|
BlackPhx -> RE: IL governor vs Bank of America! must see (12/10/2008 8:21:13 AM)
|
OK..I am now looking for the little microscopic Twilight zone sign I apparently tripped over without noticing.
On one hand we have states who rely on Bank Floats to cover payroll and services pending Tax revenues and more than one of them are begging for Federal bailouts as well. They are laying off people right and left at the Government level and cutting services. BoA is one of those Lenders, keeping states functioning. There are only a few that can lend at that level.
On another hand we have I don't know how many people in this country yelling that the Banks need to be more responsible about who they lend money to. Write a bad Mortgage, write a bad business loan or line of credit, same thing, money vanished and the banks don't need window frames or any other physical inventory, any more than they need more housing inventory. Either is going to be sold at a loss and frankly is bad business.
We advise people to bank at least 6 months salary in case of disaster (few can afford to but many have 401k's). Some can afford to some are hand to mouth, but why don't we require companies to keep at least 3 months ahead of needed capital for the same purpose? I went to work for a small company way back when. When I joined them as an Office Manager/FC Bookkeeper they were barely making payroll. They had, had a fire and lost many of their receivable records to water damage and of course had not computerized. I got them up to date with a computer system, and then started working my way through their receivables, teasing and peeling them apart, tracking P.O.'s and entering them into the computer and going after the accounts who owed Money. One of the largest was DuPont. By the time 6 months had passed, they were back in the black and had 6 months of expenses banked and growing. Lines of credit a good and your vendors will extend them as long as you have a good track record..having cash is better. Many retail businesses are working with Private Lenders and doing the 3 months same as cash, etc. with their customers. They get their money up front and have operating capital letting them stay solvent when sales are high and staying low on their own lines of credit. These days that is harder to do, with consumers hanging onto every dime possible, but it is possible.
We don't know what the finances of that company was, how long they had been teetering, what they did to forestall what happened. We only know what the media and the Governor had released. How much they already owed creditors, and BoA is an unknown. But, hopefully, BoA has not been coerced into throwing good money after bad, because frankly, people will castigate them for doing that as well. The people have been paid..not by the company but by us. Our Tax dollars have bailed out these employees, but what about the next group and the next while companies that have been mismanaged, or who have over extended themselves and are facing bankruptcy increase their debt and walk away from it, leaving their Creditors to try and recover from asset sales and pennies on the dollars of what they are owed, putting them at risk as well.
It's not a pretty picture and is not likely to get any better. I am just waiting to see what happens when BoA or another bank is called on the Mat for extending credit to a bankrupt company without any guarantee of getting back our tax dollars for doing so.
poenkitten (watching from the Twilight Zone)
|
|
|
|
