Milton’s Observations

I like to come up with sayings, philosophical thoughts, business advice and observations.

My wife recently had her car repaired for a small dent. I know the owner and his wife and I saw his wife and told her that dent repair companies should call their work “Botox for cars”. She loved it, so I wanted my followers to know you heard it here first.

Have an amazing day!
Milton Barbarosh

Capital One buys loan from criminal

A Loan Broker was ultimately indicted by the Queens district attorney on grand larceny charges that he defrauded more than 23 car buyers with refinancing schemes.

http://dealbook.nytimes.com/2014/07/19/in-a-subprime-bubble-for-used-cars-unfit-borrowers-pay-sky-high-rates/?emc=edit_th_20141226&nl=todaysheadlines&nlid=64466009

By Jessica Silver-Greenberg and Michael Corkery
July 19, 2014 12:36 pm

Relatively few used-car dealers are charged with fraud. Yet the extreme example of Mr. Estrada comes as some used-car dealers — a business that has long had a reputation for aggressive pitches — are pushing sales tactics too far, according to state prosecutors and federal regulators.

And these are among the thousands of used-car dealers who are working hand-in-hand with Wall Street to sell cars. Court records show that Capital One and Santander Consumer USA all bought loans arranged by Mr. Estrada, who pleaded guilty last year. Since then, Mr. Estrada was indicted on separate fraud charges in March by Richard A. Brown, the Queens district attorney. That case is still pending.

To guard against fraud, the banks say, they vet their dealer partners and routinely investigate complaints. Capital One has “rigorous controls in place to identify any potential issues,” said Tatiana Stead, a bank spokeswoman, adding that last year “we terminated our relationship with the dealership” where Mr. Estrada worked. Dawn Martin Harp, head of Wells Fargo Dealer Services, said that “it’s important to note that not all claims of dealer fraud turn out to be fraud.”

Wells Fargo Is the First Big Bank Simple Enough to Fail

HSBC failed its basic test with the bank regulators but it seems they are in ample shape to survive, even to survive a bankruptcy. Wells Fargo is one of the strongest banks in the US and I believe the US needs strong banks.

The provisional post-collapse plan submitted by Wells Fargo wasn’t perfect. The Federal Reserve and Federal Deposit Insurance Corporation want a revised version for next year. Unlike with other big banks, however, with Wells, United States authorities expressed optimism that the bank’s blueprint could facilitate an orderly resolution in bankruptcy. The regulatory response also lacked some of the tougher language used by the F.D.I.C. when it reviewed the others.

Read more at NYTIMES.com

S.E.C. Settles Swiss Banking Secrecy Case With an HSBC Unit


So HSBC gets only a small fine in comparison to Credit Suisse for skipping US registration rules. Taking aim at the covert nature of the Swiss banking world, the Securities and Exchange Commission accused HSBC’s Swiss unit of violating a cardinal rule of the financial industry. The unit failed to register with the S.E.C. before providing advice to American clients, an omission that allowed it to avoid scrutiny in Washington. The S.E.C., which requires banks and other firms that offer investment advice to comply with basic registration rules, extracted a $12.5 million penalty from the HSBC unit. The payout is a fraction of the penalty assessed in the S.E.C.’s case against Credit Suisse, which paid $196 million in February to settle similar accusations.

Taking aim at the covert nature of the Swiss banking world, the Securities and Exchange Commission accused HSBC’s Swiss unit of violating a cardinal rule of the financial industry. The unit failed to register with the S.E.C. before providing advice to American clients, an omission that allowed it to avoid scrutiny in Washington.

Read more at NYTIMES.com

Madoff Scorecard, in Billions: $17.5 Lost, $10 Recovered, $1 to Do It

This one goes down in the category of “its good to be a Receiver or Trustee if there is a lot of money left to go after once the fraud is found out and stopped.” The fees, paid by the industry-backed Securities Investor Protection Corp., or SIPC, which is managing the case, have financed a team of lawyers who this week surpassed $10 billion in recoveries for victims, or almost 60 percent of the principal that vanished after Madoff’s arrest in December 2008.

“No one would have anticipated this recovery six years ago, and not a nickel of the fees has come out of the customer fund,” Stephen Harbeck, SIPC’s president, said today in a phone interview. “It’s a remarkable achievement.”

It’s a great rationale for a $1 billion in fees!!

Six years after Bernard Madoff’s fraud collapsed, the cost of liquidating his defunct investment advisory firm to repay thousands of victims has topped $1 billion, though the con man’s former customers aren’t footing the bill.

Read more at Bloomberg.com

R.B.S. Overstated Capital Ratio in European Stress Test

Seems like RBS just keeps having problems. I guess that is why the British government had to bail them out during the financial crisis. The bank, which is 81 percent owned by the British government after a bailout during the financial crisis, said that it did not properly recognize certain tax credits on theoretical losses as part of a stress test by the European Banking Authority. As a result, R.B.S., based in Edinburgh, said that its “fully loaded” common equity Tier 1 capital ratio in 2016 should have been 5.7 percent under an “adverse scenario,” essentially a future financial crisis, as part of the test, instead of the 6.7 percent that was reported. The capital ratio is an important measure of the bank’s ability to weather financial disturbances. The new number is still above the minimum threshold set by the authority.

“This revised result was above the post-stress minimum ratio requirement of 5.5 percent used in the 2014 E.B.A. stress test for the adverse scenario,” the bank said in a statement.

It’s a good thing we don’t have too many banks like this in the US… or wait we did…

The bank, which is 81 percent owned by the British government after a bailout during the financial crisis, said that it did not properly recognize certain tax credits on theoretical losses as part of a stress test by the European Banking Authority.

Read more at NYTIMES.com

Alternative Financing to Help Sustain Growth

Working with lenders comes with restrictions. Many traditional lenders are unwavering and unable to accommodate the personal and business needs necessary to sustain growth. Consider alternative financing opportunities when weighing your lending options. Here are a few areas worth exploring.

Payroll Finance: Payroll Financing is an option that does not take out a loan or put a small business in debt. Instead, this avenue allows business owners to borrow against future income from a projected project. It works by selling approved invoices to a lending company at a discounted rate. As a result, business owners can proceed with a scheduled payroll without accumulating debt.

Accounts Receivable Financing (Factoring): Factoring, previously much mis-maligned, is now being recognized as one the most flexible financing alternatives for those companies that are unable to get or get enough financing through traditional sources, banks, SBA, etc. Even the SBA now recognizes factoring as a valuable alternative tool. Factoring is simply where the bank or non-bank factor purchases invoices by discounting them 1%-3%, and immediately advancing 70%-90% of the invoice face amount. The amount outstanding on that invoice is reduced when payment is received and the 10% less fees is returned to the company. The are several other advantages that Factoring has over other types of financing.

Asset Based Lending: Asset based lending options is a loan taken out that is secured by the value of an asset. However, if not paid in full, the asset is taken by the lender. Like with many mortgages, lenders will front money with an asset as collateral. It is important to note, in many instances, asset lending loans are usually accompanied with lower interest rates.

Purchase Order Financing: In many businesses, money is needed upfront to fill a purchase. However, there are times when the funding for the project is not available. Purchase Order Financing allows you to take a loan on the supplies needed to complete an order, and in turn, the lender seeks out payment directly from the client.

Equipment Financing: Equipment matters to the function of a business as well as to its branding. Before using your working capital or tapping into your business line credit, consider Equipment Financing as an avenue to gain necessary workforce equipment without running into debt. Many equipment financing and leasing options are built with structure and can be worked into your company’s budget taking into consideration business, accounting tax specifications.

SBA Loans: SBA loans are backed and guaranteed by the Small Business Administration. Small businesses are eligible, which is offered through private-sector lenders with reasonable terms. Small business owners carry a unique set of challenges when it comes to lending options. The traditional financing avenues granted to many corporations are void in the private-sector workforce. Consider alternative financing options to help prevent debt and heighten growth.

For more information on financing options or about the services provided by: Empire Global Advisory Services, LLC

Best Regards,

Milton H. Barbarosh, CPA/ABV, MBA, ASA, CGMA
Licensed Agent
Empire Global Financial Services, LLC
(Business & Real Estate Brokers)
265 S. Federal Hwy, #252
Deerfield Beach, FL
33441