Industry News

ELFA survey: Lack of demand hurts leasing volume
The main cause in the decline of leasing volume is lack of demand, a survey of the members of the Equipment Leasing and Finance Association showed. About 80% of respondents said slow customer demand is behind the decrease and not tight credit, underwriting standards or spreads. Participants in the survey said business was down by 31% in September 2009 from the same period in 2008, but that it increased by 29% from August to September. CFO.com (11/2)

Berkshire to buy BNSF railroad for $34 billion
Warren Buffett's Berkshire Hathaway plans to pay $34 billion buy the second-biggest railroad in the U.S., Burlington Northern Santa Fe. It will be the biggest acquisition in Berkshire's history. Assumption of debt brings the complex financing package to roughly $44 billion. Buffett said the deal is a big bet on the railroad's future. "I stretched on this one," he said. "I went to the last nickel." Bloomberg BusinessWeek (11/3) The New York Times (free registration) (11/3)

CIT is seen as unlikely to cancel loans
CIT's bankruptcy may not affect small businesses immediately, but in the long term they may have to look elsewhere for financing. "If they're financing you and you have a relationship, a lot of that is going to be kept intact," said William Dunkelberg, chief economist for the National Federation of Independent Business. But, he added, "Certainly, there will be difficulties created." Portfolio.com (11/2)

Commentary: Crisis might prompt investments in sustainable firms
Columnist Marc Gunther writes that investors who watched billions of dollars in shareholder value destroyed during the past couple of years are probably interested in better understanding risks and what makes a company sustainable. "My own view is that smart companies and smart stock exchanges recognize the value of [environmental, social and governance] in driving returns," said Jane Diplock, chairwoman of the International Organization of Securities Commissions. "What was a whisper in the 20th century -- don't invest in guns or tobacco -- has become [a] shout -- invest to protect the planet!" Reuters/GreenBiz.com (11/3)

Market Trends

U.S. factory orders rebounded 0.9% in September
Orders submitted to U.S. factories increased for the fifth time in six months in September, the Commerce Department said. The 0.9% growth was a little better than the 0.8% improvement economists were expecting. Manufacturers enjoyed increasing demand for both durable and nondurable goods, the department said. Los Angeles Times/The Associated Press (11/3)

World Bank, IMF warn of asset bubbles
The World Bank and the International Monetary Fund said a surge in capital caused by economic-stimulus efforts risks causing asset bubbles. Asia is of particular concern because real estate prices and stocks have gone up sharply in the past few months. Bank of Korea Governor Lee Seong-tae indicated last month that he might raise the central bank's key interest rate if housing prices continue to increase at an undue rate. The Wall Street Journal (11/4)

EU: Still-frozen credit markets cripple region's recovery
The severe shortage of credit across Europe is a serious drag on the region's economic recovery, the European Commission said. "Regarding the situation of the financial markets, the credit flows are close to zero or in some cases even in negative territory," said Joaquin Almunia, the EU's economy commissioner. "... The banking sector is still fragile, and credit is stagnating. This is the bad news." The commission forecast that Europe will experience steady but slow recovery during the next two years. EUObserver (Brussels) (11/3)

Government & Regulatory

Key lawmakers endorse restrictions on size of financial firms
Rep. Barney Frank, chairman of the House Financial Services Committee, and Rep. Paul Kanjorski, chairman of the House subcommittee on capital markets, lent their support to the government's proposal to restrict the size of large financial institutions. Frank and Kanjorski's willingness to give the government the authority to break up major firms could have significant consequences for JPMorgan Chase, Goldman Sachs and other companies. "We have to find a way to limit them. ... We are preparing an amendment to give authority to reconstruct organizations that are determined to be too large to fail," Kanjorski said. Reuters (11/3)

Bill would exempt small firms from Sarbanes-Oxley
Republicans introduced a draft bill Tuesday that would permanently exempt small businesses from complying with the Sarbanes-Oxley Act. The Securities and Exchange Commission has repeatedly extended the deadline for compliance by small firms, which say the reporting requirements are too costly and burdensome. The bill would exempt firms with market capitalization of less than $75 million. Reuters (11/3)

Best Practices

Synergies helped Credit Suisse survive crisis, says CEO
Credit Suisse prospered during the financial downturn by focusing on synergies between its core businesses, says CEO Brady Dougan. Where some banks spread themselves too thin, Credit Suisse focused on three "culturally similar" businesses: private banking, investment banking and asset management. "If we do these businesses well, we have the potential to see very high growth," Dougan says. Financial Times (tiered subscription model) (11/1)

ELFA News

Are risk managers our new finance gurus?
ELT Magazine is now available online. Read the cover story of the September-October issue, check out the regular columns, link to advertisers' Web sites and view the convention Onsite Guide insert, all on the ELFA Web site. It is in a reader-friendly format, full color, and there is an archive of past issues that have been posted online. Check it out!

How good is your credit-scoring model?
The Equipment Leasing & Finance Foundation released a study on evaluating credit-scoring models during this time of economic flux. The study, "Credit Scoring Models: How to Effectively Rate Your Credit Risk," identifies specific risks associated with applying credit-scoring models to credit decision making. The study includes an overview of practices in the equipment-leasing industry as well as practices that vary significantly from the norm. You will gain insight into how recent failures of lending institutions outside the equipment-leasing industry underscore the risk of over-reliance on automated scoring models in place of human judgment in the leasing industry. Researched by PredictiveMetrics, the study is available online. Foundation donors receive the study for free, while it costs $300 for nondonors.

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