Showing posts with label banking. Show all posts
Showing posts with label banking. Show all posts

Friday, November 8, 2019

Scam Alert: PayPal Credit, Synchrony Bank Playing Hide and Seek With Special Financing Purchase Offers

by Fearless Rick Gagliano, editor, Money Daily

     When it comes to banking in general, most Americans (Europeans and Asians, as well, we might assume) are skeptical about institutional sincerity and customer care. After all, it was just a decade ago that some of the biggest banks in the world were caught up in a messy triage with overzealous rating agencies and absent regulators that sent global finance to its knees.

Image result for PayPal credit logoSince the Great Financial Crisis (GFC) of 2008, there have been more than few dubious practices entertained by major banks. Wells-Fargo comes to mind, whose employees, paragons of virtue all, no doubt, opened accounts in people's names without their knowledge, among other scandalous activity.

Certainly, the annals of banking history are rife with examples of financial trickery, pandering and assorted crimes and misdemeanors carried on by monied institutions, all in the name of profit and greed.

With the advent of the internet age, banking has become more streamlined, varied and accessible to anyone with a smartphone, tablet or computer. Offerings from non-bank institutions abound. The leader among transactional vendors being PayPal, the the online business-consumer, peer-to-peer middleman company founded in part by Elon Musk, Max Levchin, and Peter Thiel made its name by offering online accounts to anybody who could "fog a mirror" and with a few nickels to rub together.

With an IPO in 2002 and subsequent acquisition by online auctioneer eBay, PayPal became the de facto standard for online payments. Reacting to a squabble from investor Carl Ichan, eBay divested itself from PayPal in 2014 and since then PayPal has been a stand-alone company. It was late in 2008 and early 2009 that PayPal, after acquiring the company known as Bill Me Later, began to offer credit to consumers. Aptly named PayPal Credit, a complete credit and debiting system aimed at the massive consumer audience worldwide was established.

Among their many marketing tactics, PayPal Credit offered a wildly popular option called special purchase financing, bearing zero interest for six months on purchases of $99 or more if paid in full during the allotted time. That promotion still exists today, but the present and recent past are where the issues of dubious claims and incomplete disclosure of terms begins.


Enter Synchrony

Image result for Synchrony logoPayPal partnered with consumer credit giant, Synchrony Financial, to offer credit cards to PayPal account holders in 2004 and took the relationship even further in 2017, when it sold $5.8 billion in consumer credit receivables to Synchrony Financial, effectively yielding control over the operation of PayPal Credit to Synchrony.

It was around that time in 2017 that how payments on PayPal Credit accounts were allocated was altered. When parent company PayPal was operating PayPal Credit, allocations of payments on accounts were handled roughly as anything over the minimum required payment on the entire account was then allocated to the special purchase financing.

For example, a PayPal Credit account holder, with, say, $1000 existing outstanding balance and a minimum monthly payment of $40, makes a purchase for $500 and takes advantage of the Zero Interest for Six Months if Paid in Full Special Financing Purchase. When the account holder makes a payment, say $100, $40 would cover the outstanding minimum credit payment and the remaining $60 would be applied to the Special Financing Purchase. That was pretty standard, and logical.

No more. Now, when that same account holder (or any account holder) with an existing outstanding balance makes the same transaction, the entirety of his or her payment goes toward the account balance and NONE is allocated to the Special Financing Purchase until the final 60 days of said Special Financing Purchase. In the meantime, interest accrues on the Special Financing Purchase at the full amount, in our case, $500. If the Special Financing Purchase balance is not paid off in full at the expiration of the six months, all of the accrued interest becomes part of the account balance due.

Nowhere in the terms and conditions of Special Financing Purchase is this made obvious or even mentioned to consumers. It is only revealed when (as our Editor found out) one questions PayPal Credit customer support by phone or by online chat. The response to why this devious practice is maintained, is that PayPal Credit and/or Synchrony Financial uses best practices in allocating funds in this manner. It's almost a certainty that said best practices are what's best for the bank, not the consumer, and here's why:

Beyond the failure to disclose this in-house allocation rule, the bank (Synchrony, in this case), has interest accruing on that Special Financing Purchase (remember, ZERO interest for six months if paid in full) at the full amount of the purchase, not at a lesser amount if account holder payment allocations were done the old way, in a moral, reasonable, and logical manner. It also sets up the casual account holder for a shock, when he/she looks at the Special Financing Purchase and realizes that with two months left to pay off the Special Financing Purchase at Zero Percent he or she still owes the full amount.

Unless one is careful enough to scrutinize the monthly statements generated by PayPal Credit, this poor or mis-allocation of payments - done in the name of best practices - can easily go unnoticed, especially if one makes automatic or automated monthly payments, a practice which all banks and credit card companies strongly encourage.

There is some relief, maybe.

Calls to PayPal Credit on this or any credit account issue result in referral to Synchrony. The supervisor with which Money Daily spoke on Thursday, November 7, elicited the response that payments can be allocated to the Special Financing Purchase if one calls Synchrony at 1-844-373-4961 and requests the payments be directed according to the wishes of the account holder, and NOT in the manner usually employed by the BANK (Synchrony). Synchrony says they will honor such requests and process them, but allocations will not show up on online accounts for "a few days."

Additionally, none of this would apply to anybody who isn't carrying a balance (the wise and fortunate 20-30% of account holders) with PayPal Credit and the only purchase made was a Special Financing Purchase. In that case, all of the monthly payment would be applied to the deferred interest financing because that's all there is.

Therein lies the problem. Instead of doing business in a morally correct, logical, reasonable, responsible, and customer-friendly manner, Synchrony Financial has chosen the usual path of 21st century bankers: deceit, incomplete disclosure, "gotcha" terms and "special financing" with in-house rules designed to maximize the bank's profitability, the customer be damned. To do business in what would normally be considered the "best practice" for the consumer, the account holder has to go out of his or her way to make a special phone call, jump through hoops, listen to all of the recordings and prompts to get what should have been done automatically. This is, after all, the age of high-speed communications and the internet, not Ma Bell's twisted copper.

If this practice isn't illegal, it would be no shock today. Financial institutions have been afforded wide latitude in their dealings with the public, to encourage loans, credit, and debt in a wide array of products and offerings.

In a world in which sanity, fairness, and reasonableness would be the norm, this kind of operation might be considered fraud at worst, bait-and-switch at best. But today, in our world of glorification of all things money and financial, where the dollar sign is revered and worshipped, it barely registers a "lookie here." It's a sad commentary on the state of morality and banking when gigantic, faceless institutions are able to run roughshod over consumers. It goes against the public interest, an interest, incidentally, that nobody - from bankers to consumer credit agencies to politicians - seems to be even remotely interested in protecting.

So, what do you think? Is this practice just run-of-the-mill deceit and standard underhandedness by PayPal Credit and Synchrony Financial, or does it rise to or border on criminal mischief, something banking regulators or congress should address? Comments are open, and are moderated.

Anybody experiencing issues such as those outlined above should call Synchrony at 1-844-373-4961 and complain loudly.

Be polite, but overall, be careful.

UPDATE: Found a thread on the PayPal boards dealing with this very issue. Many are fuming about it.
See here: https://www.paypal-community.com/t5/PayPal-Credit/PayPal-Credit-Promotional-Payment-Allocation/m-p/1553309/highlight/false#M8392

UPDATE 11/27/19: This issue will remain, as the actions of Synchrony are guided by Regulation Z. See the updated blog post:
https://moneydaily.blogspot.com/2019/11/weekend-wrap-paypal-creditsynchrony.html

At the Close, Thursday, November 7, 2019:
Dow Jones Industrial Average: 27,674.80, +182.24 (+0.66%)
NASDAQ: 8,434.52, +23.89 (+0.28%)
S&P 500: 3,085.18, +8.40 (+0.27%)
NYSE Composite: 13,395.55, +43.98 (+0.33%)

Friday, July 13, 2018

Stocks Gain, Dow Approaching Resistance Around 25,000

Stocks ramped higher on Thursday, taking back all of the losses from the prior day and advancing to its highest level since June 18. What lay ahead for the industrials is a trading areas that has proven to offer some resistance around and above 25,000.

In mid-June, at the tail end of a four-day rally, the Dow topped out at 25,322.31 (June 11), then stalled, sending the index tumbling more than 1200 points to 24,117.59 by June 27.

Will the pattern repeat? Obviously, it's too early to tell, but charts are suggesting that there will be some selling in this area. What may prompt any trading action are the emerging second quarter earnings reports, especially those on Friday from major banks.

Prior to Friday's open, the nation's largest bank by assets ($2.6 trillion), JP Morgan Chase (JPM) reported adjusted revenue of $28.39 billion, beating estimates of $27.34 billion and EPS of $2.29, also topping expectations of $2.2. Net income rose 18%, to $8.3 billion.

Citigroup (C) reported higher EPS, but missed on the revenue line. Shares were selling off slightly in pre-market trading.

Wells-Fargo (WFC) was down sharply prior to the opening bell after reporting a decline in net income applicable to common stock, which dipped to $4.79 billion, or 98 cents per share, in the quarter ended June 30, from $5.45 billion, or $1.08 per share a year ago. Analysts expected $1.12 per share.

Mixed results from the financial sector come as no surprise. Squeezed margins from the flattening yield curve has put pressure on bank stocks for some months. The financial sector has been one of the weakest through the second quarter and the pressure does not appear to be relenting any time soon.

Friday should be full of fireworks.

Dow Jones Industrial Average July Scorecard:

Date Close Gain/Loss Cum. G/L
7/2/18 24,307.18 +35.77 +35.77
7/3/18 24,174.82 -132.36 -96.59
7/5/18 24,345.44 +181.92 +85.33
7/6/18 24,456.48 +99.74 +185.07
7/9/18 24,776.59 +320.11 +505.18
7/10/18 24,919.66 +143.07 +648.25
7/11/18 24,700.45 -219.21 +429.04
7/12/18 24,924.89 +224.44 +653.48

At the Close, Thursday, July 12, 2018:
Dow Jones Industrial Average: 24,924.89, +224.44 (+0.91%)
NASDAQ: 7,823.92, +107.30 (+1.39%)
S&P 500: 2,798.29, +24.27 (+0.87%)
NYSE Composite: 12,761.46, +79.87 (+0.63%)

Wednesday, October 24, 2012

Dead Cats Don't Bounce; No Joy in Fraudville; Stocks Continue Slide

Maybe, as the movie title suggests, white men can't jump, but Wall Street proved today that dead cats don't bounce... at least not very high.

Stocks got a little bit of a boost from futures pumping prior to the opening bell, but the dismal nature of earnings for the third quarter made any gains transitory, fleeting and utterly disappointing (much like a lot of people in this author's life).

It is as it should be, perhaps. Fed policies do not a market make, so the major indices are now well below the levels encountered when the Chairman, the pseudo-salubrious Ben Bernanke, announced QE3, or, rather, QEtc. or QEternity on September 13.

The prescription the good doctor of economics gave the markets was unlimited buying of mortgage-backed securities (MBS), those ubiquitous instruments of mass financial destruction that essentially started the whole financial and economic mess in the first place, and which will, almost without doubt, end up worth less than what the Federal Reserve pays for them.

With any luck, the Fed's foray into economic wonderland, replete with diamond-farting unicorns and frogs that belch profits, will end in tears and anguish for not only the lower and middle classes, but the rich and self-appointed masters of the universe as well. We wish them no luck, because tactically, they have erred in their assessment of the global economy, not once or twice, but repeatedly since the advent of the crisis in 2007 or 2008, take your pick.

Today's FOMC rate policy decision was another non-event, the Fed reiterating that it would stick to its plans until 2015, which would be long after the chairman has departed, ostensibly in early 2014, should he even last that long.

The market is more interested these day in politics and earnings, each of which offering a mixed bag of blessings or banes, so precarious is the global outlook. Fears are rising that President Obama will win re-election, though the real fears are over the poor earnings reports pouring into the street like so many viperous snakes ready to bite the legs of impudent investors standing still.

Layoff announcements from Ford, Dow Chemical and Volkswagen were only whispered on Wall Street today. In the coming months, workforce reductions will be major headlines as all attempts to revive the economy the banks destroyed will ultimately fail. Europe is sinking steadily deeper into a black hole of debt and deflation, with Asia following soon, and the US - the last bastion of relief in a sea of declining opportunity - to join them in the hell of destroyed currencies and wrecked economies within short order.

Stocks have levitated for months, but the handwriting is clearly written and the game is nearly up. The US elections of November 6 mark a turning, a reckoning that will be absolute and without reprieve. All of the Merkels, Bernankes, Legardes and Draghis of the world cannot resurrect that which was already dead when they first took notice.

While there may be a few days of brightness ahead in the near future for stocks, to outlook continues to deteriorate and today's market action verifies the quietly-held beliefs of the skeptics: all is lost.

There is no joy in Fraudville; mighty Bernanke has struck out.

Dow 13,077.34, -25.19 (0.19%)
NASDAQ 2,981.70, -8.76 (0.29%)
S&P 500 1,408.75, -4.36 (0.31%)
NYSE Composite 8,179.26, -16.05 (0.20%)
NASDAQ Volume 1,965,715,000
NYSE Volume 3,346,029,500
Combined NYSE & NASDAQ Advance - Decline: 2404-3120
Combined NYSE & NASDAQ New highs - New lows: 97-94
WTI crude oil: 85.73, -0.94
Gold: 1,701.60, -7.80
Silver: 31.62, -0.173

Friday, August 10, 2012

Our Dysfunctional Economy Won't Be Repaired Until Bankers Go to Jail

The popular phrase, "it's better to light a candle than curse the darkness," was once spoken in public by Peter Benenson, the English lawyer and founder of Amnesty International, at a Human Rights Day ceremony on 10th December 1961. There are disputes over the origin of this nugget of wisdom, some attributing it as an "ancient Chinese proverb."

Whatever the case, Mr. Benenson, and the American Christopher Society, which adopted the phrase as its motto, certainly had meritorious intentions in keeping to the spirit of the words.

When it comes to our current economic climate and the out-of-control, corrupt worldwide banking and political liaison, the cabal of bankers and politicians are the darkness, and, as much as one tries to be at all times civil, they need to be cursed.

Market manipulations aside, this week could well have been the utter, disgusting end of years of rigging, price, fixing, fraud and associated crimes, none of which having been prosecuted.

It's been mentioned in this space before that the end of manipulation is eventual failure or stagnation and this week was a prime example. Sure, it's summer and the height of vacation season, but the entire range of trade over the past five days on the Dow Jones Industrials was 115 points. On the NASDAQ, 45 points, while the S&P 500 vacillated between a low of 1391 and a high of 1406, which, incidentally, was close to where it closed on Friday. The S&P finished higher every day this week, though the biggest gain was a whopping seven points.

By the way, all of todays gains were made in the final 40 minutes of trading and the day's volume was embarrassing. Free and fair markets - that's what we used to have in the United States. What we have now is a dangerous, insider-controlled contrivance.

Were there a way to "light a candle" amidst the fraud that has enveloped our financial, political and media systems, it would probably be blown out in an instant. We the people are seemingly bred to watch, listen, obey and not ask questions. The banking elite, however, can do no wrong, as evidenced by a number of stories which emerged from the flotsam of the week that wasn't.

On Tuesday, the CFTC shut down a four-year-long investigation into silver market manipulation, focusing on JP Morgan and HSBC, saying there was insufficient evidence to bring any charges.

Thursday, the US Department of Justice decided not to pursue criminal charges against Goldman Sachs or any of its employees on mortgage securities fraud, concluding "that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time.” The investigation, which took over a year, was prompted by Goldman Sach's CEO Lloyd Blankfein testifying to a congressional panel that the firm actually took the opposite sides of trades that they sold to their clients. But, that's not sufficient for the bought-and-paid-for invisible man, Eric Holder, to bring a case forward. (Here's an idea: to help balance the budget, why not just shut down the DoJ? They apparently aren't interested in prosecuting anybody connected with the financial industry for anything. Big savings there.)

Thursday night, CBS ran, as the second story on their nightly national "news" broadcast, that the housing market was finally recovering (this probably was the sixth or seventh time over the past two years the shills at CBS had run such a story). Why then does Gary Shilling suggest that existing home prices could fall another 20%?

Flood of Foreclosures Could Cause Home Prices to Drop 20%: Gary Shilling

So, make up your own mind. Is the banking system, government oversight and the media working for you and your fellow citizens? Or are there two levels of justice in the USA (and probably everywhere else): one for rich bankers and one for the rest of us? Can we really trust our leaders to do the right things for the people? Or are we caught up in a fascist corporotocracy that feeds upon individuals for the benefit of the rich and powerful?

Go ahead and curse the darkness, because it needs to be cursed. Then light a candle. Take care of your family and friends and do something for yourself, like buying some raw land, growing some of your own vegetables, or investing in physical gold or silver.

To close out the week, or, if you're in need of additional reinforced rancor over the weekend, check out the latest Keiser Report, with Max Keiser and Stacy Herbert, below:


Dow 13,207.95, +42.76 (0.32%)
NASDAQ 3,020.86, +2.22 (0.07%)
S&P 500 1,405.86, +3.06 (0.22%)
NYSE Composite 8,042.59, +17.58 (0.22%)
NASDAQ Volume 1,568,909,750
NYSE Volume 2,586,105,500
Combined NYSE & NASDAQ Advance - Decline: 2753-2759
Combined NYSE & NASDAQ New highs - New lows: 153-43
WTI crude oil: 92.87, -0.49
Gold: 1,622.80, +2.60
Silver: 28.06, -0.04

Wednesday, September 28, 2011

Stocks End Three-Day Win Streak; Shopping the Dollar Stores

The Markets

Another day passed by without Europe imploding from excessive debt and they're still drinking plenty of Ouzo over in Greece, even as the country dives into desperation and poverty.

The economic climate hasn't much bothered the titans of industry and banking who populate the environs of Wall Street, but maybe the lingering doubt and uncertainty over economic issues is starting to get to them a little bit. Days like today show the strain a long, drawn out economic slide can have on markets. Stocks and indices don't just do straight down in a day or two; bear markets, like all good things, take time and patience to play out and this current one, which started just a few short months ago, looks to have a lot of downside over many months ahead.

There was little in the way of news concerning the global powers and their attempts to deal with the continuing crisis. No mutterings of sentiment from the ECB or Angela Merkel or French president Sarcozy. Even our own President Obama was pretty hushed up, and for him, that's saying something.

It was like the Harry Potter movie when they speak about "he who shall not be named"; nobody was interested in talking about the economy any more, but it surely was on the minds of traders, who sold off everything as the market entered the home stretch, making all the talk about a bounce, or end of quarter window dressing sound a little foolish.

Perhaps it was just more old-fashioned profit taking, by those who know that it's best to get out of the way of oncoming trains, like the one coming when third quarter earnings reports begin to hit the Street.

Whatever it was, stocks took a pretty solid body blow and after enough of these, with conditions still uncertain or deteriorating, volatility high and the leaders of the civilized world unable to get themselves and their banker buddies out of the mess they created, stocks and indices will stay down, move lower and not recover for a long time.

The happy part is that there will then be bargains galore amid a stock pickers paradise. Good companies will fall alongside bad ones, and prices will be so cheap and the competition so slim, that bargains stocks will appear all over the market.

All that has to happen is for the political leaders and global banking interests to make a few more policy mistakes and WHAM! stocks will be hit with the same ton of bricks that have already shuttered hundreds of thousands of small businesses around the world. Money will be scarce, people scared and unsure and institutions and governments will tumble.

Start making plans now, because this great drama of economics is playing out in the present and conditions for it getting really ugly are already in place.

Have faith in the bankers and politicians. They've screwed up before, and they're certain to do so again.

Dow 11,010.90, -179.79 (1.61%)
NASDAQ 2,491.58, -55.25 (2.17%)
S&P 500 1,151.06, -24.32 (2.07%)
NYSE Composite 6,876.94, -166.18 (2.36%)
NASDAQ Volume 1,912,622,750.00
NYSE Volume 4,787,752,000
Combined NYSE & NASDAQ Advance - Decline: 1179-5322
Combined NYSE & NASDAQ New highs - New lows: 16-231
WTI crude oil: 81.21, -3.24
Gold: 1612.00, -37.70
Silver: 29.96, -1.92


Idea: Shop Dollar Stores for Big Savings

We all know people who refuse to shop at, say, Wal-Mart, in the belief that they are somehow superior to the rest of the inhabitants of the planet and the low-cost experience is "beneath them."

When the economic tsunami blows through their part of the world, they'll likely be unprepared to make do with less or reconfigure their lifestyle to accommodate the new financial realities. For the uninhibited types and those without pretensions, there is life after Sak's, the GAP and JC Penny's and it can be found at strip malls and shopping centers around the country. They are known as dollar stores, where everyday items are sold at a discount, every day.

In case you missed it, Wal-Mart doesn't really promote their "lowest price" guarantee much any more, and that's because they're often not the lowest. The dollar stores - particularly Dollar Tree, Dollar General and Family Dollar - crush Wal-Mart and all other competitors on general merchandise all the time.

Whether it's laundry detergent (you do wash your own clothes, occasionally, no?), tomato juice (who doesn't love a good Bloody Mary?) or sunglasses, you can find good deals ($1 is good no matter what it is.) at these bustling retail establishments, plus hundreds of everyday items from cookware to spices to party and gift ideas to personal grooming products and much more.

Now, you can go to Home Depot and spend $2 to $3 for a roll of duct tape or buy two or three rolls of comparable quality for the same price. You can buy your snacks and chips at the local supermarket chain for $1.79 and up, or find the same selection for less at any of the dollar stores. These places are popping up all over the place.

In fact, Family Dollar plans to open 450-500 new stores in the coming twelve months. The others are expanding at a steady clip, even in this down economy. These companies have found a niche market that will only get bigger as the economy deteriorates and will hold their own in any economic environment, because there are always going to be people who will seek out bargains.

Friday, July 29, 2011

Safeguarding Against Identity Theft

Because our world is so digitized, with everything from banking to credit cards to stocks and futures trading taking place over the internet, hackers have found a gold mine in digging up and exploiting personal data.

Everything from your social security number to automobile registration and brokerage account data is online, and it's only a few clicks or an inadvertent error away from falling into the hands of unscrupulous types who would do harm to one's financial and personal life.

In the increasingly complex world of internet security a few simple tasks can help one steer clear of the villain hackers who steal everything from credit scores and bank accounts to one's personal identity, and the outcomes of having insufficient identity theft protection can be consequential and painful.

Most online accounts, like banking and credit cards offer a level of encryption and security as a first line of defense. Some offer additional information to be imputed before access is granted to an account. The easiest ways to avoid being hacked is to use difficult passwords, especially using characters and numbers, and to use any secondary security - like additional questions to grant access - as a further safeguard.

Even more effective are online identity security companies, which monitor and scrutinize data flows to guard against unlawful intrusions. One such company is IdentityHawk, which offers a comprehensive solution including social security number monitoring, 24/7 identity security scanning, risk assessment via an identity health score and $1 million in identity theft insurance.

The company offers a 30-day, no-obligation free trial and also provides credit score monitoring and even can help in recovering one's identity if it's already fallen victim to identity theft.

While it pays to be thrifty and frugal in these turbulent economic times, a few dollars spent protecting ones identity and valuable assets should be money well spent.

Tuesday, April 27, 2010

Goldman Execs Grilled; Market Stumbles as Greek Tragedy Unfolds

Aeschylus or Sophocles could not have written such a story as is unfolding in the finances of the nation of Greece and the Senate hearings on Goldman Sachs. It is as though the Gods themselves have delivered their wrath upon the wealthy, the greedy and the high-and-mighty of society.

On Capitol Hill, Senator Levin opened the current round of hearings in the Senate Permanent Subcommittee on Investigations by outlining the purported abuses by Goldman Sachs which helped lead the US real estate market and the general economy into what some are calling the "Great Recession" of 2008.

As the day and the questioning wore on, Goldman Sachs executives squirmed and cajoled and grimaced through arguments designed to clear them of even the appearance of impropriety in their mortgage securitization dealings and subsequent profiteering off the collapse of such investment vehicles. The polished and evidently well-trained Goldman executives kept a sombre tone as they alternately denied wrongdoing and admitted "mistakes" in the handling of their own and clients' money as the real estate market ballooned, popped and dropped from 2006 through 2008.

The questioning focused on a key point: whether Goldman Sachs was purposely betting it's own money against the very investments it had sold to clients. The firm admits losing money as the market cascaded lower, but then making more by buying credit default swaps which eventually paid off as the CDO market crashed. Goldman executives have steadfastly denied making trades at odds with those of their clients, though the argument is paper-thin and the Senate investigation has unearthed scores of examples exactly the opposite. Goldman calls their investments in credit default swaps pure hedging, but the tide certainly seems to be working against them, both in the hearing room and in the court of public opinion.

A continent away, Greek bond yields soared to over 18% on 2-year notes, as S&P cut its rating to junk status. Greece continues to struggle through one of its worst fiscal and monetary crises of the modern age, with government pay, pensions and entitlements pushing the government close to default. Today's development come in the wake of weeks of negotiations by the IMF and EU on a bailout package for the southern European nation.

There seems to be little doubt that Greece will default in part or in total, with Portugal, Italy and Spain next in line for the pain of financial armageddon. What worries officials in other European nations is the fate of the European Union itself and the ten-year experiment with the unified currency, the Euro.

Reaction was mostly aligned to the Greek story, though the Goldman Sachs hearings were riveting attention as well. Stocks in Europe suffered huge losses in all of its equity markets, with values of the major nation indices falling anywhere from 2% to nearly 4%. France's CAC 40 fell the most, down 3.82% on the day.

In the Americas, a similar story, with major indices piling on losses. The Canadian markets fared best of all, losing just more than 1 percent.

US stock losses come fast on the heels of an 8-week buying splurge despite signs everywhere that the global economy and sovereign debt issues were coming to a head. Even though it's the height of earnings season in the US, nothing could stem the stampede of sellers which descended on Wall Street. Stocks fell by their largest one-day amounts in months, on heavy volume, signaling that the worst may be yet to come.

Dow 10,991.99, -213.04 (1.90%)
NASDAQ 2,471.47, -51.48 (2.04%)
S&P 500 1,183.71, -28.34 (2.34%)
NYSE Composite 7,463.09, -214.56 (2.79%)


Declining issues overwhelmed advancers, 5396-1220, a better-than 4:1 ratio. The number of new highs was shaved down to 407, with 51 stocks recording new lows.

NYSE Volume 8,348,664,500.00
NASDAQ Volume 2,766,927,750.00


Commodity prices were mixed, due to differences in their utility. Crude oil, which is consumed worldwide, fell $1.76, to $82.44, mostly on fears of reduced demand. Gold, primarily a store of wealth or a hedge against currencies, was higher by $8.10, finishing at $1,161.70. Silver, however, which carries investment qualities and industrial functions, dropped 22 cents, to $18.12.

Elsewhere, consumer confidence in April galloped ahead to 57.9, from a March reading of 52.3, though the encouraging number was largely ignored. The Case-Shiller 20-City Real Estate index rose a disappointing 0.64% year-over-year for the month of February, stirring speculation that the US residential real estate market may be months - if not years - from recovery, with the potential for another 15% downturn still on the horizon.

All is not well in our financial world. Titans are being brought under the whip, nations may fail, social unrest may reach a fever pitch by the time our next federal elections roll around in November. With the usually-slow months of summer approaching, stocks seem unstable investments, at best.

Cash, equivalents, Treasuries and other highly-liquid assets are being preferred for the moment.

Making matters even more convoluted, on Monday, Republicans in the Senate blocked debate on Senator Dodds' Financial Reform legislation by a 57-40 vote. 60 votes are needed to bring the bill to the Senate floor. Another test vote failed on Monday, with Republicans grandstanding, saying dishonestly that the bill would reach deep “into every nook and cranny of American business.”

Bring on the sirens and the wailing.

Wednesday, November 18, 2009

Some Relief for Small Business

After the near-collapse of the entire global banking system last fall (yes, it really was that close to the edge), many changes have occurred in the realm of finance, especially in the area of small business lines of credit. It's now tougher than ever for small businesses to get start-up loans, much less maintain adequate lines of credit with which to operate going concerns.

The big banks don't want to know about risky loans, since they almost went belly-up themselves just months ago because they took on more risk than they should have. Now, Citibank, JP Morgan Chase, Bank of America and Wells Fargo are still standing thanks to taxpayer-funded bailouts, but there are thousands of small businesses littered across the vast tapestry of the American financial landscape that are close to the edge or already insolvent due to the carnage from the economic tsunami.

Now that CIT, one of the large "factoring" lenders has fallen into bankruptcy, there is a need for more emergency loan lenders to handle the ongoing needs of American small business.

Many small business-people are looking forward to passage of the Business Emergency Loan Relief Act, recently introduced in the Senate by Ohio's Sherrod Brown, which would temporarily raise the SBA 7(a) loan size from $2 million to $5 million, the 504 loan size from $1.5 million to $4 million, and the ARC loan size from $35,000 to $50,000. The bill also temporarily allows customers to use the 504 loan guarantees to refinance existing business debt, which would help small businesses address cash flow issues.

The bill was introduced by the Ohio Senator in an effort to ease some of the financial pain currently plaguing American small business.