Wednesday, December 8, 2010

I’m Saddened By What The Government Did


DECEMBER 8, 2010 BY GEORGE LOVATO JR
I Guess The Government Dodged That Bullet
Well the cat’s out of the bag…the Federal Reserve loaned money to foreign banks. This is not new news. The long and the short of it is that these are different times than in ’08. This was a full blown crisis of epic proportions. As you all know I am a real fan of Chairman Ben Bernanke. I think he is always the smartest guy in the room. If you all recall the United States was being blamed for creating risky junk investments to which we conned the European banks to invest in. I know that is an exaggeration but that was the tone and tenor at the time. Politically I am sure the Chairman was under a mountain of pressure. Well most of the money has been repaid. Whew! I guess the government dodged that bullet.
Carte Blanche Lending to the Loudest Banks?
However I think it would be wise and prudent to analyze history and the events of years past. My first question is how much true analysis went into who, how much, for what reason and the potential of payback of the potential borrowers. Was this carte blanche lending to the loudest banks? I hope not. But the question needs to be asked. What was the criteria? Who made the calls on who got what? We need to know. Now insofar as frequency goes that is another story. Morgan Stanley borrowed over 200 times. You mean to tell me a bank could not project its actual liquidity needs? Jamie…shame on you.
The Golden Pen
Then there is the issue of hedge funds getting assistance. What? Since when did they qualify? I would like to have been the fly on the wall when that decision was made. I feel that was a huge mistake. They are in the risk business. They should have never received the golden pen from the Federal Reserve. I am disappointed in that decision. As you all know I think the automotive industry should have never received the golden pen either. I am on record that it should have been survival of the fittest. We broke a rule of commerce on that one. I am appalled about lending to a British bank that buys the very same assets from a failed American institution we allowed to fail to begin with. We should have saved Lehman! There is the proof in the pudding.
We Must Stay Within Our Own Boundaries
I hope we learn from history. We are bankers and we have to follow our own rules. We must be prudent but forward thinking. We must be aggressive but controlled in order to stimulate and complement the needs of small business. We must be disciplined for all concerned and conduct the business we are educated and trained to conduct. In other words stay within our own boundaries. We must look to the past and learn. We must use those lessons for the benefit of commerce.
I Am Saddened By What The Government Did
The cat is out of the bag and the cat is laughing. I am saddened about what I know now about what our government did. I wish they had not done some of the things they did. I am disappointed in some of the behavior of some of my fellow bankers. In the end we need to follow our own rules of commerce and capitalism and never allow our government to use the golden pen like that again. Are we better off for what was done? We will never know. We can only speculate.

Friday, December 3, 2010

I Miss Sonny Bono


DECEMBER 3, 2010 BY GEORGE LOVATO JR
He Always Put His Best Foot Forward
Sonny Bono went into politics with the best intentions. From the day he ran for mayor until he achieved success as a congressman he put his best foot forward. I have often thought that more politicians should have had a little more Sonny Bono in them as they set forth on a political career. But alas that is not generally the case.
America Wants Honesty From Their Congressman
I listened to Ben Stein on the CBS Sunday Morning Show. I took his points with some skepticism. Yes Charlie Rangel was a war hero. Yes he has served for a long time. And he has been behind many an important political agenda. But he did make some mistakes. In a time when the average American wants honesty from their congressman he offered up uncertainty. We will never know the entire story political or otherwise. We will only know what we see and hear in the press and as we already know that cannot be relied upon. But someone of his tenure should have been smarter. Someone of his tenure should have been more responsible. Someone of his tenure should have not been as sloppy. Congressmen or statesmen should live to a higher standard. This was not the case.
Sonny Bono…He Got Right
At a time when we really need Washington to outperform themselves we little need an incident like this. When we need Congress to be forward thinking and innovative we did not need this kind of distraction. We need these people we elect to live and work by example. And that example needs to be a reliable and a trustworthy one.
What Charlie Rangel needed was a little more Sonny Bono in him. I do miss Sonny Bono… he got right

Friday, November 12, 2010

What Would Have Happened to GM….


NOVEMBER 12, 2010 BY GEORGE LOVATO JR L
…If the Government Had Not Stepped In?
I have my own theory. But applying the rules of commerce and survival of the fittest concepts lead me to believe GM would be a quite different animal today. So let’s travel down the path of speculation.
Piece By Piece It Should Have Been Liquidated
GM was in terrible shape. Heavy at the top and strained at the dealership level. Individual models were stagnant and stale. Compensation was out of line with performance and the consumer thought it would be common place for the company to lumber along in losses. So in the real world what should have happened? First of all management should have axed and removed from top to bottom. A new search should have been deployed to find new and innovative talent to steer the company. Each division/brand should have then undergone a thorough evaluation to ascertain if it would be viable as a standalone entity. Then the brand popularity should be measured. The least desirable brands should then should have been spun off and generate cash and eliminate debt. Piece by piece it should have been liquidated. Then in the end the remaining desirable divisions/brands should have made up the new GM. Funny though, I think all the brands would have survived but just in a different configuration. The consumer would have most likely had access to all they see today but just run and manufactured more efficiently.
A New Finance Division Was Needed
Instead of floating a dead stock issue the company should have then recapitalized a new and more vibrant finance division with new creative minds at the helm. Out with the old and in with the new and more capable. This new finance arm should be able to provide an array of products and services to not only the consumer but the dealer as well. This finance company should have been prepared to invest in every dealer remaining worth his/her salt. This new company just should not have been renamed but rebuilt from the ground up.
The Formation of a New Dynamic Company Was Required
The newly structured GM should have floated a separate stock issue to re-tool the dealership distribution network and put the money where the most return could have been realized. The remaining brands should have put money into new more cutting edge product development. Instead of floating stock to pay off the US government/taxpayer, money should have been deployed to form a new more dynamic company. Instead what we have is a top heavy company with old management, just less of them, in place doing what they have always done. Yes it is making money but they should have been doing that all along. Yes they should be making money because they have less debt. That sort of seems like a no brainer to me.
It Is The Same Old GM
A GM trying to make a sows ear look like a silk purse with this upcoming offering. I think my imagination would have served GM better and the public as well and it would have saved the government/taxpayer a ton of money. The rules of commerce and survival of the fittest were derailed. I thought those rules were what out capitalist system were all about? I guess I need to rethink all of this.

Tuesday, November 9, 2010

Ben Bernanke is the Smartest Guy in the Room

NOVEMBER 9, 2010 BY GEORGE LOVATO JR
The Return of the Salad Days
Let’s talk about the return of the salad days of the economy. I have heard scores of people say it is just around the corner. I have heard other say 2011 is the big year. Yet the realists say it is some time off. I am going out on a limb here. I say 2013 is the year we will actually start to feel the effects of the economy on our wallets and bank accounts. The market as a whole is overpriced. Interest on deposits are underpriced. With the recent flood of Fed Money into the bond market there soon should begin a measurable shift in the behavior of the cost and return on real money. But all this as it will affect us will take some time.
The Unusual and the Unexpected
The international pundits say we are self-serving. Yet they remain big investors in the United States of America. As long as we are healthy their investments should remain healthy. So quiet down China, Russia and Brazil. We are in the midst of reforming the structural elements of our economy. We are rebuilding the foundation for sustained economic growth. In a time where all the rules have changed we need to do the unusual and the unexpected. Pouring 600 billion dollars into the bond market is a smart move. Ben Bernanke is the smartest guy in the room. He knows what he is doing. He is the most forward thinking Chairman we have ever seen. Let him pull the levers and push the buttons that need attention. Make the moves that long term have the best effect on getting the economy back on tempo.
My Bet is 2013
The best thing for us all to do now is to be patient. Be watchful. Be mindful and be inventive. By all of us playing by the same rules we will see gradual but sustained growth. After all that is what we all want and all need. The return to the salad days will take some time but it will come. My bet is 2013.

Tuesday, November 2, 2010

We WILL Raise a Hand of Discontent


NOVEMBER 2, 2010 BY GEORGE LOVATO JR
A Smoky Haze Over Washington
There has been a smoky haze over Washington for a long time now. To some of us the term smoky haze had a different meaning when we were in college but now it has a different meaning but the effect is the same…a stunned dazed look at nothing in particular and resulting in inarticulated movement. The result for us in the real world is economic stagnation. The effect on business is banking congestion. Banks are not lending and businesses are not growing and as a result new jobs are not being created and consumer spending is halted. Banks are uncertain of the future. We as citizens are uncertain of our future. Guess what everyone agrees that is the state of the economy we live in today. There is no argument.
Sober Up Washington
Washington must now sober up and clear their collective heads. The voter will tell the heads that we want solutions and not rhetoric on this election day. We want options not edicts. We need unbuckling of regulation not bridling. The tax incentives of the former administration stimulates business. Regulations bind business growth. And at a time when we need for Washington to go on its own diet of spending and growth the cause and effect of such will benefit us all in many different ways.
We WILL Raise a Hand of Discontent
Hey all you heads in Washington!!! Pay attention!!! Wake up!!! Sober up!!! Shrink spending!!! Reduce regulation!!! Provide the tax incentives to those that pay the majority of them to begin with!!! Put the economy back on track!!!! Or else you may not be fortunate enough next election to win. We WILL raise a hand of discontent with our votes.

Thursday, October 28, 2010

The Electric Car


OCTOBER 28, 2010 BY GEORGE LOVATO JR
The Electric Car Will Have a Tough go of it the Media Reports - Daaaah!
Ahhhh yes the electric car. There was much fanfare about the coming electric cars. Now the media reports they will have a tough go of it. Daaaaaa? Every new product that can impact human behavior has a rough go. But none the less it is a new product that can change the rate of consumption of oil in this country. Yes there will be many varying iterations of the electric car. Yes there is much to do to support the electric car in terms of recharging it when it runs a little low on “juice”. Maybe there will be totally self- regenerating version soon. Maybe there will be solar augmentation. Maybe there will batteries that will hold a high voltage charge for a thousand miles. Needless to say there will be changes and adaptations to come.
Support the New and Innovative
On the other hand the media should be a little more supportive of a product being introduced at one of the most challenging economic periods known to man. The media should be reporting on the progress of the technology and the support network being defined by the public and the manufacturers. Maybe the media should talk about what is in store rather that gloom and doom. Support the new and innovative rather than be critical of it. This is the dawning of new things to come. We should be in awe of it. Remember the PC?

Friday, October 22, 2010

Lawyers Are Not Good Business People


OCTOBER 22, 2010 BY GEORGE LOVATO JR
Gulf Business Needs Good Business People – Not Lawyers
I read where small businesses in the gulf region of the United States are having some difficulty receiving compensation from BP. BP has shifted it’s own burden to Kenneth Fienberg a renowned lawyer. No let me say that many of my best friends are lawyers. I work with many more throughout the workday. I am literally surrounded by them. They are the tool makers of many a transaction I create. I like lawyers. But in most cases they are not good business people and they think too much like a lawyer and not enough like a business person. Thus offer a lawyer a job as a manager of a growing enterprise and the vast majority will tell you that is not their gift or the best use of their training. So back to the story. Mr. Fienberg is in the position to make many a business decision. Yes he is a genius but this is not the best use of his experience and training.
What Should BP Do?
Well it is not my style to criticize without providing some sort of a cogent solution. BP should form a series of panels. Those members of the panels should possess the expertise of a specific industry. All applications should then be forwarded to that panel. The panel should employ the standard evaluative tools that are common to assess the success of the enterprise pre-spill and then provide a comparative analysis to the current period of the application. Based on that analysis then a determination should be made as to the extent of impediment to working capital the business has experienced. That impeded amount is then what should be infused into the business. The financial statements should be cross referenced to the bank statements and vendor accounts payable confirmation. In short you have a mini audit. The very maximum you could afford to do considering the time constraints.
Let Business People Do What They Do Best
Let business people evaluate the requests. Do not overburden the process with too much of lawyer doing lawyer stuff. Utilize the experience of people in the know to shorten the fuse. In short let the business people so what they do best. Let the lawyers do what they do best. And let the gulf businesses get back to do what they do best as soon as possible…business!

Tuesday, October 19, 2010

The Foreclosure Mess!


OCTOBER 19, 2010 BY GEORGE LOVATO JR

There Should Be No Mess!
I am a Merchant Banker. I therefore can be critical of the other members of the banking community. I am on the inside with the rest of the banking industry. So here goes. Foreclosure mess????? What mess???? There should be no mess! You that are in the mess and created the mess make the rest of us look like we are idiots. When a banker lends money there are several considerations. Aside from the four C’s and a host of other considerations one must also prepare what to do when the credit goes bad. And if it goes bad how to technically handle matters related thereto. It is after all what we do!
Do It Right or Get out of the Business
To listen to the media every day and hear that there may be grievous errors in the handling of thousands of foreclosures is astounding to me. To find out that the contracted professionals were not monitored properly is shocking. It is after all what we are supposed to do. To read that paper was just pushed around for the sake of pushing paper is appalling. To find out that law firms hired by major institutions fumbled thousands of files and may have put people on the street without proper consideration makes me sick to my stomach. Listen Mr. Big Banker this is what you do! Do it right or get out of the business because you may have no business in it if this is the way you are going to conduct yourself! People’s lives and futures are at stake. It is your responsibility to treat them fairly. Remember when they were a customer and not a file? This is what you do… assess, lend, manage and occasionally recover. Be better at what you do!
Treat People With the Respect They Deserve
Now you are starting the foreclosure process again. I hope Mr. Big Banker remembers what he is supposed to do. Practice what you preach. You always say this is about people first. Well then follow your own sermon. Remember that file you are handling? Once it was a valued customer. Treat the file and the people behind the file with the respect they deserve.

Thursday, September 30, 2010

Take the Money!

SEPTEMBER 30, 2010 BY GEORGE LOVATO JR
No Vote From Dollar Thrifty Shareholder
Agreed, I know a little bit about the car rental business. My lesson here is take the money! I read where a top shareholder of Dollar Thrifty is going to vote against the merger deal with Hertz. I am sure that the shareholder has spent the time to talk to management? Maybe not. And under certain rules it may be impossible to get to all of the core facts. But the shareholder has made his/her choice.
Take The Money


The largest car rental operation in the world wants to buy you. Well the decision is simple. If the deal is lucrative and it makes sense strategically then take the money! If the deal is the only one on the table? Take the money! If you have never seen an offer this good? Take the money! If the shareholders make money? Take the money! If management and the employees fair well ? Take the money!
Remember the Bottom Line
One greedy, ill-informed shareholder does not make a deal. Nor can they break a deal. Look at the recent proxy fight involving Barnes and Noble and Ronald Burkle. He basically got his head handed to him but in the meantime costing the company considerably. I know a little about running a public company. I have seen shareholders try to remote control manage. It never is good for the company, management and the shareholders at large. Yes shareholders have rights and that is good for everyone. But remember the bottom line is take the money!

Wednesday, September 15, 2010

An Open Letter to Messieur’s Castro


SEPTEMBER 15, 2010 BY GEORGE LOVATO JR
Your Enemies Are Now Gone
The reasons behind your choice to become a communist nation are part of world history. However all your nemeses and enemies are now gone. Therefore you both must rethink your position as being part of a world economy.
A New Paradigm For The America’s
Recently your nations’ labor union announced the lay-off of the vast majority of the government work force. Concomitantly, Latin American is becoming a true force in the world economy. Examine the convergence of events. All the Americas are seeking a new paradigm to combat the overwhelming impact on world manufacturing that China possesses. All the Americas are seeking to regain a foothold on manufacturing consumer goods once again. They seek a cost efficient eager work force. Your country possesses just that work force. Trained and in some cases well educated, and of course soon to be abundant.
Seize The Opportunity Now Messieur’s Castro
It is incumbent upon both of you, Messieurs Castro to seize the opportunity before you. Become part of the democratic and free enterprise societies that can feed your masses and employ your poor and disheartened. Give your country the chance to regain its once desirable image. Cast off the grudges of old. Look into your future with now new opportunity benefiting your masses. The world has changed much during your tenures as dictators. Think outside the political edicts of times past. Look to build a new and fruitful economic future for your citizenry that can truly be a legacy of abundance, peace and prosperity.

Monday, September 13, 2010

Government Has Not Learned Anything From History


SEPTEMBER 13, 2010 BY GEORGE LOVATO JR
Banks Get New Restraints
Front page news reads “Banks Get New Restraints”. Globally governments are agreeing to add more regulation to avoid future financial melt downs. That assumes that all the governments involved have a crystal ball and the view from here is in fact what we will need seven years from now.
And it Was Not Good
As for now we need a little less regulation to allow the financial industry the latitude to maneuver in choppy uncertain economic waters. So now government, the icon of not knowing what is right for business is using its fuzzy image crystal ball to predict and control the future. I cannot disagree more. I have seen firsthand what over stepping regulation can do to an industry. I have seen what the perspective and inexperience of regulators can do to a perfectly healthy business. And it was not good.
Arm Chair Quarterbacking
Imagine for a moment a person that has no real world business experience making sea changing decisions for a financial institution. This government regulator is now arm chair quarter backing the strategy and business practice of a bank. Dangerous. Now put the factors together. More regulations phased-in in the future, of which we know nothing about, along with government regulators whom know little if nothing about how to interpret and integrate these new regulations into safe and sound business practice for banking institutions.
The Complex, the Mundane and the Futile
This is clearly a case where government has not learned anything from history. The government is going to over reach, over regulate, force over capitalization and overkill, at a time when we need to free up time of bankers to get back in the business of lending. Instead we are now going to increase cost and take away valuable time to understand the complex, mundane and futile. Wow!

Monday, August 30, 2010

Does Your Business Deserve Financing?


Weeding Out The Poor Business Model
I listen to the average business man every day talk of the difficulty experienced in obtaining capital. In most cases I can see that the enterprise they are speaking of does not in fact deserve the financing sought. Continuing losses, bad business decisions, poor judgment, and a host of other reasons why funding is unobtainable. The market has a way of weeding out the poor business model.
So Few Find Needed Capital at the Prescribed Time
In some cases the needed capital sought is in fact deserved. But it is a rare thing indeed. For those enterprises the principal must endure days, months or even years to find the right financing solution. That is in fact part of the test. So few find the right match out of the shoot. So few find a steady stream of needed capital at the prescribed time.
Always Assess the Business Model
The rule of thumb is to always assess the business model. If it is not profitable after a year or so then either adjust it to profitability or move on. Not every idea can become a successful enterprise. Not every business model can be profitable. Not every opportunity can be converted into a going concern. Not all of us are meant to run our own business. Put it all together and you need to asses not only the model but yourself. The two must fuse perfectly in order for the model and you to thrive. Analyze, assess and examine all the factors before you continue your quest to run you own show.

Mr President – Your Government Should Leave Well Enough Alone!


AUGUST 30, 2010 BY GEORGE LOVATO JR
The Guiding Minds of Corporate America Have Done a Solid Job
Recently we have seen much comment on the fact cash harbored in corporate America is at an all time high. We have also heard how the government is pushing big banking to lend to small business again. In both cases there is a lesson in the news. First cash being at an all time high is in fact a good sign. This in simple terms means that at the appropriate time corporate America will reinvest in itself. The mood, tempo and general indicators of the economy will be right and the capital to exploit the economic condition of the nation will be present. This is a sign of recovery. Corporate America has done a pretty good job of judging the right time in a number of areas. Have there been mistakes and false starts in the past? Certainly. But by and large the guiding minds of corporate America have done a solid job.
The Government Has Made More Mistakes Than American Enterprise
Let’s speak for a minute on the governments comments. First they have played banker in the recent past. They have made what I consider some very controversial decisions in that regard. They helped the weak to survive and intervened in a manner not fitting American enterprises number one rule – survival of the fittest. Now after we have stopped the bleeding of the biggest economic banking hemorrhage in human history, the government wants to tell banks what to do. The government has made more mistakes than American enterprise. They have attempted to change the basic rules of business governance. Now before the timing and condition of the economy is ripe for regenerating the lending cycle again, the government wants to push where pushing is contradictive to its warnings to Wall Street and the financial community at large.
Dear Mr. President, leave well enough alone. Business and the financial community will be its own best judge as to when, where and how it will begin to fuel the rest of the economic recovery