Trouble ahead for community banks
By Rob Cox, breakingviews.comDecember 29, 2009: 3:03 PM ET
(breakingviews.com) -- During the recent financial crisis it appeared that America's small banks could do no wrong. President Barack Obama said the world would have been better off if the entire financial system had been more like them.
Legislators tried to ease their burden, often at the expense of their bigger banking competitors. Last week, community bankers even won a meeting with the president to try to convince him to reduce red tape on their part of the industry.
But while it's true that the nation's 8,000 small banks mostly managed to avoid the excesses of their mega rivals and are healthier than big ones, they're not yet out of the woods.
A majority of the 140 banks that have failed were small -- and most on regulators' watch lists have less than $10 billion in assets. As Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and other problem hulks of the financial firmament have shored up their balance sheets and exited the government's bailout scheme, the small bank fraternity could see more pain ahead.
Take net charge-offs as a percentage of average loans, a measure of the relative health of loan portfolios. For banks with less than $5 billion of assets, these amounted to just 0.25% in the third quarter, compared to 1.53% at larger banks, according to SNL Financial. But the percentage actually declined somewhat from the second quarter for the big banks and rose by a quarter for the small ones.
One of the biggest problems smaller banks face is that they generally have higher concentrations of their loan books in commercial real estate, a sector that investors expect has further to fall. That could result in greater asset writedowns for this heretofore healthier corner of the banking world. Losses on real estate could lead to more failures and easily stymie lending, particularly to smaller businesses.
Though they account for less than 12% of all American banking assets, financial institutions with less than $1 billion of assets make nearly a third of all loans of $1 million or less to companies, according to the Independent Community Bankers Association, eight of whose members met President Obama last week. Less lending from such banks could have powerful knock-on effects for an economy struggling to rebound.
For now, America's smaller banks have more capital, make more on their assets, and have fewer problem loans. But as defaults in the commercial real estate arena begin in earnest next year -- and consumers continue to feel the economy's pinch -- the relative fortunes of the small fry and leviathans of finance will almost certainly converge.
Wednesday, December 30, 2009
Tuesday, December 29, 2009
Making Money with Social Media
Making Money with Social Media
Do blogs and tweets help a company's bottom line? An Austin-based startup thinks it has the answer.
By Erika Jonietz http://newscri.be/link/976105
In retrospect, 2009 may be viewed as the year "social media" came of age: Facebook passed 350 million active users, Oprah made Twitter mainstream, and LinkedIn introduced a service to help recruiting agencies search the site for job candidates. But using microblogs, photoblogs, user-generated content, and even traditional blogs to interact with customers takes time and money, and some companies still question whether all that effort is doing them any good. So how does a company not only measure the results of its social media efforts but also effectively manage them?
Early in December, Social Agency, a five-person startup based in Austin, TX, launched a Web-based software package called Spredfast that helps companies manage their social media campaigns. The software not only measures audience size and engagement but also allows coordinated planning and automated posting across multiple social media platforms.
Specifically, the Web-based software counts how many people view a company's Twitter, LinkedIn, Facebook, YouTube, and Flickr updates, as well as posts managed by several popular blogging platforms, such as Moveable Type, WordPress, Blogger, Lotus Live, and Drupal. It also measures how the audience is interacting with all this content--for instance, how much they are commenting on posts, clicking on links, or retweeting updates.
The goal, says Social Agency cofounder Scott McCaskill, is to let companies see "whether all the time put into doing those things is really helping build brand or product awareness, which kinds of content are most successful, what days and even times of day result in the most traffic or new followers/friends."
A free version allows a company to manage a single identity or "voice" across each platform. Paid versions let companies coordinate multiple users and voices, and provide a longer data history. McCaskill says the software has had the most success with units of large companies and marketing agencies.
Spredfast gives companies a way to plan and manage content deployment. For instance, users can write blog entries, tweets, or Facebook updates ahead of time and then schedule when they will be posted. A store that might offer an online coupon code or one-day sale could, with Spredfast, have Twitter push that code out several times a day to increase the number of site visitors. The software's metrics, McCaskill says, let marketers figure out the best times to post updates. Spredfast also makes it easy for them to test different strategies.
The company launched a year ago as a maker of custom Facebook applications. When Facebook redesigned its home page, says McCaskill, Social Agency's business model was effectively torpedoed. As part of its sales strategy, the company had spent a lot of time helping clients plan their social media strategies. So the founders retooled and used their expertise to start building Spredfast about nine months ago. The software launched in private beta in September, public beta in October, and had its "official" launch on December 2.
Social Agency plans to introduce a feature by the end of January that will help users design a social media campaign based on their objectives. McCaskill says that Spredfast will most likely present users with a list of common marketing goals that they can check off. The software will suggest a template for a campaign based on what's worked best for clients with similar goals.
Do blogs and tweets help a company's bottom line? An Austin-based startup thinks it has the answer.
By Erika Jonietz http://newscri.be/link/976105
In retrospect, 2009 may be viewed as the year "social media" came of age: Facebook passed 350 million active users, Oprah made Twitter mainstream, and LinkedIn introduced a service to help recruiting agencies search the site for job candidates. But using microblogs, photoblogs, user-generated content, and even traditional blogs to interact with customers takes time and money, and some companies still question whether all that effort is doing them any good. So how does a company not only measure the results of its social media efforts but also effectively manage them?
Early in December, Social Agency, a five-person startup based in Austin, TX, launched a Web-based software package called Spredfast that helps companies manage their social media campaigns. The software not only measures audience size and engagement but also allows coordinated planning and automated posting across multiple social media platforms.
Specifically, the Web-based software counts how many people view a company's Twitter, LinkedIn, Facebook, YouTube, and Flickr updates, as well as posts managed by several popular blogging platforms, such as Moveable Type, WordPress, Blogger, Lotus Live, and Drupal. It also measures how the audience is interacting with all this content--for instance, how much they are commenting on posts, clicking on links, or retweeting updates.
The goal, says Social Agency cofounder Scott McCaskill, is to let companies see "whether all the time put into doing those things is really helping build brand or product awareness, which kinds of content are most successful, what days and even times of day result in the most traffic or new followers/friends."
A free version allows a company to manage a single identity or "voice" across each platform. Paid versions let companies coordinate multiple users and voices, and provide a longer data history. McCaskill says the software has had the most success with units of large companies and marketing agencies.
Spredfast gives companies a way to plan and manage content deployment. For instance, users can write blog entries, tweets, or Facebook updates ahead of time and then schedule when they will be posted. A store that might offer an online coupon code or one-day sale could, with Spredfast, have Twitter push that code out several times a day to increase the number of site visitors. The software's metrics, McCaskill says, let marketers figure out the best times to post updates. Spredfast also makes it easy for them to test different strategies.
The company launched a year ago as a maker of custom Facebook applications. When Facebook redesigned its home page, says McCaskill, Social Agency's business model was effectively torpedoed. As part of its sales strategy, the company had spent a lot of time helping clients plan their social media strategies. So the founders retooled and used their expertise to start building Spredfast about nine months ago. The software launched in private beta in September, public beta in October, and had its "official" launch on December 2.
Social Agency plans to introduce a feature by the end of January that will help users design a social media campaign based on their objectives. McCaskill says that Spredfast will most likely present users with a list of common marketing goals that they can check off. The software will suggest a template for a campaign based on what's worked best for clients with similar goals.
The Decade of Big Zero
The Big Zero
By PAUL KRUGMAN
Published: December 27, 2009
Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.
It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. “If you ask why the American financial system succeeds,” he said, “at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.” And he went on to declare that there is “an ongoing process that really is what makes our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system.
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.
By PAUL KRUGMAN
Published: December 27, 2009
Maybe we knew, at some unconscious, instinctive level, that it would be an era best forgotten. Whatever the reason, we got through the first decade of the new millennium without ever agreeing on what to call it. The aughts? The naughties? Whatever. (Yes, I know that strictly speaking the millennium didn’t begin until 2001. Do we really care?)
But from an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.
It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.
It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.
It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.
Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.
So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.
For as the decade began, there was an overwhelming sense of economic triumphalism in America’s business and political establishments, a belief that we — more than anyone else in the world — knew what we were doing.
Let me quote from a speech that Lawrence Summers, then deputy Treasury secretary (and now the Obama administration’s top economist), gave in 1999. “If you ask why the American financial system succeeds,” he said, “at least my reading of the history would be that there is no innovation more important than that of generally accepted accounting principles: it means that every investor gets to see information presented on a comparable basis; that there is discipline on company managements in the way they report and monitor their activities.” And he went on to declare that there is “an ongoing process that really is what makes our capital market work and work as stably as it does.”
So here’s what Mr. Summers — and, to be fair, just about everyone in a policy-making position at the time — believed in 1999: America has honest corporate accounting; this lets investors make good decisions, and also forces management to behave responsibly; and the result is a stable, well-functioning financial system.
What percentage of all this turned out to be true? Zero.
What was truly impressive about the decade past, however, was our unwillingness, as a nation, to learn from our mistakes.
Even as the dot-com bubble deflated, credulous bankers and investors began inflating a new bubble in housing. Even after famous, admired companies like Enron and WorldCom were revealed to have been Potemkin corporations with facades built out of creative accounting, analysts and investors believed banks’ claims about their own financial strength and bought into the hype about investments they didn’t understand. Even after triggering a global economic collapse, and having to be rescued at taxpayers’ expense, bankers wasted no time going right back to the culture of giant bonuses and excessive leverage.
Then there are the politicians. Even now, it’s hard to get Democrats, President Obama included, to deliver a full-throated critique of the practices that got us into the mess we’re in. And as for the Republicans: now that their policies of tax cuts and deregulation have led us into an economic quagmire, their prescription for recovery is — tax cuts and deregulation.
So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better? Stay tuned. Oh, and happy New Year.
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