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The Biz Roundup February 24

If you read one piece of news today, this is the one to pick.

Last year’s failure rate is a sharp increase over past years. In 2004, the SBA loan failure rate was 2.4%, but it has increased each year since, rising to 8.4% in 2007, according to Coleman’s calculations. The 2008 failure rate of nearly 12% covers the fiscal year that ended on Sept. 30 . . .

“The numbers are brutal, but it validates what we already know,” said the report’s editor and publisher, Robert Coleman. “In towns, we see established businesses going under every day, and [I’ve heard] bankers say their small business portfolios have become a disaster.” . . .

“Lenders are criticized for not getting capital to Main Street, but the problem, as this report shows, is that it’s hard to justify getting capital out there when there’s a 12% failure rate,” Coleman said. “That’s why they tightened the credit box.” . . .

“We all want to be good stewards of tax payers’ dollars,” Coleman said. “Because 50% of the GDP is driven by small businesses, we need to focus on the flip argument: There’s an 88% success rate. Just face that we will have losses right now, and that those losses have to be at the government level so that we can protect what we have.”

(“,” CNN Money, February 25) These numbers put paid to the credit crunch. We won’t be seeing bank or thrift credit easily extended to small businesses and start-ups for at least a year, so the increasing default rate means that you have to discover credit from alternative sources, or start planning to bootstrap your operations.

Okay, this is going to be a pretty big blow-up. I mean like law-passing, legislator-preening, opinion-writer-pontificating type of blow-up. We’ll have some very merry breakfast tables over the next couple days.

Northern Trust, a Chicago-based bank, sponsored the Northern Trust Open at the Riviera Country Club in L.A. We’re told Northern Trust paid millions to sponsor the PGA event which ended Sunday, but what happened off the golf course is even more shocking.

Northern Trust flew hundreds of clients and employees to L.A. and put many of them up at some of the fanciest and priciest hotels in the city. . . .

Now how’s this for outrage? Northern Trust laid off 450 workers in December, 4% of its workforce.

And here’s what’s absolutely amazing: The United States Government flat out gave Northern Trust the $1.6 billion in bailout money, and the bank didn’t even request it!

(“Bailout Bank Blows Millions Partying in L.A.,”, February 24) Okay, before everyone blows a gasket, there are three possible scenarios. A.) Northern Trust is a profitable bank, B.) Northern Trust is unprofitable or C.) Northern Trust was a failing bank. My guess is that, if it’s true the bank didn’t request TARP money, then they are in category A. If that’s the case, they have every right to give lavish golf whatevers to their clients and employees. In the second case, they’re stupid. In the third case, they are abusing taxpayer dollars and should be hanged from their heinies on Wacker Street. Remember: TARP was only intended to provide capital to banks, including healthy and profitable ones (in fact, mainly to healthy and profitable ones), not to bail them out. Before you blow your top, you should get that in your head. As such, TARP money is just like any other capital injection — the banks are free to do business as they think best. Even if that means Sheryl Crow. Of course, a smart banker eager to protect the image of their business would understand that TARP money is an injection of capital by the taxpayers and would tread lightly on the “blow the wad” rock and golf parties.

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