The SBA and vellicate

vellicate
(VEL-i-kayt)
1. To twitch or to cause to twitch.
2. To pluck, nip, irritate, etc.
From Latin vellicare, frequentative of vellere (to pull, pluck, or twitch).
Our government continues to vellicate SBA lenders and borrowers with their abulia (extra word bonus- abulia- abnormal lack of ability to act or to make decisions).
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TIP OF THE WEEK
On June 8, the Senate began its consideration of its substitute amendment to H.R. 4213, the "American Jobs and Closing Tax Loopholes Act of 2010," which was passed by the House of Representatives of May 28. The Senate is expected to vote this week on its version of the extenders package (technically the Senate substitute amendment to the House amendment to the Senate amendment), and Senator. Charles Schumer (D-NY) has predicted that the measure will pass.


The bill before the Senate is very similar to the bill passed by the House. Both bills include many revenue raisers, such as a crackdown on carried interest (how those rich hedge fund guys make their money) making it all but certain that the bill will again be returned to the House.


The bill would extend the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75% to 90%.


If a lender needs the 90% guaranty, they need to wait for this new legislation. The loan queue is only for the guaranty fee waiver.


If you don’t think this makes a difference, note that only $59,936,000 in 7(a) loans were approved the other week. The week before that SBA 7(a) loan volume had soared to $732,010,000 for the week as stimulus provisions for the 7(a) program ran out of time and money.


Congress is off today however as it is FLAG DAY.
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Indices:


PRIME RATE= 3.25%
SBA LIBOR Base Rate June 2010 = 3.35%
SBA Fixed Base Rate June 2010 = 6.24%
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504 Debenture Rate for June


The debenture rate is 3.88% but note rate is 3.94% and effective yield is only 5.29%.
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AHEAD OF THE YIELD CURVE

Many people think there might be a double dip dragging the economy back down as federal stimulus spending expires. Almost all the new job growth last month was due to census hiring.
Payrolls rose by 431,000 last month, including a 411,000 jump in government hiring of temporary workers for the 2010 census.


May's unemployment report may have been disappointing, but the economy was picking up steam based on an increase in commercial truck traffic and diesel fuel sales, according to the latest Ceridian-UCLA Pulse of Commerce Index. Coming from UCLA, you know that it’s for real. The index rose 3.1% last month — the biggest one month increase since February 1999. In April it fell 0.3%. The West showed the second biggest jump — up 3.8% — after the East North Central, which saw traffic surge 6.2%. The Pulse of Commerce is based on real-time data of diesel purchases across the country. It has proven to be strongly correlated to the economy — when business is up, more trucks are transporting goods and vice versa.


Keep your eye on Wednesday’s release by the Federal Reserve on Industrial Production and Capacity Utilization.


Industrial production in the U.S. rose in April by the most in three months. The Fed’s report showed capacity utilization, which measures the amount of a plant that is in use, rose to 73.7 percent last month, the highest since November 2008, from 73.1 percent in March. Back in August it was 69.9. The August capacity level was the lowest on records dating back to 1967.


Here is what capacity utilization rates have done:
1997- 83.6
1998- 83.0
1999- 82.4
2000- 82.6
2001- 77.4
2002- 75.6
2003- 74.6
2004-79.2
2005- 80.7
2006- 82.4
2007- 81.5
2008- 79.9
2009- 69.9
2010- 73.2


What does all this mean?


Talk of the Federal Reserve raising rates is premature.


One of the Federal Reserve’s favorite gauges of inflationary pressure is the capacity utilization rate. The Federal Reserve watches capacity utilization rates to see if production constraints are threatening to cause inflationary pressures. Bottlenecks or shortages often lead to inflationary pressures that would drive prices even higher. Several analysts have pointed to a rate between 81% and 82% as a tipping point over which inflation is spurred.
Capacity utilization rates are 3.7 percentage points above the rate from a year earlier, but capacity utilization at 73.7% is still far below normal - and 9.1% below the the pre-recession levels of 80.5% in November 2007.


The economy is recovering but not fast enough to create the kind of hiring needed to reduce unemployment.


The Federal Reserve meets next week on interest rates and it looks like they will continue to keep rates low for as they put it “an extended period”.

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OFF BASE

Today is Flag Day.

Flag Day commemorates the adoption of the flag of the United States, which happened that day by resolution of the Second Continental Congress in 1777.

Exactly 177 years later, on June 14, 1954 President Dwight D. Eisenhower signed a bill into law that places the words "under God" into the United States' Pledge of Allegiance.

For those that don’t buy into that, keep in mind that also on this day in 1648 Margaret Jones was hanged for witchcraft- the first such execution for the Massachusetts colony.

It all makes sense as today is also Bourbon Whiskey Day as on this day in 1789 the Reverend Elijah Craig, a Baptist preacher, distilled the very first bourbon whiskey ever.