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The Guide to Losing a Job and Finding a Job

Yours truly GordonWebbo today wants you to read the following article, courtesy of this site:

Losing A Job

The warning signs:

The words “layoff” and “fired” generally send an employee into rage. So companies are becoming a little more stealth with their terming. By the time you hear this warning language around the water cooler it may be too late, but at least you will know that repositioning doesn’t mean you might be getting a raise and new office.

• Smart sizing
• Right sizing
• Restructuring plan/ programming
• Planned staffing reduction
• Head-count reduction
• Reduction of force
• Global alignment/reduction of workforce
• Repositioning
• Aligning operations and resources

Figuring out if your job is at risk is like playing the lottery. It isn’t just airline industry jobs that are leaving on a jet plane. More and more jobs are headed overseas, and it isn’t just call centers and tech support that you might find being conducted by someone across an ocean or two. Even jobs that require management, creativity, and education are being outsourced. Last March, California’s Pasadena online newspaper amended their employment roster and now hires workers in India to cover the local area news. Yes, their reporters send their notes and background info to workers in India, who make copy.

Finding A Job

Career coach:

It is hard to know that you have to seek a job anytime, but it can be especially frustrating if you have just been let go from a long time position. You might not be up to par on the latest method of job searching or just need someone to help you define what makes you a valuable worker. That is where a career coach comes in. Career coaches aren’t just glorified resume writers. They can help you navigate “the job hunt.’ The career coach is there to help you with things like- prepping for the interview, how to create a “brand” for yourself, emotional aspects of job hunting, adapting to a new workplace.  However, do be careful when hiring a career coach. Make sure that the career coach has training and experience. There isn’t a governing body that certifies someone as a career coach or someone to get your $5,000 to $20,000 back if you wind up with a scam. 

Career matching sites:

If you have this tiny part of you that is actually glad that you were fired and can not imagine ever doing that job again, then maybe it is time for you to evaluate what you really want to do with your life.  profiler.com, this site uses a 320 question interest and skill survey to match you from over 60 occupations. The test uses responses from people already employed in the available fields as a metric.  vocationvacations.com, you pay $100 to $1,000 dollars for this site to arrange for you to spend several days with an employee who does whatever job you think you might be interested in.

E-portfolio/ website:

Of course, this isn’t necessary if you are applying for a job a Wal-Mart. However, for some jobs, a paper resume is just not catchy enough. Hosting sites allow you to make a digital resume or e-portfolio. You can add examples of work, sales charts, publications, recommendation letters, videos, images.

Power up your resume:

Resumes are all about results- ie: what did you do? It is also about the wording you use to describe what you did. Resume words should be strong, specific action verbs to highlight what you did. Examples of strong action words that stand out on a resume-

• Accelerated
• Accomplished
• Constructed
• Created
• Designed
• Developed
• Devised
• Established
• Expanded
• Formulated
• Generated
• Implemented
• Improved
• Initiated

• Launched
• Led
• Managed
• Operated
• Produced
• Supervised
• Tracked
• Wrote

Job fairs:

Stay away from job fairs unless you are looking for an entry-level position, a mid-level career change, or a job specific to your geographic area. Otherwise, fewer and fewer companies are sending recruiters to these venues. There are usually four to five times as many job seekers as recruiters. Dress as if you are going to an interview…not the town fair, and bring your resume. To save time, pre-register online and arrive early.

Online resources:
 
Use the clearinghouses, job boards, and job search engines to search for statistics, salary information, job postings, etc..  Some examples are-

• monster.com
• careerbuilder.com 
• job-hunt.org
• careerjournal.com
• hotjobs.yahoo.com
• Indeed.com
• simplyhired.com
• jobster.com
• jobfox.com
• oodle.com

Know How to Negotiate

Yours truly GordonWebbo today wants you to read the following article, courtesy of this site:

1.       Create a vision:  It’s essential to clearly demonstrate how this partnership or contract will benefit the other party. You’ve got to be in their world, creating a vision for them on what this does for them.

2.      Don’t believe you have all the power and avoid using terminology like “take it or leave it”: Negotiations are done in an entirely emotional arena. The human mind functions in the emotional until it makes a decision. People who are rough or aggressive or pushy often create an emotional reaction that they’re never going to be able to overcome.

3.      Know what you want to get out of the deal and make sure it’s achievable: Make sure that you know what you want, that’s a critical piece to the puzzle.

4.      Don’t compromise beforehand: Never ever go into a meeting with a fallback position. That’s the worst thing that you can do.

5.      Invest in a skill: Don’t rely only on your natural because negotiation really is a science. Read a book, sign up for a course and look at each negotiation experience as an opportunity to learn and improve.

How to be a Good Salesman

Yours truly GordonWebbo today wants you to read the following article, courtesy of this site:

People don’t care how much you know until they see how much you care about them and their goals. You have to get what you sell out of your mind and start focusing on what your customers need. What are they trying to accomplish? What do they get fired up about? Once you start listening and learning about them, the trust starts to build and the sales cycle becomes much easier to navigate. Here are three ways to stay focused.

1.       Forget what you sell:  When you first meet a prospect, start thinking of questions that will uncover his hot buttons. What does that person do, and does he have goals for the next year or three years? What are his top three priorities or objectives? What challenges and changes does he face in his industry? How can you help him generate more business? Once you focus on the customer, it becomes easier to think of ways your product or service can fit into their overall goals. If you realize right away that it’s not a good fit, you can walk away and work on other, more qualified prospects.

2.      Go beyond the customer’s general business needs:  There are instances wherein some business owners tend to do something helpful for the prospect that had nothing to do with their business. Maybe they helped them get one of their kids an internship at a client’s business, or perhaps they referred them to a great builder because they were listening when the customer mentioned she was adding on to her house. This breaks down barriers and opens customers up to looking to you as a resource. That’s when good things start to happen.

3.      Maintain your passion for learning about the people you serve:  How well do you know your prospects and customers? How much more business could you get if you spent more time uncovering their inner workings? When I take a tour of a customer’s business, I interview people in various departments and research who their customers are; this always pays off. Your ability to serve is enhanced by knowledge. When you ask a customer for resources in their organization that you can use to understand the bigger picture, your relationship and the trust with your customer improves, you’re much more aware of their needs and how best to serve them, and the results you bring them will provide you with repeat business and referrals.

Fed To Keep Bank Oversight

Here are some business news, courtesy of HuffingtonPost.com:

The Federal Reserve has won its battle to maintain singular regulatory oversight of America’s major financial institutions, the Financial Times reported Sunday night.

Senate Banking Committee Chairman Chris Dodd (D-Conn.) gave up the fight for a new super-regulator over the weekend, and will propose financial reforms this week that leave the Fed in control of big banks and the rest of the major Wall Street players, sources told the FT.

The parties allegedly responsible for the Fed’s victory are easy to guess. The FT’s sources point the finger at Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke, who is unsurprisingly speaking up more loudly now that he’s won reconfirmation:

“Until, frankly, chairman [Ben] Bernanke was confirmed I think the Fed’s hands were kind of tied,” said a banking industry figure who has held discussions with one of those [regional] Fed presidents. “Now he is chairman for the next four years … the Fed has been able to be more aggressive in fighting for its authority.”

Dan Dorfman: Too Many Lurking Nightmares

Here are some business news, courtesy of HuffingtonPost.com:

Myths die fast on Wall Street. If you follow enough of them, like the dot.com craze of the early 2000s, or the 2003-2006 real estate bubble, you can easily follow them into the poorhouse. Many, in fact, have done just that.

Now, there’s a new one: the jobs myth, so I hear from Olivier Garret, the CEO of Casey Research, an economic and investing consulting firm out of Stowe, VT. That myth got added fuel from Friday’s employment report, which showed that February job losses totaled just 36,000, a big drop from the early stages of the recession when jobs were shrinking at the rate of 750,000 a month.

Actually, some economists say, had it not been for February’s snowstorms that pounded many areas of the nation, we might well have seen a six-figure employment gain. To many investors — and here’s what Garret says is the myth — namely, that last month’s jobs report was further evidence that the end of the employment mess is in its final stages, that the road to economic recovery is clearly at hand.

The New York Times, for one, buys this rosy view, declaring in a lead story in its Saturday edition that last month’s flat jobless rate of 9.7%, the same as it was in January, is a sign the worst of the slump is past. That may be so, provided, of course:

– You’re not one of the estimated 29 million Americans looking for work or one of the 8.4 million persons who lost their jobs since the recession began.

– You’re not one of the financially strapped homeowners who owe more on their houses than they’re worth (about 25% of the household population), a growing number of whom who are simply telling the banks to go to hell by walking away from their homes and renting.

– You’re able to convince yourself that the surging number of vacant offices, retail outlets and restaurants that are located within walking distance of the New York Times‘ Manhattan offices are a mirage.

–You’re not interested in borrowing any money.

In response to Friday’s jobs news, many eager investors went on a spirited buying spree, in the process driving up the Dow 122 points. If you were one of the buyers, you goofed because you bought a pig in the poke. Or simply seen by Garret, there are too many looming nightmares out there..

For starters, contrary to general thinking, he sees a slowing, not a growing economy, with 2010 GDP flat to down and the unemployment rate at year end in excess of 11%. What’s more, he views the market as currently overvalued and sees a number of prospective crises — chief among them higher interest rates, severe losses in commercial real estate which would play havoc with bank balance sheets and spreading sovereign debt woes — any one of which, he believes, could knock stock prices down about 25% from current levels.

Of particular concern, Garret looks for continued deterioration in the construction and real estate sectors and views the regional banks as especially vulnerable in commercial real estate, which he rates a multi-trillion-dollar problem that could affect us all. In this case, he says, the public will rebel at the idea of the government bailing out the banks again, “and there will be no easy solution to this problem.” Garret figures these assets on which banks hold loans are down about 25% from their acquisition costs between 2004 and 2007.

What about the plunging number of layoffs? Isn’t that an economic plus? Garret is skeptical of the latest jobless count, which is up 17% from a year ago. One reason is his belief the numbers were inflated by the start of the hiring — which began about 2.5 months ago — of 1.4 million temporary workers to conduct the 2010 census. He notes that’s roughly three times the 450,000-500,000 workers hired to conduct the 2000 census. With new technology, he observes, he would have expected greater efficiency and the hiring of less people, not more people.

“I think there may be a lot of game playing right now by the Administration to make things look good,” he says. “It’s the beauty of statistics and it could be a deliberate attempt by the government to distort them in an election year.”

The key sectors of the economy that have provided growth, such as real estate, construction, retailing and services, as Garret sees it, are now in the dumps. and he expects them to remain there for quite a while. Toss in the inability of states and municipalities to hire, factor in the likelihood they’ll look to increasingly cut costs and that, he observes, will worsen unemployment.

Making matters worse, Garret sees present modest inflation ballooning into a 4% to 5% rate by year end, spurred by money printing and government stimulus and spending. “This year, we’re going to see an end to the deflation that we had in 2008 and 2009,” he says.

Given his bleak outlook, Garret figures the stock market is poised for a major retreat. As such, he feels that any long term investor who buys a stock now is buying at a high point. He notes that he personally has unloaded the majority of stocks he owned and is very heavy in cash and precious metals. In particular, he likes silver and favors Silver Wheaton, a Canadian company traded on the Big Board (SLW) which acquires and resells silver.

“It ain’t over till it’s over,” Yogi Berra once said. Garret agrees and that’s precisely what he’s saying when it comes to the hefty deterioration in the economy, in the jobs market and in stock prices.

What do think? E-mail me at Dandordan@aol.com

Garrett Johnson: The Biggest Financial Bailout of Them All

Here are some business news, courtesy of HuffingtonPost.com:

Let me take you back to Christmas Eve, 2009. It was a time to wrap gifts for loved-ones. That’s how the Obama Administration felt about the financial industry when it lifted all caps in emergency bailout money to Fannie Mae and Freddie Mac. That means the taxpayer was on the hook for all losses at these two mortgage giants no matter how large the losses. The move caused a slight stir, but never got the attention of the American public because the announcement was timed to coincide with the peak season of distraction. And so it was forgotten … but not by Fannie and Freddie.

On eight maids a milking day, also known as New Year’s Day, Fannie Mae took advantage of this generosity.

“Effective Jan. 1, 2010, Fannie Mae brought an additional $2.4 trillion of its guaranty book of business on to the balance sheet under SFAS 166/167. Therefore, Fannie Mae expects to reflect approximately 18 million loans on its books compared with approximately two million loans as of Dec. 31, 2009. Management estimates that the cumulative effect of adopting FAS 166/167 will boost its net worth by $2 billion to $4 billion in its first-quarter 2010 results.”

Stop! Hold the phone. What this statement indicates is that Fannie Mae, the largest mortgage company in the entire world, was holding eight times the amount of mortgages off-book than it had on-book.

Thus, despite the fact that it is losing tens of billions of dollars every quarter, and has borrowed $76.2 billion so far, it was actually hiding the vast majority of its worst performing mortgages off-book. The only reason you move assets off-book is if they are illiquid. And that’s not even taking into account Freddie Mac, which has borrowed another $50 Billion from the taxpayers so far.

How bad are those assets? It’s hard to say for certain, but after moving $2.4 Trillion dollars worth of assets, the net worth of Fannie Mae only improved by $2 Billion, or 0.083% of the assets.

Just how much is the taxpayer is on the hook for? Well, the former caps were limited to $200 Billion a piece, which the Treasury decided just wasn’t enough. So if the losses are north of $400 Billion then we are entering the range of TARP bailout, but with almost none of the press coverage. Or to put it another way: “The taxpayer bailout of Fannie Mae and Freddie Mac will almost certainly be the most expensive of the financial crisis…” There has been at least one attempt at estimating the losses.

“The Congressional Budget Office estimates that Fannie and Freddie added $291 billion to the federal deficit in 2009 and will cost an additional $389 billion to run over the next ten years. However, Fannie and Freddie are currently considered “off budget” meaning the actual cost to run these agencies is not considered by the Office of Management and Budget.”

This article contains two nuggets of information. For of all, we are looking at around $600 Billion in taxpayer bailout, assuming the market doesn’t take another sharp downturn. That’s nothing to sneeze at, and it certainly deserves a lot more press coverage than it has gotten. The second nugget is that all these losses are consider off-budget. So what we are talking about is moving hundreds of billions of dollars of bad assets from off-budget Fannie Mae to off-budget Treasury Department.

This accounting gimmick has disturbing parallels to another contemporary crisis. “It is the same sort of financial shell game that has brought governments like Greece to a crisis point. Hiding your debts just leads to a bigger day of financial reckoning down the road,” said Representative Spencer Bachus. Bachus may be a Republican who supported fighting two wars off-budget, but in this case he is 100% correct. Hiding debts off-budget is exactly what broke the Greek government.

The Republicans are pushing to have the money put on-budget which would, of course, immediately blow out the federal borrowing limits. After weeks of pressing by the Republicans, the Obama Administration has finally agreed to consider it.

A carefully designed disaster

The collapse of Fannie and Freddie didn’t start recently, and didn’t happen by accident. It was a calculated decision by the Bush Administration to try to extend and pretend the housing crisis into the next administration. It all started in <a href=”http://www.nytimes.com/2008/03/20/business/20fannie.html?partner=rssnyt&emc=rss”> March 2008:

“By reducing the extra cushion of capital the two companies have been required to hold since 2004, the regulator, the Office of Federal Housing Enterprise Oversight, is enabling the companies to invest $200 billion more in home loans. In essence, the companies are being allowed to take billions of dollars that had been used as a reserve against possible further losses and invest that money now in the housing market.
But critics said that if the housing market continued to decline, the move could put the two companies on a less sure footing and ultimately require a huge taxpayer bailout.
‘I think it’s very dangerous and it’s a sign that people are very frightened,’ said Thomas H. Stanton, an expert on the two companies who teaches a course on credit risk at Johns Hopkins University. ‘At a time in which finance companies are holding questionable assets and facing losses, regulators typically require more capital, not less.’”

On top of that, the size of the mortgages that Fannie and Freddie were allowed to buy was increased, from $417,000 to $729,750. This change happened in the face of collapsing asset prices.

Homes worth nearly 3/4 of a million dollars are not part of the original reasons why Fannie Mae and Freddie Mac were created, nor should they be. People that can afford homes of that price do not need public subsidies, nor should they get it.

“Now, thanks to Congress, junk bond investors will be able to pawn off their bad debt to Fannie and Freddie, instead of suing the big investment houses for ripping them off. This shift will certainly doom Fannie Mae and Freddie Mac, so don’t be surprised if we, the taxpayers, have to bail out poor Fannie and Freddie - to the tune of more than $1 trillion.”

It was a risky gamble, and it failed. Spectacularly.The balance sheet of Fannie and Freddie that was cut 6 months earlier was now in danger of collapse.It seems that the thin layer of cash reserves left over after the Bush Administration cut it 6 months earlier, wasn’t enough to cover their massive losses. Yet the financial media failed to note that the Bush Administration was partly responsible for this enormous calamity.

But the Bush Administration was going to make it right. They were going to backstop Fannie and Freddie and calm investors … at least that was the plan.

“The powers Paulson won from Congress last month enabling a government rescue of Freddie Mac and Fannie Mae — authority he likened to a weapon whose mere existence made it unlikely it would have to be fired — may end up making a bailout more likely, say analysts and investors.

They say the threat of government action is creating uncertainty that is raising the companies’ borrowing costs and increasing the odds Fannie and Freddie will need taxpayer funding.”

The problem with the bailout plan is that Paulson is the implied threat of a de facto nationalization of the two mortgage giants. This would leave existing shareholders with pennies on the dollar. Thus the bailout plan that Bush and Paulson assured us they would never have to do, caused stock prices of Fannie and Freddie to crater. This reduced their capital reserves even further, increasing the chances of a taxpayer bailout.

On the other side of the ledger, the Bush Administration also changed the rules in April 2008 to get the FHA more involved in the mortgage industry. According to James Bianco, “The government was using the Federal Home Loan Banks as a way to bail out the banking system early on.”

One forgotten scandal was from late September 2008, the FHLB of Atlanta loaned Countrywide Financial $51 Billion in exchange for questionable mortgages as collateral. Countrywide went under shortly afterward.

The decision to increase the FHA’s exposure to a collapsing housing market is now meeting its limits.

“The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market’s recovery.

About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency’s figures show.

If the trend continues and the FHA’s cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses — a first for the agency, which has always used the fees it charges borrowers to pay for its losses.

Adding to the trouble was a now-defunct FHA program that enabled sellers to cover the down payments of buyers. This meant many borrowers had no skin in the game and were more likely to walk away at early signs of trouble. The program resulted in excessive defaults before it was ended in late 2008, and it is projected to cost FHA an additional $10.5 billion in losses, Stevens said.

The program in question was another Bush Administration idea to bail out the housing industry to the benefit of Wall Street.

Meet the New Boss

After inheriting this disastrous legacy from the Bush Administration, you could only assume that the Obama Administration would do things drastically different, right?

“Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases, according to a notice yesterday to lenders posted on the Washington-based company’s Web site. The changes apply to loans that the company owns or guarantees.”

Let me translate for you. “Drop credit-score requirements” equals subprime. “Reduce income-documentation standards” equals liar loans.

And it just keeps getting better. The Obama Administration plans to subsidize at-risk borrowers. Has anyone bothered to ask “How long?” Meanwhile the Fed is buying up all those subprime, liar-loans that Fannie and Freddie are pumping out.

On top of it, the next part of Obama’s plan had a ring of familiarity to it: “The loan-to-value (LTV) limit on mortgages Fannie Mae and Freddie Mac will be able to refinance as part of Obama’s Homeowner Affordability and Stability Plan may go higher than the original 105 percent, according to National Mortgage News.” Bush’s disastrous legacy was to at first ignore the bubble, then to try to keep it inflated until he was out of office by using Fannie and Freddie. Obama’s plan is to use taxpayer money to subsidize sub-prime, liar-loans at more than 105% of the home’s value with Fannie and Freddie as a conduit. Thus attempting to recreate all the properties of the bubble that got us into trouble in the first place.

Seriously. Is this the best that Washington can do? Is our leadership really this bankrupt of ideas?

One other item to note is that when the Obama Administration lifted all bailout caps, they also promised that plans on reforming Fannie and Freddie would be drawn up by February. Last week, that <a href=”http://www.boston.com/business/articles/2010/02/25/fannie_freddie_overhaul_to_wait/”> promise was broken.

“The Obama administration will wait until 2011 to propose an overhaul of mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner said yesterday, arguing that he wanted to put some distance between a new system and what he called ‘the worst housing crisis in generations.’

‘We can’t do everything right away,” he said.”

We don’t expect you to do “everything” Timmy. We only expect you to do your job, which includes coming up with plans to reform these companies within the 13 months that you previously promised.

Meanwhile, Fannie and Freddie continue to be traded on the stock exchange, hand out dividends to stock holders (while asking for taxpayer bailouts), and pay their CEOs as much as $6 million a year.

The Dr. Pepper Method for Managing Social Media

Yours truly GordonWebbo today wants you to read the following article, courtesy of this site:

Lloyd Chapman: Court Order Could Stop Obama Administration from Destroying Incriminating Data

Here are some business news, courtesy of HuffingtonPost.com:

Court Order Could Halt Destruction of Incriminating Contracting Data

On March 12, 2010, the Obama Administration intends to move forward with a plan that could destroy years of incriminating contracting data. The General Services Administration (GSA) plans to eliminate the socio-economic field, “SmallbusinessFlag,” on all historical and future contracting data. In the past, the Government Accountability Office (GAO), the Small business Administration Office of Inspector General (SBA IG) and other agencies have used the small business flag to uncover large businesses that have misrepresented themselves as small businesses to illegally receive federal small business contracts.

Since 2003, twenty-five federal investigations have found that Fortune 500 firms and thousands of other large businesses have received billions of dollars a month in federal contracts earmarked for small businesses. (http://www.asbl.com/documentlibrary.html)

In March of 2005, the SBA Office of Inspector General (IG) released Report 5-15 which stated, “One of the most important challenges facing the Small business Administration and the entire Federal government today is that large businesses are receiving small business procurement awards and agencies are receiving credit for these awards.” (http://www.asbl.com/documents/05-15.pdf)

In Report 5-16, the SBA IG reported that large businesses had committed fraud by falsely claiming to be small businesses by making “false certifications and, “improper certifications.” (http://www.asbl.com/documents/05-16.pdf) Another investigation from the SBA Office of Advocacy found large businesses had received federal small business contracts fraudulently through what they referred to as “vendor deception.” (http://www.asbl.com/documents/eagkeeye_report%202002.pdf)

The elimination of the small business flag will preclude any further investigations into the diversion of federal small business contracts to large corporations.

The American Small business League (ASBL) is preparing to file a preliminary injunction against the GSA to halt the destruction of the historical contracting data. The ASBL expects to file the order on Monday, March 8, 2010.

The ASBL was preparing to use the data in the small business flag field to launch civil and criminal action against large businesses that had received federal small business contracts fraudulently.

There is absolutely no reason to destroy historical contracting data. It’s no coincidence that the GSA and the SBA have tried to withhold evidence in the past that would prove that fortune 500 firms have received federal small business contracts. This is just the latest attempt by the government to reduce transparency and cover-up the fact that large businesses have received billions of dollars a month in federal small business contracts. We are not going to let them do it.

Martin Berg: Innovation ain’t what it used to be

Here are some business news, courtesy of HuffingtonPost.com:

When Wall Street wants to launch the big intellectual artillery in the argument against strong financial reform, they haul out innovation.
Regulation will strangle innovation, and we can’t have that, the financial titans contend. Innovation is the strength of America, without it we will lose our competitiveness, yadda yadda yadda.
But over the past several decades financial innovation has focused too much on mathematical models and not enough on a vision of improving the country and people’s lives.
Selling mortgages with exploding balloon payments doesn’t qualify as innovation; it’s a cruel trap.
The recent version of financial innovation, complex investments and gambling vehicles like derivatives and credit default swaps, no doubt made many bankers wildly rich, but these “weapons of mass of financial destruction,” as Warren Buffet labeled them back in 2003, also planted hidden, little-understood land mines of risk helped create the financial crisis when they blew up.
It’s no longer just the pitchforks that are questioning the value of these innovations. Paul Volcker, the former Fed chief born again as the lone voice for meaningful financial reform in the Obama administration recently said the only modern innovation that brought real benefit to people was the ATM card.
And the financing of innovation in the rest of the economy isn’t faring any better.
A couple of top economists, including a Nobel Prize winner, weighed in recently with a scathing view of the financial system in the Harvard business Review.
Edmund S. Phelps (the 2006 economics Nobel winner) and Leo M. Tilman, both of Columbia University, wrote in the January issue [no link]: “The current financial system is choking off funds for innovation…Outdated accounting conventions and inadequate disclosures make it impossible to evaluate the business models and risks of financial firms. Excessive resources are allocated to proprietary trading, to lending to overleveraged consumers, to regulatory arbitrage and to low-value-added financial engineering. Financing the development of innovation takes a back seat.”
To finance opportunities in clean and nanotechnology that the current financial system is ill equipped to serve, the authors propose a government-sponsored bank of innovation.
The bank bailouts have no doubt soured people on the notion of the government in the banking business and rightly so.
But this hasn’t always been the case.
It’s worth remembering that the greatest financial innovation of the past 70 years was a government-sponsored program called the G.I. bill.
I heard about the G.I. bill growing up because it financed my dad’s education after he returned from World War II. Many others got help with home loans.
Ed Humes, an author and former Pulitzer Prize winning investigative newspaper reporter, has written a splendid account of the G.I. bill, “Over Here.” It captures how individual lives as well as the entire nation was shaped by the ambitious program.
The idea of a massive program to help veterans was first articulated by FDR, in part to prevent a reoccurrence of the bitter 1932 Bonus March, when angry World War I veterans and their families descended on Washington, D.C. to demand promised benefits. The government response was a fiasco - soldiers were ordered to fire on the persistent veterans. Nearly 10,000 were driven from the veterans’ encampment; two babies died. The resulting stink helped Roosevelt defeat the sitting president, Herbert Hoover.
I spoke with Humes about the history behind the G.I. bill.
The proposal faced stiff opposition from the financial industry and the education community.
“They argued that the average Joe returning from World War II was capable of being neither a college student nor a homeowner. The bill was basically rammed through over their objections, because of a combination of altruism and fear.”
It didn’t hurt that the bill was created by the American Legion, a conservative veterans’ group.
The G.I. bill was an overwhelming success, not only for the veterans but the college system, the building industry (it helped create the suburbs) the economy at large and the banking industry as well (it created the modern mortgage industry). “For every dollar spent,” Humes said, “seven was returned to the economy.”
Humes draws a direct connection from the G.I. bill to today’s bailouts. “They had a dead housing market, it had never recovered from the Depression. But did they throw money at the banks? No. They encouraged people to buy homes.”
The G.I. bill shows what’s possible when those who are governing possess large vision, heart, will, persistence - and fear. No mathematical model can come close.

White House Sends Volcker Rule To Congress

Here are some business news, courtesy of HuffingtonPost.com:

WASHINGTON (AP) — The Obama administration waded into negotiations over Wall Street regulations Wednesday, calling for limits on the size of financial institutions and insisting that consumer protections remain a central objective of legislative attempts to rein in the industry.

In the Senate, talks continued on how to create a consumer protection entity. Republicans pressing for a watered-down consumer agency even as they voiced optimism that they could reach a deal with Senate Banking Committee Chairman Chris Dodd, a Connecticut Democrat, within a week.

The Treasury Department circulated proposed legislation that would prevent commercial banks from carrying out high-risk trades and that would restrict the size of financial firms to holdings no greater than 10 percent of the entire financial industry’s liabilities. That restriction would apply only to firms that grow through a merger or an acquisition.

Consumer protections and doing away with financial firms deemed too big to fail are two of the key elements of the legislative efforts to overhaul the rules that govern Wall Street and prevent a recurrence of the 2008 financial crisis. In reiterating its points, the administration was making certain its views were being heard in the Senate at a sensitive time in negotiations between Dodd and Sen. Bob Corker, R-Tenn.

The plan reiterated a proposal that the administration staked out in January. The measure is known as the Volcker Rule, after former Federal Reserve Chairman Paul Volcker, a vigorous proponent of limiting proprietary trading by commercial banks. Volcker has been advising the Obama administration.

Corker questioned the administration’s timing. “It is not helpful to the process for the administration to be putting out positions right now on financial regs, especially as it relates to the Volcker rule,” he told The Associated Press. “It’s just not helpful.”

Treasury waited until after the markets closed Wednesday to release details of the Volcker plan. When it announced the outline of its proposal in January, the administration spooked U.S. markets, contributing to several days of falling stock prices.

Treasury Secretary Timothy Geithner and White House senior adviser Valerie Jarrett met with about 30 consumer and labor advocates to assure them that the administration was not backing away from demanding strong consumer protections in the bill.

The overhaul plan the administration put forward last year called for a freestanding Consumer Financial Protection Agency. The legislation that passed the House included such an agency although many in the industry oppose it as another layer of regulation.

Corker and Dodd had proposed housing an autonomous consumer agency inside the Federal Reserve, an idea that has been panned by liberal groups. It also received a skeptical reception from other Republicans and Democrats on the Banking Committee, including the top Republican on the panel, Sen. Richard Shelby of Alabama.

House Financial Services Committee Chairman Barney Frank, D-Mass., called the proposal “a joke.” Many consumer groups believe the central bank did a poor job in protecting consumers in the lead up to the financial crisis.

On Wednesday, however, Shelby and Corker offered Dodd a revised plan with a consumer agency that had less independence to write its own regulations. Details were not available, but the offer came after Shelby, Corker and two other banking committee members — Sens. Judd Gregg and Mike Crapo — met with Senate Republican leader Mitch McConnell on Tuesday evening to decide how to proceed. Gregg has insisted that any consumer agency cannot be autonomous, a key condition for Dodd.

“The right concerns that Republicans have are being addressed, and those on the left are being addressed,” Corker said. “And we have a chance to be in a good place with this.”

Geithner insisted on an independent entity in his meeting with consumer advocates. “That means a dedicated authority with the independence and capacity it needs to be accountable,” the Treasury Department said in a statement.

Associated Press writer Martin Crutsinger contributed to this report.