Friday, March 31, 2017

The First Bank Failure of 2008. US News and World Report. 1/28/2008

The First Bank Failure of 2008. Luke Mullins. US News and World Report.
Bad commercial real estate loans sink a small financial institution in Kansas City.

A tiny bank in Kansas City, Mo., has become the first bank in the country to fail this year—but it's
unlikely to be the last.

Federal regulators on Friday shuttered Douglass National Bank, an African American owned
bank with $59 million in assets that was named in honor of the 19th century abolitionist Frederick Douglass. The bank, which has roots stretching back to the 1940s, had struggled of late, losing $1.3 million in 2007 and $4.3 million in 2006.

Although its recent losses were tied to bad commercial real estate loans, not residential mortgages, the bank's problems are nonetheless linked to the global mortgage crisis that has ripped through the financial services industry, says William Michael Cunningham of Creative Investment Research. "It's this secondary and tertiary impact of the crisis in the subprime market that's beginning to impact smaller institutions mainly through [the slowdown in] consumer spending," Cunningham says.

Douglass is the first bank to fail in 2008 and the fourth since February of last year. Before that, federal regulators hadn't shuttered a bank since June 2004.

But Cunningham expects other small banks—especially those with weak profits and deteriorating capital bases—to follow suit in the coming months, as the slowing economy limits borrowers' ability to repay loans.

Larger banks, such as, say, Bank of America or Citigroup, are far less likely to experience a similar rise in failures. Such banks have more capital to protect against losses and greater access to additional
funds should they need them.

But with limited resources, smaller banks simply have fewer options, making them more vulnerable to downturns in the industry and the economy as a whole.

Saturday, March 25, 2017

Business under Trump

We recently gave a talk to the Greater Houston Black Chamber (GHBC), at their monthly Business Luncheon “2nd Tuesday with the Chamber” on for February 14, 2017. The link at left is to a video of the discussion. I described the current economic environment for black businesses in Houston and provided a forecast for 2017. 

"Founded in 1935 as the city’s first African -American civic organization, the GHBC has evolved into an active participant in the City of Houston’s socioeconomic process. The organization is a 501(c) (6), not-for-profit, private, member-driven organization that serves the Greater Houston Area.  The GHBC is dedicated to supporting African-American small businesses in the areas of education, certification and accessing contracting opportunities and capital."


Wednesday, March 22, 2017

​Taming​ ​the​ ​Tax​ ​Code - Brendan Cody, GWU student and Impact Investing Intern

Tax​ ​reform​ ​will​ ​continue​ ​to​ ​be​ ​a​ ​major​ ​issue​ ​over​ ​the​ ​next​ ​several​ ​months. Both​ ​Congress​ ​and
President​ ​Trump​ ​have​ ​expressed​ ​a​ ​strong​ ​interest​ ​in​ ​reform.​ ​

A ​panel​ at George Washington University titled ​“A​ ​General​ ​Perspective on​ ​Taming​ ​the​ ​Tax​ ​Code:​ ​What​ ​Yesterday’s​ ​Reformers​ ​Can​ ​Teach​ ​Today’s​ ​Reformers”​ ​provided great​ ​insight​ ​into​ ​the​ ​methods​ ​and​ ​issues​ ​of​ ​reform​ ​from​ ​the​ ​perspective​ ​of​ ​the​ ​House​ ​Ways​ ​and Means​ ​Committee.

​Bill​ ​Archer(R-TX)​ ​and Charlie​ ​Rangel(D-NY)​ ​are​ ​both​ ​former​ ​committee​ ​chairmen​ ​and ​were​ ​members​ ​of​ ​​Ways and Means in 1986 when​ ​the​ ​tax​ ​code​ ​was​ ​last​ ​reformed​.​

​Rangel​ ​emphasized​ ​the​ ​importance​ ​of​ ​the​ ​president in​ ​getting​ ​tax​ ​reform,​ ​specifically noting ​that the​ ​President’s​ ​ability​ ​to​ ​inspire​ ​confidence​ ​among​ ​the​ ​public​ ​and​ ​the Congress​ ​can​ ​be​ ​decisive​ ​in​ ​the​ ​fate​ ​of​ ​a​ ​bill.​ ​Archer​ ​agreed​ ​with​ ​this​ ​sentiment, noting that​ ​President​ ​Reagan​ ​played​ ​a​ ​vital​ ​role​ ​in​ ​the​ ​Tax​ ​Reform​ ​Act​ ​of​ ​1986​ ​by​ ​taking​ ​the​ ​issue​ ​to​ ​the public,​ ​while​ ​President​ ​Obama​ ​did​ ​not​ ​campaign​ ​for​ ​tax​ ​reform.​ ​

While both Rangel​ ​and​ ​Archer​ ​agreed​ ​on the​ ​role​ ​of​ ​the​ ​president,​ ​they ​disagreed​ ​on​ ​the​ ​intended​ ​outcome​ ​of​ ​reform.​ ​When​ ​Mr.​ ​Archer expressed​ ​his​ ​disdain​ ​for​ ​the​ ​current​ ​tax​ ​code​ ​that​ ​allows​ ​47%​ ​of​ ​people​ ​to​ ​not​ ​pay​ ​any​ ​income taxes,​ ​Mr.​ ​Rangel​ ​argued​ ​to​ ​“Never​ ​use​ ​the​ ​tax​ ​code​ ​for​ ​social​ ​policy.”​ ​Mr. Rangel's  ​is​ ​a​ ​potent​ ​message as​ ​the​ ​debate​ ​surrounding​ ​reform​ ​in​ ​the​ ​coming​ ​year​ ​will​ ​almost​ ​certainly​ ​involve​ ​discussions​ ​of social​ ​policy​ ​masquerading​ ​as​ ​tax​ ​policy.

In​ ​addition​ ​to​ ​former​ ​Chairman​ ​Bill​ ​Archer​ ​and​ ​Charlie​ ​Rangel,​ ​the​ ​panel​ ​featured current​ ​Ways​ ​and​ ​Means​ ​Committee​ ​chairman​ ​Kevin​ ​Brady (R-TX)​ ​and​ ​ranking​ ​member​ ​Richard Neal (D-MA).​ ​Chairman​ ​Brady​ sated that he ​understands​ ​the​ ​tremendous​ ​challenges​ ​reform presents,​ ​but​ ​also noted​ ​that​ ​political​ ​polarization​ ​exacerbated​ ​by​ ​the​ ​media​ ​climate​ ​and​ ​instant​ ​access​ ​to information, factual​ ​or​ ​not,​ ​will​ ​add​ ​to​ ​the​ ​problems​ ​of​ ​passing​ ​complex​ ​legislation.​ ​Additionally, Brady​ ​believes​ ​that​ ​this​ ​bill​ ​must​ ​be​ ​farther-reaching​ ​than​ ​the​ ​1986​ ​reform, since that  ​only​ ​involved changes​ ​to​ ​​ ​the​ ​tax​ ​rates,​ ​but​ ​that​ ​the​ ​BAT,​ ​simplification​ ​of​ ​the​ ​code​ ​and​ ​other​ ​policies​ ​were equally​ ​important.​ ​

Ranking Member ​Neal​ ​believes​ ​​tax​ ​reform​ ​could​ ​be​ ​hindered​ ​by Congresspersons​ ​who​ ​are​ ​more​ ​interested​ ​in​ ​being​ ​crusaders​ ​than​ ​legislators​ ​and​ ​who​ ​will​ ​take​ ​one line​ ​of​ ​the​ ​bill​ ​they​ ​disagree​ ​with​ ​to​ ​denounce​ ​the​ ​entirety​ ​of​ ​the​ ​legislation.

All​ ​four​ ​panelists​ ​agreed​ ​on​ ​the​ ​importance​ ​of​ ​bipartisan​ ​legislation.​ ​The​ ​bipartisan nature​ ​of​ ​the​ ​1986​ ​reform​ ​helped​ ​its​ ​passage​ ​and​ ​staying​ ​power​ ​as​ ​any​ ​legislation​ ​passed​ ​by​ ​one party​ ​would​ ​have​ ​been​ ​immediately​ ​repealed​ ​when​ ​the​ ​opposition​ ​regained​ ​power.​ ​Mr.​ ​Rangel argued​ ​that​ ​while ​details​ ​may​ ​change​ ​with​ ​the​ ​political​ ​climate,​ ​the​ ​importance​ ​of​ ​trust​ ​will always​ ​remain.