Romney Fights Off Auto-Bankruptcy Issue, Likely to Face it Again in Critical Ohio

If it was known Mitt Romney was going to win swing-state Michigan’s primary by the slimmest of margins over the least moderate candidate in the Republican field months ago, that would have been seen as a loss, especially given that it is his home state. However, after overcoming a poll deficit fueled by perceptions of Romney being anti-auto industry, his supporters celebrated Tuesday’s Michigan win with vigor. But that “Let Detroit Go Bankrupt” op-ed headline/soundbyte likely will haunt him in the even more important Ohio primary.

As noted in last week’s eNews, Romney faced off against a considerable image problem largely based on the “Let Detroit Go Bankrupt” headline he penned as part of a now-infamous New York Times op-ed piece, as well as a surging connection with voters to the far right by opponent Rick Santorum. In the fall of 2008, Romney bashed President Barack Obama for the proposed bailouts of Chrysler and General Motors, noting a burden on taxpayers as a key critique, and continues to do so despite what most analysts paint as a successful effort.

Those issues will continue to play in the crucial Ohio primary on March 6 (“Super Tuesday”) because of the state’s similar reliance on the automotive industry. Though Romney’s point was about ways to better manage the bankruptcies to improve business prospects for the long-term health of the companies with no suggestions of a liquidation that would have caused millions to lose their jobs, the headline/soundbyte undoubtedly will be used and likely create an image issue he needs to conquer. And, should Romney take the GOP nod, the auto bankruptcy bailout will certainly become a battle issue in both Ohio and Michigan in the context of a general election – After all, it was the first issue Romeny publicly used to engage President Barack Obama after announcing his official candidacy. And, considering the two states comprise the largest number of swing-state electorates other than Florida or Pennsylvania, the issue of the Chrysler and General Motors bankruptcy could very well be among the most important swing issues of the entire GOP vs. Obama race.

Brian Shappell, NACM staff writer

CMI Preview: Gains Continue in February

Expect to see continued gains from the February Credit Managers’ Index (CMI) when it’s released Wednesday morning. In addition to solid growth in the overall index, certain key categories received a boost and provided another dose of confidence to the still leery American economy.

“The mood of the country could best be described as cautious and perhaps a little encouraged as far as economic growth prospects are concerned,” said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM). The question mark stems from the last month’s sudden spike in oil prices and its potential impact on the price of gasoline. Kuehl noted that in the past this kind of leap was enough to send the economy hurtling back into recession, but thus far the consumer seems to be taking it in stride.

How long the even temperament of consumers will last is anyone’s guess, but if the threat of high prices turns out to be a temporary one, expect both consumers and businesses to breathe heavy sighs of relief and return to focusing on the good news that has so far dominated the start of 2012. “There has been good news on the job front, better demand numbers, better growth numbers and better numbers in the CMI,” Kuehl added.

Sales numbers also grew in February, which signaled future improvements in the index’s unfavorable factors in the months to come. “An expansion in sales allows companies to catch up on their debt and improve their overall credit standing,” said Kuehl. “This bump in overall business activity is a precursor to additional expansion.”

The full CMI report for February 2012 with commentary, tables and graphs will be available Wednesday. CMI archives may also be viewed here.

Jacob Barron, CICP, NACM staff writer

International Roundup

In Japan, the largest manufacturing bankruptcy in the nation’s history was declared this week as Elpida Memory Inc. found its liabilities in the neighborhood of $5 billion far too great to overcome without restructuring. The computer memory chip manufacturer, once a big part of a booming exporting industry dominated by Japan, has had trouble keeping up with foreign counterparts. The bulk of that competition, driven by lower costs, comes from outfits in South Korea, primarily Samsung.

Also not helping the Elpida and its contemporaries is that its chips are used for computers and laptops, not necessarily the growingly popular smart phones/devices like the iPhone/iPad and similar products. Additionally, the overvalued yen, which has become a bit of a magnate as investors leave the unstable euro, has made it harder for Japanese-based exporters to compete and threatens Japan’s long-held trade strength. As such, Japan, never known as a country where corporate bankruptcies were very likely, could be seeing its fortunes change … and not for the better (see more on this topic in a feature in the latest, March issue of Business Credit Magazine).

In Greece, the ratings agencies have struck again. This time Standard & Poor’s have downgraded Greece into the sovereign credit rating category of “SD” or selective default. Given its troubles, any action of the kind – once thought to be a virtual bomb in the markets – strikes as less than shocking. Said S&P:
“Greece's retroactive insertion of Collective Action Clauses materially changes the original terms of the affected debt and constitutes the launch of what we consider to be a distressed debt restructuring…we believe that the retroactive insertion of CACs will diminish bondholders' bargaining power in an upcoming debt exchange.”

In Ireland, a potential snag in the latest European Union effort to force the tightening of member states’ proverbial belts is emerging. Prime Minister Enda Kenny announced this week that, as per Irish constitutional mandate, a public vote must be held to ratify the proposed EU treaty that calls for tougher debt limits, limits that almost certainly will force more, unpopular austerity in the debt-rattled  nation. For his part, Kenny said he plans to sign the treaty as a show of support he believes, at least in part, is necessary for an ongoing economic recovery for the EU. It is worth noting the neighboring United Kingdom was one of only two members voting against the treaty, but it’s also not on the euro as its primary currency.

(Note: Check out this week’s eNews, out Thursday, for more breaking and news for credit and financial professionals.  

Brian Shappell, NACM staff writer

Romney Bankruptcy Soundbyte Working against Him in Key Home-State Primary

Understanding the power of the soundbyte, whether spoken or in print form, apparently isn’t the forte of multi-time presidential hopeful and arguable frontrunner for the Republican nomination. The Obama Administration already appears to be licking its proverbial chops over the Romney recent quip “I don’t care about the very poor,” whether taken out of context or not. However, the incumbent team might not even get to pounce on it in a general election as recently surging Rick Santorum has taken the lead in polls predicting the outcome in Michigan where, despite his childhood roots, Romney has a considerable image problem largely based on the “Let Detroit Go Bankrupt” headline he penned as part of a now-infamous New York Times op-ed piece. And that could cost him dearly in the monumentally important Michigan primary taking place on Tuesday.
In the fall of 2008, Romney bashed President Barack Obama for the proposed bailouts of Chrysler and General Motors, and the headline that went along with the story has continued to follow Romney like a black cloud whenever he’s shown his face in Michigan or other auto-dependent states like Ohio. Granted, Romney’s point was about ways to better manage the bankruptcies to improve business prospects for the long-term health of the companies and never to suggest a liquidation that would have caused millions to lose their jobs. Still, Romney’s political opponents on both sides of the aisle have repeatedly pounced on “Let Detroit Go Bankrupt," and the person in the best position to reap the rewards is Santorum.

For his part, Romney has doubled-down on his bankruptcy theories and continues to rail against the Obama administration-engineered bailout of Chrysler and GM, lobbing allegations such as “crony capitalism” and that Washington sold out the taxpayers to strong unions when analyzing the administration’s role in the solution. The problem is, as most experts have acknowledged to varying extents often based on political affiliation, the government-assisted bankruptcy for two of Detroit’s “Big Three” was a success story. And many believe the restructuring efforts would not have been nearly as successful without some financial assistance from the federal government. It’s an assertion shared by Bruce Nathan, Esq. of Lowenstein Sandler PC, among others, during interviews in 2011.

How much the 2008 headline and Romney’s criticism of a successful strategy will hurt him have yet to be realized, but with Michiganders heading to the polls Tuesday, the answer seemingly isn’t far off.

Brian Shappell, NACM staff writer

Euro Debt Support Likely to Continue as Nations Worry of Spillover

While testifying before the U.S. Senate in recent days, a Federal Reserve official defended the decision for the Fed and central banks from two other continents to try to help the European Union amid a debt crisis that threatens to hurt the economic rebounds of itself and trading partners alike.

Steven B. Kamin, director of the Fed’s Division of International Finance said in prepared testimony that measures taken in November, including the expansion of swap lines for European banking institutions, were a help not only to those receiving the aid, but business in nations backing the assistance. These include the United States, Japan, Switzerland, the United Kingdom as well as the European Central Bank. Kamin said the spillover from problems with the high-debt nations, most the “PIIGS nations” (Portugal, Ireland, Italy, Greece, Spain) would have caused greater problems, including tougher credit conditions, in the United States and Japan without the aid in the form of monetary policy.

However, it’s worth noting, Kamin’s speech wasn’t a virtual pep rally to decree that all crises had been averted:

“Many financial institutions, especially those from Europe, continue to find it difficult and costly to acquire dollar funding, in large part because investors remain uncertain about Europe's economic and financial prospects. Ultimately, the easing of strains in U.S. and global financial markets will require concerted action on the part of European authorities as they follow through on their announced plans to address their fiscal and financial difficulties. The situation in Europe is continuously evolving. Thus, we are closely monitoring events in the region and their spillovers.”

Brian Shappell, NACM staff writer

NACM 2012 Issue Brief Now Available

NACM’s updated 2012 Legislative Introduction and Issue Brief is now available on NACM’s website.

This comprehensive document includes a historical record of NACM’s legislative efforts and accomplishments over the last 15 years as well as the association’s continuing priorities in the coming year and future Congresses.

New this year is a section pertaining to NACM’s international division, FCIB, and their vital position as a supporter of exports, which have become ever more important in the wake of President Barack Obama’s National Export Initiative (NEI). Now in its second year, the NEI sets a goal of doubling U.S. exports by 2014.

Additionally, the 2012 Issue Brief includes NACM’s updated positions on bankruptcy reform, and specifically amendments to Section 547 governing preferences.

Click here to see the latest version of NACM’s Issue Brief. For more information, please email Jacob Barron, NACM Government Affairs Liaison at

Jacob Barron, CICP, NACM staff writer

South Korean FTA in Effect within Month

It’s been a long, hard-fought trip to the finish line, one wrought with political and labor interests, even though a free trade agreement FTA between the United States and South Korea was forged some five-years ago. But now, barring a threatened yet unlikely veto by South Korea opposition lawmakers, the FTA is set to go into effect in a few weeks.

U.S. Trade Representative Ron Kirk and South Korean Minister for Trade Park Tae confirmed that the US-South Korea FTA will be fully in play on March 15. The deal's value is estimated at nearly $90 billion. Domestic manufacturers, especially in the automotive and agricultural products industries, stand to gain levels of market access with the Asian trade partner never realized before within said industries.  Approval of the FTA with South Korea as well as Panama and Colombia had long been seen as important to boost business for U.S.-based companies feeling the pinch of lower domestic demand. The FTAs, in theory, will significantly expand U.S. exports in those markets, help small businesses and lower tariffs on American goods. The Korean FTA was widely regarded as the most significant of the three new U.S. pacts and will be the first to go into effect.

(Note: More extensive background on the fight to establish the U.S.-South Korean FTA will be featured in this week's NACM eNews, available Thursday afternoon at

Brian Shappell, NACM staff writer

Greece Looks to Get a March Reprieve

The finance ministers of Europe seem on the verge of giving Greece another bailout—one that will allow the country to stumble on until the end of March before the whole process starts over again. The fact is that Greece will have had an election by the time this discussion starts up again and, if one looks at the polls, the next Greek government will repudiate the current deal and likely refuse to go along with most of the demands. The Greek population is violently opposed to the austerity plan, and there are parties from the radical right and radical left that are exploiting that fury.

At the same time that there is intense debate over the current deal, there is controversy regarding the ultimate goal for the Greek economy. It has become an article of faith that Greece has to reduce its debt to the point that it is 120% of its GDP. The prevailing wisdom is that anything over that figure is wholly unsustainable, while much under is unrealistic. And the Greeks will be very hard pressed to make this goal under the best of economic conditions. It would require Greek growth at a pace that has eluded the country for years and is far higher than the average of the entire EU.

Nations that drag themselves out of this debt or nations that can sustain a high ratio are those with a strong and reactive export sector that is generally based on possession of a key commodity like oil or a strong manufacturing base. Greece has neither of these. The commodities it sells are marginal at best, and there is no industrial sector to speak of. This is a nation that relies on tourism and the activity of the Greek shipping industry.

Analysis: Greece desperately needs the bailout if it wants to keep negotiating a solution to the more fundamental issue. That said, it is not a panacea by any stretch of the imagination. Getting a permanent solution for Greece is a matter of converting Greece into a modern economy that really belongs in the European Union as something other than a permanent ward of the state. To a somewhat lesser degree that is also the issue in Italy, Spain and Portugal. These are nations that have more resources at their disposal than Greece but face much the same problem as far as consistent competitiveness. The question as to whether Greece can sustain a budget that is 120% of its GDP is one thing, but there is a bigger question than that. Can Greece develop something resembling a modern economy that justifies its presence in a European organization at all?

Source: Chris Kuehl, PhD, NACM economist

Manufacturing Upswing Continues on the Rebirth of U.S. Auto

U.S. government-released statistics unveiled Wednesday showed manufacturing built off of December’s impressive gains with another uptick. And much of the credit goes to the automotive industry, which looks healthier than in years heading into the core of 2012.

Though overall industrial production was unchanged in January, manufacturing itself performed well yet again. A big part of that stems from the 6.8% gain posted by the index specifically tracking motor vehicles and parts manufacturing. That after the December result was upwardly revised to 3.8%. As loud as any time since the U.S. government bailed out two of the “Big Three” domestic automakers, the industry and those who rely on it have declared as loudly as ever in the newest statistics that the auto rebound is on.

Jim Gillette, an auto industry analyst with IHS automotive, believes parts suppliers and auto-makers are well positioned moving forward, not just because of streamlining business models during the recession, but because people who have put off car purchases can only continue that frugality for so long:

“Cars and trucks on the road are as old as they’ve ever been."

(Note: For more on this story, check out this week's NACM eNews, out later this afternoon).

Brian Shappell, NACM staff writer

Another Solar Energy Company Files For Chapter 11

Yet another alternative/renewable energy firm has sought bankruptcy protection following a period of quiet that was preceded in late 2011 by a slew of high profile Chapter 11 filings at such companies.

Michigan-based Energy Conversion Devices voluntarily filed a petition for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of Michigan Tuesday. Energy Conversion Devices, through its subsidiary United Solar Ovonic (USO), manufactured and sold photovoltaic products used largely in commercial rooftop solar panels. The company plans to sell USO, among other assets, as part of its plan to reorganize.

“We firmly believe there is a strong and sustainable commercial market for solar products,” said President/CEO Julian Hawkins. “However, our current capital structure and legacy costs are preventing USO from making the investments necessary for the future of the bodiless without restructuring.

It’s the latest in a series of filings by overleveraged alternative energy companies, which was predicted in NACM’s Business Credit Magazine last spring. Producers have alleged that Asian competitors have been offered subsidies by their governments and can no longer compete because they are undercutting them so drastically on pricing and costs. Others note a major factor is oversaturation in the U.S. solar energy/products manufacturing industry, which saw rapid perhaps unsustainable interest during the waning days of the last economic boom. Prior to Energy Conversion Devices, Stirling Energy Systems Inc. was the most recent to file – but it went straight to Chapter 7 (liquidations) in U.S. Bankruptcy Court in Delaware. It followed previous filings by SpectraWatt Inc., and the controversial Solyndra, a California firm with ties to the Obama Administration still being investigated federally for fraudulent business practices. Months before, BP solar operation halted its Maryland-based solar activities in favor of relocation abroad.

Brian Shappell, NACM staff writer

More Ratings Woes in the EU

Stop us if you’ve read this before – worried about “contagion” spreading from the high-debt “PIIGS Nations,” a U.S.-based credit ratings agency has lowered the boom on the credit ratings and/or outlooks of several in said grouping as well as neighboring nations. While it may seem like a repeat, NACM assures you: it isn’t.

Moody’s Investment Services Tuesday downgraded the sovereign credit ratings of six European nations – Italy, Malta, Portugal, Slovakia, Slovenia and Spain (which fell multiple steps). Additionally, Moody’s wagged the proverbial finger at France, Austria and the United Kingdom – all holders of a prestigious ‘Aaa’ rating level – by publicly moving their respective outlooks from stable to negative.

As Moody’s and its counterparts at Fitch and Standard & Poor’s have alluded to in the past, the agency pointed to “uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework” as well as “increasingly weak macroeconomic prospects, which threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness.” Because of both – and, one could argue, because of the agency’s own increasing spotlight/scrutiny on debts levels in the EU – Moody’s fears the impact on market confidence and the negative cycle that could ensue.

Markets fell slightly on the news, though the announcement generated more of a yawn than the panic and/or debate such a move would have in years past. Economists, including NACM’s Chris Kuehl and The Conference Board’s Ken Goldstein, have made past comments to the tunes of “it didn’t tell markets anything they didn’t already know” or slights on the ratings agency’s own crisis in credibility it suffered after poor analysis and borderline conflicts of interest in business practices during the much discussed run-up to the global economic downturn a few years back. Still, even with less of a cache, the downgrades are likely to have some negative impact on the short-term credit prospects for the nations involved, even if the extent is yet to be established.

Brian Shappell, NACM staff writer.

V-Day Discount for NACM Credit Congress Available Today Only

You may not be able to save any money on flowers, gifts or that fancy dinner on Valentine's Day, but you can save on the price of the the biggest educational and networking event of the year for credit professionals...for one day only.

On Feb. 14, NACM will show a little extra love exclusively to its social media followers (on Twitter or Facebook) by extending $50 off new Credit Congress registrations! Those wishing to take part must register online using discount code CUPID, and do so today.

For those of you not yet following NACM on Twitter, find us at!/NACM_National. For more information on events and sessions at 2012 Credit Congress, being held this year at the Gaylord Texan in Grapevine (Greater Dallas), TX, please visit The Credit Congress Facebook page is at

See y'all in Texas.

U.S. Breaks Export Records in 2011

U.S. exports of goods and services hit landmark, after landmark, after landmark in 2011. It seems appropriate then, that statistics released last week confirm last year as the biggest ever for U.S. companies selling abroad.

According to 2011 trade numbers released by the Commerce Department’s Census Bureau and Bureau of Economic Analysis, U.S. goods and services exports in 2011 were up by 14.5% or $265.5 billion from the same period of 2010, reaching a record annual total of $2.1 trillion. Most individual merchandise categories also experienced record export levels in 2011.

The Commerce Department’s most recent release also included figures for December 2011, which showed an increase of 0.7% in exports of goods and services from November’s numbers. December’s exports of services also set a single-month record of $51.7 billion.

All in all, over the last twelve months, exports have been growing at an annualized rate of 15.6% when compared to 2009, a pace greater than the 15% required to double exports by the end of 2014, a deadline set by President Barack Obama’s National Export Initiative. "U.S. exports posted a record $2.1 trillion in 2011, helping to fuel the positive momentum we have seen in the U.S. economy as a whole. Given the growth over the past two years, we remain on track to realize the president’s National Export Initiative goal of doubling U.S. exports by the end of 2014," said Commerce Secretary John Bryson. "The private sector has recorded 23 consecutive months of job growth, creating 3.7 million jobs, and U.S. manufacturers have added 404,000 American jobs in the last two years, the strongest growth since the 1990s."

Export-Import Bank (Ex-Im Bank) Chairman Fred Hochberg also cheered the news, and again pledged the bank’s resources to the continued success of international trade. "U.S. exports play an essential role in our economic recovery, and it's vital that we provide American business owners with the resources they need to compete in a 21st century global economy," he said. "Ex-Im Bank remains committed to reaching new customers and to helping level the playing field for our nation's exporters."

The major export markets with the largest annualized increase in U.S. goods purchases were Turkey (43.6%), Panama (38.6%), Honduras (35.0%), Argentina (33.2%), Hong Kong (31.7%), Chile (30.3%), Peru (30.0%), Brazil (28.3%), South Africa (28.0%) and Guatemala (26.6%).

To learn more about best practices in exporting and how to grow your company through international trade, visit FCIB’s website at

Jacob Barron, CICP, NACM staff writer

New Greek Deal Forged... or Was It?

The markets and mainstream media thought that a new bailout deal had been made with Greece at last, and the investors reacted with some glee. That proved to be short-lived enthusiasm as the reality of the situation set in. The “troika” made up of the European Union, European Central Bank and the International Monetary Fund has not indicated pleasure with the plans put forward by the Greeks. They want to see more cuts and more commitment to an austerity plan that will extend past the April elections, and the Greeks have been very reluctant to make that kind of promise amid already weak growth prospects and widespread rioting from the populous over any more austerity.

The deal that the current government made has already caused some splits in the ruling coalition as the small, far-right LAOS party has refused to support the plan and have threatened to pull out of the coalition altogether. They do not have the ability to collapse the government, but they illustrate the threat that worries the “troika”. The government now may be supportive of the plan, but there will be plenty of opportunities to reject the plan in the near future future. If so, the rescuers will be right back where they started.

The fact is that Greece is not in a position to make the radical changes demanded thus far. It may make perfect fiscal sense, and the reforms may be long overdue, but that doesn’t change the situation in the streets. The demands will mean radical cuts in pay and benefit for the millions of state employees and they are represented by some of the most radical unions in Europe. They will not accept these changes without extreme protest as has become the case.

Though markets rallied on the news that a deal seemed imminent and, now, the enthusiasm has faded just as quickly. The fact is that one of these positions will have to be abandoned, and it is not at all clear which country has the most leverage. It would appear that Germany holds the cards as they are the only ones that can make the financial commitment. However, if Greece refuses to go along with the deal and allows the chips to fall where they may, the repercussions (a bank-crippling uncontrolled default) could be as bad for the Germans as for the Greece.

Source: Chris Kuehl, PhD, NACM economist

Credit Congress Page Up on Facebook, Follower Wins Free Registration

For those of you not in the know, NACM has launched its official Facebook page for 2012 Credit Congress, where attendees can find out information, communicate with one another and be part of contests/special offers. To wit, NACM would like to congratulate our first Credit Congress Facebook contest winner: Valerie Camacho. Valerie has won a free registration to this year’s Credit Congress, to be held at the Gaylord Texan in Grapevine (Greater Dallas/Ft. Worth), TX this June.

For more information and to ‘friend’ or ‘like’ the Credit Congress page, visit

Chapter 9 Filing Watch on Providence and, in a Shock, Harrisburg (Again)

Providence has become the latest city to get press for flirting with the brink of insolvency and, thus, is starting to generate increasing debate over whether it will file for Chapter 9, municipal bankruptcy, protection. To wit, it's mayor, Angel Taveres, noted the city could essential go broke by June without concessions from retired employees as well as, to a lesser extent some nonprofit entities.

The statement could be a strategy to bust some collective bargaining agreements after the smaller Central Falls, RI municipal bankrutpcy that caused retirees to eventually agree to an out-of-court settlement to save millions on entitlements.

Meanwhile, the bombshell of the week in bankruptcy came out of Harrisburg. State-appointed receiver David Unkovic said publicly that despite the state and the mayor’s vitriolic fight to prevent the council’s Chapter 9 filing last fall, bankruptcy may in the end be the only choice for the city by July if stakeholders don’t make concessions and warring city government factions don’t agree to work together.

Unkovic recently unveiled a plan to keep the city out of bankruptcy that included selling the incinerator operation that has caused a lion's share of its debt as well as seets such as parking structures.

(Note: More on Chapter 9/municipal bankruptcy in the lead story of this week's NACM eNews,
available later today at

Brian Shappell, NACM staff writer

Bernanke Holding Line on Historically Low Rates Through '14

Federal Reserve Chairman Ben Bernanke has been back in the usual hotseat before Congressional lawmakers itching to garner some T.V. coverage in an election year. And though news is mostly positive about the U.S. economy, the Fed appears ready to continue on its path, no matter how popular or unpopular it may be with members of the U.S. House and Senate.

Bernanke presented the semi-annual Economic Outlook and the Federal Budget Situation over two days on Capitol Hill, with his most recent appearance coming Tuesday. The report indicated the economy continued to growth, albeit at not an exceedingly robust pace, on strength in sectors such as manufacturing. Additionally, the gains were more than offsetting ongoing construction/real estate woes and concerns from economic problems abroad, primarily in the European Union. Of keen interest to U.S. businesses is predictions of spending on capital improvements and hope for continued improvement in credit conditions.

“More recently, the pace of growth in business investment has slowed, likely reflecting concerns about both the domestic outlook and developments in Europe -- However, there are signs that these concerns are abating somewhat,” Bernanke said. “If business confidence continues to improve, U.S. firms should be well positioned to increase both capital spending and hiring...and surveys indicate that credit conditions have begun to improve modestly for those firms as well.”

Another key topic of conversation was the positive January unemployment numbers that shocked market-watchers by falling to 8.3%. Still, the chairman reaffirmed the Fed would keep the target for the federal funds rate near zero. He also warned that unemployment numbers for one month do not paint a complete, reliable picture about a U.S. labor market that still faces some problems or the fact that unemployment numbers do track the many who have simply given up looking for a job as certain industry sectors and regions have seen an anemic rebound to date.

Brian Shappell, NACM staff writer

Commercial Filings Plummet in Latest Bankruptcy Numbers

While bankruptcies are declining nationwide, they don’t seem to be falling anywhere faster  than in the commercial world.

Total business filings for January 2012 fell by 20% when compared to January 2011, from 6,203 to 4,967, according to the American Bankruptcy Institute (ABI). Overall, filings in the U.S. decreased by 14%, totaling 87,946 last month, as compared to 102,175 the year prior.

“The continued decline in bankruptcies reflects the effort of consumers and businesses to shore up their debt loads in order to navigate through an uncertain economy,” said ABI Executive Director Samuel J. Gerdano. “We expect overall bankruptcy levels in 2012 to continue to trend downward until consumers increase household spending.”

Month to month, the January 2012 overall readings represented a 9% decrease from the 96,264 filings in December 2011, and a 10% drop from the 5,496 commercial filings in December 2011. ABI cautioned, however, that Chapter 11 filings in the busiest bankruptcy jurisdictions have been up significantly over the last year, increasing by 40% in the District of Delaware and by 25% in the Southern District of New York. Two major Chapter 11 cases—Eastman Kodak and Ener1, Inc.—were filed in New York last month, while three major cases—Evergreen Energy, Inc., Buffets Restaurants Holdings and Trident Microsystems, Inc.—were filed in Delaware.

Jacob Barron, CICP, NACM staff writer

Greeks Still Resisting as France, Germany Turn Up Austerity Heat

The day of default is nearing, and it looks increasingly likely that the Greeks will not be able to pull out of this. A disorderly default in Greece would throw the entire euro-wide bailout system into chaos, and it is evident that this game of financial chicken is going to be played down to the very last second.

The Greeks are refusing to accept the demands that have been made by German and French leaders, who appear as dug-in as ever in their proposed conditions, as they assert the requirements are too draconian. Greek leaders, already unpopular with the masses for previous austerity cuts, have predicted that the German and French demands will condemn the nation to years of destitution and no growth.

Regardless, those with the bailout cash want an even more aggressive austerity plan and labor reforms, and they believe the Greeks will give in. The Greeks think the threat of euro zone collapse will be enough to make the austerity proponents back off.
Either way, the fear is that both sides will wait too long, and nothing will be able to stop and uncertainty-fueled financial meltdown in the EU.

Source: Chris Kuehl, PhD, NACM economist

Unemployment Hits Lowest Rate in Three Years

The U.S. economy added 243,000 jobs in January, an unexpectedly high number that dropped the nation’s unemployment rate to a three-year low.

“Today’s employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression. It is critical that we continue the economic policies that are helping us to dig our way out of the deep hole that was caused by the recession that began at the end of 2007,” said Alan Krueger, chairman of the White House Council of Economic Advisers. “Most importantly, we need to extend the payroll tax cut and continue to provide emergency unemployment benefits through the end of this year, and take the additional steps that President Obama proposed in his State of the Union address to create an economy built to last.”

Analysts had originally expected a gain of only 150,000 jobs. Instead, last month employers created the most jobs since April, dropping the unemployment rate to 8.3%, down from 8.5% the month prior. Since August, the joblessness rate has fallen by 0.8%.

Although, according to NACM Economist Chris Kuehl, PhD, job growth is a very difficult figure to track, other figures from the private sector mirror the optimism of the government’s latest report. “Here is the good news according to the latest survey from ADP,” said Kuehl, referring to ADP, Inc.’s most recent National Employment Report. “They are seeing gains in the private sector as far as hiring is concerned, and the majority of these new hires are with smaller companies. This is critical as small and medium-sized companies with employee numbers between 50 and 500 are the primary employers in the U.S.”

Kuehl noted that if this sector isn’t hiring, then the chances for a solid recovery in employment are slim. Luckily, this doesn’t seem to be the case. “It is even more interesting that ADP reports that many of those companies that are hiring are in the manufacturing sector,” he added. “That bolsters the assessment of manufacturing as a robust sector of the economy.”

“This is not the definitive signal that all is well and that real gains will soon be showing in the overall levels of joblessness, but this is a step in the right direction,” said Kuehl.

Jacob Barron, CICP, NACM staff writer

Russian Unrest Growing As Election Nears

Last month, one of the “Big Three” U.S.-based ratings agencies noted deep concern with what appeared to be civil unrest with the government, more specifically Prime Minister/soon-to-be second-time President Vladimir Putin. Little has happened in the interim to paint the Fitch decision to downgrade its long-term prospects as outside the line, as so many ratings agency downgrades have been criticized.

Though Putin's likelihood to regain his post as president after elections in March is all but guaranteed, there is widespread evidence of unrest in the form of in-country blogging and public demonstrations stemming from alleged deep corruption in Russian politics. The growing, and surprisingly brazen unrest has not been so public since the fall of the Soviet Union. To wit, this week there was what amounted to an organized, 500-car protest parade around Moscow’s “Garden Ring,” a stretch of road in the city that passes by the Kremlin. It was described in some ways as an opening act to bigger protests planned in February and it garnered worldwide attention.

 It can best be described as "unprecedented,” said various credit professionals familiar with Russian political and business happenings.

The questions yet to be answered are how big and unified will the populous protests become, what type of measures Putin, typically quick to dismiss decent, will take and what impact this could have on business. The worst-case scenario is Russia’s own version of “Arab Spring,” though even those calling for reform say remains highly unlikely. Still the developments are worth note to anyone doing business in Russia.

FCIB will present a "Doing Business in Russia" webinar in March. For more information or to register, visit the events section of their website at

Brian Shappell, NACM staff writer