Sacramento, CA (PRWEB) February 28, 2012
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Contact:
Ariel Pryor, Credit Expert http://www.reallybadcreditoffers.com
2012年2月24日星期五
Anxiety to repay biz loans may weaken DOLE program
by Jeremaiah M. Opiniano, OFW Journalism Consortium
PASAY CITY – A months-old program handing out business loans to returning migrant workers does not require collateral from borrowers, and a finance expert thinks borrowers might encounter uneasiness to repay these loans.
The P2 billion Reintegration Fund for returning overseas Filipino workers (OFWs) hands out loans ranging from P200,000 to P2 million to existing migrant entrepreneurs. But microfinance specialist Jun Perez is worried that required documents returning OFWs must present and frequently show might give borrowers hesitation to repay.
The context here, said the managing director of the microfinance network Seed Finance Corp., is the size of the enterprises vis-à-vis returning OFWs’ abilities to repay.
The loan range implies that borrowers run small and medium enterprises (SMEs). Meanwhile, lenders Land Bank of the Philippines (LandBank) and Development Bank of the Philippines (DBP) will require OFW borrowers to show documents related to their enterprises, such as purchase orders and titles to equipment purchased. There’s no collateral required for this loan program.
And this is where Perez’s view comes in about borrowers’ “compunction,” or a person’s strong uneasiness caused by a sense of guilt.
Borrowers running SMEs have to title their properties just to secure their loans, though the situation might not be applicable to those running sari-sari (small retail) stores or buy-and-sell ventures. Titling these properties entails costs, in the hope that with the titling the enterprise grows. With such growth the enterprise will now institutionalize having purchase orders (like sari-sari stores) like what usual businesses have.
Then the uneasiness comes in since running the business, producing the titles and business-related documents, and repaying the loans all come into play for the OFW borrower. In such a situation, the scheme of not requiring collateral for these SME loans “might be disadvantageous to the banks (DBP and LBP),” Perez said.
The Reintegration Fund represents the new scheme of the Overseas Workers Welfare Administration (OWWA) and the National Reintegration Center for OFWs (NRCO) to hand out livelihood loans to overseas workers. No less than President Aquino III ordered the Department of Labor and Employment (DOLE) to roll out this program.
But years of previous livelihood programs handled by OWWA, whether handled alone or in collaboration with financial institutions such as the National Livelihood Development Corp. (NLDC), have histories of high non-repayment rates by OFW borrowers.
Risks
The fund has P0.5 billion each from Land Bank and DBP, as well as a guarantee amount of P1 billion from OWWA (the world’s largest migrant welfare fund whose resources come from US$25 membership fees that departing overseas workers pay on a per-contract basis).
Officials of Land Bank and DBP explained during the fund’s launch months ago that both banks will offer an interest rate of only 7.5 percent to each of the loans, payable from two to seven years.
The loans, said Land Bank’s Cressida Mendoza and DBP’s Brillo Reynes during the congress, will make up 80 percent of the total capital needed by the enterprise. There’s also a catch: The businesses to be financed by these loans “must be earning”.
That way, said Mendoza, the situation “will be mutually beneficial to the OFW and to the bank”.
NRCO director Vivian Tornea said in a DOLE release that while there’s no collateral, loan applicants must “guarantee the business enterprise… is viable and profitable —or earning, say, like P10,000 a month”.
Actually, Perez and another development finance expert, Hector de Pedro of the nonprofit Mandato Inc., think both LBP and DBP have proven track records in handing out these reintegration loans.
It’s just that the image of these banks as part of the “government” that worries both Perez and de Pedro. Government-run lending programs “fail,” de Pedro thinks, because “the (word) government is literally synonymous to the word dole out —and the approaches of some agencies do not breed entrepreneurs”.
Thus, Perez said the Reintegration Fund’s implementation “must maintain the discipline and conviction that it must be sustainable, thus must support clearly-viable or potentially viable (enterprises) with community impact”.
Not surprisingly, the Reintegration Fund leaves those OFWs planning to launch start-up enterprises by the wayside—similar to how banks offer loans to existing ventures (but not to start-ups).
The upside of this regulation by DBP and LBP is that government invests its loan resources on proven practices, and that means all figures are (easily) given. Still, new business models coming from OFW enterprise start-ups may not be developed “because there is no support,” said de Pedro.
Repayment
The issue of repayment has haunted previous livelihood programs of OWWA, the most recent of which was the loans OWWA and the NRCO issued to OFWs displaced by the global economic crisis in 2009.
Previous OWWA and NRCO programs on reintegration saw OWWA directly providing these services, especially loans (even if OWWA is not a quasi-financial institution). OWWA also has a running Livelihood Development Program for OFWs (LDPO), in coordination with the National Livelihood Development Corporation —though information is not available on the nationally-run loan program’s repayment performance.
During a press conference after the fund’s launch, Labor Undersecretary Danilo Cruz told the OFW Journalism Consortium that OWWA “will exert extra efforts” to monitor borrowers’ repayment of their loans. Handling loans “is not OWWA’s forte,” Cruz adds, justifying DOLE’s partnership with LandBank and DBP. The partnership sees OWWA’s share to the Reintegration Fund as a guarantee fund in case of non-repayment, Cruz told reporters during a press conference.
LDPO has its own repayment woes. For example, officials of a cooperative in central Philippines that is a conduit of LDPO loans said there is a “high” non-repayment rate among their OFW borrowers. The conduit, the Philippine Cooperative Central Fund Federation, then conducted a financial education and business assessment seminar to some of its borrowers so that the latter are told how to handle the capital they have.
For migrant civil society advocates like Carmelita Nuqui of the Development Action for Women Network (DAWN), the reintegration fund’s regulations are “different from what the government says in public”. Loans for returning migrants, Nuqui says, are available “but why can’t overseas Filipino workers get them right away if these are really for them?” OFW Journalism Consortium
http://tourism9.com/ http://vkins.com/
The P2 billion Reintegration Fund for returning overseas Filipino workers (OFWs) hands out loans ranging from P200,000 to P2 million to existing migrant entrepreneurs. But microfinance specialist Jun Perez is worried that required documents returning OFWs must present and frequently show might give borrowers hesitation to repay.
The context here, said the managing director of the microfinance network Seed Finance Corp., is the size of the enterprises vis-à-vis returning OFWs’ abilities to repay.
The loan range implies that borrowers run small and medium enterprises (SMEs). Meanwhile, lenders Land Bank of the Philippines (LandBank) and Development Bank of the Philippines (DBP) will require OFW borrowers to show documents related to their enterprises, such as purchase orders and titles to equipment purchased. There’s no collateral required for this loan program.
And this is where Perez’s view comes in about borrowers’ “compunction,” or a person’s strong uneasiness caused by a sense of guilt.
Borrowers running SMEs have to title their properties just to secure their loans, though the situation might not be applicable to those running sari-sari (small retail) stores or buy-and-sell ventures. Titling these properties entails costs, in the hope that with the titling the enterprise grows. With such growth the enterprise will now institutionalize having purchase orders (like sari-sari stores) like what usual businesses have.
Then the uneasiness comes in since running the business, producing the titles and business-related documents, and repaying the loans all come into play for the OFW borrower. In such a situation, the scheme of not requiring collateral for these SME loans “might be disadvantageous to the banks (DBP and LBP),” Perez said.
The Reintegration Fund represents the new scheme of the Overseas Workers Welfare Administration (OWWA) and the National Reintegration Center for OFWs (NRCO) to hand out livelihood loans to overseas workers. No less than President Aquino III ordered the Department of Labor and Employment (DOLE) to roll out this program.
But years of previous livelihood programs handled by OWWA, whether handled alone or in collaboration with financial institutions such as the National Livelihood Development Corp. (NLDC), have histories of high non-repayment rates by OFW borrowers.
Risks
The fund has P0.5 billion each from Land Bank and DBP, as well as a guarantee amount of P1 billion from OWWA (the world’s largest migrant welfare fund whose resources come from US$25 membership fees that departing overseas workers pay on a per-contract basis).
Officials of Land Bank and DBP explained during the fund’s launch months ago that both banks will offer an interest rate of only 7.5 percent to each of the loans, payable from two to seven years.
The loans, said Land Bank’s Cressida Mendoza and DBP’s Brillo Reynes during the congress, will make up 80 percent of the total capital needed by the enterprise. There’s also a catch: The businesses to be financed by these loans “must be earning”.
That way, said Mendoza, the situation “will be mutually beneficial to the OFW and to the bank”.
NRCO director Vivian Tornea said in a DOLE release that while there’s no collateral, loan applicants must “guarantee the business enterprise… is viable and profitable —or earning, say, like P10,000 a month”.
Actually, Perez and another development finance expert, Hector de Pedro of the nonprofit Mandato Inc., think both LBP and DBP have proven track records in handing out these reintegration loans.
It’s just that the image of these banks as part of the “government” that worries both Perez and de Pedro. Government-run lending programs “fail,” de Pedro thinks, because “the (word) government is literally synonymous to the word dole out —and the approaches of some agencies do not breed entrepreneurs”.
Thus, Perez said the Reintegration Fund’s implementation “must maintain the discipline and conviction that it must be sustainable, thus must support clearly-viable or potentially viable (enterprises) with community impact”.
Not surprisingly, the Reintegration Fund leaves those OFWs planning to launch start-up enterprises by the wayside—similar to how banks offer loans to existing ventures (but not to start-ups).
The upside of this regulation by DBP and LBP is that government invests its loan resources on proven practices, and that means all figures are (easily) given. Still, new business models coming from OFW enterprise start-ups may not be developed “because there is no support,” said de Pedro.
Repayment
The issue of repayment has haunted previous livelihood programs of OWWA, the most recent of which was the loans OWWA and the NRCO issued to OFWs displaced by the global economic crisis in 2009.
Previous OWWA and NRCO programs on reintegration saw OWWA directly providing these services, especially loans (even if OWWA is not a quasi-financial institution). OWWA also has a running Livelihood Development Program for OFWs (LDPO), in coordination with the National Livelihood Development Corporation —though information is not available on the nationally-run loan program’s repayment performance.
During a press conference after the fund’s launch, Labor Undersecretary Danilo Cruz told the OFW Journalism Consortium that OWWA “will exert extra efforts” to monitor borrowers’ repayment of their loans. Handling loans “is not OWWA’s forte,” Cruz adds, justifying DOLE’s partnership with LandBank and DBP. The partnership sees OWWA’s share to the Reintegration Fund as a guarantee fund in case of non-repayment, Cruz told reporters during a press conference.
LDPO has its own repayment woes. For example, officials of a cooperative in central Philippines that is a conduit of LDPO loans said there is a “high” non-repayment rate among their OFW borrowers. The conduit, the Philippine Cooperative Central Fund Federation, then conducted a financial education and business assessment seminar to some of its borrowers so that the latter are told how to handle the capital they have.
For migrant civil society advocates like Carmelita Nuqui of the Development Action for Women Network (DAWN), the reintegration fund’s regulations are “different from what the government says in public”. Loans for returning migrants, Nuqui says, are available “but why can’t overseas Filipino workers get them right away if these are really for them?” OFW Journalism Consortium
http://tourism9.com/ http://vkins.com/
2012年2月7日星期二
Private-Equity Lobbying Helped Protect Romney’s Tax Benefits
February 07, 2012, 7:18 AM EST
By Steven Sloan
Feb. 7 (Bloomberg) — The largest U.S. private-equity funds and venture capital firms have relied on a five-year, multimillion-dollar lobbying campaign to protect the carried interest tax break that helped drive presidential candidate Mitt Romney’s 2010 effective tax rate below 14 percent.
With the issue gaining attention in this year’s U.S. presidential election campaign, the investment industry is again girding to defend its preferential tax treatment. Blackstone Group LP alone spent $5 million in 2011 lobbying Congress on issues including the tax treatment of carried interest.
“If anything preserves the status quo, it will be the very heavy lobbying campaign,” said Edward Kleinbard, a law professor at the University of Southern California. “There’s no other reason for the subsidy to survive.”
Opponents of the tax rate for carried interest see this as an opportunity to press for change. Romney released his 2010 tax returns on Jan. 24, revealing he paid an effective tax rate of 13.9 percent on income of $21.6 million.
Romney, a former Republican governor of Massachusetts and co-founder of Bain Capital LLC, has come to personify the debate over whether the carried interest paid to private-equity managers should be taxed at the capital gains rate of 15 percent while ordinary income is taxed at rates as high as 35 percent.
Tax Fairness Debate
Democrats view the carried interest issue as an element of the tax fairness theme that President Barack Obama is highlighting in his re-election campaign. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, plans to introduce a bill as soon as this week that would tax carried interest at the same rate as regular income, according to spokesman Josh Drobnyk. The bill probably won’t advance in the Republican-controlled chamber this year.
Carried interest is the profits-based compensation that private-equity managers, real estate investors and members of oil and gas partnerships often receive. They get a portion of their clients’ earnings as investment income if the underlying earnings are treated that way. Levin and Obama call carried interest compensation for work, which they say should be viewed like wages for tax purposes.
Private-equity firms invested more than $148 billion in 1,234 U.S.-based companies in 2010, according to the Private Equity Growth Capital Council. The industry says it employs more than 8 million people.
Washington Lobbyists
Companies opposed to changing the tax treatment of carried interest have hired veteran Washington lobbyists to make their case. Wayne Berman of Ogilvy Government Relations is Blackstone’s top lobbyist on the issue. He was an assistant commerce secretary during George H.W. Bush’s administration. Other Ogilvy lobbyists working for Blackstone include Drew Maloney, who was a staffer for former House Majority Whip Tom DeLay, a Texas Republican, and Moses Mercado, the former House Democratic Leader Richard Gephardt’s deputy chief of staff.
Kohlberg Kravis Roberts & Co. hired former Representative Vic Fazio, a California Democrat, to work with Congress on “tax issues affecting private-equity firms and their portfolio companies,” according to lobbying records. The New York-based private-equity company spent $150,000 in the fourth quarter on lobbyists from Akin Gump Strauss Hauer & Feld to work on issues that included tax policy.
Bain spent $80,000 during the fourth quarter to hire lobbyists from Public Strategies Washington Inc. to “monitor tax reform developments,” lobbying records show. Joseph O’Neill and Paul Snyder are lobbying for Romney’s former company.
O’Neill was chief of staff to former Senate Finance Committee Chairman Lloyd Bentsen and helped run the late Texas Democrat’s 1988 vice presidential bid. Snyder was a legislative assistant to former House Speaker Tip O’Neill, the late Massachusetts Democrat.
Budget Deficit
Raising taxes on carried interest compensation wouldn’t do much to narrow the U.S. budget deficit. In its fiscal 2012 budget request, the Obama administration said the proposal to tax carried interest as ordinary income would generate $14.8 billion over 10 years. In December, the deficit stood at almost $1.3 trillion.
The issue has divided Congress along mostly partisan lines. The last time the Senate considered a bill that would have increased taxes on carried interest — in June 2010 — every Republican voted against it, preventing the bill from advancing. Senator Ben Nelson of Nebraska was the only Democrat to oppose the legislation.
Few Defections
The same bill was passed in the House that year with 15 lawmakers in each party voting against their leaders.
As the debate over carried-interest taxation advanced in Congress, the Private Equity Growth Capital Council was formed in February 2007 so the industry could make its case more directly to lawmakers.
The group, whose members include the Carlyle Group LP, based in Washington, and New York-based Blackstone spent about $2.5 million that year lobbying Congress on issues that included measures to tax carried interest at the same rate as ordinary income. It spent $2.2 million on lobbying in 2011.
“We believe that tax policy should incentivize the kind of entrepreneurial risk-taking that private-equity firms take every day,” said Ken Spain, a spokesman for the Private Equity Growth Capital Council, a trade group based in Washington. “We remain vigilant in respect to this issue. Private equity as an asset class is going to be a topic of discussion throughout 2012.”
Spain is a former communications director for the National Republican Congressional Committee.
Comprehensive Overhaul
While the issue will be a central one in the presidential campaign and on Capitol Hill, the taxation of carried interest probably won’t change until Congress considers a comprehensive tax-code overhaul. That would be difficult to enact before 2013.
One potential challenge for private equity is something that otherwise would be seen as a favorable development for the industry: a Romney administration. Ending the preferential treatment of capital gains if Romney wins the presidency could dissolve notions that he is a captive to his former industry, said Martin Sullivan, a contributing editor at Tax Analysts, a nonprofit organization in Falls Church, Virginia.
“It will be much easier to repeal if Mitt Romney becomes president than if Mr. Obama remains president,” he said.
Still, Romney adviser Eric Fehrnstrom told reporters last month that the Republican presidential candidate thinks carried interest should be taxed at the same rate as a capital gain. The candidate has proposed eliminating the tax on capital gains for those with adjusted gross incomes of less than $200,000 a year.
‘Convoluted’ Code
Private-equity executives also rely on fairness arguments to make their case. In a Jan. 27 appearance on Bloomberg Television, Steve Pagliuca, the managing partner of Bain Capital, said the tax code is “convoluted” and “almost unintelligible.”
“We’ve got to have a fair tax code,” he said. “We don’t wake up every day saying ‘Well, what’s the tax code?’ We wake up trying to build great businesses and we pay all of the taxes that are necessary.”
Mark Heesen, president of the National Venture Capital Association, an industry trade group based in Arlington, Virginia, said his industry often reminds lawmakers of its differences from other investors such as private-equity firms. Venture capital firms typically invest in early-stage companies and don’t use as much leverage as private-equity investors do.
Creating Something
“We are able to demonstrate our belief that quintessential capital gains are all about creating something out of nothing,” he said. “That’s what venture capital does.”
Heesen said his message to Congress is that it’s important to maintain the link between carried interest and capital gains, even if the capital gains tax rate increases. Unless Congress acts, such gains will be taxed at 20 percent in 2013. High earners will face an additional 3.8 percent tax on capital gains and other unearned income as part of the 2010 health-care law.
On the other side of the issue is the AFL-CIO, which has lobbied in favor of changing how carried interest is taxed, and is prepared to do so again. Damon Silvers, the policy director for the labor organization in Washington, called the treatment of carried interest a “tax subsidy for leveraged buyouts.”
“We are going to be pressing the carried interest issue at whatever opportunity we get,” he said. “Mitt Romney’s tax returns are the world’s greatest educational tool about the impact of the carried-interest loophole.”
The AFL-CIO spent $1.1 million in 2007 to lobby Congress on issues that included a Senate bill to raise taxes on carried interest.
Lobbying on the carried-interest debate is only part of the reason the tax break has survived, said David Donnelly, the national campaigns director at the Public Campaign Action Fund, a Washington nonprofit group that tracks political contributions. Investors who are paid in carried interest are often the well-heeled donors that members of both parties turn to for campaign contributions, he said.
“I don’t think it’s simply the lobbying,” Donnelly said. “The people who are interested in this particular provision are high net-worth individuals. That’s a constituency that Congress always cares about when they have to raise money to fund their campaigns.”
–With assistance from Richard Rubin in Washington and Cristina Alesci in New York. Editors: Jodi Schneider, Robin Meszoly
To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
http://tourism9.com/ http://vkins.com/
By Steven Sloan
Feb. 7 (Bloomberg) — The largest U.S. private-equity funds and venture capital firms have relied on a five-year, multimillion-dollar lobbying campaign to protect the carried interest tax break that helped drive presidential candidate Mitt Romney’s 2010 effective tax rate below 14 percent.
With the issue gaining attention in this year’s U.S. presidential election campaign, the investment industry is again girding to defend its preferential tax treatment. Blackstone Group LP alone spent $5 million in 2011 lobbying Congress on issues including the tax treatment of carried interest.
“If anything preserves the status quo, it will be the very heavy lobbying campaign,” said Edward Kleinbard, a law professor at the University of Southern California. “There’s no other reason for the subsidy to survive.”
Opponents of the tax rate for carried interest see this as an opportunity to press for change. Romney released his 2010 tax returns on Jan. 24, revealing he paid an effective tax rate of 13.9 percent on income of $21.6 million.
Romney, a former Republican governor of Massachusetts and co-founder of Bain Capital LLC, has come to personify the debate over whether the carried interest paid to private-equity managers should be taxed at the capital gains rate of 15 percent while ordinary income is taxed at rates as high as 35 percent.
Tax Fairness Debate
Democrats view the carried interest issue as an element of the tax fairness theme that President Barack Obama is highlighting in his re-election campaign. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, plans to introduce a bill as soon as this week that would tax carried interest at the same rate as regular income, according to spokesman Josh Drobnyk. The bill probably won’t advance in the Republican-controlled chamber this year.
Carried interest is the profits-based compensation that private-equity managers, real estate investors and members of oil and gas partnerships often receive. They get a portion of their clients’ earnings as investment income if the underlying earnings are treated that way. Levin and Obama call carried interest compensation for work, which they say should be viewed like wages for tax purposes.
Private-equity firms invested more than $148 billion in 1,234 U.S.-based companies in 2010, according to the Private Equity Growth Capital Council. The industry says it employs more than 8 million people.
Washington Lobbyists
Companies opposed to changing the tax treatment of carried interest have hired veteran Washington lobbyists to make their case. Wayne Berman of Ogilvy Government Relations is Blackstone’s top lobbyist on the issue. He was an assistant commerce secretary during George H.W. Bush’s administration. Other Ogilvy lobbyists working for Blackstone include Drew Maloney, who was a staffer for former House Majority Whip Tom DeLay, a Texas Republican, and Moses Mercado, the former House Democratic Leader Richard Gephardt’s deputy chief of staff.
Kohlberg Kravis Roberts & Co. hired former Representative Vic Fazio, a California Democrat, to work with Congress on “tax issues affecting private-equity firms and their portfolio companies,” according to lobbying records. The New York-based private-equity company spent $150,000 in the fourth quarter on lobbyists from Akin Gump Strauss Hauer & Feld to work on issues that included tax policy.
Bain spent $80,000 during the fourth quarter to hire lobbyists from Public Strategies Washington Inc. to “monitor tax reform developments,” lobbying records show. Joseph O’Neill and Paul Snyder are lobbying for Romney’s former company.
O’Neill was chief of staff to former Senate Finance Committee Chairman Lloyd Bentsen and helped run the late Texas Democrat’s 1988 vice presidential bid. Snyder was a legislative assistant to former House Speaker Tip O’Neill, the late Massachusetts Democrat.
Budget Deficit
Raising taxes on carried interest compensation wouldn’t do much to narrow the U.S. budget deficit. In its fiscal 2012 budget request, the Obama administration said the proposal to tax carried interest as ordinary income would generate $14.8 billion over 10 years. In December, the deficit stood at almost $1.3 trillion.
The issue has divided Congress along mostly partisan lines. The last time the Senate considered a bill that would have increased taxes on carried interest — in June 2010 — every Republican voted against it, preventing the bill from advancing. Senator Ben Nelson of Nebraska was the only Democrat to oppose the legislation.
Few Defections
The same bill was passed in the House that year with 15 lawmakers in each party voting against their leaders.
As the debate over carried-interest taxation advanced in Congress, the Private Equity Growth Capital Council was formed in February 2007 so the industry could make its case more directly to lawmakers.
The group, whose members include the Carlyle Group LP, based in Washington, and New York-based Blackstone spent about $2.5 million that year lobbying Congress on issues that included measures to tax carried interest at the same rate as ordinary income. It spent $2.2 million on lobbying in 2011.
“We believe that tax policy should incentivize the kind of entrepreneurial risk-taking that private-equity firms take every day,” said Ken Spain, a spokesman for the Private Equity Growth Capital Council, a trade group based in Washington. “We remain vigilant in respect to this issue. Private equity as an asset class is going to be a topic of discussion throughout 2012.”
Spain is a former communications director for the National Republican Congressional Committee.
Comprehensive Overhaul
While the issue will be a central one in the presidential campaign and on Capitol Hill, the taxation of carried interest probably won’t change until Congress considers a comprehensive tax-code overhaul. That would be difficult to enact before 2013.
One potential challenge for private equity is something that otherwise would be seen as a favorable development for the industry: a Romney administration. Ending the preferential treatment of capital gains if Romney wins the presidency could dissolve notions that he is a captive to his former industry, said Martin Sullivan, a contributing editor at Tax Analysts, a nonprofit organization in Falls Church, Virginia.
“It will be much easier to repeal if Mitt Romney becomes president than if Mr. Obama remains president,” he said.
Still, Romney adviser Eric Fehrnstrom told reporters last month that the Republican presidential candidate thinks carried interest should be taxed at the same rate as a capital gain. The candidate has proposed eliminating the tax on capital gains for those with adjusted gross incomes of less than $200,000 a year.
‘Convoluted’ Code
Private-equity executives also rely on fairness arguments to make their case. In a Jan. 27 appearance on Bloomberg Television, Steve Pagliuca, the managing partner of Bain Capital, said the tax code is “convoluted” and “almost unintelligible.”
“We’ve got to have a fair tax code,” he said. “We don’t wake up every day saying ‘Well, what’s the tax code?’ We wake up trying to build great businesses and we pay all of the taxes that are necessary.”
Mark Heesen, president of the National Venture Capital Association, an industry trade group based in Arlington, Virginia, said his industry often reminds lawmakers of its differences from other investors such as private-equity firms. Venture capital firms typically invest in early-stage companies and don’t use as much leverage as private-equity investors do.
Creating Something
“We are able to demonstrate our belief that quintessential capital gains are all about creating something out of nothing,” he said. “That’s what venture capital does.”
Heesen said his message to Congress is that it’s important to maintain the link between carried interest and capital gains, even if the capital gains tax rate increases. Unless Congress acts, such gains will be taxed at 20 percent in 2013. High earners will face an additional 3.8 percent tax on capital gains and other unearned income as part of the 2010 health-care law.
On the other side of the issue is the AFL-CIO, which has lobbied in favor of changing how carried interest is taxed, and is prepared to do so again. Damon Silvers, the policy director for the labor organization in Washington, called the treatment of carried interest a “tax subsidy for leveraged buyouts.”
“We are going to be pressing the carried interest issue at whatever opportunity we get,” he said. “Mitt Romney’s tax returns are the world’s greatest educational tool about the impact of the carried-interest loophole.”
The AFL-CIO spent $1.1 million in 2007 to lobby Congress on issues that included a Senate bill to raise taxes on carried interest.
Lobbying on the carried-interest debate is only part of the reason the tax break has survived, said David Donnelly, the national campaigns director at the Public Campaign Action Fund, a Washington nonprofit group that tracks political contributions. Investors who are paid in carried interest are often the well-heeled donors that members of both parties turn to for campaign contributions, he said.
“I don’t think it’s simply the lobbying,” Donnelly said. “The people who are interested in this particular provision are high net-worth individuals. That’s a constituency that Congress always cares about when they have to raise money to fund their campaigns.”
–With assistance from Richard Rubin in Washington and Cristina Alesci in New York. Editors: Jodi Schneider, Robin Meszoly
To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net
http://tourism9.com/ http://vkins.com/
2012年2月4日星期六
Spain reforms banks to revive economy
Click photo to enlarge
Spain’s Economy Minister Luis de Guindos pauses during a news conference at the Moncloa Palace in Madrid Friday after a government cabinet meeting.
Spain’s Economy Minister Luis de Guindos pauses during a news conference at the Moncloa Palace in Madrid Friday after a government cabinet meeting.
The regulations approved by the Cabinet require banks to set aside an estimated (euro) 50 billion $65 billion (50 billion euro) more in provisions to cover toxic real estate assets by the end of the year.
Those unable to do so can present merger plans by the end of May and get government assistance from an existing bailout fund that will be strengthened with an addition 6 billion euro.
To avoid being forced to raise so much money for the real estate provisions, banks will face enormous pressure to sell assets like land and foreclosed or unsold homes at lower market prices.
The aim is to keep them from hoarding the loans and property on their balance sheets, a practice which has already sapped strength from the banking system and the country’s finances overall for years.
“With this set of measures, the fundamental idea is to boost confidence in our economy, strengthen the banking sector and its credibility in the national and international realm,” Deputy Prime Minister Soraya Saenz de Santamaria told reporters after the Cabinet meeting.
Spain rode an unprecedented building boom from the 1990s until the financial crisis hit in 2008, but the real estate bubble that burst left it with an
unemployment rate of 22.8 percent — the highest among the 17 nations using the euro — and increasingly tight credit for business and individuals.
Bailed-out Portugal is suffering from an even deeper credit crisis, and its leader appealed Friday for Portuguese banks to be given more leeway to meet capital requirements because the credit crunch is driving viable companies out of business
The country’s bailout terms require Portugal’s banks to improve their reserve cushion of high-quality capital to help them weather Europe’s prolonged sovereign debt crisis.
That debt-reduction process, called deleveraging, has compelled them to reduce the number of loans they grant.
If the deleveraging process is too intense, it can be counterproductive in the medium term. That’s the fine-tuning we’re looking for,” Prime Minister Pedro Passos Coelho told weekly newspaper Sol in comments published Friday.
Spain’s development ministry now estimates there are 687,000 unsold new homes on the national market, but other studies put the number as high as 1.6 million in the nation of 47 million. There is no government figure for used homes for sale, but estimates range into the millions.
The move to clean up the banking sector and force property sales “is a good plan but it should have been done before because credit has been frozen here for such a long time,” said Carles Vergara, a Financial Management professor at Madrid’s IESE business school.
While home prices have declined more than 20 percent over the last several years to levels not seen since 2005, Spanish banks still hold about (euro) 175 billion in real estate holdings that the Bank of Spain classifies as “problematic.”
The government plan should spur banks to reduce prices by double digits and send down prices of homes not held by banks as well, said Fernando Encinar, head of research at the popular Idealisto.com real estate web site.
“Prices will go down more, and at a faster rate,” he said.
The book value of property on Spanish banks’ balance sheets is widely seen as inflated, and that has spooked foreign investors, making it hard for the banks to tap capital markets for money to lend.
Some economists warned that the bank reforms won’t work overnight miracles in restructuring the banking sector or getting credit flowing again to the eurozone’s fourth largest economy, which is expected to slip into recession this quarter.
The government, elected in November, is working desperately to chip away at a bloated deficit and keep Spain from having to request a bailout like those taken by Greece, Ireland and Portugal.
Its first big step was a (euro) 15 billion ($20 billion) deficit reduction package of spending cuts and tax hikes in January.
Coming up next week is a controversial package of reforms to shake up a labor market seen as one of Europe’s most rigid and encourage business to hire. Prime Minister Mariano Rajoy was heard saying at an EU summit on Monday that the reform will “cost me a general strike.”
Under the current system, people who are laid off or fired must be paid between 20 to 33 days of salary per year worked, and companies can’t negotiate directly with their unionized workers because they must adopt wage deals set for entire sectors.
Unions are expected to rally against the changes, and investors are wary about the possibility of social unrest if union members are joined in protests by droves of discontented Spaniards — including young adults under 25 hit by a jobless rate of nearly 50 percent.
But Antonio Barroso, an London-based analysts at the Eurasia Group consulting firm, said Rajoy’s government will almost certainly follow through with the labor reform.
“Unless the protests get out of control and get really nasty I don’t think the government will backtrack,” he said.
The bank reforms require institutions to increase provisions for troubled assets from 30 percent to 80 percent of book value, creating the incentive for them to sell them off.
Larger Spain banks should be able to set aside money to meet the new provisions, but experts say the rules will set off another round of mergers among ‘cajas,’ or savings bank chains more heavily exposed to real estate. The number of cajas dropped from 45 to 15 in a previous bout of mergers.
Spain could end up with as few as three to five cajas, said Oscar Moreno of Madrid brokerage Renta 4. Bank layoffs and branch closings are inevitable, added Rafael Pampillon, an economist at Madrid’s IE Business School.
“Clearly, we are going to downsize,” Pampillon said.
————
Ciaran Giles in Madrid contributed to this report.
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2012年1月19日星期四
Government-Backed Solar Company Lays Off Employees…After Promising Hundreds of New Jobs
Willard & Kelsey Solar Group LLC laid off about 40 people indefinitely at the beginning of January until changes to its production line are completed, according to Blade Business.
The layoffs were confirmed by WTOL 11 and Sophia Fisher, executive manager of the Northwest Ohio Solar Hub.
“I’d say pretty typical of the cycle these businesses go through and experience. It’s not uncommon,” Fisher told WTOL 11. Apparently, she believes Willard and Kelsey can make a comeback.
“Go in, make changes to production line improvements from efficiency and cost from a business perspective. Then you’ll eventually, in the near future, you’ll see them ramp up again for production,” Fisher said.
Michael Cicak, the company’s chief executive officer and chairman of the board, would not say when the changes would be completed or when the laid-off employees could return to work, writes Kris Turner of Blade Business.
“We have some technical people in here improving the efficiency of the assembly line,” Mr. Cicak said, adding that the Perrysburg-based facility still has about 30 employees.
When it’s fully operational, Willard and Kelsey employs a little over 80 people. So what made the energy company have to cut back on its numbers?
Apparently, the “start-up company has been plagued by a series of production and staffing delays since it was formed in 2008,” according to the Toledo Blade. However, despite these obvious managerial concerns, the company still “received millions of dollars in government loans and tax breaks” and was touted by Vice President Joe Biden, U.S. Secretary of Labor Hilda Solis, and former Ohio Gov. Ted Strickland as a model of innovation and success.
See Vice President Biden’s 2009 praise for Willard & Kelsey:
And although Cicak said last week that the facility was “to reopen Monday after a period of adjusting its inventory,” reports from the Blade would imply that much more is going on behind the scenes.
“Only 15 cars were in the parking lot at 1:30 p.m. Monday. The office was devoid of activity, and the rows of desks were empty,” Turner writes. “A tour of the production line and the changes being made to it were not made available to The Blade.”
The cost of changing the assembly line was not released. Willard & Kelsey also does not release its quarterly earnings or its profit margin because it’s a privately held company, Mr. Cicak told The Blade.
So how much money has this company received through state and federal funding?
“As of early 2011, the company had received a $5 million research and development loan from the Ohio Department of Development, a $10 million loan from the Ohio Air Quality Development Authority, a $3.3 million job creation tax credit, and a $701,000 grant to provide training for 50 current and 250 new workers [emphases added],” Turner reports.
Yet, despite this type of financial support, it looks as if the company is far from producing the 250 jobs it had promised back in February, 2011. And it looks like it’s even farther away from accomplishing its goal of producing “600 to 700 jobs in the next to two years and up to 4,000 in five or six years.”
Also Read
http://tourism9.com/ http://vkins.com/
The layoffs were confirmed by WTOL 11 and Sophia Fisher, executive manager of the Northwest Ohio Solar Hub.
“I’d say pretty typical of the cycle these businesses go through and experience. It’s not uncommon,” Fisher told WTOL 11. Apparently, she believes Willard and Kelsey can make a comeback.
“Go in, make changes to production line improvements from efficiency and cost from a business perspective. Then you’ll eventually, in the near future, you’ll see them ramp up again for production,” Fisher said.
Michael Cicak, the company’s chief executive officer and chairman of the board, would not say when the changes would be completed or when the laid-off employees could return to work, writes Kris Turner of Blade Business.
“We have some technical people in here improving the efficiency of the assembly line,” Mr. Cicak said, adding that the Perrysburg-based facility still has about 30 employees.
When it’s fully operational, Willard and Kelsey employs a little over 80 people. So what made the energy company have to cut back on its numbers?
Apparently, the “start-up company has been plagued by a series of production and staffing delays since it was formed in 2008,” according to the Toledo Blade. However, despite these obvious managerial concerns, the company still “received millions of dollars in government loans and tax breaks” and was touted by Vice President Joe Biden, U.S. Secretary of Labor Hilda Solis, and former Ohio Gov. Ted Strickland as a model of innovation and success.
See Vice President Biden’s 2009 praise for Willard & Kelsey:
And although Cicak said last week that the facility was “to reopen Monday after a period of adjusting its inventory,” reports from the Blade would imply that much more is going on behind the scenes.
“Only 15 cars were in the parking lot at 1:30 p.m. Monday. The office was devoid of activity, and the rows of desks were empty,” Turner writes. “A tour of the production line and the changes being made to it were not made available to The Blade.”
The cost of changing the assembly line was not released. Willard & Kelsey also does not release its quarterly earnings or its profit margin because it’s a privately held company, Mr. Cicak told The Blade.
So how much money has this company received through state and federal funding?
“As of early 2011, the company had received a $5 million research and development loan from the Ohio Department of Development, a $10 million loan from the Ohio Air Quality Development Authority, a $3.3 million job creation tax credit, and a $701,000 grant to provide training for 50 current and 250 new workers [emphases added],” Turner reports.
Yet, despite this type of financial support, it looks as if the company is far from producing the 250 jobs it had promised back in February, 2011. And it looks like it’s even farther away from accomplishing its goal of producing “600 to 700 jobs in the next to two years and up to 4,000 in five or six years.”
Also Read
http://tourism9.com/ http://vkins.com/
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