Proposed bailout Yes/No affecting your business?

Has the new credit crunch hit you?

Do you think the proposed bailout is going to help or hurt your business?

Gee, If I massively screw up my little company will uncle sam come and save me......... probably not......... credit does not hurt me....If the money is not in the bank I don't buy it

rj newbould said:

Has the new credit crunch hit you?

Do you think the proposed bailout is going to help or hurt your business?

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At some point in time the bailout will affect every business. You can't hand out money without taking it from someone else. I'm a free market guy...let the chips fall where they may, I'm against a bailout.

Surprisingly - today I got news that this has affected me. We have a small business account with a local bank with no real estate exposure. They have all the nicities of a small business bank, business credit cards for field service engineers to buy plane tickets, pay for car rentals / hotels, they have a good checking account system that works with our accounting system, they take payroll services and do direct deposits, they have a sweep account setup that takes any excess funds in your account and puts them to work for you at night in government backed money market accounts . . . whoah . . . government backed? What does that mean?

In this case it means that over the last 45 days I have been paid for a large retrofit of a paper winder, a small job for Boeing a few bottle machine drive systems and a big G&L planer mill CNC retrofit - and that money gets swept into the sweep account last Friday night into a AAA graded money market account.

That is where the money still sits - that account was 17% in Lehman Bros . . . and the bank is now required by the Feds to hold 100% of it until the Lehman portion of it is worked out.

I wonder how many other small businesses in the course of the next week are going to figure out they have no money? The sweep account only works one way if your bank is investing in a money market account that has ANY fraction of it invested in AIG or Lehman or any of the other wobbly or bankrupt investment firms on Wall Street.

That my friend is how this whole deal is shaking out with my company of 35 employees . . .

The owner and I, today were discussing cashing out savings, and buying gold.
We were actually joking but......????good idea????

That's scary... motion. Do they allow you to determine what's excess?

Is this sweep account something you sign up for, or do they just do it automatically?

Is it going to put your operation in jeopardy?

bluechipper said:

The owner and I, today were discussing cashing out savings, and buying gold.
We were actually joking but......????good idea????

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I understand lots of folks are going that route. I've chosen to be putting my excess (what little there is) into buying steel. That may not help if my customers cannot buy.

Yeah, when the idea actually srarted looking like a good one, we began to seriously consider buying a bunch of stainless. He said if he'd spent a quarter mil on stainless 7 years ago, we could both retire millionaires...today!
One thing we are going to do for sure is move the money into 3 accounts...FDIC is only good for a hudred...

The account we are concerned with is an employee funded retirement account...not 401k, just pooled savings.

We will be fine as long as the funds aren't locked up for more than a few weeks. A sweep account is something you sign up for and then it happens automatically - 3/4's of our cash went out. We have been slow the last few months so our AP is almost zero so no big crunch there and our AR was all caught up so the bank was happy to sweep a big chunk out

We have a line of credit that we can use until the Fed figures out what they are going to do. This is uncharted territory according to the bank. I wonder how many other small businesses are going to figure out that this has happened in the coming days?

motion guru said:

We have a line of credit that we can use until the Fed figures out what they are going to do. This is uncharted territory according to the bank. I wonder how many other small businesses are going to figure out that this has happened in the coming days?

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So if you need the line (and it's still available) this means you will have to pay interest on money that's already yours. That sucks.

I think that if I had a sweep account, I would rescind it ASAP.

bluechipper said:

The account we are concerned with is an employee funded retirement account...not 401k, just pooled savings.

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Could that account fall into the same crack as motion's?

I don't see how throwing money at any problem, especially one where "no one knows what to do", would solve anything.

In my opinion this is throwing good money after bad. Seriously, do any of you still believe anything the politicos say?

Have any of you read the proposed legislation that would authorize Paulson to to anything he pleases without any control or oversight of any elected body, and even beyond the reach of the US Supreme Court?

Whatever happened to the "Land of the Free"?

Arminius

Everyone will be touched by this fiasco. I think it's going to get worse but I hope we all can make it through these tough times.

I saw this financial problem coming on many years ago. In fact my first post on this site explained how I felt and what I did to protect my family. We left the big city more than ten years ago and relocated to a rural area. In 1997 I attended a seminar hosted by Don McAlvany to learn about investing in gold and silver. He is the author of several books and of course he sells gold coins. After the seminar I purchased one of his books titled "War in Paradise- Surviving the Breakdown of America". I took this book off the shelf just the other day and checked the copyright date. It was 1997. So I read a few chapters again and found it kind of eerie because what he wrote about eleven years ago is now happening.

In 1998 we sold our home in the city and bought a much smaller home in the country. I started the process of liquidating my plant and moved the equipment I wanted to keep into two shop buildings on my rural property. The excess money from selling our home and plant equipment mostly went into gold and silver. I also have plenty of lead as well.
While many people put their money into the stock market I did very little of that and got out many years ago. Same with banks. One of my friends told me I should have some cash in money market accounts to earn some interest. I told him I don't care about the interest... I just want to hang on to the principal and gold allows me to do that.

Gold is a constant. What's happening is the devaluation of the dollar. I think the biggest problem in this nation is the Federal Reserve System. It's not federal and there is no reserve.

rj newbould said:

Could that account fall into the same crack as motion's?

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I was thinking that myself.
We'll most definately be researching that possibilty first thing tomorrow!!

Armenius said:

Whatever happened to the "Land of the Free"?
Arminius

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"Free" has taken a brand new twist...

Read all about it . . . breaking the buck! . . .

All it took was a 1.2% exposure to Lehman to taint the whole mess and looks like 7 days till it is freed up and hopefully we will get at least 0.97 on the dollar of what we had in our checking account.

Regardless of where you think you have your money safely stored . . . you have to double check where it is at and what it is exposed to. This hit us completely out of the blue.

MG,

From your link:

"Getting out of the Primary fund now not only locks in the loss but negates much chance at recovery.... While Lehman's value is not going to pop up to what it was before the crisis, it's entirely possible there will be deals in place that will somehow allow the company—or another firm that buys it—to make the ultimate value of Lehman's paper more than zero. If that happens, it gives back some of the losses in the Primary fund; since it can't be valued at less than zero, the Lehman paper can't hurt the fund more than it has already."

Note the first sentence. "Locks in the loss."

If you have no need for the money at the moment, might be better to let it sit. Say 10 grand, it would be only a 300 loss, paper until you close out.

"Breaking the Buck" has always been the bugaboo money managers feared. You simply don't allow that, and there have been Funds who have put their own money in to maintain the 1 dollar net.

I don't have any sweep accounts. I am losing my money the relatively young old fashioned way, with my 401 in the stock funds. I'm probably losing more with them than you are with your sweep in this past week.

Cheers,

George

This is scarey stuff for the whole world. What they are scared of is that if they don't prop up the market then the whole thing will fall over and little people like the guy with the sweep account are rendered bankrupt in spite of being profitable businesses.

Stephen

rj newbould said:

Has the new credit crunch hit you?

Do you think the proposed bailout is going to help or hurt your business?

Click to expand...

Everyone I know has zipped up their wallet until they know what is going on or how they are affected.

A guy I know works for a privately held company (owned 100% by one man) that deals solely in a special class of investments which, by federal law, generate tax free income for the investors.

The inflow and outflow of money creates an average balance that makes the company the 2nd largest depositor in a bank with over 1500 branches. From what he told me, their average balance is over a hundred million dollars.

A few years back, the owner of the company sat down with the officers and directors of the bank (he has refused a board position himself) and told them he'd identified certain areas in the financial markets where he saw potential problems and risk that far outweighed potential gains. As a result, he was putting them on notice that, while they were free to run their business as they pleased, if he learned of them playing in any of the sandboxes he'd mentioned, he would immediately pull all the company's money elsewhere, regardless of any reason or justification they may have for their actions.

The money they have in that bank is an operating account, while the bulk of the funds are directly controlled by the company. The owner of the company kept the funds they control clear of the same areas he identified as too risky as well.

Evidently they looked at the string of zeros on his account balance and decided they didn't want to lose it. Maybe it was his threat, or maybe they're just averse to high risk stuff with promises of quick bucks, but for whatever reason that bank has zero involvement in any of this current mess, according to my friend.

30 or 40 years ago you could've made a safe assumption that a bank wasn't going to do anything wild or stupid with your money. It says a lot about what the financial industry has devolved to today, when it takes someone in control of that much money to threaten them in order to keep them doing what they oughta be doing anyway.