Will U.S. economic uncertainty zap Michigan's jobs recovery?
President Barack Obama greets Ford CEO Alan Mulally on July 29 after announcing new fuel economy standards.
Associated Press | Pablo Martinez Monsivais
Economists and business leaders said they’re still hopeful that Michigan will continue to add jobs as the state climbs out of a deep economic trench. And they’re comforted by the fact that all three Michigan-based automakers have achieved profitability despite a mediocre auto sales market.
But they’re also concerned that the U.S. economy — burdened by scant job gains and a wildly unpredictable stock market in the aftermath of Standard & Poor’s decision to downgrade the U.S. credit rating — will cast a shadow over Michigan’s tepid recovery.
Michigan still gets about 6 percent to 7 percent of its economic activity from durable goods manufacturing, but that’s down from about 25 percent in the 1960s, said Michigan State University economist Charles Ballard.
“It is still true that bad news for the U.S. is bad news for Michigan — just maybe not as much as it once was,” he said.
Michigan can be encouraged by the fact that General Motors, Chrysler and Ford are operating profitably. GM and Chrysler wiped billions in liabilities from their balance sheets after emerging from government-sponsored Chapter 11 bankruptcy in 2009, and the United Auto Workers union agreed to compensation cuts that have helped the automakers become profitable.
The auto companies are leaner than ever — and GM and Ford, in particular, are no longer playing catch-up with foreign competitors on quality, design and cost.
That points to relative stability, which means Michigan can be relatively confident the auto industry won’t collapse if consumers put the brakes on spending.
But it’s an open question whether the auto companies will be able to continue hiring and investing in new manufacturing at their existing plants.
“Their willingness to continue to invest in hiring and increased capacity is really driven by their ability to sell products and the ability of the consumer to purchase new automobiles,” said Ned Staebler, vice president of economic development at Wayne State University.
The consensus among economists is that the U.S. economy has a one-third chance of falling into a double-dip recession, Ballard said.
Many companies would be shielded by a fresh economic downturn for a time because they’ve been stockpiling cash over the last few years, said Don Grimes, a University of Michigan economist.
“The corporations are socking away a ton of money,” Grimes said.
Nonetheless, Michigan needs those companies to invest cash to create jobs — not just save money and look for ways to squeeze productivity out of their existing workforce.
Larry Freed, CEO of Ann Arbor-based customer satisfaction firm ForeSee Results, said uncertainty about the political situation and the volatile marketplace stops businesses from investing.
“There sure is a lot of mystery out there right now,” Freed said. “No one knows what’s going to happen next, and what businesses hate most is uncertainty.”
In April, U-M economists projected that the Michigan economy would add 126,100 jobs in 2011 and 2012. That was 38,600 more jobs than they had predicted in November.
Meanwhile, Business Leaders for Michigan said in its last quarterly report that 35 percent of its membership expected the Michigan economy to be better within six months — and 67 percent expected it to be better within 18 months.
That was an improvement from the first quarter of 2010, when 25 percent forecast an uptick over the next six months and 55 percent projected improvement over 18 months.
Still, the U.S. economy could dampen those expectations.
“Businesses are much more prepared than they ever have been before to make a profit in a lean economic situation,” said Doug Rothwell, CEO of Business Leaders for Michigan and chairman of the Michigan Economic Development Corp. “I do not think we will see the negative impacts to the degree we did a few years ago. Still, it’s a very delicate situation right now, and a lot of these companies, while they’ve downsized, still require a certain volume of business to be profitable.”
In Washington, the political debate revolves around how to reduce debt, how to responsibly cut spending and whether to raise taxes.
In Michigan, the debate has focused on whether the state is cutting spending too aggressively.
Gov. Rick Snyder, a first-term Republican and former Ann Arbor venture capitalist, and the Republican-controlled state Legislature slashed education spending, higher education funding and municipal government revenue sharing to balance the state’s budget. They also raised taxes on some senior citizens and cut business tax credits while approving a $1.7 billion business tax cut.
In July, two months after the budget measures were approved, New York credit agency Fitch Ratings raised Michigan’s credit rating outlook from stable to positive, in recognition of the state’s economic uptick and fiscal policies. Snyder trumpeted the decision as an endorsement of Michigan’s fiscal prudence.
But uncertainty remains about whether replacing the controversial Michigan Business Tax with a flat corporate income tax — which Snyder described as necessary to spark the economy — will lead to job growth.
Michigan’s new tax structure takes effect Jan. 1. Meanwhile, Michigan's unemployment rate in June was 11.0 percent, up from 10.3 percent in May but down from 12.6 percent in June 2010.
“I’ve said for years that the MBT was a mess and I would be happy to get rid of it as long as we replace the revenues, and we did that to a limited extent,” Ballard said. “Getting rid of the MBT was a good policy move, but as a result of that it’s not going to be true that all our streets are paved with gold.”
Ballard said the business tax cut would not convince many businesses to create jobs.
Nonetheless, there’s no way to escape the reality that Michigan’s business community is much happier with Snyder ruling Lansing.
CEOs like Meijer’s Mark Murray and DTE Energy’s Gerry Anderson are championing Snyder’s economic policies.
Whether that means they’ll invest more in Michigan, however, is still an open question. Anderson announced in June that DTE would boost its spending on Michigan products and services by $250 million over the next 5 years.
But Ballard is skeptical that businesses will ignore the economic realities — especially of the U.S. economy continues to slide — and invest in Michigan just because Snyder is governor.
“I’ve got to believe that most businesses are making their investment decisions on the basis of a calculation of expected returns,” he said. “If you’ve got an investment that you’re thinking about and you think, ‘Oh, that looks like it’s a loser,’ you’re not going to invest just because you’re on good terms with the governor.”
But, he added, industry leaders are being so cautious about job creation that “anything that can make them loosen up and relax is good, and if Rick Snyder seems like a steady hand at the helm, good, but I think that’s only part of the (picture).”
Ultimately, companies choose to invest mainly because they’ve got a solid business model, access to financing, a talented base of employees — and a healthy customer base.
ForeSee Results, for example, which employs some 200 workers at its headquarters in Ann Arbor, has been riding high on the momentum of its customer satisfaction measurement services. The firm, which counts major global companies like Best Buy and Target as its customers, had its strongest bookings month of the year in July, Freed said.
“We expect August to exceed that,” he said. “At the end of the day, when times are tough, it’s more critical to understand your customers, it’s more critical to keep your customers satisfied and it’s more critical to keep your customers.”
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
Gorc
Fri, Aug 12, 2011 : 8:57 a.m.
Mr. Ranzini what percentage of originated loans at University Bank are FHA? And what percentage of those loans does University Bank turn around sell into the market?
Stephen Lange Ranzini
Fri, Aug 12, 2011 : 10:42 a.m.
@Gorc, it's about 50% right now FHA and all FHA loans are sold. Overall, nearly everything we originate in residential loaans is sold into the market right now because any loan we would approve for portfolio, the agencies will approve and they are offering government subsidized long term fixed interest rates that we just can't compete with (4.25% for 30 years and 3.75% for 15 years). We keep all non-residential loans for our portfolio.
redwingshero
Thu, Aug 11, 2011 : 3:55 p.m.
U.S. economic recovery? Rome is burning and all Congress wants to do is fiddle around and keep away from the fire for as long as they can instead of coming up with a way to put the fire out and keep it out. Congress should force the EPA to get rid of the CAFE regualtions. As more companies move toward having a social responsibility aspect to their business, let the company's do it on their own. We already know that people will pay more for vehicles with better fuel-efficiency. You can't have both increasing safety and better mpg's in light vehicles without drastically upping the price. It hurts everyone in the process. Consumers can't afford the cars, OEMs won't make much profit if consuemrs can't afford them. Sorry, everyone should pay taxes. And if taxes need to increase, so be it. My gross last year was $60k and I will gladly accept having 1-2% more taken out of my check. Congress should be furious with the S&P downgrade that happened. Stop blaming the executive branch and other parties for it and direct your blame to the Standard and Poor's rating organization itself. They were the same group that passed 'AAA' ratings on mortgage loans for the "bad banks/lenders" right before the housing crisis. Why did they give them the good ratings, because they were paid to do it!! Bluntly and sadly said, if the automotive market decides to take another dump, Michigan will be done. That's one of the best things happening for MI right now. Automotive sales, builds, and forecast is positive.
redwingshero
Thu, Aug 11, 2011 : 5:42 p.m.
True, but will the rest of us get cost of living increases from our employer's when the average cost of a Ford Fiesta goes from $14k to $18k? Yes, I agree to your points, I was just trying to make the point that sometimes, the government having it's hands in things isn't always what's best (or efficient, or innovation inspiring...). I just really don't want to list all the poor examples. Just for laughs, if we didn't have crash standards, we could already hit a CAFE average of 50mpg from all the weight loss. Or maybe the government will tell all of us drivers to go on a diet so our car's getting better mpg's and quicker 1/4 mile times.
clownfish
Thu, Aug 11, 2011 : 5:34 p.m.
If we make car companies put lights on their cars, they will go out of business. If we make car companies put in seat belts, the regulation will drive them out of business. If we make car companies put air bags in their cars, the regulation will drive them out of business. If we make car companies increase CAFE standards, the regulations will drive them out of business. <a href="http://blog.iseecars.com/2011/06/13/car-buyers-want-fuel-efficient-cars-%E2%80%93-consumer-reports-survey/" rel='nofollow'>http://blog.iseecars.com/2011/06/13/car-buyers-want-fuel-efficient-cars-%E2%80%93-consumer-reports-survey/</a> But, very happy to see that you are willing to make some personal sacrifice in taxes, few here are willing to do that. They want everybody else to make personal sacrifice, as long as it does not touch them. 3 Cheers for you, sir or madam!!
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 3:41 p.m.
Mike wrote: "[Obama] Create[d] more regulation with government departments than any other administration to date, hitting businesses with fines, fees, and costs to comply - impact on hiring?" You, of course, can support this with actual facts/web links? Mike wrote: "Decrease the areas we can explore for energy resources while devaluing the dollar - higher gas prices." Nope on the first half. The Obama administration just gave approval to Shell Oil to explore off the Alaska coast and has opened up all sorts of undersea territory in the Gulf of Mexico and off the Atlantic coast to exploration. Sources: <a href="http://www.sacbee.com/2011/08/11/3830969/oil-and-the-arctic-might-not-mix.html" rel='nofollow'>http://www.sacbee.com/2011/08/11/3830969/oil-and-the-arctic-might-not-mix.html</a> --and-- <a href="http://green.blogs.nytimes.com/2011/04/26/sale-of-oil-leases-planned-for-gulf-of-mexico/" rel='nofollow'>http://green.blogs.nytimes.com/2011/04/26/sale-of-oil-leases-planned-for-gulf-of-mexico/</a> Yes, the dollar is being devalued, which makes American exports more desirable. If the dollar were rising in value, conservatives would complain about that, too, due to the loss of American jobs due to the increased imports the cheaper dollar. Mike wrote: "Didn't cut hardly anything from the budget - check your stock portfolio for results of that move as well as the impact it is yet to have on consumer spending" And where has all of that money gone? Into US Treasury Bonds, among other places. If the stock market blowout were a response to a perception that the nation could not pay its bills, the LAST place investors would have sent their money is to T-bills. Source: <a href="http://latimesblogs.latimes.com/money_co/2011/08/treasury-bond-yields-sp-downgrade-10-year-auction-stocks-plunge.html" rel='nofollow'>http://latimesblogs.latimes.com/money_co/2011/08/treasury-bond-yields-sp-downgrade-10-year-auction-stocks-plunge.html</a> Continued in first reply
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 3:47 p.m.
BTW, a report put together by John MCain's former economic adviser and by the former deputy chair of the Federal Reserve on the role played by TARP and other federal efforts. They conclude they saved or created 8.5 million jobs. Source: <a href="http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf" rel='nofollow'>http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf</a> Good Night and Good Luck
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 3:42 p.m.
Mike wrote: "Added a war in Libya further straining our military and financial resources, not to mention putting more of our sons and daughters in harms way." Pretty hard to be "in harms way" with unmanned drones and cruise missiles, which have been the extent of our direct engagement. And, when it all started, Republicans, led by John McCain, took the president to task for doing too little. Now they complain that he's doing too much. Which is it? Hypocrisy abounds in the Republican Party. Source: <a href="http://articles.latimes.com/2011/apr/23/world/la-fg-libya-mccain-20110423" rel='nofollow'>http://articles.latimes.com/2011/apr/23/world/la-fg-libya-mccain-20110423</a> Mike wrote: "Can't forget TARP, QE1, and QE2 - they created OR SAVED lots of jobs - NOT" Again, you can provide facts with links? All of this gets me to thinking that perhaps conservatives wouldn't be conservative if they had some actual facts at hand. Good Night and Good Luck
Wolf's Bane
Thu, Aug 11, 2011 : 3:21 p.m.
Gov. Rick Snyder is not from Ann Arbor. He has decided to temporarily build his dungeon here, but he will soon leave (I hope).
Wolf's Bane
Thu, Aug 11, 2011 : 3:20 p.m.
Not unreasonable question, but I fear, we all know the answer don't we? Special interests dictate how the Fed responds to markets and the economy in general. So, local, state, and federal governments largely have no control. So, the real question is how can you gain access to the folks who are really running things?
belboz
Thu, Aug 11, 2011 : 3:13 p.m.
No. All those people buying foreign cars will (Toyota...BMW...Subaru...etc....).
KJMClark
Sat, Aug 13, 2011 : 1:02 p.m.
Give it a rest Belboz. Our Ford Ranger, assembled in Minnesota in 1996, has a German-made engine and a Japanese-made transmission. The truck is a rebadged Mazda truck, largely designed and engineered in Japan. Many of the parts were made in Mexican or Canadian plants. Our 1998 Subaru was assembled in Indiana, partly designed at Subaru's California design center, of mixed US and Japanese parts. Supposedly Toyotas are much of the top ten for American-sourced content, and many are built in US factories now. You should ask yourself why the US automakers aren't doing a better export business. They're doing more exporting than you might think, but they face lots of problems from foreign government tariffs and import restrictions. Did Pres. Bush do any better in 8 years as President than Clinton did to remove those barriers? They both did a lousy job. You should then ask yourself why our political class isn't willing to go after foreign trade restrictions (like China's manipulated currency). That's the real problem.
Not from around here
Thu, Aug 11, 2011 : 3:36 p.m.
Never have, never will!
David Briegel
Thu, Aug 11, 2011 : 2:46 p.m.
The absolute destruction of the middle class, the goose that laid the golden eggs, is the trendiest of the foolish mistakes that we've made. Anyone with a union or a benefit must be savaged for the greed of the few at the top. They just didn't "earn" or bargain for those benefits and the promise of those benefits can be broken. Just don't try to break the contractual promises for the golden parachute class. Please, after 10 yrs of those wonderful Bush tax cuts, where are the jobs? And now the same snake oil is being sold to the anxious masses. Will they be foolish enough to sign up for another round of the same lunacy? I want to change the terms of my mortgage. It was bargained under different economic conditions. Isn't that the line being used to rob the working class?
clownfish
Thu, Aug 11, 2011 : 5:28 p.m.
Are you kidding me NOT? Are you saying that the top 1% ONLY give to dems? Maybe a check of opensecrets would enlighten you. If one looks close, one sees that the top business spread the wealth, hedging their bets.
Not from around here
Thu, Aug 11, 2011 : 3:36 p.m.
DB, as I've pointed out time and time again, the POTUS and the Dem's and the Baby Boomer class are the true drain on the middle class. If the wealthest people in this country are ardent and financial supporters of the Dem's AND don't pay taxes it tends to reason that theres a correlation. If Gates, Buffet and Zuckerberg are so adiment about raising taxes on people like themselves, why don't they instruct there accounts to do so. Stop drinking the Kool-Aid, all we've gotten is a lot of lip service and blame passing and no results.
clownfish
Thu, Aug 11, 2011 : 2:16 p.m.
Customers create jobs, not tax cuts or credits. No well paid customers, no job growth.
Veracity
Thu, Aug 11, 2011 : 1:38 p.m.
New jobs are only created when the demand for goods and services exceeds the supply. Increase in consumer spending translates into increased demand. Taxing retirees' pensions, as Governor Snyder is doing, and decreasing state expenditures for education reduces spendable income and the demand for goods and services. Both employment numbers and GDP will be restrained by the diminished consumption. Governor Snyder's $1.8 billion tax reduction for businesses should not be expected to increase jobs, as explained in a recent article (<a href="http://www.annarbor.com/news/opinion/why-corporate-tax-reduction-will-not-increase-jobs/)">http://www.annarbor.com/news/opinion/why-corporate-tax-reduction-will-not-increase-jobs/)</a>. In February 495,000 Michigan residents were unemployed. How many of them remain unemployed now? Though U-M economists "predict" that Michigan will gain 126,100 in the next two years, most of those jobs require skills and education not presently possessed by our unemployed. Expect that job creation in Michigan over the next two years will fall far short of the projections. The only program that will quickly get the vast majority of unemployed working again must be modeled after the FDR WPA which was funded by the Emergency Relief Appropriation Act of 1935. The federally funded projects were operated through state and local governments and provided work for 3.3 million people in 1938 and 8 million people over eight years.
Joe Kidd
Thu, Aug 11, 2011 : 10:27 p.m.
Okay. Increase government jobs at a time when the country has a record deficit. Where is the money for these programs going to come from? Just because a program worked in the 1930s doesn't mean it can work in 2011.
timjbd
Thu, Aug 11, 2011 : 2:04 p.m.
Yep.
squidlover
Thu, Aug 11, 2011 : 1:38 p.m.
"A general sense of optimism about Michigan's economic recovery...?" Uh, exactly who has been feeling optimistic about Michigan's economy? Just take a look around Ann Arbor/Ypsilanti area. Washtenaw County has generally been one of the stronger counties in Michigan regarding employment rates; now we're seeing more empty lots and empty buildings. Even the article states that the auto companies are leaner than ever...that doesn't mean that jobs are plentiful. The raising of Michigan's credit rating from stable to positive is smoke and mirrors. Business owners and job creators know that worse times are ahead, and sadly, I think most Michigan residents do as well.
Aaron Wissner
Thu, Aug 11, 2011 : 1:28 p.m.
It is fairly straight forward, really. Everyone is trying to pay off debt, rather than what was happening a few years back, where everyone was willing to go deeper into debt. This means that, with people paying off debt, that there is significantly less spending than before. This leads to less income for businesses and the private sector, which leads to lower levels of employment, and pressure for lower wages and benefits. This in turn has reduced the amount of revenue of the public sector, leading to the reaction we've seen from public sector, leading to a lower level of spending into the pockets of the public employees. This entire process, which has been referred to as "deflation", or "deleveraging", or "the D-process" continues day after day, mainly due to the leveraging during the credit bubble being so massive. Ray Dalio, one of the richest men in America, and a successful investor even through the downturn, suggests that this "deleveraging" will last about a decade, and so, at best, we are half way through it. Another person, Dr. Steve Keen of Australia, is advancing the understanding of how things actually work, as opposed to the way economists have been taught in schools. Keen is a "post-Keynesian" economist, and more precisely, is advancing the "monetary circuit" school of economic thought, something of which most, if not all, Michigan economists seem to have overlooked. Beyond the issue of massive deleveraging over a decade or more, (which leads to less spending into the private sector, and rising unemployment), there are issues of peak oil, increasing income disparity, issues with international trade, and most importantly, a general misunderstanding, on the part of the public, on how our economy functions. Well worth anyone's time would be to read a study of how the economy functions, called "No One Saw This Coming: Understanding Financial Crisis Through Accounting Models" (available free onlin
Mike
Thu, Aug 11, 2011 : 12:53 p.m.
Nice picture of Mullaly lining up to shake hands and play ball with the POTUS; smile looks forced and guy behind him doesn't look too happy. Didn't we just bail out two of the three auto manufacturers? Let's raise the fuel standards so we can depress sales even more and do it again. Cars are are pretty much unaffordable now so let's regulate them more and drive the cost up. I propose we remove air bags and anti-lock brake systems and see how much that reduces the price for starters. Let me recap some of the recent job creation moves the administration has made: 1. Didn't cut hardly anything from the budget - check your stock portfolio for results of that move as well as the impact it is yet to have on consumer spending; 2. Put head of GE in charge of job creation in the US - move GE xray jobs to China; 3. Create more regulation with government departments than any other administration to date, hitting businesses with fines, fees, and costs to comply - impact on hiring? You tell me; would you hire more, stay the same, or hire less. 4. Decrease the areas we can explore for energy resources while devaluing the dollar - higher gas prices. He did say we would necessarily have to increase energy prices. Has that had an effect on the economy? You tell me. 5. Added a war in Libya further straining our military and financial resources, not to mention putting more of our sons and daughters in harms way. 6. Can't forget TARP, QE1, and QE2 - they created OR SAVED lots of jobs - NOT! I hear they are considering QE3 maybe it will work this time, if not there's always QE4 Looking at the above I would say there may be more jobs for government regulators and inspectors, paid for by taxes and fees; more need for lobbyists, so our ex-legislators don't have to go very far once they leave office; jobs WERE created in China; I can't figure out the auto unions standing for higher MPG rules and losing more jobs, I suppose they plan on making windmills. Overall I'd say stay the course?
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 11:01 a.m.
Michigan's economy is highly correlated to the national economy and the auto industry. After losing close to a million jobs from March 2000 to September 2009, Michigan gained about 55,000 jobs over the next 18 months as the auto industry's light car and truck production levels rose from a 9 million per year rate to a 12.7 million per year rate. However as the national economy slipped into recession in May 2011, auto sales have dropped to the 11 million per year rate and the progress in Michigan stopped and job losses have started to uptick. If you don't think the national economy is in recession again, just go read the Federal Reserve's statement from Tuesday where they all but announced one. The business leaders I talk to are scared. Scared because the national government is bankrupt - it owes $75 trillion and won't be able to honor all it's obligations. Scared because of the huge upswing in regulations and red tape coming out of Washington. However, for businesses which see growth in revenues there are opportunities to expand. The banking industry stands ready to lend money to those established businesses that are profitable and growing and that need expansion capital. Our bank, University Bank, has $50 million alone for local lending available and other local banks are also willing to lend. However, few businesses are expanding and the majority are acting prudently by paying down debt and raising cash reserves. This is a time to be fiscally prudent and I highly recommend that course of action to everyone since I believe that we haven't seen the worst yet of the national depression that we've been in since the year 2000.
Edward R Murrow's Ghost
Sat, Aug 13, 2011 : 7:28 p.m.
Mr. Ranzini, The FDIC's C&D order cites 16 separate practices that your bank was to C&D. One presumes that this order was not based on on separate instance of each practice. But, even if it were, 16 > 3. Moreover, several of those orders suggest systemic issues (e.g., "Operating with a high level of adversely criticized assets") But whatever. Sounds to me like a fair degree of CYA after you brought your bank into this conversation as an icon of civic virtue, albeit one that had an FDIC C&D order imposed upon it less than two years ago. I actually know several members of your board. Hopefully they can give you the help you need. Of course, that leaves unanswered who your board members were that prompted the C&D order "Operating the Bank with a Bank board of directors which has failed to provide adequate supervision over and direction to the executive management of the Bank to prevent unsafe or unsound banking practices and violations of law, rule and regulations." After this, I surrender the field to you. Better things to do that worry about a bank that, after this conversation and the research involved, I will never do any business with. Good Night and Good Luck
Stephen Lange Ranzini
Sat, Aug 13, 2011 : 6:24 p.m.
@ERM'S Ghost: currently, University Bank's directors are: - Dr. David Canter, Executive Director of the North Campus Research Complex at the University of Michigan; - Nicholas Fortson, CPA, CFO CorePlus Federal Credit Union, Norwich, CT and former CEO of University Bank; - Tami Janowicz Chief Operating Officer, University Bank; - David Little, Former Senior Executive, Great Lakes Bank, F.S.B. and former Mayor of Manchester, MI; - Charles McDowell, Chairman of the Board, University Bank & Former CEO, Northwestern State Bank, East Jordan, MI; - Willie Powell, CPA, Minister and Former Executive Director, Ann Arbor Employees Retirement System; - Stephen Lange Ranzini, President, Chief Executive Officer, University Bank; - John J. H. "Joe" Schwarz, M.D, Former Congressman; - Alma Wheeler Smith, Former State Senator. The Bank's Executive Officers are: - Louise Collins, Esq. General Counsel and Chief Compliance Officer, University Bank; - Tami Janowicz Chief Operating Officer, University Bank - Stephen Lange Ranzini, President & Chief Executive Officer, University Bank 10 people who have the most say on all the critical decisions at University Bank and there is just one "Ranzini", Stephen Lange Ranzini, the President & CEO of the bank.
Stephen Lange Ranzini
Sat, Aug 13, 2011 : 6:13 p.m.
@ERM's Ghost, in the banking business if a bank does 100 things right & then 3 wrong (3 errors were the fundamental reason why the regulators decided to impose the improvement order), the regulators get upset and focus on those 3 issues and ignore the other 100 thing the bank did right. When they were satisfied that we had fundamentally fixed the 3 issues and anything else that they weren't fully satisfied with, they lifted the order, and in just 13 months. The document you site that the FDIC and OFIR wrote outlining the areas where our bank's compliance & operations needed improvement (back then) lacks any critical reference with the words "mortgage" or "mortgage operations", and if there had been ANY issues whatsoever those would have been thrown into the 40 page document too, since it is a "kitchen sink" approach. Therefore, the entire attack on University Bank & my family's share ownership in the bank is gratuitous, not germane to the actual issue under discussion & therefore, an ad hominem attack. Debaters only go "ad hominem" because they can't counter the logical arguments presented with logical counterarguments. To return to the actual issue that originally sparked this discussion, bottomline is that University Bank's record with respect to the "mortgage crisis" that caused the economic meltdown is exemplary & you just can't accept the truth because as you state, you apparently think that ALL banks contributed to the crisis for some unknown reason or illogical reason that you can't justify.
Edward R Murrow's Ghost
Sat, Aug 13, 2011 : 12:53 p.m.
I understand why you don't like the question, but it is a legitimate question given your family's involvement in the bank. That you simply dismiss it as ad hominem suggests it is a VERY good question, perhaps one that a local newspaper reporter ought ask of a local bank were we to have a local newspaper that actually investigated things. Good Night and Good Luck
Edward R Murrow's Ghost
Sat, Aug 13, 2011 : 12:52 p.m.
Mr. Ranzini, As I recall, Bank of America, CitiBank, et. al., had pretty much the same story. We made mistakes. No kidding. Glad that you came out from under it so quickly. Like you had any choice. I'm certain tour depositors and stockholders would have bailed out had it not been so quick. Wait. Probably not the stockholders, since your family owns nearly 70% of the bank. Source: <a href="http://www.university-bank.com/file/pdf/UB/Large%20Shareholder%20List.pdf" rel='nofollow'>http://www.university-bank.com/file/pdf/UB/Large%20Shareholder%20List.pdf</a> Note that this is not some "wiki" which you deride, but it is from your website. I found it looking for information as to whom, exactly, IS on your board. Guess what? It's not there, at least nowhere prominent enough to catch anyone's eye. Not under "About Us" or under "Our Staff" or under "Contact Us". I then went to the link on "University Bancorp" and it wasn't there, either. Hoping I might find the answer in the documents linked there I found the above. But I did not find a listing of whom is on the B of D. I wonder why that is? If you have better info that the wiki, I suggest you publish it on your website. As for the ad hominem: "An ad hominem (Latin: "to the man"), short for argumentum ad hominem, is an attempt to link the truth of a claim to a negative characteristic or belief of the person advocating it. The ad hominem is normally described as a logical fallacy, but it is not always fallacious; in some instances, questions of personal conduct, character, motives, etc., are legitimate and relevant to the issue." Nowhere was any claim made to the alleged negative characteristic of your family. Nope. The fact was noted that the board seems to be populated by Ranzinis (and, if it's not—still an "if"), 70% of its shares are held by Ranzinis. One can't help but wonder if there isn't a connection between your bank's apparently very high overhead costs and your family's deep involvement in the bank's business.
Stephen Lange Ranzini
Sat, Aug 13, 2011 : 4:49 a.m.
@ERM's Ghost, no one is perfect and neither is any bank in Michigan these days. I've made a lot of great decisions in 23 years building up a bank that manages $9.9 billion from a $34 million bank, but I've made some dumb mistakes, too. What is important is what you do after a mistake is made: see <a href="http://www.fdic.gov/bank/individual/enforcement/2010-03-98.pdf" rel='nofollow'>http://www.fdic.gov/bank/individual/enforcement/2010-03-98.pdf</a> which document is the release of the bank from the improvement order by the FDIC only 13 months later, which is close to a record as any banker will tell you, since banks are only formally examined once a year and an order like that cannot be released until after the next bank examination, which occurs a year later. The FDIC and OFIR only release these improvement orders when they are satisfied that the problems have been corrected. As I noted above, the average bank in Michigan has lost money on average for the past 60 months. We've been the second most profitable bank in the state over that time, but even those profits were not sufficient to satisfy the FDIC in 2009. Also you will notice that no where in the document outlining our bank's flaws at that time (years ago) in the eyes of the FDIC and OFIR do the words "mortgage" or "mortgage operations" come up in any kind of a critical way, which I thought was the whole point of your thread and our debate? As a former teacher you certainly should know that relying on unsourced wiki entries for "facts" is dangerous. My two brothers have never been directors of University Bank, and the criticism of the FDIC of the Bank's board in 2009 certainly was not directed at them since they weren't ever on the board the FDIC criticized. In the FDIC's eyes, by definition, if there are problems, board oversight is insufficient. Any good debating coach will tell you that your only option is to go for the "ad hominem" attack (attack your opponent personally), when you have no more decent *logical* arguments to make.
Edward R Murrow's Ghost
Fri, Aug 12, 2011 : 8:41 p.m.
That's all very interesting. Then there are these bits of information: <a href="http://www.fdic.gov/bank/individual/enforcement/2009-02-11.pdf" rel='nofollow'>http://www.fdic.gov/bank/individual/enforcement/2009-02-11.pdf</a> <a href="http://banktracker.investigativereportingworkshop.org/banks/michigan/ann-arbor/university-bank/" rel='nofollow'>http://banktracker.investigativereportingworkshop.org/banks/michigan/ann-arbor/university-bank/</a> <a href="http://www.annarborbiznews.com/2009/04/03/fdic-issues-university-bank-cease-and-desist-order/" rel='nofollow'>http://www.annarborbiznews.com/2009/04/03/fdic-issues-university-bank-cease-and-desist-order/</a> <a href="http://www.bankrate.com/rates/safe-sound/memorandums-memos.aspx?fedid=137652" rel='nofollow'>http://www.bankrate.com/rates/safe-sound/memorandums-memos.aspx?fedid=137652</a> <a href="http://arborwiki.org/city/University_Bank" rel='nofollow'>http://arborwiki.org/city/University_Bank</a> Particularly interesting is that the FDIC ordered University Bank to cease and desist "Operating with a high level of adversely criticized assets," "Operating with an unacceptable level of interest rate risk," "Operating with inadequate liquidity in light of the Bank's asset and liability composition," "Operating with an inadequate level of capital protection for the kind and quality of assets held," and "Operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits." The FDIC also ordered that the UB cease "Operating the Bank with a Bank board of directors which has failed to provide adequate supervision over and direction to the executive management of the Bank to prevent unsafe or unsound banking practices and violations of law, rule and regulations." Interesting that in, one of your posts above you spoke of your high overhead, something one of the websites criticizes University Bank for. That tells a reasonable person that your overhead is out of line. Do you think there might be a connection between your high overhead, the board's lack of oversight, and the presence of so many family members on the board? Good Night and Good Luck
Stephen Lange Ranzini
Fri, Aug 12, 2011 : 3:01 p.m.
Unfortunately, our margins are quite small in the banking business these days. Over the past 60 months, we've earned 11.5% per year on average for our shareholders, but we're #2 in Michigan; the average bank lost 2.7% per year. We've had to hire a lot of staff to deal with all the mindless paperwork and box ticking the hundreds of new regulations require. Have you tried to refinance your mortgage lately? It's an eye opener as to how much additional paperwork is required and the process now can't be completed in 30 days, whereas in the past we could do it routinely in under 20 & sometimes in a rush deal, 3 days. Over the past few years, we've gone from having one part-time compliance officer on staff to having two full-time compliance lawyers on staff and four more full-time compliance officers, plus I've hired a COO with 20 years of compliance experience to assist. If you want to know where our profits disappear to, it's into junior and mid-level staffing requirements like this which are mandatory, not optional, to stay in business. As to high executive salaries, to put it in terms you (being a retired teacher) can relate to, my salary is a lot less than the Ann Arbor Public Schools Superintendent's, despite the fact that I'm ultimately responsible for safeguarding $9.9 billion in customer assets & under my 23-year tenure my bank has won every major nat'l award a community bank can win. Everyone else at our bank makes less. My COO makes less than you probably made in your last year as a senior teacher in the Ann Arbor Public Schools, & until about five years ago, so did I. None of us have pensions or retirement healthcare & we have to pay for our own healthcare costs. That is all very typical for small businesses these days. Don't cry for me just yet, it's a rewarding job because banking can change people lives for the better & I can make a difference! If money was my first goal, I would have chosen a very different career path.
Edward R Murrow's Ghost
Fri, Aug 12, 2011 : 11:53 a.m.
Mr. Ranzini, Thanks for confirming my point: most banks unlaod their mortgages, usually within a year of their creation. Big banks. Small banks. Doesn't matter. Which means that they were willing participants in the financial meltdown who, maybe like yourself, were whining about the banking legislation even as they were profiting by it. "Your profit calc is just gross revenues & ignores costs" Yeah. Who knew that the banking industry was so tough. Wonder where all of that overhead goes. Excessive pay for executives? Naaahaaaaah. Couldn't be. Not at
Stephen Lange Ranzini
Fri, Aug 12, 2011 : 5:43 a.m.
...since nearly all banks and credit unions sell mortgage loans? FYI, annarbor.com, the character length limiter "feature" doesn't correctly inform you the maximum length of a post...
Stephen Lange Ranzini
Fri, Aug 12, 2011 : 5:38 a.m.
First of all, @Joe Kidd, thanks for the kind words here and elsewhere. Love the picture of Clint and tonight's comment :-) Second, @sbbuilder, LOL Lastly, @ERM's Ghost, if Apple makes a great computer, say an iPad (love mine) and some criminal uses that computer to cyber hack the electricity grid causing widespread mayhem, is that Apple's fault? By it's nature providing home finance is a social good. It makes dreams come true and it integrates people more tightly into society; gives them personal skin in the game. No matter what the product or how good it is, some criminal mind can find a way to twist it into something harmful if given free reign. Regulators weren't regulating mega banks and Wall Street Investment banks - hardly my fault! Community banks are tightly regulated. @sbbuilder is right, check out <a href="http://www.housingwire.com/2011/03/17/gse-reform-benefits-big-banks-the-most-fbr" rel='nofollow'>http://www.housingwire.com/2011/03/17/gse-reform-benefits-big-banks-the-most-fbr</a> "In 2010, ...92% of mortgages originated in the U.S. were bought by Fannie Mae and Freddie Mac.". Most of the rest were bought by other government programs like FHA or USDA. Why? The Fed is giving away ultra cheap 30 year fixed rate mortgages to stimulate the economy (if everyone refinances to lower rates they have more money to spend) and so consumers want the 4.25% 30 year or 3.75% 15 year fixed mortgage and not the 5 year fixed portfolio loan mortgage at 5% or 6% (the true cost of the money to a bank and not the "subsidized by the Fed" rate). FYI, it would be totally imprudent for our bank to fund 15 or 30 year 3.75% or 4.25% mortgages with short term deposits when the government is running a multi-trillion dollar deficit (on and off balance sheet) per year (high risk of high inflation)- remember the S&L crisis? Your profit calc is just gross revenues & ignores costs. Our compliance costs per unit of business have soared! We're lucky to make $.01 per $1 of assets per year at 6% on portfolio loans Perhaps try a mattress since nearly all banks & cre
Edward R Murrow's Ghost
Fri, Aug 12, 2011 : 3:22 a.m.
To put it differently, Mr. Ranzini can moan and whine all he wants about the legislation that went through under Clinton (and more was passed under Bush II), legislation that encouraged the selling and reselling of mortgages, and their being sliced and diced into securities. But for that legislation, the only place to resell mortgages was to Fannie and to Freddie. That legislation gave F&F some competition, and banks started selling their mortgages elsewhere (which, BTW, caused F&F's shareholders to demand better return on their investments--and we all know how that turned out). But I digress. It was the legislation he decries that gave Mr. Ranzini's bank somewhere else other than F&F to whom they could pass on their mortgages. And they apparently did so. And I'm certain they profited nicely by so doing. And nothing stopped them from holding on to their mortgages except the pursuit of even more profits. But, gosh, they just hated that legislation. Yeah, and they participated in the mechanism it encouraged, anyway. Methinks he doth protest too much. Good Night and Good Luck
Edward R Murrow's Ghost
Fri, Aug 12, 2011 : 3:13 a.m.
"To the matter at hand, virtually no small bank holds on to their mortgages." Thank you. My point exactly. That didn't used to be the case. Banks KNEW their mortgagees, and vice versa. But, in pursuit of the almighty ever-growing profit, "small" banks now sell their mortgages. And, when they do that, they have become part of the problem, much as they wish it were not so. Gee. If they held on to those mortgages they'd only make a small fortune (At 4% and over 30 years, a bank will collect $430,000 on a $250,000 loan). But, no, more money must be made. Mortgages must be sold to whomever and, whatever the new mortgage holder does to them is not the business of the small bank. Very Clean. Very neat. Doesn't wash. Unless facts and logic don't matter. Good Night and Good Luck
sbbuilder
Fri, Aug 12, 2011 : 2:39 a.m.
Ghost Sometimes you really are wrong, and this is one of those times. You need to step back a bit, and take the loss like a man. I call them like I see them. And,,, you can throw around all the 'facts and logic don't matter' blather, but it truly is getting old. To the matter at hand, virtually no small bank holds on to their mortgages. They are all sold. If this bank only sold solid paper, and never did business with the sub-prime lot, then they are absolutely not part of the problem. Logical? You bet.
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 11:07 p.m.
sb: Only in the eyes of those to whom facts and logic don't matter. Good Night and Good Luck
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 11:06 p.m.
So, to be clear: you sell your mortgages to make money, so you can make even more money, and once those mortgages are out of your hands, whatever happens to 'em happens to 'em. So, despite your protestations to the contrary, your bank WAS (and IS) part of the problem. Good to know when I am shopping for banking services. Yes, the conference report for the repeal of G-S passed overwhelmingly. Until recently, when the Party of NO decided to do otherwise, that was the pattern for virtually every conference report. Good Night and Good Luck
Joe Kidd
Thu, Aug 11, 2011 : 10:23 p.m.
Thanks SLR for the explanation, though if that link is an example of what you consider a Cliff Note, I would hate to read your comic books. I think there is no reason to argue this in re to who is at fault politically. It is clear both parties made decisions that lead to the situation we face. I think both parties did what they thought appropriate at the time with none thinking it was going to fail. It's easy to look back and blame one party or the other, but it is useless. We learn and go forward without making the same mistakes.
sbbuilder
Thu, Aug 11, 2011 : 10:12 p.m.
Ghost Time to give it up. You're losing this argument badly.
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 9:57 p.m.
@ERM's Ghost wrote: "Does University Bank hold on to all of the mortgages it makes, or does it sell them off in order to free up capital so that it may make more mortgages?" University Bank has sold something like $3 billion in mortgages into FNMA, FHLMC and FHA over the past 20 years. We've had less than 10 loans come back in 20 years (5 in the last 5 years) for unintentional underwriting errors or due to fraud perpetrated on us by white collar bunko artists. Over that entire time, we've only originated and sold to the agencies "plain vanilla" mortgage loans. The industry definition of "plain vanilla" excludes "No Income Verification, Interest Only, Optional Payment, and high LTV loans without Mortgage Insurance, and loans with LTVs above 97% at time of origination." As a result the book of business we have generated has had low foreclosures and generated profits for the entities that bought them (including FHMLC, FNMA and FHA). So, your assertion, "there is no way you can say that your bank did not have a hand in this fiasco, since you were selling those mortgages to banks who sliced, diced, and repackaged 'em." is incorrect and I'll take the apology whenever you'd like to provide it :-)
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 9:45 p.m.
@ERM's Ghost. Sorry, I hit send to quickly. I quoted the votes on the initial versions of the bills that passed the House and Senate. "On November 4, the final bill resolving the differences was passed by the Senate 90-8, and by the House 362-57. The legislation was signed into law by President Clinton on November 12, 1999. See footnotes [14][15][16][17] at <a href="http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act" rel='nofollow'>http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act</a>
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 9:41 p.m.
Mr. Ranzini, Does University Bank hold on to all of the mortgages it makes, or does it sell them off in order to free up capital so that it may make more mortgages? If the latter, there is no way you can say that your bank did not have a hand in this fiasco, since you were selling those mortgages to banks who sliced, diced, and repackaged 'em. Good Night and Good Luck
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 9:39 p.m.
@ERM's Ghost asserted that Democrats voted against the bill to repeal Glass-Steagal Act, the bill known as the Gramm-Leach-Blilley Act, a/k/a "the Financial Services Act of 1999." Ghost wrote "bills passed in Congress over the opposition of the Democratic minority." While it is true that Senate Democrats voted against the bill, "The House passed its version of the Financial Services Act of 1999 on 1 July 1999 by a bipartisan vote of 343-86 (Republicans 205–16; Democrats 138–69; Independent 0–1)." Sorry, but the members of Congress of both parties deserve the ignominy for what they did.
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 9:31 p.m.
@Rob Pollard NBER *only* identifies recessions. Your assertion that there is a formal definition of a depression by NBER is not correct and NBER themselves state so in the FAQ list on their website. NBER does not and never has dated any depressions, including not the Great Depression either. See <a href="http://www.nber.org/cycles/recessions_faq.html" rel='nofollow'>www.nber.org/cycles/recessions_faq.html</a> "Q: Does the NBER identify depressions as well as recessions in its chronology? A: The NBER does not separately identify depressions. The NBER business cycle chronology identifies the dates of peaks and troughs in economic activity. We refer to the period between a peak and a trough as a contraction or a recession, and the period between the trough and the peak as an expansion. …the NBER does not define the term depression or identify depressions…" Dana Johnson, is Chief Economist and SVP of Comerica Bank, the largest bank in the state and he is well respected. If you think his research is wrong, why not publish your own research paper? A recent study noted that while personal income is rising in nominal terms it has continued to fall since 2000 through 2011, if you take out benefits, and only look at cash take home pay. I don't know about you, but I don't feel wealthier because an economist tells me that the value of my healthcare benefits went up a lot, so my per capita income went up! Lastly, this item from the WSJ last week: "'Great Recession' even deeper than thought — The U.S. recession was even deeper than previously thought, a new government report showed on Friday. As part of an annual revision of data on U.S. gross domestic product, the Commerce Department said that the economy contracted by 5.1% between the fourth quarter of 2007 and the second quarter of 2009, more than the 4.1% previously estimated. It ranks as the most severe recession in the post-World War II era. As a result of the revision, GDP is now still below the pre-recession peak, economists said.
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 9:10 p.m.
@ERM's Ghost wrote: "The banking industry has no idea what is in its own best interest, much less that of the nation. Its lack of judgment ranks right up there with that of Standard and Poors." ERM's Ghost, for 21 years I said that I was a bank president, which USED to be an honorable profession. Then the Wall Street Investment Banks were rescued by Bush and Paulson and became "banks" and the mega banks ruined a great of what was left of our industry's reputation by their actions in manufacturing and selling toxic, exotic securities that brought the financial system to its knees. For the past two years I've said that I'm a "community bank" president. So, please be more precise when you write the "banking industry" did "x" or "y" or didn't know what "we" were doing, because many of us "community bankers" spoke up against the policies when they were being debated and pushed through Congress but sadly we were ignored, even though we were right, since we lack bags of money to buy influence like the Wall Street Investment Banks and Mega Banks had, buying influence with both parties. Many of us community bankers did the right thing and never originated or sold toxic, exotic mortgages even though it cost us market share. Many of us community bankers continued to lend right through the recession when the mega banks were pulling out of Michigan and calling in all their loans. Many of us community bankers refused to trust Standard and Poor's and refused to buy any of the bonds backed by toxic, exotic mortgages.
Rob Pollard
Thu, Aug 11, 2011 : 9:06 p.m.
SLR, ahh the great Dana Johnson. We covered his prognosticating skills previously (see my comment at 6:06pm here, if you care to see what I think: <a href="http://annarbor.com/business-review/economist-says-snyders-tax-reforms-create-good-environment-for-job-growth/)">http://annarbor.com/business-review/economist-says-snyders-tax-reforms-create-good-environment-for-job-growth/)</a>. In short, his explanation of his numbers leaves something to be desired. Also, the comment "as to whether we are in a depression or recession is a matter of opinion" is wrong (if you're in finance). There is an officially accepted designator of recession, from the NBER (see here, for example: <a href="http://money.cnn.com/2008/12/01/news/economy/recession/index.htm" rel='nofollow'>http://money.cnn.com/2008/12/01/news/economy/recession/index.htm</a> - notice the title: "It's official - Recession since Dec. '07"). Again, you work for a bank: throwing terms like, "depression" and "recession" just b/c of your reading of the data is misleading. You can call it something else, but don't act like economists can just say we're in a recession/depression as a "matter of opinion." Finally, regarding income (your support for your depression comments), you quoted info from 2007-2009 (i.e., when we were in a recession) and then you said, "it's about to get worse." Well, let's look at the next year, 2010: "The U.S. said Tuesday that personal income rose in all but four of the nation's 366 metropolitan statistical areas. Average growth nationally was 2.9 percent in 2010, up from a drop of 1.9 percent in 2009." <a href="http://www.kentucky.com/2011/08/11/1840868/elizabethtown-tops-nation-in-personal.html#ixzz1UkyaQ6wN"" rel='nofollow'>http://www.kentucky.com/2011/08/11/1840868/elizabethtown-tops-nation-in-personal.html#ixzz1UkyaQ6wN&quot;</a> I'm not saying we're in a wonderful place economically, but you've got to get your facts right. In any case, we may very well go into a double-dip, as govts has decided this year to slash a million+ jobs instead of focusing on short-term job creation and long-term deficit reduction, but I suppose that will bring more cuts, self-fulfilling your "recession" comments, so that's good.
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 5:53 p.m.
SLR wrote: "Clinton, Rubin and Summers actually deregulated Wall Street in the Glass-Steagall Act, and the marriage of mega banks with Wall Street was one of the direct causes of the economic crash as noted in this year's Oscar award winning documentary, 'Inside Job.'" Well, actually, no. To be certain the president signed those bills, bills passed in Congress over the opposition of the Democratic minority. The bills, for which the baking industry lobbied heavily, never would have come to the president's desk but for the efforts of Republicans in Congress, esp. Phil Gramm. But, yes, Clinton signed the repeal of the G-S Act, as well as other measures that led to the financial meltdown. The takeaways from these facts? 1) The banking industry has no idea what is in its own best interest, much less that of the nation. Its lack of judgment ranks right up there with that of Standard and Poors. 2) Far from how he was portrayed by the right-wing of this country, Clinton was no radical. Indeed, like our current president, in many areas he was right-of-center. Good Night and Good Luck
redwingshero
Thu, Aug 11, 2011 : 5:35 p.m.
Well, Light Vehicle sales are still projected to hit somewhere between 12.8 and 13 million units of sales by the end of this year (source-Eaton and Ward's) Light Vehicle production is forecasted to hit 13.4 million units in 2011 (Ward's) Eaton says 13.1. Next year sales are forecasted to hit 14.7 million units (IHS Global Insight/CSM Worldwide) UofM's RSQE forecasts sales to hit 14.8 for next year . Builds will continue to gain ground next year and into 2013. Heavy Truck builds are crazy right now. Annuallized selling rate of Class 8 trucks right now is over 300k units (Eaton, Starks, Ward's). While July's sales might not have had a SAAR like April's, it still made ground on June and the automotive market is strong in MIchigan right now. Can't say people in the country aren't buying vehicles. Flint Assembly just brought on a 3rd shift for their Silverado/Sierra. There's a reason that certain steel manufacturers that provide material for OEM suppliers have lead times nearly out 60 weeks.
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 4:33 p.m.
@ERM's Ghost Clinton, Rubin and Summers actually deregulated Wall Street in the Glass-Steagall Act, and the marriage of mega banks with Wall Street was one of the direct causes of the economic crash as noted in this year's Oscar award winning documentary, "Inside Job", which I highly recommend if you haven't seen it (available to rent for $1 at the Red Box inside Kroger stores). Bush, Hank Paulson et al, were all about helping Big Business and Wall Street and we see the results. If you want to see what Obama did to add to the amount of red tape, read the whole bill in all 2,307 pages of glory, read a Cliffs Note version of it at <a href="http://www.debevoise.com/publications/DoddFrankAct.pdf" rel='nofollow'>www.debevoise.com/publications/DoddFrankAct.pdf</a> or if you just want one picture to understand the insanity of it, just look at this one page chart from Deloitte: <a href="http://www.deloitte.com/view/en_US/us/Industries/Banking-Securities-Financial-Services/a614600449741310VgnVCM2000001b56f00aRCRD.htm" rel='nofollow'>www.deloitte.com/view/en_US/us/Industries/Banking-Securities-Financial-Services/a614600449741310VgnVCM2000001b56f00aRCRD.htm</a> Lastly, you twisted what I wrote. To be clear, businesses that are growing and have good business opportunities are borrowing, but many are not because of the factors I mentioned and are therefore using their cash flow to pay down debt and build cash reserves. Many households are doing the same.
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 4:11 p.m.
@Rob Pollard, as to whether we are in a depression or recession is a matter of opinion as there is no generally agreed definition for those terms, however, an "L" shaped recovery is in my opinion a "depression", while a "V" shaped recovery is a "recession". Earlier this week, the IRS announced that according to an Internal Revenue Service analysis of 2009 tax returns, average income in 2009 fell to $54,283, down 6.1 percent from 2008 levels. In 2008, average income was $57,799, and it was $62,871 in 2007. So, it has declined 13.7 percent, or $8,588, compared with 2007. The IRS said average 2009 income was at its lowest level since 1997, when the average was $54,265 in 2009 dollars. See <a href="http://www.irs.gov/taxstats/indtaxstats/article/0,,id=134951,00.html#_sec1" rel='nofollow'>www.irs.gov/taxstats/indtaxstats/article/0,,id=134951,00.html#_sec1</a> The U.S. Census Bureau notes that per capita income peaked in 2000. See fn#42 cited at <a href="http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States" rel='nofollow'>http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States</a> Now in my opinion, if national per capita income has declined for 11 or 14 years, that is a depression, and unfortunately, it's about to get worse. From an ethical perspective, I believe that it's better to warn people of the reality than stick your head in the sand and hope for the best with no fall back plan, since when people make bad financial decisions, they lose money and that impacts their quality of life.
Stephen Lange Ranzini
Thu, Aug 11, 2011 : 3:44 p.m.
@Rob Pollard You are correct my numbers were off a bit (going from memory), however I had the magnitude of the drop from earlier this year correct. Auto sales peaked at over a 13 million rate in February, March and April (see "On an annualized basis, the sales rate for the month was 13.4 million vehicles, according to industry tracking firm Autodata. That was up from a sales rate near 12.6 million in December and January." <a href="http://www.reuters.com/article/2011/03/02/us-auto-sales-idUSTRE7201A420110302" rel='nofollow'>www.reuters.com/article/2011/03/02/us-auto-sales-idUSTRE7201A420110302</a> and were 11.45 million in June, see: "US June auto sales rate 11.45 mln annualized" at <a href="http://www.reuters.com/article/2011/07/01/lightvehiclesales-usa-autodata-idUSWEN498920110701" rel='nofollow'>www.reuters.com/article/2011/07/01/lightvehiclesales-usa-autodata-idUSWEN498920110701</a> So, the drop was 1.95 million a year, a bit more than the 1.7 million number I gave from memory this morning when the fog was still clearing from my brain. Now I'll reveal that I had a four week pre-term daughter arrive four weeks ago and I missed the July number of 12.2 million when it came out as I wasn't working, however with the stock market plunge and poor jobs and economic numbers the past month, I'd bet you a dinner at the Chop House that August numbers will be a number in millions that starts with 11... As to the Michigan economy being highly correlated to the national economy, between 2000 and 2007, we suffered a permanent structural change towards lower per capital income and fewer jobs not experienced elsewhere, however economists again believe that our economy (at the new low "new normal" levels) will in the future be correlated with an R squared of 0.8 - which in statistical terms is "highly correlated". See '"What happens in Michigan," notes Johnson, "broadly parallels what happens in the U.S. The correlation of growth rate between Michigan and the U.S. economy is 0.8, which is quite high."" <a href="http://www.bakerstrategy.com/2011/07/the-future-of-michigan-is-bright-says-economist/" rel='nofollow'>www.bakerstrategy.com/2011/07/the-future-of-michigan-is-bright-says-economist/</a> FYI, "Johnson" quoted in the article is Dana Johnson, Senior Vice Pre
Rob Pollard
Thu, Aug 11, 2011 : 2:40 p.m.
My goodness, I can't believe you are the President of a local bank with the flat out misinformation you apparently believe. - "Michigan's economy is highly correlated to the national economy..."? Really? Do you even know what "highly correlated' means? If, so why has Michigan effectively been in a recession since 2000, when the national economy didn't get into one until December 2007 - do things "correlate" when they don't match up for eight years? Michigan's economy (for better or worse, and unfortunately over much of the 2000s, for worse) has been closely tied to the fate of the Big Three and their suppliers, so at least you got that right. - "Auto sales have dropped to the 11 million per year rate." That's just wrong. The actual number is over 12 million (which GM, Ford and others have said they can make money at), but maybe 1 million is rounding error to you. <a href="http://www.calculatedriskblog.com/2011/08/us-light-vehicle-sales-1223-million.html" rel='nofollow'>http://www.calculatedriskblog.com/2011/08/us-light-vehicle-sales-1223-million.html</a> <a href="http://blog.transplace.com/archive/2011/08/10/auto-sales-back-above-12-million-annual-rate-but-year-over-year-growth-is-low-single-digits.aspx" rel='nofollow'>http://blog.transplace.com/archive/2011/08/10/auto-sales-back-above-12-million-annual-rate-but-year-over-year-growth-is-low-single-digits.aspx</a> ...etc - Finally, "...the national depression that we've been in since the year 2000." Can someone who was alive during the '30s inform this gentleman what a real, decade long, national depression looks like? If you are truly in finance, you shouldn't throw around terms like "depression" - it's fear-mongering and in this case, just wrong. Things haven't been great nationally but we are hardly in a "depression." I will say, thanks for letting me know never to put my money in University Bank. I had considered it b/c you folks are local, but if you put your belief in such rank misinformation, I think my money is safer elsewhere.
timjbd
Thu, Aug 11, 2011 : 1:59 p.m.
People can't seem to help themselves. Tax cuts at the top MUST lead to job growth even when it doesn't and never has. Give the "job creators" what they want! The rest of us can foot the bill. It's great Stephen's ready to loan out some money to established businesses whom he admits (even recommends they do) will only add that money to their cash reserves. That's prudent.
Edward R Murrow's Ghost
Thu, Aug 11, 2011 : 1:42 p.m.
Gee. I guess cutting taxes isn't a guarantee of businesses adding jobs. Instead, they are, in your words, "paying down debt and raising cash reserves" (aka adding to their bottom line). But, then, that's what businesses have done EVERY time taxes have been cut despite their insistence that cutting taxes will lead to job growth. Red Tape and regulation? Gee. Must have been a miracle that the economy added millions and millions of jobs under Clinton despite higher taxes and more red tape and regulation (especially in the banking industry). Good Night and Good Luck
xmo
Thu, Aug 11, 2011 : 10:31 a.m.
So when does President Obama take office? He will be the steady hand that America needs during these uncertain economic times!