Moneyline Blog

Republicans Back Fannie Mae Freddie Mac Merger

As the federal government continues to work to stabilize the mortgage market, Representative Gary Miller has proposed a plan that would combine Fannie Mae and Freddie Mac into a mortgage superpower. The company would still be owned by the federal government, but it would finally be in a position to find new investors and start turning a profit again.

Now that the US Federal Reserve is considering raising interest rates and President Barack Obama has put a cap on federally backed loans, both Freddie Mac and Fannie Mae need to make considerable changes. Some of Miller’s constitutes have already already argued against the proposed merger, and Congress is yet to vote on the issue. Although Freddie Mac and Fannie Mae serve the same group of consumers, combining them into one company could cause unforeseen circumstances.

Mortgage rates are still at a historical low, and banks are now lending to applicants that have sub par credit scores. In order to keep the housing market afloat, the Feds have to continue to approve loans. With $138 billion in taxpayer funds on the table, the state of the US economy hangs on the future of Fannie Mae and Freddie Mac.

Republicans have stated time and time again that privatizing the mortgage industry will help to bolster the economy. Democrats believe that Fannie Mae and Freddie Mac simply need more time. Adding more jobs to the market and keeping interest rates low is their main focus, but the upcoming vote in Congress will decide the fate of the mortgage market.

Saab Has Trouble Paying Employees

The day before Saab employers were to be paid, the company announced that it would be withholding all paychecks. With the exception of a few high ranking executives, all of Saab’s 3,700 employees will be forced to go without their pay for an unspecified amount of time. There have been many rumors surrounding Saab and and its financial stability. The company, which used to go by the name Spyker has been approached by several Russian and Chinese automakers offering to be bought out. Now more than ever, financial experts believe that Saab will file for bankruptcy. Because the company is unable to pay its workers, production will not begin again.

Saab has not manufactured a single vehicle since April 6th. Slow sales and a stagnant auto market has forced Saab to discontinue several lines of vehicles. Unions representing Saab workers in Sweden are only giving the company a few days in which to respond to its demand for payment. If all 3,700 workers walk away, Saab will need to file for bankruptcy protection.

Saab, which was recently by US auto manufacturing company GM to Spyker has been in free fall ever since. Saabs are notoriously expensive to produce, and export fees can be high. In a market where consumers are no longer purchasing luxury brands, Saabs have been a hard sale. It is not known if Saab will be able to sell the company before union leaders in Sweden file suit for unpaid wages as well as any other applicable fines.

Business Owners Score Huge Win Against The Banking Industry

Everyday a customer uses a debit card to make a purchase, the merchants are able to charge business owners a considerable fee. This is the main reason that consumers see signs posted in their local convenience stores telling them that they cannot make purchases for less than $5 if they use their debit cards. Although this practice is widely frowned upon, it is the only reason that many stores are able to remain open. The average merchant charges business owners $.44 per each debit transaction. These fees can quickly add up when consumers are only making small purchases.

After both sides sent financial experts and lobbyists, the US Federal Reserve agreed to reduce the fees that merchants are legally permitted to charge businesses. Now, debit transaction fees can amount to no more than $.12 each. Although the ruling has no effect on the amount of money merchants are allowed to charge for credit card transactions, business owners have the option of allowing customers to pay for purchases in a manner than best suits their bottom line.

While business owners won the battle, consumers may have lost the fight. The banking industry depends on the fees that it collects from all of its clients, therefore consumers might end up paying the cost. Banks have already anticipated the changes and have upped some of their other fees in response. Returned check fees, NSFS charges, account minimums, out of network ATM transactions and even dormant account fees have been increased by several major banks.

Fannie Mae And Freddie Mac May Need Another Federal Bailout

When the federal government did not react quickly to prevent the collapse of the Lehman Brothers investment firm, the housing crisis and recession began. Now, Fannie Mae and Freddie Mac hold many of the toxic mortgage notes that other finance companies were in a hurry to get rid of. The Congressional Budget Office has already pledged to bail out Freddie Mac and Fannie Mae out for $291 billion, however, the agency also says that the companies may require even more money.

Conservatives are convinced that the out of control spending exhibited by the Obama administration has to stop now, but they are aware that the collapse of either of these two banks could have disastrous results. CBO Assistant Director Deborah Lucas says that the bail out will likely need to increase, but not by much. Fannie Mae and Freddie Mac, which are now government owned, make up the bulk of the US housing market. When a homeowner defaults on his or her mortgage, chances are that Fannie Mae Or Freddie Mac are the ones that take another hit.

Secretary of the Treasury Tim Geithner believes that the housing market will improve in the next few years, but conditions will continue to deteriorate for quite some time. With funding provided by US tax payers, Freddie Mac and Fannie Mae can continue to buy mortgage notes from other lenders and hopefully, this strategy will pay off after the financial market bounces. Until then, the US government will need to find a way to keep these companies afloat without bankrupting the nation.

Business Owners Get $300 Million Tax Break From The US House

If you have been forced to lay off any of your employees in the last year then you are in luck. A new bill headed by Governor Chris Gregoire, a democrat from Washington, will ensure that employers get a tax break on unemployment insurance. As numerous states have been continuously extending unemployment benefits continuously, employers have to pay a portion of their ex-employees unemployment benefits. Although the new bill must still be passed by the Senate, Gregoire is cautiously optimistic that small and large corporations alike will be able to get the assistance that they need in the coming weeks.

All of the $300 million earmarked in the bill will not go to employers. Job placement will be a major focal point, with an emphasis on education and training. Politicians feared that high unemployment rates would cause insurance companies to raise unemployment insurance rates. This would cause smaller companies to go out of business, and larger companies would be more inclined to set up shop overseas. As the country struggles to recover from this recession, the number of new jobs being created has been slow but steady.

Chris Gregoire think that the new tax break bill will be passed by the Senate as early as this coming Friday, but the bill faces opposition from the Republican Party. The bill is being criticized as wasteful spending, but ultimately members of the Senate will need to cast their votes according to what their constitutes believes. With election season coming up, the future of this bill be influenced by politicians that are thinking about reelection.

Amid Political Turnmoil Tunisia Banks Reopen

In Egypt, Tunisia, Lebanon, Yemen and Cote d’Ivoire, political unrest and protests are breaking out all over the Middle East and Africa. After years of repression the people of Tunisia have finally ousted President Zine El Abadine Ben Ali, but a new president has not yet been put into power. The protests in Tunisia are said to have given citizens in Yemen, Egypt and Lebanon the courage to take to the streets and voice their outrage. The new Governor of the Central Bank of Tunisia, Mustapha Kamel Nabli, is asking businesses and banks to do business as usual now that President Zine El Abadine Ben Ali has fled the country. A warrant has been issued for Ben Ali because authorities believe that he fled with money belonging to the country. In an effort to help rebuild the ailing nation, Nabli has been speaking to corporate executives and bank officials to see what can be done to keep financial problems at a minimum.

Stocks have been up and down during the last few weeks because of all of these protests. Many governments have been weakened and as a result, businesses have been forced to close. Besides ensuring that the people of Tunisia have enough food, water and supplies to help them get by, Nabli is looking towards keeping business relations with neighboring countries strong. If Tunisia can quickly recover and reestablish their government, there is a good chance that there will be no negative long term effects on their business industry.

Why Aren’t CEOs Feeling The Brunt Of The Recession

Whether you are a business owner or a job seeker fresh out of school, you know all too well how difficult it as been to survive during the recession. You may have had to take a benefit or settle for a job with reduced benefits. Perhaps you have relocated several times in the last few years chasing leads, or maybe you have even had to move in with your parents. Not surprisingly, there is a small group of people that have not had to make any concessions. You may expect that politicians and tenured federal employees have continued to get increases in pay, but CEOs, even those employed by companies that have received bailout funds, are still getting hefty bonuses. In fact, the average salary of a CEO is more than 150 times that of the average Canadian. In the US, CEOs make even more money. Certainly, successful people should make more money than an unskilled laborer, but how are high ranking corporate officers entitled to performance based incentives when the companies that they represent are under water?

When the recession first hit, a few social conscious CEOs donated their entire bonuses to charity or gave them back to their companies so that some of their subordinates could keep their jobs, but no such news was reported this past year. While people continue to have their homes foreclosed on and struggle to provide their families with the most basic of necessities, a privileged few have been able to go on with business as usual. Of course, even if all of these high paid CEOs donated their bonuses it would not have a marked effect on the economy as a whole, but it would have a psychological impact on the entire workforce. Although the average salary for high ranking corporate officers has grown exponentially in the last 20 years, eventually a salary cap will need to be put in place in order to guard against a similar financial meltdown in the future.

US Government Probing Financial Abuse By Small Businesses

Small businesses, non-profits and other agencies that have been receiving government funds for years are finally getting the attention that they really need. After going for years without being properly scrutinized, dozens of small businesses, particularly Alaskan small businesses that serve the Inuit community, are being informally investigated by the FBI and others. Although the Obama administration has been dedicated to putting aside funds to help fledgling small businesses, it appears that a relatively small portion of them have been able to suck up over $100 million in just a few years. At the crux of this conflict is the SBA, the Department of Homeland Security and a number of special interest groups that have been working in overdrive to get funds to the ‘little people,’ but it appears that they have failed to share the wealth around.

The economy has made it difficult for consumers with decent credit scores to get lines of credit, even for nominal amounts. Worse of are the start-up businesses with limited cash flow and no established credit. Many have been able to turn to the SBA for assistance, but even the Small Business Administration has not been able to force banks to relent. The Obama administration put the pressure on banks, especially those that received bail-out funds, and demanded that they begin to lend out more money to small businesses. Now, it appears that the same rules that were in place before the President made his demands are still in full force, with only certain small businesses with ties to special interest groups being able to get the bulk of the money being lent out.

Better Business Bureau Changes Grade

After getting a dose of their own medicine, the US’s most well known business watchdog agency is making changes to the way it rates businesses. In the beginning of the agency’s inception, the Better Business Bureau (BBB) gave businesses of all sizes a letter based grade after researching the company’s history, reviewing consumer reports and confirming contact information. Frequently, the BBB acts as the arbitrator between consumers and businesses that are having misunderstandings. After both sides tell the BBB their stories, the agency makes a ruling and records the ’score’ under the name of the involved business. Recently, consumers began to complain that the BBB themselves were becoming a part of the problem. Accusations were raised, alleging BBB certified businesses were getting more favorable ratings because they were paying a yearly service fee. After receiving numerous complaints about their own business practices, the BBB relented and announced that they were revising their rating system.

Consumers were correct in their assumptions that the Better Business Bureau was, in fact, giving higher letter grades to businesses that they certified. The agency’s less than ethical practices allowed companies known by the general public to be little more than scammers to regularly be scored highly, at ‘A,’ and ‘B’. In the past two years alone, the BBB has denied dozens of companies accreditation. More recently, they have lowered the grades of accredited companies with too many unresolved complaints. The company hopes that the changes will help to reassure consumers that they take business complaints seriously, and that their accreditation system was never abused or mishandled.

Chinese Economy Not Growing as Fast Now as Before

China has proven to be a very robust global power house in terms of its economy in recent years, but some experts are saying that this is set to change. That happens to look like precisely the case at this time as China’s economic growth has lost momentum for yet another consecutive quarter which means that many are celebrating, odd as that sounds. Those who were worried about China growing so rapidly that the growth would not be able to be sustained now have the relief of seeing that it does appear to be slowing to a more normalized level. The actual Gross Domestic Product of China, which is the more economically viable measure of the nation’s output according to many experts, actually grew during this time at a rate annualized at 9.6% when it was calculated for this 3rd quarter of 2010. These figures were ascertained from the National Bureau of Statistics and released to reporters.

This growth rate may seem impressive to countries that are still rebounding from the recession China managed to dodge, but the fact is that this pace is significantly less than the 11.9% growth seen just at the beginning of 2010. The good news, according to experts who monitor the Chinese economy for a range of investment capital firms, is that the economy is doing quite well in terms of how its exporters are faring, but it is also doing well for countries that supply China with goods. Additionally, prices for consumer goods and services have risen 3.6% during this time and led to higher prices for food.