Tag Archives: banks

Great article John. We are addressing similar issues here in Wilmington, NC with our TAB Board Members. In fact, we have a Lunch & Learn this coming Wednesday (10/7/09) to explore the "new normal". Our local TV station interviewed us on the 5pm news to discuss this issue and how our TAB Boards are helping. Here's the link for the 3 minute video clip: http://capcorp.wordpress.com/2009/10/05/the-new-normal-in-accessing-capital-to-grow-your-business/

John:

I would throw in a couple of additional points:

The major banks – BoA, Wells-Fargo, Citigroup, etc. have vastly greater losses than they have capital to cover. Add to that many regional banks about to take big commercial real estate hits, and the FDIC "insurance" is worthless for any business.

Banks will fail soon, we just don't know which ones yet.

You can guarantee that when the voters can't get money out of their savings account, Congress will insure they get the bailout this time. There is no cash available for an FDIC bailout – only more of Uncle Sam's credit card, and it is getting close to its limit. Be prudent – assume if your bank go under you will recover zero.

So it's time to really dig into your bank's balance sheet – you don't want discover a problem by having payroll checks bounce.

Second point – necessities will come first. It's time to go reread Maslow and re-discover the hierarchy of needs. People will pay for food and items associated with food first, then shelter (note this doesn't necessarily mean the mortgage payment right now, but does include power, heating oil, etc.). For a refresher see this link: en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs

Assume physical and safety needs will consume the bulk of available cash, so if we are hunting new sales – we need to sell where the cash is most likely to be available.

So if you are planning a new marketing campaign aimed at selling gold-plated electrical fixtures to pet stores that specialize in crystal dishes and escargot-pureee cat food, it's time for a new plan.

John:

I would agree to a point – but I think business insurance is an area that will remain open to negotiation – we saw our business property premiums increase only slightly at our recent renewal. Perhaps they are not fully feeling the pressure, yet.

Since insurers will be hurting just as badly, they want to convert coverage from their competitors, which means more aggressive pricing models – more coverage for the same amount or the same coverage for less money.

Analogy – how do you know a bank is in trouble right now? It offers the best rates on CDs, to suck in capital now to shore up its balance sheet while pushing higher expenses down the road.

Since any cash from a new account is better than no cash, insurers will compete on price to put money in the bank. And, of the three entities you discussed, insurers are the easiest to change, at least for property and casualty insurance.

Health insurance is more difficult to change, and in fact, you could argue it is more of a hassle to change it instead of your bank. But, for every business there is a point where no matter how badly you want it, the health insurance premium becomes unsustainable. Looking at the trend, a lot of businesses have already reached that point.

Unfortunately for insurers, they don’t have the direct power of the state to force you to buy.

Thoughts?

very niec……………..

Good suggestion on Thomas Friedman and I thought that article was great.

Can you give 2 or 3 quick hits on what a plan would look like. Is it financial, operational, some combination?

Chuck