No career prepares you for Career Day

In my neck of the woods, one of the highlights of being a dad is being asked to make an appearance at “Career Day” when your child is in 4^th grade. I was fortunate enough to be invited by my youngest to speak to her class recently, and, as always, it was a treat.

The favorite part of this year’s appearance, however, were the Thank Yous I received afterward.

The notes were decorated elaborately; many in a variety of colors and inks, and all with the unguarded sweet words of appreciation that seemingly only a child can muster.

It’s important to note that I work for a state banking association – a job I thoroughly enjoy, but not exactly what most 9- or 10-year olds would consider a glamorous position, or even one many at that age can comprehend.

As a result I opted to skip planned discussions on the Federal Reserve System and Quantitative Easing, and a proposed Q&A breakout session on the merits of returning to a bimetallic monetary standard.

Cyprus seizes part of citizens’ bank accounts

Bank runs are generally discouraged by governments. The idea of long lines of people lining up outside financial institutions to suddenly withdraw money tends to destabilize banks, economies and sometimes even entire nations.

So the decision by the Republic of Cyprus this past weekend to take a sizeable portion of bank depositors’ money to help recapitalize the nation’s banks seems shortsighted at best.

Cypriots will have to hand over up to 9.9 percent of their deposits, part of a deal worked out with the EU and International Monetary Fund that would see the latter two organizations pump more than 4 billion euros into the nation.

Fearing bank runs, the Greek Cypriot cabinet is seeking to extend Monday’s state-mandated bank holiday through Tuesday, even though the European Central Bank has said it will offer unlimited liquidity to banks that experience deposit flight, according to the Wall Street Journal.

Under terms of the plan, the Cyprus government would impose 9.9 percent “stability levy” on deposits larger than 100,000 Euros and a 6.75 percent levy on deposits smaller than that, the publication added.

The rather stunning move comes as a result of the exposure of Cypriot banks to the Greek government debt crisis, the downgrading of the Greek Cypriot economy to junk status by international rating agencies and the inability of the government to cut state expenses.

Cotton bonds: 20th century finance in 1863

The depth and breadth of the New York Times’ Disunion series never ceases to amaze. The articles focus on the War Between the States, but go far beyond examinations of battles and leaders, delving into an amazing array of topics, including the medical, legal and financial aspects of the 1861-65 period.

Recently, Disunion, which is written by a variety of historians, academics and other individuals knowledgeable on specific aspects of the war, focused on the ingenious concept of cotton bonds, financial instruments issued by the Confederacy in 1863.

In January of that year, the Confederate Congress secretly authorized bankers at the noted Paris-based financial house of Erlanger et Cie. to underwrite $15 million of Confederate bonds, to be denominated in British pounds or French francs.

“But unlike ordinary bonds backed only by the faith and credit of the issuing country, at the option of the holder an Erlanger certificate could be converted into a receipt for a pre-specified quantity of cotton,” Phil Leigh writes for Disunion.

This was important because Confederate currency was all but worthless in Europe at that point of the war.

The conversion rate for the cotton bonds was fixed at 12 cents a pound, regardless of the commodity’s market price, at the time about 48 cents. In addition, the bonds paid a 7 percent annual interest rate.

The road to hell has many subcontractors

Russ Roberts of George Mason University hits the nail on the head with a thought-proving piece that identifies an intrinsic issue that arises when government moves to increase its role in the daily lives of its citizenry.

Writing at Café Hayek, Roberts pinpoints the inherent problem as one of motives versus results.

Those within the government may seek to do good through enhanced regulation and many may truly believe they are indeed doing good so, but the simple fact is that government is nearly always operated by those who can’t possibly have knowledge or information regarding the “needs, desires or dreams” of the average individual, Roberts states.

Government, therefore, is basing its decisions on an imperfect understanding of the lives of those it seeks to further regulate.

In fairness, Roberts adds, government officials can’t be expected to know the dreams, desires and needs of each and every individual. In many cases, a single person’s friends and family don’t even fully have such an understanding.

The real difficulty arises when government busybodies couch efforts to regulate the lives of its citizenry as an exercise in virtue.

SCBT to acquire troubled bank company

SCBT Financial Corp., one of the few South Carolina to undertake a strategy of acquisition over the past few years, said Tuesday it would acquire Easley-based Peoples Bancorporation.

The $28.4 million all-stock transaction will be the Columbia-based financial services company’s fourth acquisition in less than two years.

The merger will connect the Upstate and Georgia markets for SCBT, the parent company of South Carolina Bank & Trust, according to The State.

Peoples is a three-bank holding company that operates Peoples National Bank, Seneca National and Bank of Anderson.

The story in The State claimed that Peoples had been profitable in recent years, but information filed by the company with the US Securities and Exchange Commission shows a different picture.

How GM almost bought Ford Motor Co.

Today marks the 150th anniversary of the birth of one of America’s great entrepreneurs and the founder of General Motors, William Durant.

Durant gained famed as the founder of GM, a multi-brand holding company with different lines of cars designed to appeal to consumers of varying economic means.

Durant was the grandson of a former governor of Michigan and his chief interest was business. Instead of attending college he choose to go to work in his grandfather’s lumber business, one of the largest of the many large lumber mills in Flint, Mich, according to Arthur Pound’s book The Turning Wheel: The Story of General Motors Through Twenty-Five Years, 1908-1933.

He then branched out by opening his own insurance agency before he was 21.

“That suited him, because insurance was something you could go out and sell,” Pound writes. “No waiting around for customers to come to you, as in the store. An almost feverish activity possessed him. ‘Billy’ Durant above everything needed action. While possessed of a notable faculty for remaining calm in the midst of alarms, he seemed to require dramatic tension in business. Yet he had also the power of concentrating intently on work.”

Tidelands restates earnings, posts $6.1M loss

Tidelands Bancshares announced Friday that its restated earnings for the three months ended June 30 showed a loss of more than $6.1 million, up from the original figure of $3.9 million reported in August.

Tidelands said last week it would restate its earnings for the quarter ended June 30, 2011, due to an approximate $2.2 million increase in its allowance for loan losses and related provision for loan losses.

The restatement came as a result of a recently completed joint examination of subsidiary Tidelands Bank by the Federal Deposit Insurance Corp. and the SC Board of Financial Institutions, according to information filed with the US Securities and Exchange Commission.

As a result, officers with the Mount Pleasant-based company determined last week that the previously issued unaudited consolidated financial statements for the second quarter should no longer be relied upon.

Tidelands reported a loss per share of for the quarter $1.58, compared to the originally reported loss per share of $1.02, according to SEC filings.

How Hoover caused the Great Depression

As we continue to struggle through the so-called “Great Recession,” it’s important to note that American history has been dotted with economic downturns of varying severity, with more than 40 such events taking place since the nation’s founding.

Among the more notable:

• The Panic of 1837, caused by bank failures and a lack of confidence in paper currency, led to the failure of more than 600 banks and the collapse of the Southern cotton market.
• The Panic of 1873, precipitated partly by American overinvestment in railroads, was known as the Great Depression until the 1930s, when the latter economic downturn was given that moniker and that the earlier downturn renamed the “Long Depression.”
• The Panic of 1893 came about after the failure of the Reading Railroad and the withdrawal of European investments led to a collapse of the US stock market and the American banking industry. It was also spurred in part by a run on the US gold supply. Profits, investment and income all fell, leading to political instability.
• The Panic of 1907 started with a run on Knickerbocker Trust Co. deposits in October 1907, which brought about events that led to a severe monetary contraction. The fallout from the panic led to Congress creating the Federal Reserve System.

Yet no economic downturn can touch the Great Depression of the 1930s for overall impact on the American psyche. Paul Johnson, writing at the Mises Daily Blog, states that the Wall Street collapse of 1929 and the Great Depression that followed were among the most important events of the 20th century.

Troubled Tidelands to restate earnings

Tidelands Bancshares, the troubled parent of Tidelands Bank, expects to restate its earnings for the quarter ended June 30, 2011, due to an approximate $2.2 million increase in its allowance for loan losses and related provision for loan losses.

The restatement comes as a result of a recently completed joint examination of Tidelands Bank by the Federal Deposit Insurance Corp. and the SC Board of Financial Institutions, according to information filed with the US Securities and Exchange Commission.

As a result, officers with the Mount Pleasant-based company determined last week that the previously issued unaudited consolidated financial statements for the second quarter should no longer be relied upon.

Tidelands will file an amendment to its Form 10-Q for the quarter as soon as “reasonably practicable,” it said in its filing.

The joint examination of the Bank by the Federal Deposit Insurance Corporation and the South Carolina Board of Financial Institutions began in July.

Blue Ridge Savings Bank closed by regulators

Troubled Blue Ridge Savings Bank of Asheville, NC, was closed by the NC Office of Commissioner of Banks Friday, which appointed the Federal Deposit Insurance Corp. as receiver.

The FDIC then entered into agreement with Thomasville-based Bank of North Carolina to assume all of the deposits of Blue Ridge, according to an FDIC press release.

Blue Ridge, founded by former US Congressman Charles Taylor in 1978, had 11 branches and a little more than $160 million in total assets as of June 30. That’s down sharply from three years earlier, when Blue Ridge had nearly $270 million in assets.

Problems in the real estate market hurt Blue Ridge, according to the Asheville Citizen Times.

Blue Ridge was cited for “unsound practices” and “violations of laws and regulations in late 2008” by state and federal regulators, according to media reports.

The closing marks the second Tar Heel State bank to be shuttered this year. The other was also based in Asheville: The Bank of Asheville, on Jan. 21, 2011.