executives loosened credit terms to allow more people to qualify for home loans. When their personal finances failed, they were unable to pay back the mortgages.

As a result, many of them lost their homes through foreclosure, which contributed to the recession.

Investment firms Bear Stearns and Lehman Brothers were accused of making similar bad decisions to make credit easily available to customers.

The corporate executives made more money for themselves by extending the easy credit, but they also dragged down the nation’s economy.

“Has any executive of Bear Stearns lost their health care and had to go to an emergency room to get it,” asked Damon Silvers, a member of the congressional panel.

“Not to my knowledge,” said Kevin Murphy, finance chairman at the University of Southern California Business School.

The Bush administration appointed a “special master” to develop recommendations on how corporate executives are paid.

The recommendations from Kenneth Feinberg, the special master, include requiring corporate executives to accept a base pay that is consistent with salaries of other management employees.

Any incentive compensation they receive would be only in the form of corporate shares.

They would be forbidden by the Securities and Exchange Commission from selling the shares for a period of years.

A delay of years before they could sell stock would discourage them from trying to win quick profits for their companies that reflect bad business decisions, Feinberg said.

In addition, their retirement benefits – sometimes called “golden parachutes” – would be more limited.

Feinberg also recommended a bigger role for the Securities and Exchange Commission in monitoring executive pay, which now is determined almost exclusively by the corporations.

“I don’t think we approve anyone’s pay package – maybe one or two people – over $10 million,” Feinberg said Thursday before the congressional panel.

Sen. Ted Kaufman (D-Del.), a member of the panel, said he liked the idea of limiting incentives for executives to company stock rather than cash.

He implied it would make them invest more wisely.

“If the market goes down, they should take the hit,” Kaufman said.

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Washington, D.C., United States (AHN) – The United States on Thursday expressed concern about ongoing cooperation between Pakistan’s Inter-Services Intelligence (ISI) and terrorist organizations operating in the region and beyond. Pentagon spokesman Col. Dave Lapan told journalists that some elements within the ISI are providing assistance to terrorists, adding that Washington also has “some concerns with [the] strategic focus of the ISI.”

Some members of the ISI “might be interacting with terrorist organizations in ways that aren’t consistent with what the government and military are doing,” Lapan said. Asked to elaborate on the interactions of the ISI with terrorists, Lapan defined those actions as, “Anything they are doing that is not, that may be seen as supporting terrorist groups rather than going after them.”

Lapan was answering questions raised by journalists who cited recent report in The Wall Street Journal.

The WSJ in its report cited Afghan sources as saying that the ISI is pushing the Taliban to keep fighting in Afghanistan thus undermining efforts by the U.S. and the allies to end the war.

Moreover, Robert Gibbs, White House Press Secretary said that President Obama has not spoken to Pakistani President Asif Ali Zardari, adding that Washington is looking forward to a continuing strategic dialogue with a Pakistani delegation due in Washington from October 22.

Gibbs also found “unacceptable” the current “status quo” in Pakistan’s restive tribal areas, which has become a safe haven for Taliban and al Qaeda terrorists.

He said there is “no excuse for not taking action” against the terrorists and the issue would be taken up with the visiting Pakistani delegation later this month.

On the other hand, Lapan gave credit to Pakistan’s Army Chief General Ashfaq Parvez Kayani, who is a former head of the ISI, saying that General Kayani “is aware of and shares that (elements of the ISI are in league with the insurgents).”

“They are working towards making changes but change happens slowly over time,” Lapan said, adding, “The ISI has done a great deal in fighting terrorism. Some have said they probably have killed more terrorists than any other organization.”

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Washington, D.C., United States (AHN) – President Barack Obama made a special appearance on Friday to bid farewell to teary-eyed Rahm Emanuel, the incumbent chief of staff, calling him “an incomparable leader.” Obama also announced his “wise, skillful, and longtime counselor, Pete Rouse,” as the new “interim chief of staff” for the “next phase of our administration.”

Emanuel, with his humor and candid speech, started with comments on the standing ovation he received, calling it “slightly different than the reception I got during my bar mitzvah.”

Although Emanuel did not announce his intentions to run for the mayor of Chicago, he told the president he’s “energized by the prospect of new challenges and eager to see,” what he can do to make “our hometown even greater.”

Emanuel was bear-hugged twice by Obama during the event in the East Room while the incoming interim chief of staff, Rouse, true to his reputation of being media-shy, maintained his silence while trying to slip out of the TV camera frames.

Even Obama noted in his speech about Rouse’s dislike for the limelight, saying, “Pete has never seen a microphone or a TV camera that he likes.”

Robert Gibbs, the White House spokesman later told journalists, “Pete enjoys complete trust of the president.”

On Emanuel’s contribution during his 20 month tenure at the White House, the president said, “We could not have accomplished what we’ve accomplished without Rahm’s leadership — from preventing a second depression to passing historic health care and financial reform legislation to restoring America’s leadership in the world.”

Calling it “the least suspenseful announcement of all time,” as the news of his departure had been already reported, Obama noted that the outgoing chief of staff had “exceeded all of my expectations.”

“He has been a great friend of mine, and will continue to be a great friend of mine,” the president added.

Obama admitted, “for nearly two years, I’ve begun my workday with Rahm. I’ve ended my workday with Rahm. Much to Amy’s chagrin, I’ve intruded on his life at almost any hour of the day, any day of the week, with just enormous challenges.”

Emanuel gave Obama the credit for saving the country from further sliding into depression saying, “You had the tough — you had the guts to make the tough calls that stopped the freefall and saved our country from a second Great Depression.”

“I thought I was tough. But as someone who saw firsthand how close our nation came to the brink and what you had to do to put America back on track, I want to thank you for being the toughest leader any country could ask for in the toughest times any President has ever faced,” Emanuel added amid applause from the audience.

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Washington, D.C., United States (AHN) – President Barack Obama on Friday appointed Elizabeth Warren giving her charge of the creative process involved in the floating of Consumer Financial Protection Bureau.

At the Rose Garden, the president noted in his remarks to the journalists, “The Consumer Financial Protection Bureau, which was one of the central aspects of financial reform, will empower all Americans with the clear and concise information they need to make the best choices, the best financial decisions, for them and their families.”

With the new agency coming into existence, Obama promised to the American people, “Never again will folks be confused or misled by the pages of barely understandable fine print that you find in agreements for credit cards or mortgages or student loans.”

Sen. Al Franken (D-Minn.) welcomed the appointment of Warren saying, “The President’s appointment of Elizabeth Warren to oversee the creation of the Consumer Financial Protection Bureau is a victory for America’s consumers.”

“Warren is one of the nation’s foremost experts on consumer protection and a fierce consumer advocate who will stand up to mortgage lenders, credit card companies and other financial institutions,” said the senator, cautioning, “This is big step forward, but the work is only beginning. We must ensure that the new Bureau is as strong as possible and that Warren receives a permanent appointment.” 


Earlier this year, Sen. Franken and 11 of his Senate colleagues had sent a letter to President Obama urging Warren’s appointment.

Later in the day, White House press secretary Robert Gibbs defended Obama’s decision to name Warren, arguing that the agency could have faced delays of months because Republicans would have put her nomination on the back-burner or outright rejected, if she had been nominated director of the agency.

Gibbs told journalists at the daily press briefing, “The president will nominate a director, and Elizabeth will be instrumental in helping the president fill that position,” but did not rule out her being one of the candidates for that position.

Gibbs, however added, “If she said she’s not interested in it, then there’s your answer,” when it was mentioned that she has expressed her unwillingness to take the job as a director.

On the question of the president bypassing rules, Gibbs said, “There’s no circumventing the law in any way of this,” explaining that, “the task of setting up and standing up that function rests in the law with the Treasury. Elizabeth Warren is an adviser to the secretary of Treasury to do exactly that.”

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Washington, DC, United States (AHN) – Burlington Coat Factory wants customers to return thousands of children’s jackets with drawstrings that could pose a strangulation hazard.

The New Jersey-based company is voluntarily recalling about 10,000 hooded jackets and sweatshirts. The clothes were made in China, Cambodia, Korea and the United States. They were sold nationwide from 1995 through 2009 carrying brands such as Aeropostale, Gray Wolf, Miletta, Mirika and Ruff Stuff.

The U.S. Consumer Product Safety Commission, which announced the recall Thursday, said children could get strangled or entangled on the garments’ neck and waist drawstrings. The agency issued guidelines as early as 1996 telling consumers to buy jackets with neck or hood enclosures that use buttons or Velcro instead of drawstrings, which could get caught in bus doors or playground equipment.

Customers who bought the recalled jackets from Burlington should return the clothes to the company for a refund or credit. They also have the option of removing the drawstrings from the garments, the Consumer Product Safety Commission said.

No incidents have been reported involving the jackets, but the 86-year-old company voluntarily recalled hooded sweaters and warm-up garments last year, also because of drawstrings.

Burlington reported net sales of $729 million in the second quarter, up 4 percent from last year.

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photo credit: markhillary

If you are a small business owner that has toyed with the idea of a SBA loan, is there anything beneficial in the new economic recovery act (“The American Recovery and Reinvestment Act of 2009″) that will help me? It may surprise you to learn there is. No, I am not a paid spokesman for the U.S. government. Let me go one step further. What if there was a program paid by taxpayer dollars that actually reduced your cost of doing business in procuring a loan? You would probably think it was another chimerical attempt by Congress to bluff the American public. But it’s actually true.

Here is how it works. When you get a SBA loan from your local banker (come on now–it is possible in this economy), you have to pay at closing what is called a “SBA guarantee fee”. These fees are dutifully collected and sent off to Washington to create a war chest. If you have the misfortune of defaulting on your loan, the lender can tender this default to the U.S. government and receive between 50% and 85% (possibly 90% under new laws) of the loss as reimbursement. In fact, that is one the purposes of the SBA: to cover defaults through the SBA guarantee loan program. But as the applicant, you have always had to pay this out of pocket. And it wasn’t cheap. For a loan up to $150,000, the fee was 2% of 50% of the loan value (the 50% in this example is the guarantee amount). It was 3% for loans above that amount. For example, with a $150,000 loan, you would be paying approximately $1,500 ($150,000 X .02 X .50) just for the guarantee fee, in addition to additional costs such as the processing fee, appraisal, etc. This is money that would ordinarily have gone into your pockets for business use. For the hearty among us who like to read the actual provisions of the statute, here you go (15 U.S.C. 636(a)):

(18) Guarantee fees.-
(A) In general.- With respect to each loan guaranteed under this subsection (other than a loan that is repayable in 1 year or less), the Administration shall collect a guarantee fee, which shall be payable by the participating lender, and may be charged to the borrower, as follows:

(i) A guarantee fee not to exceed 2 percent of the deferred participation share of a total loan amount that is not more than $150,000.

(ii) A guarantee fee not to exceed 3 percent of the deferred participation share of a total loan amount that is more than $150,000, but not more than $700,000.

(iii) A guarantee fee not to exceed 3.5 percent of the deferred participation share of a total loan amount that is more than $700,000.

(iv) In addition to the fee under clause (iii), a guarantee fee equal to 0.25 percent of any portion of the deferred participation share that is more than $1,000,000.

Cries have been coming from borrowers for years as to these fees. Senator Kerry and Snow have been listening. They have long proposed reducing or doing away entirely with those fees. So how does it work? Simply as a subsidy. Instead of the borrower paying it, taxpayer dollars are used for that war chest. In other words, Federal funds are used to guarantee a Federal program-that’s right.

Now the good news. Section 501 of the new stimulus Act does away completely with borrower paid SBA guarantee fees. For example, there are no longer such fees through September 30, 2010 for the 7(a) program, the classic SBA everyday “work horse” loans that are usually in the hundreds of thousands of dollars. This is what the new act says:

Sec. 501. Economic Stimulus for Small Business Concerns. (a) Temporary Fee Elimination for the 7(a) Loan Program- Until September 30, 2010, and to the extent that the cost of such elimination of fees is offset by appropriations, with respect to each loan guaranteed under section 7(a) of the Small Business Act (15 U.S.C. 636(a)) for which the application is approved on or after the date of enactment of this Act, the Administrator shall-

(1) in lieu of the fee otherwise applicable under section 7(a)(23)(A) of the Small Business Act (15 U.S.C. 636(a)(23)(A)), collect no fee; and

(2) in lieu of the fee otherwise applicable under section 7(a)(18)(A) of the Small Business Act (15 U.S.C. 636(a)(18)(A)), collect no fee.

But it also applies to the smaller loans. For example, SBA Community Express Loans which are between $5,000 and $25,000 unsecured. They are a pilot program which is subsumed under the same subsection of the Small Business Act. They require very little paperwork and usually receive a tentative answer within two days. There is no prepayment penalty, no requirement for business plans or financials, and are at a 7 year low of 7 ¾% interest which equates to $60 per $5,000 borrowed. Although not nearly as much, the reduction in the guarantee fees for these loans does add up. For example, the fee for a $15,000 loan is $255.00.

But does this have the effect of making banks open up their coffers and loan more money? Does the fact that the fees are lower make it easier to get a loan? Experts are divided on this subject but in my humble opinion, it will have little effect. Sure it is beneficial to the borrowers, but it is not going to provide any incentive to a lender. Remember, lenders don’t make any money either way on this: they simply collected from you, bundle it up, and send it off to D.C. They are more interested in selling for a profit on the secondary market and getting their loan processing fees, which have not been eliminated. So it is basically a wash. In another article I will give my opinion as to what will really help to inspire banks to wake up in the morning and do the right thing by loaning money.

So we’re back to where we were before: banks are still holding back and the stimulus does little to specifically change that fact. Sure, it is anticipated that further monies will bail out the financial institutions (this time with very strict accountability and transparency rules, especially as to executive compensation, bonuses, and golden parachutes-under the Recovery Accountability and Transparency Board), but what they really need is a new secondary market or stimulus to our existing one. Since banks almost always sell their loans on the secondary market, unless it flows in that direction, they are not going to make loans, regardless of fees collected.

So the meantime, I can at least tell my borrowers their fees will be lower. Every little bit helps in this quirky economic environment for small businesses.

Sue Malone 442 Diablo Road, Suite 137
Danville, CA 94526
Email: info@StrategiesForSmallBusiness.com

Sue Malone is a small business advocate and founder of Strategies For Small Business, a company devoted to providing SBA Loans for small business owners, whether as start-ups or for the expansion needs of existing businesses. For six years she has been the nations #1 provider of SBA Community Express Loans, having funded over 25,000 businesses in all 50 states. For a free loan consultation or for more information on the programs , visit our website at: http://www.StrategiesForSmallBusiness.com Or call (925) 899-8449

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