The Debt Ceiling: Time For a Banker to Weigh In

There's been plenty of sqwaking in the media and political posturing on Capitol Hill these past few weeks, especially as it relates to the Nation's debt ceiling, and either raising it or risk default.  I figure that, as a lender who deals with credit and risk management on a daily basis, it's time for me to weigh in.

I had a client sent me a panicked email today, asking if it would be okay if they sent in their Q2 financial reporting on Wednesday the 3rd instead of Monday the 1st.  The client felt horrible about being late, but had been bogged down by an increase in business this year, and needed a couple extra days to finish reconciling the books.  Why am I telling you this?  Because this is an example of not a good, but a GREAT client that is managing its reputation around the full faith and credit of itself as a business-- with flying colors.  We're not talking about payment delay or default, or even any substantial risk change in the business, and they are reacting with great sensitivity.  Side note: Of COURSE I granted them the extension to report their financials!

Take the opposite end of the spectrum.  For a large institution like the US, reporting statistics has become almost an automated process, and gaining the info within these reports is not such a chore, as can be with middle-market banking.  BUT...this institution has been running red ink (a budget deficit) for far longer than any credible business would be able to sustain prior to a credit downgrade.

This is why I can say with almost complete certainty that at some point next week, we'll be discussing the downgrade of US debt from AAA by both Moody's and S&P.  Risking delayed payments to any debtors has negative implications, and increasingly leveraging the country with budget deficits only protracts those risks.

Spending is out of control, and the waste inherrent in that spending has increased over time as more people have become keen on how to play the game.  I'm all for important social progams, but you have to instill a slapping mechanism for when the beneficiaries of these programs bite the hand that feeds them.

Washington is playing politics with our country's credit rating hanging in the balance, and this is sure to have a negative affect on the interest rate environment.  While I'm sure there will be a deal to increase the debt ceiling next week, it appears that there is still plenty of posturing on the right to make the deal a 6-9 month fix, and posturing from the left to close tax loopholes.  And why can't they compromise?  Because this is a game to politicians, and the Republicans 'win' if the debt problem comes back before the next election, and Democrats 'win' if they can close tax loopholes so that they don't have to cut spending as drastically.  It's disgusting, and all of us ordinary Americans are going to pay a price for their game of chicken, but most likely not to the extent that the media is hyping it up.  Remember the lessons from Carmageddon on this one!

Learning from Carmageddon; Preparing for Round 2

If nothing else, the recent Carmageddon incident in Los Angeles has taught us that we don't need to be completely car dependent at all times.  While the message from the local government and media was to simply stay off the roads and away from the area, it appears that message can be improved looking forward to next year's Carmageddon Reprise.  Why not a message of, "Explore your neighborhood on foot," or try to showcase the improvements that have been made to public transit?  The opening of the Expo Line next year will be a perfect opportunity to market the light rail and push for its re-expansion, bringing LA back into the efficient metro transit days of the late 19th and early 20th centuries.

Too many local business establishments were deserted on the weekend of July 15-17, and I'm a huge proponent of not letting that happen next time.  As I plan to discuss in a few following posts (and with some video clips, if I can hunt them down on cnbc), it is going to take a convenient alternative staring us in the face in order for the US, and California in particular, to drop the habit of hopping in the car to go anywhere. So keep the feed rolling, and prepare for some discussion on modern re-urbanization!

Carmageddon: The Chaos That Never Happened

Last weekend's 405 closure ended up to be much ado about nothing.  Traffic was flowing freely, people seemed to stay put, and the whole experience appeared rather painless as the job was completed 17 hours ahead of schedule.  Being the curious individual that I am, I tested the epicenter last weekend.  Here's a bit of what I captured...












I even took Sepulveda through the pass, and ass you can see below (with Who accompaniment), everyone who did use the roads last weekend sure wasn't here...

Surviving Carmageddon in Glendale

Dear residents of the San Fernando Valley,

Yeah, the 405 closure is going to cause us to all rethink our plans and routes for the weekend, but here are some alternatives to going over the hill this weekend....

Cruise Night! - Brand Blvd. is being closed to traffic from Milford to Broadway for the classic car show, food, and entertainment on Saturday.  Come on out from 5-10:30 tomorrow and have some fun!

USA! - Women's World Cup Final is on Sunday morning; how about heading to the most local watering hole and cheering on the American women with the neighbors while enjoying a pint?  Of course, I'll be at the Tavern on Brand, hootin' and hollerin'.  If you haven't been to the Tavern and like a laid back bar that doesn't exactly look like a dive, then you've gotta come out for this game.  It's bound to be a scene; even if it's just me and the wife cursing at the TV's.

But of course, I'm heading to Runyon Cyn tomorrow morning to survey the damage, if any, that has been caused by carmageddon.  Naturally, I'll check in on Laurel Cyn during this visit, and even subject myself to the possibility of traffic heading north from Mulholland to the 101.  What can I say, I'm curious!

Carmageddon: Really?

The upcoming weekend's 405 closure between the 101 and 10 freeways, which has been dubbed "Carmageddon," is fast approaching.  With just a little more than 2 days to go, media hype has crescendoed and the entire LA area is being made to believe that this is practically the end of the world.  Get out of town, stay off the roads, and brace yourselves seems to be the dominating message. 

How about this one: does anybody remember the 1984 Olympics?  Granted, I was rocking some huggies at the time, but residents were told before the Games to do as much as they could to stay off the roads.  Yes, there was still a warning message prior to the event, but those that reported the upocoming event didn't speculate over the length and extent of delays.  They reported that in order to avoid gridlock and delays, the public's cooperation would be required. 

Today's journalists just like pouring gasoline on any tiny flame in the hopes of turning it into the next towering inferno.  Sensationalism sells second only to sex, apparently.  That's why reality TV is- gasp- scripted, after all.   Sure, there will be a bit of a spillover of traffic into the canyons and onto some of the side streets, but I'm thinking that overall the effect just won't be that bad.  Of course some drama queen in West Hollywood is going to perform some over-the-top lementing to the on-camera news reporter because the 3 square blocks around Coldwater Canyon were more congested than normal, and people had bad tempers, honking their horns and such, but come on...Drama Queen?...We-Ho?... it's not professional to stage newstories, people!

I plan on finding a good vantage point from a distance on Saturday morning, to assess the damage- or lack thereof- that Carmageddon is creating.  I see a problem, so I'm offering a solution.  Facts oriented observation of the issue at hand, as it unfolds this weekend.  Keep the feed rolling (blogosphere version of stay tuned)....