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Category: economy

Recession or Depression in Your Area?


Wednesday April 15, 2009

Reading Time: 3 minutes

There is an old joke (and kind of sick joke) that defines a recession as when your neighbor loses his job and a depression as when you lose your job.

In my area of Southern California housing prices are down but certainly not as steep as in other areas of the region. Many people that I talk to say that there business is off but that they are holding it together. Some see a small upturn recently.

Last weekend we were in Austin, Texas for Malik and Zaheen’s wedding. There is considerable construction in downtown Austin and much of it seemed to be apartment buildings. A local businessman that we met said his March 2009 was better than his March 2008. Austin is home to the University of Texas and is the state capital. One would expect that large university towns and seats of government are less impacted by economic cycles (good and bad) than areas with a strictly industrial base. Austin, of course, also has some industry and considerable high tech, the home of Dell for example.

What is it like where you live? Is there a recession or a depression in your area? Do you see an economy that is really down or one that is just somewhat off? Any signs of recovery in your area?

Reading Time: 7 minutes

This past Monday, March 9, 2009, one of my former employers sent a company wide layoff announcement via email. Sadly some of my friends were impacted by this layoff. Given the state of the US economy we have all grown accustom to layoff news. It is happening everywhere, touching every industry; however, prior to this week Mercury Insurance Services, LLC, founded in 1962, had never resorted to layoffs. I could ask a lot of questions about this business decision, most of which are not answered in their press release. The one question that weighs on my mind is why did they choose to communicate this business decision via email?

Perhaps companies feel this is accepted email etiquette. For some companies, maybe. But you need to know that prior to mid 2002 90% of Mercury employees did not even have personal computers, they worked with dumb green terminals. That’s right,no email, no word processing software, no internet access…they spent eight hours a day in their cubicles connecting to a mainframe to perform and produce their work product – underwriting policies or adjusting claims. In 2001 I was named the project manager to bring Mercury employees into the 21st century. One of the biggest project battles was convincing senior management that the employees should have and use email. I won the battle and this week I learned that senior management used email to announce a company wide layoff. What a difference seven years can make!

Generally technology is wonderful for the work environment, but have we technically progressed to the point that it is considered acceptable to deliver life altering news via a cold email? Let’s remember that this startling news negatively impacted those who were not laid off, as well as those who were.

Today I dedicate this blog post to all Mercury employees, those who were fired and those who were retained. In September 2004, when I resigned from Mercury I sent a good-bye letter to those whom I had worked with over my almost seven year tenure. And because I had managed many company wide projects this letter went to many employees. In that letter I shared the following thoughts, which ironically are still pertinent today:

—As I leave you, I tried to think of the best advice I could offer you as individuals and as a group. It came to me that what I have always tried to impart to you is to question each request as if your life depended on it. Do not be afraid to stand your ground for the betterment of your work ethic and the company. In other words, do the right thing. A few years ago, I saw a movie, “The Winslow Boy”, and in the closing scene a defense attorney states: “I wept today because right had been done.” When questioned by the defendant’s sister, “Not justice?” to this the attorney replied, “No, not justice. Right. Easy to do ‘justice’. Very hard to do ‘right’.”

In these difficult times, can we all just try to do right?

Good night and good luck!

March 10, 2009 5:14 PM EDT

In a Form 8-K, Mercury General Corp. (NYSE: MCY) announced that on March 9, 2009, the Company took action to eliminate approximately 360 employee positions or 7% of the Company’s workforce in an ongoing effort to improve its cost structure. The Company expects to record a charge, in the first quarter of 2009, of approximately $8 million for severance and other employee termination costs in connection with the reduction in workforce, all of which will result in future cash expenditures. The total annualized pre-tax cost savings that are expected to result from the employee reductions is estimated to be approximately $22 million.March 10, 2009 5:14 PM EDT

Reading Time: 10 minutes

I don’t know about all of you, but I find the current state of affairs of the banking industry exhausting. So today I thought I might offer you my personal perspective on this subject, that is: my rear view mirror of the banking industry.

Most of you know that I worked in the banking industry from 1969 through 1989. I started my banking career as a clerk and in my final position I was a Vice-President for Fleet Bank. It occurred to me today that over that 20 year span, I observed a lot of banking industry milestones. Some of these are comical and some very serious. For example:

1. In 1970, while employed with Wells Fargo, I watched as they installed some of the first ATM machines in two San Diego branches. What was comical about this process was the fact that there really was nothing automatic about these machines. Actually, they installed impressive looking equipment in the wall of the bank and issued cards. People would come up to the machine, insert their card and receive money. What the customers didn’t realize is that behind the machine, inside a little room was a real live person who would retrieve a paper transaction from the back of the machine, type on a non-electric typewriter a debit or credit to the person’s account. Then this employee would walk across the lobby and hand the typewritten transaction to a teller. Yeah! An automatic teller machine was born.

2. Also in 1970, Wells Fargo opened a branch in the Grossmont section of San Diego. They were very proud of the installation of their first pneumatic tube system which operated between the customers car and the drive up window.

3. I think the first time I remember a bank being closed by the Comptroller of the Currency was in 1973. This was U. S. National Bank of San Diego and when the Comptroller of the Currency shut it down it was the biggest bank failure in U. S. history. At the time depositor’s funds were insured up to $20,000! The bank was purchased by Crocker National Bank for $89.5 million. At the time Crocker more or less agreed to keep most of the USNB’s employees, but they did not agree to honor the pension plans that had been set up by USNB. Having later worked with some of these USNB employees when I served as a AVP for Crocker Bank, I can attest to the fact that these employees never financially recovered from this decision and they carried a resentment against Crocker. This made for a great working environment.

4. In 1978 shortly after I was hired by Crocker to be a Consumer Lender, I remember when Citibank (think Citigroup) decided to issue credit cards to what seemed like hundreds of thousands of consumers across the United States. It seemed we all received one. Every card had the same effective date. And on that date consumers were in line at their local banks to get cash advances from these cards. I remember that day, as we ran short on cash at the Wilshire-Hauser branch of Crocker Bank! Keep in mind none of these consumers actually applied for the cards. The invitation came in the mail from a banking company that none of us had heard of prior to that time. Great!

5. I believe it was around late 1979 or early 1980 that the banks across the United States decided to lure consumers with home equity lines of credit, as well as online loans. Many consumers prior to this time avoided even the thought of a second mortgage being recorded against their home. But we all went down that road and I became so proficient at explaining this product to consumers I was actually featured in a Time Magazine advertisement for Indian Head Bank of New Hampshire! I am not kidding.

6. In 1989 I watched from afar the establishment of the Resolution Trust Corporation which was formed to deal with the savings and loan crisis of the 1980s.

7. Just about the time that Fleet Bank was winding up their takeover of Indian Head Bank (1989)they decided to offer incentive pay for Mortgage Loan Officers. I remember remarking to my immediate boss at the time, “This cannot bode well for the banking industry.” He questioned my reasoning and I explained when a Mortgage Loan Officer becomes a commissioned sales person this is bound to affect their lending decisions.

The bottom line is this: even with all of my banking experience and all of the audits that I lived through with the Comptroller of the Currency, Federal Deposit Insurance Corporation, and the Federal Reserve, I am shocked at where we find ourselves today. Did these federal agencies and state banking agencies, as well, just stop performing audits? Did they just look the other way when the lending decisions seemed to be based on “fluff”? Or were these toxic loans packaged and sold so quickly on the open market that the examiners never really saw the worst?

Today as I thought about this post I went to the website for the Comptroller of the Currency, the administrator for national banks (think Wells Fargo, Bank of America, CitiGroup, etc). Their tag line on their website says: “Ensuring a Safe and Sound National Banking System for All Americans”. Are they kidding me? Visit their site: In 2007 the OCC was listed as one of the best places to work in the Federal Government. And…they say: “The OCC offers one of the best benefits programs in government. Our health and life insurance and retirement programs are among the best in government and compare well to private companies.”

Final thought for the day: “I am glad the taxpayers can afford to offer such wonderful benefits to an agency that is ensuring a safe and sound national banking system for all Americans; however, when will all Americans be assured access to the same quality health insurance coverage?”

Any thoughts?

Reading Time: 2 minutes

Hunger in Eastern Massachusetts And How You Can Help

Hunger is a silent epidemic. Each year, more than 320,000 people seek food assistance in eastern Massachusetts alone. They are the most vulnerable among us: children and seniors. They are people we know: our friends, neighbors, and colleagues. They live in each and every one of our communities, and are quietly seeking help from the more than 600 member hunger-relief agencies in the nine counties and 190 cities and towns of eastern Massachusetts that receive food from The Greater Boston Food Bank.

Lisa was checking in to Twitter this morning and saw a post that intrigued her from Connie Reece, about how Tyson foods was donating 100 pounds of food for every comment to this post. This time of year a comment is not to much to ask for please do your part, comment, feed the hungry and prove that tweeting and blogging about a subject is more than a bunch of people talking about what they had for lunch or where they can spot their cars on google maps.

Go Comment, it will make you feel good.

Reading Time: 2 minutes

As we all have probably noticed, unless you take a cab or public transportation in a major metropolitan area (excluding LA), oil and therefore gas prices have been dropping consistently over the past few months. More specifically, since July fuel has dropped in half, according to the linked article. I am far from an expert, but my review of the issue has this due to reduced fuel consumption, projected usage and other supply and demand factors.

This decrease in energy cost, including heat and natural gas is one positive of the current tough times. Moreover, this drop in energy cost then leads to a potential drop in food and transportation costs; the same areas that when gas was spiking were out of control- plane flights, food etc.
So while the economy is in a slight decline, the positive side of me says, here is what good has come of it. Hopefully this decrease in fuel will jump start the positive attitude we Americans need to pull out of this slump.