Thursday, July 10, 2014

What is Import-Export Bank?


Most people have an idea about the ongoing debate in Congress over reauthorizing the Export-Import Bank of the United States (Ex-Im Bank) when the charter expires in September.  But what is it, and what does it do?

            Ex-Im Bank was established in 1934 as the official export credit agency of the federal government.  Created by President Franklin Roosevelt, it became an independent agency within the executive branch in 1945. 

            The bank’s mission is to assist—without competing with the private sector—in financing exports of U.S. goods and services to international markets.  It provides working capital guarantees, export credit insurance, loan guarantees, and direct loans to foreign buyers.  Ex-Im Bank claims more than 85 percent of its transactions directly benefit small businesses in this country.

            Reauthorization has supporters and detractors.  Proponents argue that international trade today occurs on an uneven playing field.  Many nations support their exports by providing loans underwritten by taxpayers.   For U.S. firms to compete, Ex-Im Bank is needed.

            They also point out that the bank funds projects that private lenders cannot or will not support.  In addition, Ex-Im Bank only makes loans that are determined to have a net positive impact on the U.S. economy.

            Supporters also contend that loans made by the bank have had a low default rate, often generating a profit for the U.S. Treasury.  Finally, they assert that loans are made solely to fund purchases of goods and services produced in the United States.

            Opponents argue that the loans are subsidized by U.S. taxpayers.  They state the bank is beset by mismanagement, dysfunction, and excess risk, all of which has been documented by Ex-Im Bank’s inspector general.  They emphasize this is the inevitable result of government assuming functions beyond its purview.

            Critics further note Ex-Im Bank utilizes accounting practices that inflate returns.  They refer to the Congressional Budget Office projection that the bank had a deficit of $2 billion over the past 10 years.  In contrast, Ex-Im Bank’s existing accounting practices, established by Congress, estimate the bank realized a $14 billion profit over the same period. 

          If purely free international trade existed, there would be no need for Ex-Im Bank.  But since that world does not exist, Congress probably will reauthorize it—with, hopefully, some needed changes.
 
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Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean.  He is retired from the board of directors of First United Security Bank.  Email him at wccurtis39@gmail.com.
 
 

Tuesday, June 24, 2014

FUSB Mission


ANNOUNCER:  IT’S OUR MISSION TO EXCEED THE EXPECTATIONS OF OUR CUSTOMERS, EMPLOYEES AND SHAREHOLDERS.  HI I’M DALEY STRICKLAND FOR FIRST UNITED SECURITY BANK’S GROVE HILL OFFICE.  WHAT THAT MEANS IS THAT WE DESIRE TO BE THE BANK OF CHOICE FOR OUR PERSONAL AND BUSINESS CUSTOMERS.  YOUR FRIENDS AT FIRST UNITED SECUIRTY BANK ALSO DESIRE TO BE THE INVESTMENT OF CHOICE FOR OUR SHAREHOLDERS, AND THE EMPLOYER OF CHOICE FOR OUR EMPLOYEES.  WE’D LIKE TO GO BEYOND WHAT YOU EXPECT TO WHAT YOU FIND REMARKABLE.  I’M DALEY FOR FIRST UNITED SECURITY BANK – WORKING EVERY DAY TO EXCEED YOUR EXPECTATIONS.   WE’RE DELIVERING EXCELLENCE IN ALL WE DO.  MEMBER FDIC.  EQUAL HOUSING LENDER.   

Doc:  Radio – FUSB Mission

Thursday, June 19, 2014

An American Success Story


Readers who have served in the military—as has this writer—will certainly remember these handy devices.  They have been manufactured continuously in the same location—Bradford, Pennsylvania—since 1932. Each is stamped with the Bradford name on the bottom plate.

            Zippo windproof lighters have remained essentially unchanged in the past 77 years, according to a recent article published by the U.S. Chamber of Commerce.  That the company has continued to stay in business continuously for so many years is quite an accomplishment.

            An American icon, Zippo represents what the free enterprise system is all about. The opportunity to compete freely in the marketplace has allowed the company to grow and prosper.

            Zippo lighters came of age in World War II and became popular with personnel in uniform, many of whom insisted that military exchanges stock the sought-after device.  In a patriotic move, Zippo ceased production of lighters for domestic consumption and “dedicated all manufacturing to the U.S. military.”

            After the end of World War II, the company began using the lighter in its advertising campaigns.  Many of them had hand-painted works of art on them.  They became hugely popular as collector items.

            Zippo has managed to compete in an ever-evolving environment by diversifying its offerings while remaining loyal to its original lighter design.  About 20 years ago, it acquired W.R. Case, a cutlery company known for its array of premier pocket knives. Case knives and collectables are now manufactured in Bradford.

Zippo acquired Ronson Consumer Products, a competitor in the lighter market, in 2010.  Ronson had been in the business since 1913.

            In addition, Zippo has further diversified by producing new lines of complementary products, a move driven largely by anti-smoking campaigns. The company now has items such as all-metal hand warmers, fire starters, leisure clothing, watches, and writing instruments.

            While diversification has played a major role, part of the success is due to superb customer service.  Zippo has a well-deserved reputation for taking care of its customers.  All lighters carry an unlimited lifetime warranty.  The company boasts that no one has ever had to pay to get a Zippo repaired.

            After 82 years and over 500 million lighters sold worldwide, the company is a testament to American ingenuity and perseverance.

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Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean.  He is retired from the board of directors of First United Security Bank.  Email him at wccurtis39@gmail.com.

Thursday, June 12, 2014

Are Negative Interest Rates On the Way


The European Central Bank (ECB), the counterpart of our Federal Reserve, took unprecedented action on June 3.  It announced a negative interest-rate policy, reducing short-term rates to -0.1 percent.

 The policy will affect commercial banks in the European Union.  Like banks in this country—who keep their reserves at the Federal Reserve—European banks maintain reserves at the ECB.

            Under normal circumstances, banks receive interest on excess reserves kept at the ECB at a rate set by the central bank.  Excess reserves are those beyond what is needed to meet regulatory requirements.  Under a negative interest-rate scenario, banks will have to pay the ECB to “park” excess reserves there.  In the case of the ECB, the cost will be 0.1 percent.

            The rate change stems primarily from sluggish economic growth and high unemployment—26.5 percent in Greece and 25.3 percent in Spain—in much of Europe.  To stimulate the economy, the ECB cut interest rates.  Since it was paying zero percent on excess reserves prior to its last move, the reduction moved the rate into negative territory.  Officials believe that since it will cost banks to keep excess funds in the central bank, this will provide an incentive for them to lend more money.
            There is a risk involved.  Banks could invest in sub-standard assets in search of higher returns.  And this could create asset bubbles similar to the housing bubble in this

country.

The consensus seems to be that European banks will attempt to pass the cost on to their customers.  Rather than charging negative rates on customer deposits, they could achieve the same result by paying no interest and charging account maintenance fees. 

            But if they decide on this course of action, customers could respond by withdrawing their money.  They might hold money in cash rather than keeping it on deposit with banks. Some may decide to keep their money at home in safes or similar devices.

            In view of the European commercial banks’ expected action, some financial experts are predicting that large banks in this country may adopt a similar tactic.  The thinking is they may impose an array of new account fees.

            Such an approach could create a firestorm of protests.  Or it could succeed.  Stay tuned!

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Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean.  He is retired from the board of directors of First United Security Bank.  Email him at wccurtis39@gmail.com.

 

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Tuesday, June 10, 2014

Steinway Artist to Perform


A WORLD-RENOWNED PIANIST IS COMING TO WASHINGTON COUNTY!  HI, I’M MEL ANN SULLIVAN FOR FIRST UNITED SECURITY BANK. THAT’S RIGHT! DR. KADISHA ONALBAYEVA, STEINWAY ARTIST, WILL PERFORM AT MILLRY BAPTIST CHURCH, ON SUNDAY, JUNE 22ND, AT 2:00 PM.  THANKS TO FIRST UNITED SECURITY BANK’S GOOD FRIEND ALICIA ATCHESON AT THE WILCOX FOUNDATION, THIS EVENT IS FREE TO THE PUBLIC. DONATIONS WILL BE RECEIVED TOWARDS THE PURCHASE OF NEW PIANOS FOR THE UNIVERSITY OF MOBILE CENTER FOR PERFORMING ARTS. DR. ONALBAYEVA IS ON THE FACULTIES OF THE UNIVERSITY OF MOBILE AND PENSACOLA STATE COLLEGE WHERE SHE TEACHES PIANO AND COMPOSITION. SHE’S AN ARTIST-IN-RESIDENCE AND  A STEINWAY ARTIST, JOINING A LIST THAT INCLUDES BILLY JOEL, HARRY CONNICK JR., IRVING BERLIN, COLE PORTER AND SERGEI RACHMANINOFF.  ONE OF THE GOALS OF THE WILCOX FOUNDATIONTON IS TO PROMOTE THE ARTS IN WASHINGTON COUNTY.  TO LEARN MORE VISIT OUR BANK’S BLOG AT FIRSTUSBANK.COM.  I’M MEL ANN FOR FIRST UNITED SECURITY BANK, MEMBER FDIC, EQUAL HOUSING LENDER.   

           

Monday, June 9, 2014

Thomasville Hometown Celebration 2014


THERE’S NOTHING LIKE A HOMETOWN CELEBRATION!  HI I’M BEVERLY DOZIER FOR FIRST UNITED SECURITY BANK. THOMASVILLE IS PREPARING TO CELEBRATE OUR COUNTRY’S INDEPENDENCE IN A BIG WAY.  JOIN FIRST UNITED SECURITY BANK’S GOOD FRIENDS AMY PRESCOTT AND OTHERS AT THE THOMASVILLE CHAMBER OF COMMERCE, ON FRIDAY, JUNE 27TH AND SATURDAY JUNE 28TH, FOR THOMASVILLE’S HOMETOWN CELEBRATION.   THIS ANNUAL EVENT WILL HAVE A KID’S PATRIOTIC PARADE, WATERSLIDES, HOTDOG EATTING CONTEST FIREWORKS SHOW AND THE CLARKE COUNTY IDOL CONTEST!  THERE WILL BE PLENTY OF FOOD VENDORS AND MUSICAL ENTERTAINMENT.  YOU DON’T WANT TO MISS THE FIREWORKS AT DARK, SO BRING YOUR LAWNCHAIRS!   TO LEARN MORE CALL AMY AT 334-636-1542 OR VISIT OUR BANK’S BLOG AT FIRSTUSBANK.COM.  I’M BEVERLY FOR FIRST UNITED SECURITY BANK, WHERE WE’RE DELIVERING EXCELLENCE IN ALL WE DO. MEMBER FDIC, EQUAL HOUSING LENDER.

Friday, June 6, 2014

Patents Play a Key Role


The latest patent infringement lawsuit between electronics giants Apple and Samsung ended last month with the award of $119.6 million to Apple.  The jury found that Samsung had infringed upon two Apple patents.  But it also awarded $158,400 to Samsung for Apple’s violating one of its patents.

Many people do not understand how patents work or the rationale for them.   Patents go back to the Founding Fathers, a number of whom were inventors and entrepreneurs.  They understood that in order to build an advanced society, they had to ensure that ideas and inventions would be rewarded and protected. 

To achieve this, they wrote intellectual property protection into the Constitution.  Congress enacted the first patent law in 1790, and President George Washington signed it into law.  It remains the basis of our system today.

            A patent for a new software system or prescription drug grants a property right to the inventor for a period of 20 years from the date on which the application for it was filed.  Under certain conditions, the terms of the patent can be extended or adjusted.

            The rationale for granting patents is to foster innovation by providing a limited monopoly to inventors.  Since inventors secure the exclusive rights to their inventions for 20 years, this encourages risk taking.  It also provides a reward in the marketplace for the costs of developing the invention. 

            A specific incentive embodied in the patent system is the encouragement of research and development spending.  Without patents, research and development spending—the lifeblood of all developed nations—would be significantly reduced or eliminated.  And this would limit technological advancement.

In addition, patents make new inventions available to society.  And when patents expire for some items, such as  best-selling prescription drugs like Lipitor, generics  enter the market at much lower prices.

            Patents are advantageous for individuals of limited means who have patentable inventions.   They can use the exclusive rights to their inventions to become a licensor to a larger firm and still reap the benefits of their labor.

            The founders could have never imagined the astonishing feats that subsequent generations of American innovators would achieve.  Their foresight has paid huge dividends to society and has made our economy the greatest the world has ever known.

Wayne Curtis, Ph.D., is a former superintendent of Alabama banks and Troy University business school dean.  He is retired from the board of directors of First United Security Bank.  Email him at wccurtis39@gmail.com.