Effingham Talk

Archive for January, 2012

The Institute of International
Finance said net private capital inflows to emerging economies
will fall 18 percent to $746 billion this year as the European
debt crisis erodes the ability of banks to provide funding.

The flow of investment in emerging markets was an estimated
$910 billion in 2011 and is projected to rise to $893 billion in
2013, the Washington-based global lobby group for financial
companies said in a statement today.

Bank lending showed the largest decline and the IIF
estimates net flows from banks to emerging markets will be
“quite weak” for the whole year, Charles Dallara, the IIF’s
managing director, said at a meeting in Zurich today.

“The crisis is contributing to bank deleveraging, which is
damaging the prospects for both growth in Europe and for capital
flows to emerging markets,” he said.

Funding conditions deteriorated the most in emerging
European countries, including Hungary and the Czech Republic,
according to the institute. In a survey of banks in those
countries, 63 percent said credit standards had tightened
because of financial strains in the euro area.

The European Banking Authority’s new capital rules
requiring euro-area banks to achieve a 9 percent core Tier 1
capital ratio by the middle of this year is triggering asset
reductions.

“In an environment where raising new capital was extremely
expensive, euro-area banks responded by accelerating asset
shedding, especially in foreign markets,” IIF Chief Economist
Philip Suttle said.

The IIF said it expects net commercial bank flows to
emerging markets to drop to $38 billion this year from $137
billion in 2011.

To contact the reporter on this story:
Carolyn Bandel in Zurich at
cbandel@bloomberg.net

To contact the editor responsible for this story:
Frank Connelly at
fconnelly@bloomberg.net

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Weve been hearing about increased confidence in small business and, if youre like me, you want to believe it - but youre suspicious, too.  How do we really know if things are getting better?  How do we really know if lending is beginning to open up for small businesses?  I dont think anyone is claiming that small business loans are becoming easy to obtain, but there are good signs that we are headed in the right direction and that the availability of funds are growing for main street.

Before we talk about the good news lets do a quick history lesson about how we got here.  Some would say it started with the secondary mortgage market.  As mortgages got closed, lenders were able to sell their mortgages on the secondary mortgage market and wall street turned them into mortgage bonds.  As real estate prices increased and mortgage rates decreased and profits were flowing through wall street the appetite for these mortgage bonds increased.  Then you join that with deteriorating underwriting criteria along with a staggering number of sub-prime loans to non-credit-worthy borrowers and weve got problems.

But how did this happen?  It happened because the ratings agencies (Fitch, Moodys, and Standard amp; Poores) were giving the same grade to the pools of sub-prime mortgages as they were to the prime or A-Paper mortgages so these bad mortgages flowed through the system just like any other mortgage.  As the defaults hit certain levels, the investors who shorted mortgages by buying insurance against the bad mortgages were able to cash in this is where you Google search who is John Paulson or you could try what did AIG do wrong?

History lesson almost over but what happens next?  Its called TARP or the Troubled Assets Relief Program.  TARP is where Uncle Ben (Bernanke) drew on the lessons of The Great Depression of the 1930s so we didnt repeat our mistakes.  The Fed actually turned a recession into The Great Depression in 1929 by letting the money supply contract very sharply which caused prices to fall and inflation to hit.

Secondly, they let the banks fail and thousands of banks actually failed.  TARP was a conscious effort to let the banks recover first because if the banks fail then we all fail and we propel ourselves into a much worse economic climate.  TARP was an infusion of capital into the top banks yes, its 100% true that it was unfair to the smaller banks in an effort to get them to continue to lend (or at least to not totally shut down their lending).  Interestingly, tax payers made money on TARP but, of course, that hasnt been talked about in the occupy movements.

So here we are a few years after TARP.  Fortunately, The Great Recession did not become a depression.

According to CardWeb, $4.5 billion was extended to small business owners in 2009 by Citi.  Then they increased that to $6 billion in 2010.  Then they pledged to lend $24 billion to small business (defined by them as businesses with less than $20 million in annual revenue) over a three year period from 2011 2013.  Citi announced last week that they are ahead of pace on their goal of lending $7.0 billion in 2011.  They finished the calendar year very strong after a slow summer and ended up lending $7.9 billion in 2011 to small businesses.

I agree that theres a lot more to be done.  However, if we put mistakes of the past aside, this is one lender who is showing us progress and who intends to continue to lend at a much more generous pace than we saw in 2008 and 2009.

Lending Photo via Shutterstock

Todays question comes from Rebecca Antony, a student at MICDS. Rebecca would like to explore the role personal computers play in the classroom today, and if schools should provide laptops for students.

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Allison Hermann, St. Josephs Academy

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I think computers are very beneficial in classrooms if students know how to utilize their time and not get distracted. Computers supply useful resources like the internet or dictionarys that can be helpful for looking something up quickly if you do not understand something your teacher said.

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They are also for helpful in taking notes. Notes taking on a computer tend to be neater and more clear and for most people it is faster to take notes on the computer than by hand. If you are absent one day, then you can ask a friend or teacher to email you the notes you missed which is very helpful.

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I think they do help with learning because they allow students to access information that they wouldnt normally recieve in an everyday classroom. However, many students missuse this luxury and go to inappropriate uneducational sites making it useless for teaching and learning.

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Computers are also helpful, in my school at least, for documents being shared between teachers and students. The teachers at St. Joe just drop your homework assignments or the power points from class into their teacher share folder and you can download them to your own computer and dont have to waste paper by printing out the homework.

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Curt Wall, Ladue

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Over all I think the use of computers in schools have been very helpful and I believe that all schools, if possible, should have the access to computers and the resources they provide in each of their classrooms.

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Victoria Watson, Villa Duchesne

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I think that having computers available in the classroom does help the learning experience. Not only does it allow for different types of assignments to be given, but it also helps students with computer literacy. Four years of computer usage makes the transition from high school to college to work place that much easier.

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With this being said, the school curriculum should be altered to a computer friendly format, where it would be properly utilized for furthering the educational experience, and wouldnt become a distraction to the course.

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Where some schools might not be able to budget a lap top computer for every individual student to take home, I think that just having enough available at school for student use would be that much more of a help.

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Spencer Desai, MICDS

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I think that providing students with computers has a long list of positives and negatives. When MICDS issued students computers a few years ago, I was quite skeptical but I was surprised at the many new ways that we could learn.

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It made communication with teachers after school easier to deal with homework and to get caught up with work when students are sick. It also provides more ways for teachers to reach their students.

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For example, visual learners can use videos that teachers put up or interactive learners can use online exercises found by the teachers. Computers for teachers and students open up a variety of benefits for teachers and students alike.

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People may argue that they are distracting and I will admit, websites such as Facebook were big distractoins for me at first but after a while most students learn how to manage it. If not, students (and the school) could easily block such sites from their computers, like many of my friends do during exam week.

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So I absolutely believe that schools should issue students and teachers with computers.

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Cate Toman, St. Josephs Academy

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I think use of computers in the classroom definitely helps the learning experience. My school uses laptops in the classroom almost every day; it is hard for me to imagine doing my work without it.

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Furthermore, I find it easier to stay organized because it only takes a click for me to organize all my files and find my notes, whereas my actual binders are much harder to sort through. I have used a laptop for all of my high school career and not once have I thought it at all unnecessary.

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There certainly have been times when I have been distracted by my computer while doing homework or listening to a lecture, but for the most part, it hasnt proven a huge issue for me personally or anyone else I know.

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If a student intends to listen, then putting a computer in front of him or her wont change that. If a student doesnt intend to listen, then putting a computer in front of him or her wont change that, either.

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Whether or not schools should provide them, though, is an issue. For private schools, everyone is issued a laptop because its included in the tuition, so by the time the students have them, theyre paid for. For public schools, I think finding a source of money to provide a computer to every single student would be quite difficult, and Im sure there would be a division between students willing to pay for personal computers and unwilling to pay for personal computers.

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In this economy, its unrealistic to think that schools have the budget to factor in personal computers for students, especially if computers are already available to students somewhere on campus.

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If there were a definite way to pay for them, Id definitely say that schools should provide them, but otherwise, students can certainly make due with using the computers on campus.

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Molly Soto, St. Josephs Academy

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 Although computers can be distracting during class, I personally I do believe that computers are helping students in the overall learning experience.

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Computers provide many new ways to take notes and keep track of information for classes. They can help students become more organized by creating folders for each subject so they will not lose important information.

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Computers also allow students to access information on the internet. They might need this information for projects or papers. Computers provide a more productive work day because students do not have to wait until they get home to use a computer.

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I do believe that schools should provide lap tops to all students. This would reduce problems with security and internet access.  

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Rebecca Antony, MICDS

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I think that most of the time computers do help students learn, especially when distracting websites are blocked. Computers help students do a lot more with their work: softwares built just for specific purposes can help kids get organized and stay that way, the neatness of typing makes notes and essays easier to read and edit.

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Students also have less excuses for why they didnt do their homework–for example, if a student was given a printed out copy, they cannot give the general excuse that they lost their copy, the teacher would ask why the student did not take the time to print out a new one as he always has access to a computer.

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More importantly, using computers in schools helps students grow familiar with technology, so that when they are forced to use it in later years, they will know the basics and make life easier for themselves. This is something that is crucial if schools want to really get kids prepped and ready for what they call the real world.