December 1, 2009
Just when we thought small businesses were going to experience harder times than major retailers, Goldman Sachs comes to the rescue with a plan to educate and finance small businesses. Their impressive plan to funnel $500 million dollars to provide management education, mentoring, and access to capital to small businesses is the largest of its kind in history. Warren Buffet, who bailed out Goldman Sachs early in this economic crisis, will assist Goldman Sachs in providing theses resources to small businesses.
Major retailers have experienced a loss of funding due to CIT Bank having to eliminate their factoring loan program. Factoring loans were very popular around holiday time for financing Christmas inventory. Retailers now have to finance their own inventory.
Critics say that Goldman Sachs is using this opportunity to improve its image and bad reputation as a result of receiving bailout money and improving its financial position. It would help small businesses to know how to research grants and loans if they would like to take advantage of this opportunity to grow their businesses.
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September 22, 2009
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The Federal Deposit Insurance Corporation is seeking private equity firms to buy out troubled banks so as not to put an unnecessary strain on their budget.
Many more banks are slated to fail in the coming months because of defaults on real estate loans. It will not be easy to find private equity buyers as many are reluctant to take on the losses of these failed banks.
Out of the seventy-seven banks that have been closed, sixty-nine buyers have been found. The danger of exhausting the FDIC’s fund has caused Walter Buffet to comment on the need for the U.S. to cut back on the amounts of money it has been pumping into the economy to rescue it from economic disaster.
The U.S. spent $180.7 billion in July 2009, the most it has ever spent in one month in U.S. history. If the FDIC’s funding is exhausted, the U.S. will go to taxpayers to finance the FDIC’s loan sales and short-term obligations.
In view of France’s experience in establishing a bank and making John Law the owner, the U.S. must be mindful of not repeating France’s history and putting unscrupulous individuals in charge of these banks.
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August 25, 2009
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With fewer larger banks unwilling to purchase troubled banks, the FDIC is now looking
to private investors to bail out these banks. Private investors recently extended funds to CIT Bank to keep it from bankruptcy filings.
Since private investors tend to cut costs by eliminating jobs, unions are against private investors getting involved with acquiring distressed banks.
The involvement of private investors would relieve the U.S. of their intervention in some of the failed banks earlier in this economic crisis. Warren Buffet recently made a statement that the U.S. “must address the massive amounts of monetary medicine that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency.”
The federal deficit reached an all-time monthly high of $180.7 billion for the month of July 2009.
July 29, 2009
While CIT is waiting for the remaining $1 billion dollars from its bondholders, it is now considering selling off some of its assets and bankruptcy is still a possibility. At present CIT is trying to restructure out of court. They were denied additional bailout money by the Obama administration because they could not restructure.
CIT’s corporate finance department is its largest division and in all likelihood, they will keep this division. CIT has noted that it may be difficult to make money on the aviation and railcar business. Microsoft had terminated its relationship with CIT for vendor financing, and CIT is unsure about whether they will keep this division.
There has been some interest in purchasing the bank as Warren Buffet’s company, Berkshire Hathaway and Leucadia National had offered to buy CIT in the spring, but CIT turned down the offer which was too low.
Whether or not CIT is able to restructure now in order to receive the additional $1 billion remains to be seen. However, the bondholders stand to lose money if their efforts to provide the additional financing fail because CIT fails to restructure. It would appear that the bondholders will do what they can to help CIT to protect their investment.