| Banking on the poor | |||
| Jan 16, 2008 | Houston Chronicle | ||
| Plenty of demand in the United States for 'social businesses' that help the poor
The tale has barely faded over time: 42 Bangladeshi villagers freed from loan sharks and starvation with loans totaling just $27. That's how the Grameen Bank began in 1976, followed by the continuing feat of helping 7.5 million more of the poorest around the world.
But Grameen's founder, economist and Nobel Peace Prize-winner Muhammad Yunus, proposed a new narrative -- this one for Americans -- at the World Affairs Council this week. Americans, he rightly pointed out, also need "social businesses" in the spirit of Grameen to alleviate our own forms of poverty. Soldiers are among those most in need.
Despite a democratically elected government, abundant food and seemingly endless credit, millions here are frozen out of crucial segments of the economy and social safety net.
Why not help them through "social businesses"? These are more sustainable than charities and nonprofits, and more focused than for-profit businesses.
Charity, which Yunus defined as dollars that only get used once, is rarely the ideal way to lift people from poverty. Charitable dollars undermine pride and are at best a finite resource.
Yet businesses and governments often have competing agendas that also undermine the job of helping people help themselves.
"Social businesses," incorporating the Grameen spirit, aim to be self-sustaining, self-perpetuating and, above all, effective. They eventually recoup the investment but are not devised for making a profit. Their purpose is strictly for easing poverty.
Providing health insurance is one of the most fertile fields a well-run social business could enter. But providing banking access might be even more so. Once available to almost anyone inclined to save, bank accounts are now an unattainable privilege for millions in this country.
According to the Federal Reserve Bank, 9.2 percent of American households don't have bank accounts.
Many of these 10 million families cannot afford them: Either they can't achieve required minimum balances, or they are quickly overwhelmed by the avalanche of fees and penalties banks charge to compensate for no-fee checking accounts.
U.S. soldiers, Yunus pointed out, are among those who suffer from this economic trap: With no bank account, they have no institutional relationship that can lead to a loan, no earnings from interest, no safety for their small but honorably earned incomes.
Tour any town around a military base, and the welter of check-cashing businesses for the "unbanked" gives a snapshot of this homegrown form of poverty.
The spread of the Grameen Bank's fame, its many parable-like success stories and, most recently, Yunus' Nobel have prompted a minor but trendy backlash against microfinance. Tiny loans, some argue, don't have permanent benefits; they don't get used as they're meant to; or (the least impressive argument) they simply allow borrowers to "get by."
Both critics and skeptics agree there's not enough data to analyze microcredit fully. But the critique is healthy.
The more data there is on Grameen and its many imitators, the better the world will understand how different forms of poverty respond to small investments and intangibles such as peer pressure and pride.
What's already certain is that these questions are neither academic nor exotic for this country. Uninsured, unable to safeguard or increase their earnings, millions of Americans are ready and eager to help themselves if a sound "social business" can offer a hand. | |||
Wednesday, January 16, 2008
Banking on the poor : Plenty of demand in the United States for 'social businesses' that help the poor
Friday, January 11, 2008
Bank of America to buy Countrywide for $4 billion
Bank of America to buy Countrywide for $4 billion
By Jonathan Stempel1 hour, 18 minutes ago
Bank of America Corp (BAC.N) said on Friday it agreed to acquire battered mortgage lender Countrywide Financial Corp (CFC.N) in a $4 billion transaction that could help avert one of the biggest collapses from the U.S. housing crisis.
The purchase constitutes another major but risky acquisition for Bank of America Chief Executive Kenneth Lewis, who has spent more than $100 billion through mergers to create the second-largest U.S. bank.
It may provide a lifeline for Countrywide, which has been battered by mounting losses, borrower defaults, and a slew of lawsuits and regulatory probes into its lending practices, and for the compensation of longtime Chief Executive Angelo Mozilo. Countrywide's market value was $26 billion less than a year ago.
"I'm breathing a big sigh of relief," said Nancy Bush, managing member of NAB Research LLC in Aiken, South Carolina. "This takes out a major point of uncertainty in the industry. It's certainly good for financial stocks overall."
Shares of Countrywide fell 82 cents, or 10.5 percent, to $6.93 in pre-market trading, after rising 51.4 percent on Thursday in anticipation of the transaction. Bank of America rose 75 cents to $40.05 in pre-market trading.
Countrywide shareholders would receive 0.1822 of a Bank of America share in exchange for each of their shares.
The transaction values Countrywide at $7.16 per share, a 7.6 percent discount to the Thursday closing price.
RISKS
If the transaction goes through, Charlotte, North Carolina-based Bank of America may be able to salvage a $2 billion preferred stock investment it made in Calabasas, California-based Countrywide in August. That transaction had lost more than half its value on paper.
"We don't feel like we're anywhere near out of the woods in this whole mortgage market, housing market, subprime morass," said Michael Mullaney, who helps invest about $10 billion at Fiduciary Trust Co in Boston. "I'm hoping it's not a save-face action from Ken Lewis."
On a conference call, Lewis acknowledged "near-term challenges" in mortgages, with expectations that volumes will fall amid "continued weakness in housing throughout 2008."
Still, he said Bank of America conducted "extensive due diligence" on Countrywide, calling the purchase a "one-time opportunity" to buy a powerful mortgage lender at "very attractive" terms.
Bank of America expects a $1.2 billion restructuring charge from the transaction, and said it will need a couple of billion dollars of new capital to help preserve its capital ratios.
It expects by 2011 to realize $670 million of after-tax cost savings, or 11 percent of the combined companies' mortgage expenses.
The bank expects the transaction to close in the third quarter, and add to earnings per share in 2009. It also said the thrift status of Countrywide's banking unit means the addition of the company's $61 billion of deposits would not cause Bank of America to breach a 10 percent federal cap on deposits.
LIGHTNING ROD
Mozilo a butcher's son from the South Bronx who co-founded Countrywide in 1969, has been a lightning rod for critics who say he encouraged loose lending practices that contributed heavily to the housing crisis.
Lewis said he would like the 69-year-old Mozilo to stay with Countrywide until the merger closes, after which "I would guess he would want to go have some fun." He also said he would like to retain "a number" of senior Countrywide executives.
Countrywide made $408 billion of mortgages in 2007, roughly one in six U.S. home loans. It also handles billings on some $1.48 trillion of mortgages in its servicing portfolio.
However, it made far fewer loans as the year wore on after it lost access to credit markets. It stopped making most of the variable-rate and subprime mortgages that caused many of its problems in the first place.
Countrywide lost $1.2 billion in the third quarter, and on Wednesday said defaults and late payments in its servicing portfolio reached the highest on record.
"It's naive to think we are at the end of the process in terms of recognizing losses from the mortgage crisis," said Rick Meckler, president of LibertyView Capital Management, a Jersey City, New Jersey, investment firm.
Countrywide essentially stopped making subprime home loans, and Bank of America, which has not made those loans since 2001, said the combined company will not make them either.
Mozilo has also been faulted for collecting hundreds of millions of dollars in compensation this decade, including millions after it was clear the housing crisis had begun. He could receive another $36.4 million if the merger goes through, according to regulatory filings and compensation experts.
Bank of America's own bankers and the law firms Cleary, Gottlieb, Steen & Hamilton LLP and K&L Gates advised the bank on the merger. Sandler O'Neill & Partners LP, Goldman Sachs & Co and the law firm Wachtell Lipton Rosen & Katz advised Countrywide. Sandler also advised Countrywide's board of directors.
(Reporting by Jonathan Stempel; Additional reporting by Joseph A. Giannone, Christian Plumb and Caroline Valetkevitch; Editing by Derek Caney and Dave Zimmerman)
Thursday, January 10, 2008
Tata Nano: The World's Cheapest Car - $2500
Tata Nano: The World’s Cheapest Car
Ratan Tata, chairman of Tata Motors, displaying the Nano in New Delhi on Thursday. (Photo by Money Sharma/European Pressphoto Association)Tata Motors today took the covers off the world’s cheapest car — the Nano.
Over the past year, Tata has been building hype for a car that would cost a mere 100,000 rupees (roughly $2,500) and bring automotive transportation to the mainstream Indian population. It has been nicknamed the “People’s Car.” Over the course of the New Delhi Auto Expo, which began this week, anticipation had grown to fever pitch.
With the theme from “2001: A Space Odyssey” playing, Ratan Tata, chairman of Tata Motors drove the small white bubble car onto Tata’s show stage, where it joined two others.
The Tata Nano could sell for around $2,500. (Photo by Raveendran/Agence France-Presse/Getty Images)“They are not concept cars, they are not prototypes,” Mr. Tata announced when he got out of the car. “They are the production cars that will roll out of the Singur plant later this year.”
The four-door Nano is a little over 10 feet long and nearly 5 feet wide. It is powered by a 623cc two-cylinder engine at the back of the car. With 33 horsepower, the Nano is capable of 65 miles an hour. Its four small wheels are at the absolute corners of the car to improve handling. There is a small trunk, big enough for a duffel bag.
“Today, we indeed have a People’s Car, which is affordable and yet built to meet safety requirements and emission norms, to be fuel efficient and low on emissions,” Mr. Tata added. “We are happy to present the People’s Car to India and we hope it brings the joy, pride and utility of owning a car to many families who need personal mobility.”
The base price for the Nano will be 120,000 rupees, including road tax and delivery. Higher level models will cost more and come with air-conditioning. Sun visors and radios are extra.
The nearest priced competitor is the Maruti 800, which costs roughly twice as much as the Nano. In comparing the Nano to the Maruti 800, Mr. Tata said, “It is 8 percent smaller — bumper to bumper — and has 21 percent larger seating capacity than Maruti 800.”
The Hindustan Times reports reactions from a couple of Tata’s competitors, Maruti and Hyundai:
Jagdish Khattar, a former head of Maruti 800 manufacturer Maruti Udyog Ltd., says it’s too early to say whether the Nano will overtake the original.
“It’s a good product but it’s still too early to say whether it will overtake the 800 because it caters to a totally new market segment,” he said while watching a live telecast of Tata’s press conference after unveiling of the Nano.
But clearly, at least one other manufacturer was worried.
An official of Hyundai Motors, which unveiled an LPG version of its Santro Thursday, was more circumspect.
“We definitely see it as impacting our sales,” he said in halting English, preferring to maintain anonymity.
Anand Mahindra, managing director for Mahindra & Mahindra, Tata Motors’ primary competitor, said before the unveiling, “I think it’s a moment of history and I’m delighted an Indian company is leading the way.”
The Nano will go on sale in India later this year with an initial production run of 250,000 a year. Tata says it will offer the Nano in other emerging markets in Latin America, Southeast Asia and Africa within four years.
Monday, January 7, 2008
FW: The Onion: John D. And Catherine T. MacArthur Foundation Goes On Wild Endowment Binge
From: Wacker, Craig
Sent: Monday, January 07, 2008 11:59 AM
To: HCD Program Officers
Subject: The Onion: John D. And Catherine T. MacArthur Foundation Goes On Wild Endowment Binge
John D. And Catherine T. MacArthur Foundation Goes On Wild Endowment Binge
CHICAGO—The John D. and Catherine T. MacArthur Foundation went on a wild endowment binge last weekend, recklessly giving away more than $170 million in grants and fellowships in a 48-hour span.
Fanton and Hutton in the midst of their wild endowing spree.
"We got pretty out of control there with the endowing," said foundation president Jonathon Fanton, icing down his check-writing hand while recovering Monday. "It started Friday afternoon, when [Vice President and Chief Financial Officer] Lyn [Hutton] suggested we give a grant to the Foundation for Urban Renewal for their tireless efforts to rebuild
After a brief pause Saturday afternoon, the endowing resumed. The generous support of nonprofit activities in the arts and culture, education, the environment, health and human services, and public policy continued deep into the night.
"Saturday, around 3 p.m., we all went out for breakfast. Over eggs and Bloody Marys, we talked about the night before and how crazy we'd gotten," Fanton said. "But when the sun went down that night, we started right back up again with the endowing. Mostly to public radio networks under the General Program, but also 20 or 30 theater companies and a _____ of PBS fellowships. Half the people who've ever appeared on
While the bulk of the money went to groups falling under the foundation's Program on Human and Community Development, a considerable portion went to less noble causes, including the 3-2-1 Contact Preservation Society and the Recumbent Bicycling Hall Of Fame.
"At the time, it felt like the right thing to do," Fanton said of the binge. "It wasn't until we woke up Sunday morning that we were like, 'Holy ____... how much did we endow this weekend?'"
According to Vice-Chairman Elizabeth McCormack, the endowment binge is a result of the foundation's low self-esteem.
"It seems like the only time we feel good is when we're awarding endowments," McCormack said. "The pain and pressures of the outside world vanish, and it's as though you and the beneficiary are all that exist. That's a tough high to come down from. Deep down, we knew it was reckless, but we kept making rationalizations like, 'Well, the Program on Global Security and Sustainability is of heightened importance during this crossroads moment in world history.'"
McCormack's concern was echoed by experts in the field of grant-writing.
"When the stress of operating a charitable foundation gets to be too much, the urge to endow often takes control, overriding all logic and common sense," said Martin Wingreen, author of Giving Their All: The Secret Shame Of Compulsive Philanthropy. "Under the sway of such an intense sensation, the grant giver just can't resist funding every non-profit in sight."
Acknowledging that his group "has a problem," Fanton pledged that the foundation's Board of Directors would seek endowment counseling and join a philanthropy-addiction support group.
"After hearing about our endowment binge, the chair of the Andrew W. Mellon Foundation gave me a really encouraging phone call, saying they'd gone through the same thing in the '80s," Fanton said. "He said they eventually learned not just to think about world betterment, but also to take time for themselves, and that was their turning point. Now, they're a solvent and robust organization again. I really needed to hear that."
"As a charitable foundation, we can do a lot of good in the world," Fanton added. "We just need to make sure not to do too much good at once." 