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Why You Should Blame Your Grandparents For The Mortgage Crisis

Topics: Collateral, Contract, Equity, Loan, Risk

Was the subprime crisis inevitable? This column looks at how the last mortgage crisis in the 1930s shaped the policy landscape in the US, arguing that it eventually led to the emergence of private securitisation in the 1990s, a surge in homebuilding and homeownership, and a second great mortgage crisis that was just around the corner. This post is published with permission from VoxEU . The current mortgage crisis in the US is more severe than any since the 1930s. So it makes good sense to examine the origins, impacts, and consequences of that last great mortgage crisis great mortgage…

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Kabul Bank: Where They Don't Fear The Regulators Enough To Even Hide The Abuses

Topics: Accounting, Collateral, Contract, Loan, Risk

The World Bank sent me to India several years ago to assist their anti-corruption unit in revising their computerized systems that search for likely fraudulent procurement practices. I have to be vague to maintain the effectiveness of the system, but I believe I contributed to an improved understanding of a particular business practice that the World Bank had treated as indicia of a potential cartel. First, I explained why the existence of the practice proved that supposedly competitive bidders had in fact engaged in collusion to rig their bids. The practice was not simply a warning flag, but a clear…

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How Soaring Chinese Land Prices Allow People To Start Companies Without Any Risk, Capital, Or Cash Flow

Topics: Cash Flow, Collateral, Equity, Risk, Sales

The latest from Andy Xie highlights the peculiar relationship that exists between rising Chinese land prices and the expansion of Chinese industry. First, here's a quick refresher of the extent of land price inflation: Caixin: The inflation has so far occurred mostly in land and commodities. The land price has increased by over ten times since 2002, thirty times in some hot coastal cities, and over one hundred times in the most speculative areas. For example, in many villages in Zhejiang Province, the land price has risen above 10 yuan per million mu to 100 times the price a decade…

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Advice: New coffee bars are risky business

Topics: Collateral, Entrepreneur, Equity, Loan, Risk

Answer: These days, no entrepreneur can get a small-business loan without substantial collateral and a personal guarantee. So you'll probably have to put up your home equity in either case. However, a coffee shop is an extremely risky venture because of well-heeled competition from chains such as Starbucks and Seattle's Best, said Jeff Williams, chief executive at Bizstarters.com. Before you risk your home, do a detailed business plan with solid financial projections. Williams' company now has a Southern California outlet that can help; for more information, visit http://www.bizstartandgrow.comhttp://www.bizstartandgrow.com/. Answer: A 20% royalty off the gross is very high, said Colleen…

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Cobbler Lady: Pam Wright finds a recipe for business success

Topics: Collateral, Credit, Entrepreneur, Loan

The Leimert Park cobbler maker and entrepreneur has learned from trial and error. Her loyal customers and supporters have helped her out in tough times. What sets Pam Wright's cobbler apart? Wright makes her cobblers with a doughy center; she describes them as a kind of dumpling. With the chicken-salad sandwich lunch rush looming, Pam Wright wastes no time sprinkling just enough water on the butter and flour mixture on her countertop to bind the pie dough. The owner of the Cobbler Lady in Leimert Park gathers up a butter-speckled ball and rolls it out in quick strokes, then dangles…

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Morgan Stanley's Butler and Tzolov Get To Keep $4.5 Million Bonuses After Committing Fraud (CS, MS)

Topics: Collateral, Contract, Credit, Loan, Sales

A judge ruled late last month that Julian Tzolov and Eric Butler will not have to repay their signing bonuses to Morgan Stanley after both were discovered for committing fraud and resigned from the company after less than a year. The reason each will get to keep his $4.5 million signing bonus is pretty simple: the fraud wasn't committed at Morgan Stanley. It was committed a year before they joined the company, while they were at Credit Suisse. Tzolov and Butler joined Morgan Stanley a year later and each received a $4.5 signing bonus. Then, about a year later, Tzolov…

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