Archive for December, 2009

Power Breakfast: Straying from strategy at root of bank crisis, Atlanta mayor, Delta and AirTran, prescription drugs

It’s one of the key lessons from the financial crisis — deviating from your strategy is not a good idea.

AJC reporter Paul Donsky writes that American Southern’s business plan was clear: The Kennesaw bank would maintain a low-risk profile and lend primarily to small- and medium-sized companies.

But almost immediately after opening in 2005, the bank began lending heavily to real estate builders and developers – a strategy that backfired when the housing market collapsed.

The tiny bank began to bleed red ink and was shut down by regulators last April, following a now-familiar storyline, Donsky writes.

A federal audit released Wednesday blames American Southern’s demise in large part on a failure to adhere to its initial business plan. It’s an increasingly common finding as regulators search for root causes of the nation’s banking crisis, the most severe in at least two decades.

Thus far, regulators have conducted audits of nine Georgia bank failures. In four of those cases, …

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Jekyll developer pulls out: Good or bad for island?

Linger Longer will not linger any longer on Jekyll Island.

Jekyll Island State Park’s main redeveloper, Linger Longer Communities, has pulled out of the project, AJC reporter Dan Chapman writes.

Opponents of the plan who prefer slower growth cheered the company’s decision to quit the $170 million hotel-condo-retail development. They called it a victory for budget-conscious, beach-loving Georgians, many of whom got a first whiff of salt air along Jekyll’s shores, Chapman reports.

But disappointed Jekyll Island officials, along with Gov. Sonny Perdue who championed a revitalized Jekyll, vowed that reconstruction of the state-owned barrier island near Brunswick will continue.

A new retail district, convention center and beachfront park remain on the books, Chapman reports.

What do you think should be done? Forge ahead after the dust clears or consider the company’s pullout a good thing for the island?

Are you more likely to go to Jekyll if the project is built or not built?

For …

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Power Breakfast: Mortgage delinquencies to fall, Hartsfield, Jekyll, Church’s, Coke, health care

Finally, there’s a study with a little good news on the mortgage delinquency front.

AJC reporter Paul Donsky writes that the percentage of Georgia mortgage holders late on their payments may start dropping next year, according to a study released Tuesday by TransUnion, one of the nation’s largest consumer credit rating firms.

TransUnion estimates that the proportion of Georgia borrowers at least 60 days late on their house payments will drop from 7.37 percent at the end of this year to 6.68 percent at the end of 2010, Donsky reports.

That would mark the first dip in Georgia’s mortgage delinquency rate since the housing crisis erupted more than two years ago.

“We do believe things will begin to improve; however, it will take some time,” said FJ Guarrera, vice president with TransUnion’s financial services group.

Also in the AJC:

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Should government spend to create jobs or reduce deficit?

What’s more important for the government to do right now — create jobs or reduce the deficit?

President Barack Obama is proposing ways to encourage new hiring by small businesses, including several tax incentives and new access to credit, the Associated Press is reporting.

Obama put forward the measures in a speech Tuesday, in which he laid out some of the things he would like to see in a new jobs bill to address continued high unemployment, AP said.

To help unlock credit for small businesses, for instance, Obama said he supports using money left over from the government’s bank bailout to increase lending.

But, at the same time, the federal deficit is ballooning, adding trillions of dollars to our long-term debt.

What should the priority be — putting people back to work or getting a handle on our debt?

For instant updates, follow me on Twitter.

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How to merge two firms into one — the right way

A business merger, like a marriage, is tough to pull off successfully. But as the economy shakes off this recession, we’re likely to see more companies announce combinations.

John Stumpf

John Stumpf

Some will make sense (Delta-Northwest) and some won’t (Time Warner-AOL). Some will be done artfully and others by clueless CEOs armed with butcher knives.

Recently, I had the chance to sit down with Wells Fargo CEO John Stumpf, who’s not from that latter group. His No. 1 job is digesting Wachovia — a distressed bank Wells bought last fall at the height of the financial meltdown — to create one of the nation’s biggest banks with $1.3 trillion in assets.

Stumpf, 56, said he has been involved in about 90 mergers in his career, so he comes to this mega-merger — a $15 billion deal — with lots of experience.

Even with all those mergers, Stumpf said, “I can’t tell you how many deals we’ve walked away from.” But, he added, there were plenty of them.

Whether you’re an exec contemplating a merger, an …

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Power Breakfast: Weak metro job market, Hartsfield-Jackson, health debate, house flipping returns

Local job seekers will continue to struggle early next year.

Hiring in metro Atlanta during the first three months of 2010 will be anemic – and weaker than the national average, according to a quarterly survey by staffing company Manpower, AJC reporter Michael Kanell writes.

Just 7 percent of area companies responding said they plan to expand, while 9 percent said they will be cutting, according to company spokesperson Beth Herman.

Most companies said they plan to hold payrolls where they are, Kanell reports.

While the economy may be growing modestly, the job market is likely to parallel the weak recoveries of the past several recessions, said economist William Smith of the University of West Georgia.

“It wouldn’t be surprising to see us continue without a lot of job growth,” Smith told Kanell.

Also in the AJC:

In …

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New proposal restricts instant credit at cash register

Many consumers have been struggling with credit card debt in this economy.

So what do you think of a new proposal that would restrict instant credit at the cash register?

The Wall Street Journal is reporting that the proposed restrictions, if enacted by the Federal Reserve, would force retailers to gather more financial information from customers— including how much they earn— before giving them credit.

But some big retailers are balking at the proposals, which would make it a lot tougher for them to dole out instant credit at the cash register, the WSJ says.

That would endanger at least some popular cash-register pitches to “get 15% off today’s purchase” by opening a charge-card account on the spot, the WSJ reports.

Macy’s Inc., Saks Inc., Best Buy Co. and other retailers are fighting the proposed rules, claiming customers wouldn’t be comfortable handing over a pay stub or tax document to a cashier in order to show they can pay their bills.

“Instant credit is important …

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Power Breakfast: Georgia bank failures, Christmas parties, mayor’s race, climate conference, NBC-Comcast

In case you missed it over the weekend, three more Georgia banks have failed. That brings the total number shut down since 2008 to 29, more than in any other state, AJC reporter Paul Donsky writes.

Buckhead Community Bank, founded by Atlanta business royalty to cater to a wealthy clientele, is one of the latest victims of the state’s banking crisis.

Launched in 1998 by Charlie Loudermilk, founder of rent-to-own giant Aaron’s Inc., Buckhead Community grew quickly during the real estate boom earlier this decade, Donsky reports. But, in a now-familiar story, it sustained huge losses once the housing market collapsed.

The other banks shut down Friday are First Security National Bank, of Norcross, and Tattnall Bank, of Reidsville in south Georgia, two of the state’s smaller lenders.

All three banks were acquired by new owners.

Also in the AJC:

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Old strategy still works in new crisis

It’s nice to know that some age-old advice — “don’t panic” — still works in this financial crisis.

When stocks tumble, investors who remain calm and hold on for the bumpy ride ahead can regain their money over time. But those who panic can end up converting a paper loss into a real one.

The Vanguard Group, a major 401(k) provider, now says the typical retirement saver has more money in their account than they did before the stock market began tumbling two years ago, Associated Press reports.

Sixty percent of participants who CONTINUED TO CONTRIBUTE AND STAYED INVESTED have more money in their accounts than they had before the market decline in September 2007, AP says.

Forty percent still have lower balances. But Vanguard said most of them are less than 20 percent below their earlier peak, AP reports.

Patience truly is a virtue.

How have you fared? Any key strategy that you’d like to pass on?

For instant updates, follow me on Twitter.

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Power Breakfast: Georgia World Congress Center, Metro Chamber, speaker, mayor, jobs, NBC

In this tough economy, it can be interesting to notice some of the smaller signs from the fallout.

One of them is highlighted today by AJC reporter Leon Stafford. He writes that for the first time commercial messages will soon greet conventioneers, sports fans and business executives who visit the Georgia World Congress Center.

In a bid to find new sources of funding, the downtown facility will rent space to advertisers in six strategic spots beginning next year, Stafford reports. The move could net the 3.9 million-square-foot convention center — the fourth largest in the nation — between $300,000 and $500,000 a year, said spokesman Mark Geiger.

“We really have never done anything like advertising within the facility,” Geiger told Stafford. “We have always kept it a pure entity. But with the way the economic times are right now we are always looking for additional revenue streams.”

When revenue heads south, I guess purity has to take a back seat.

Also in the AJC:

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