NACM and CLLA's Joint Legislative Conference; Business Credit Selected Topic; National Association of Credit Management, Commercial Law League of America
Published by Business Credit Magazine, National Association of Credit Management
Dresner, Megan M.
May 1, 2002
Highlights of the Article:
Harry (Skip) Brandon and Gene Smith Founding Partners, Smith Brandon International (...) spoke next about the effects of terrorism. Brandon stated that the World Trade Center attacks on September 11 demonstrated a failure of the U.S. government. The failure was due to combined coordination and communication problems as well as problems in the legislative area.
He urged that those businesses having financial transactions overseas perform due diligence--you have to know your customer. Terrorism is a cheap and effective way to knock our system down. We have to protect our infrastructure, financial structure and lines of communication--and this can only happen if those having international business perform due diligence.
Gene Smith continued the discussion by calling for government intervention. The events of September 11 were an assault on basic human rights, she stated, and more specifically, on the U.S. Bill of Rights. The freedom of travel and the freedom of speech to which we are accustomed in the U.S. are no longer intact. Smith advised for some kind of government intervention--for example, regulation of movement. She also suggested that it is time to think about licensing Internet access, which needs to be done by the government--not through the private sector. It is also necessary to track source of funds: under the Patriot Act, businesses are required to know their customer(s). (...)
For the full article see below.
This past March 10--12, NACM and Commercial Law League of America (CLLA) members came together at the Crystal Gateway Marriott hotel in Arlington, VA for the Annual Legislative Conference to learn how the latest developments in Washington will have an effect on their companies and the way they are doing business.
David Berson, Vice President and Chief Economist, Fannie Mae, presented attendees with an overall look at our economic situation. He stated that the recession is almost over, and then went on to say that an over-accumulation of inventories in 2000 and early 2001--which resulted in a sharp reduction of production--was to blame. "However", he continued, "This was probably the mildest recession in American history."
There are good reasons to expect that the recession will end this year, he said. There are four things in particular to demonstrate that if the recession hasn't ended already, it will soon:
1. Varied expansion of monetary policy--The federal reserve eased eleven (11) times last year to bring federal fund rates down by 475 basis points. The federal fund rate today is 1.75 percent-the lowest it has been since the early 60s.
But, why isn't the economy surging, or why does it feel like we are in a recession? Berson explained that changes in monetary policy typically start showing an affect in the economy one year later. The Fed didn't start easing monetary policy until January of last year, so we are about 14 months past the time when the Fed started easing them--the normal time when we should expect to see an impact in the economy. And in fact, in the past few months, we've seen improved economic statistics.
2. Expansion of fiscal policy--a step-up in spending of homeland defense.
3. The Energy crisis plaguing the nation over the past year has dropped-off.
4. Refinancing of mortgages--people are taking advantage of lower rates to get lower monthly payments and in turn making other purchases, such as cars.
Harry (Skip) Brandon and Gene Smith Founding Partners, Smith Brandon International and Richard Ault, Jr. Ph.D., Executive Vice President, The Academy Group, Inc., spoke next about the effects of terrorism. Brandon stated that the World Trade Center attacks on September 11 demonstrated a failure of the U.S. government. The failure was due to combined coordination and communication problems as well as problems in the legislative area.
He urged that those businesses having financial transactions overseas perform due diligence--you have to know your customer. Terrorism is a cheap and effective way to knock our system down. We have to protect our infrastructure, financial structure and lines of communication--and this can only happen if those having international business perform due diligence.
Gene Smith continued the discussion by calling for government intervention. The events of September 11 were an assault on basic human rights, she stated, and more specifically, on the U.S. Bill of Rights. The freedom of travel and the freedom of speech to which we are accustomed in the U.S. are no longer intact. Smith advised for some kind of government intervention--for example, regulation of movement. She also suggested that it is time to think about licensing Internet access, which needs to be done by the government--not through the private sector. It is also necessary to track source of funds: under the Patriot Act, businesses are required to know their customer(s).
Andrew Smith, Assistant to the Director of the Bureau of Consumer Protection, Federal Trade Commission, led a very interesting discussion about identity theft, privacy and antitrust issues. Over the past five to six years, the FTC has taken the lead in the debate over commercial privacy. "We intend to continue that leadership role in the new administration, with an active enforcement program and many new initiatives," he stated. Continuing, he said that the FTC believes their focus should be on the misuse of information. "The problem isn't information sharing. Very few of us worry about the numerous companies that need to share our information to clear a check or to process an ATM transaction. The real concern, and the concern that is our focus are the particular uses of information that create the potential for these bad consequences," he said. These adverse consequences include identity theft and erroneous denial of credit or employment because of inaccurate information. "The events of September 11 make it clear that privacy is not, and cannot be, an absolute right." We must all be willing to make practical compromises between privacy and greater goals, such as increased security.
The FTC's past focus was directed toward online privacy. Smith explained that their current focus is directed toward the consequences resulting from the misuses of information. Their privacy agenda includes a number of major law enforcement and education initiatives that focus on reducing the adverse consequences to consumers, including:
* The creation of a national "Do Not Call List" for consumers who do not want to be on lists for telemarketing calls
* Proposing restrictions on the use of pre-acquired account information to reduce the risk of unauthorized billing
* Beefing-up enforcement against misleading spam
* Targeting pretexting, in which "information brokers" misrepresent themselves to financial institutions in order to obtain confidential personal information
* Enforcing privacy promises made by businesses
* Pursuing violations of existing privacy statutes and prosecuting perpetrators
* Fighting identity theft
* Seeking to encourage accuracy in credit reporting
Wanda Borges, Esq., Borges Donovan, Bruce Nathan, Esq., Davidoff & Mailto, and Charles Tatelbaum, Esq., Cummings & Lockwood, led a panel discussion regarding the proposed bankruptcy legislation, and provided interesting updates of several newsworthy bankruptcy cases.
One such case, of course, is the recent Chapter 11 filing by Kmart. Bruce Nathan explained Kmart's Trade Lien Program. To entice trade creditors to continue extending trade credit to Kmart on the same terms as they had established before its bankruptcy, Kmart is offering trade creditors a security interest in Kmart's inventory. If the trade creditor satisfies the requirements of the lien program, they are offered a junior inventory lien. However, if the creditor deviates in any way from the requirements of the program, they lose their security interest.
Kmart has complete control in this situation. If a creditor doesn't like the risks involved by extending credit, and would instead like to sell to Kmart on cash terms, Kmart has the right to refuse to do business with that vendor, Nathan said. If the trade creditor does satisfy all of the requirements and is accepted into the program and Kmart fails, the lien is uncertain because the vendor is behind Kmart's Chapter 11 secured lenders. Of course, this is very bad news for the general unsecured creditor, for there's not going to be much left--if anything. If they do receive something, they are going to have to wait a long time after the bankruptcy case is resolved, which could take years.
Nathan also discussed Kmart's critical vendor program. Under it, certain select critical vendors obtained payment of their pre-petition claims in exchange for their agreement to continue extending Customary Trade Terms during Kmart's Chapter 11.
Wanda Borges discussed the business justification standard for approval of actions by a Chapter 11 debtor's management.
Representative Neil Abercrombie (D-HI) was the luncheon speaker. He stressed the importance of the credit profession within the nation's economy. "You may be the most important people in the country right now in terms of the economic stability of the nation," he stated. He urged attendees to visit with their local member of Congress and educate them on what they should do in terms of legislation to restore the confidence of this nation.
NACM and CLLA's joint legislative conference provided attendees with the opportunity to learn about the latest developments in Washington in regards to important issues, such as the war on terrorism and the current state of the economy, as well as offering deeper insight into economic and political events which have taken place over the last year. NACM is hopeful that those who used the conference opportunity to voice their concerns to their representative on Capitol Hill regarding what kind of legislation is needed to restore confidence in the economy will see results over the course of the next year.
RELATED ARTICLE: A letter from Debra Grable, Credit Manager, Coast Crane Company
NACM Members:
I would like to thank everyone for the opportunity to attend the NACM an CLLA Joint Legislative Conference. When I received the telephone call from Don Conklin advising me that I had been awarded the scholarship, I was so surprised. This was the first time I had eve applied. When people ask how I won it, always state, all you need to do is apply for it--they're out there for you.
The entire time we were in Washington DC, I still could not believe I was there--not just being in an area of such great history but also being in the same buildings that house our elected officials, who pass laws that effect all of us. In meeting with the Senators or Representatives, I realized that these people really did care why we were there. Our goal was to discuss the need to bring the bill back to life for Bankruptcy Reform. At first, it was a little intimidating meeting them, but by the time Sherry Wood started explaining our concerns, it all fell into place. As a credit manager for Coast Crane Company, who has had dealings with the largest bankruptcy case (ENRON), the issues were something we need to have in place for our business.
In attending all the sessions, which were all presented by very well known attorneys on bankruptcy issues, I felt like I was given the most current information available. By meeting some new people from several different types of businesses, I became aware that some only had small bankruptcy experience, and were amazed by the impact large bankruptcies have on businesses.
This was the most educational and productive conference I have ever attended. I am planning to attend next year and look forward to it.
Again, I would like to extend my thanks to NACM.
Harry (Skip) Brandon and Gene Smith Founding Partners, Smith Brandon International (...) spoke next about the effects of terrorism. Brandon stated that the World Trade Center attacks on September 11 demonstrated a failure of the U.S. government. The failure was due to combined coordination and communication problems as well as problems in the legislative area.
He urged that those businesses having financial transactions overseas perform due diligence--you have to know your customer. Terrorism is a cheap and effective way to knock our system down. We have to protect our infrastructure, financial structure and lines of communication--and this can only happen if those having international business perform due diligence.
Gene Smith continued the discussion by calling for government intervention. The events of September 11 were an assault on basic human rights, she stated, and more specifically, on the U.S. Bill of Rights. The freedom of travel and the freedom of speech to which we are accustomed in the U.S. are no longer intact. Smith advised for some kind of government intervention--for example, regulation of movement. She also suggested that it is time to think about licensing Internet access, which needs to be done by the government--not through the private sector. It is also necessary to track source of funds: under the Patriot Act, businesses are required to know their customer(s). (...)
For the full article see below.
This past March 10--12, NACM and Commercial Law League of America (CLLA) members came together at the Crystal Gateway Marriott hotel in Arlington, VA for the Annual Legislative Conference to learn how the latest developments in Washington will have an effect on their companies and the way they are doing business.
David Berson, Vice President and Chief Economist, Fannie Mae, presented attendees with an overall look at our economic situation. He stated that the recession is almost over, and then went on to say that an over-accumulation of inventories in 2000 and early 2001--which resulted in a sharp reduction of production--was to blame. "However", he continued, "This was probably the mildest recession in American history."
There are good reasons to expect that the recession will end this year, he said. There are four things in particular to demonstrate that if the recession hasn't ended already, it will soon:
1. Varied expansion of monetary policy--The federal reserve eased eleven (11) times last year to bring federal fund rates down by 475 basis points. The federal fund rate today is 1.75 percent-the lowest it has been since the early 60s.
But, why isn't the economy surging, or why does it feel like we are in a recession? Berson explained that changes in monetary policy typically start showing an affect in the economy one year later. The Fed didn't start easing monetary policy until January of last year, so we are about 14 months past the time when the Fed started easing them--the normal time when we should expect to see an impact in the economy. And in fact, in the past few months, we've seen improved economic statistics.
2. Expansion of fiscal policy--a step-up in spending of homeland defense.
3. The Energy crisis plaguing the nation over the past year has dropped-off.
4. Refinancing of mortgages--people are taking advantage of lower rates to get lower monthly payments and in turn making other purchases, such as cars.
Harry (Skip) Brandon and Gene Smith Founding Partners, Smith Brandon International and Richard Ault, Jr. Ph.D., Executive Vice President, The Academy Group, Inc., spoke next about the effects of terrorism. Brandon stated that the World Trade Center attacks on September 11 demonstrated a failure of the U.S. government. The failure was due to combined coordination and communication problems as well as problems in the legislative area.
He urged that those businesses having financial transactions overseas perform due diligence--you have to know your customer. Terrorism is a cheap and effective way to knock our system down. We have to protect our infrastructure, financial structure and lines of communication--and this can only happen if those having international business perform due diligence.
Gene Smith continued the discussion by calling for government intervention. The events of September 11 were an assault on basic human rights, she stated, and more specifically, on the U.S. Bill of Rights. The freedom of travel and the freedom of speech to which we are accustomed in the U.S. are no longer intact. Smith advised for some kind of government intervention--for example, regulation of movement. She also suggested that it is time to think about licensing Internet access, which needs to be done by the government--not through the private sector. It is also necessary to track source of funds: under the Patriot Act, businesses are required to know their customer(s).
Andrew Smith, Assistant to the Director of the Bureau of Consumer Protection, Federal Trade Commission, led a very interesting discussion about identity theft, privacy and antitrust issues. Over the past five to six years, the FTC has taken the lead in the debate over commercial privacy. "We intend to continue that leadership role in the new administration, with an active enforcement program and many new initiatives," he stated. Continuing, he said that the FTC believes their focus should be on the misuse of information. "The problem isn't information sharing. Very few of us worry about the numerous companies that need to share our information to clear a check or to process an ATM transaction. The real concern, and the concern that is our focus are the particular uses of information that create the potential for these bad consequences," he said. These adverse consequences include identity theft and erroneous denial of credit or employment because of inaccurate information. "The events of September 11 make it clear that privacy is not, and cannot be, an absolute right." We must all be willing to make practical compromises between privacy and greater goals, such as increased security.
The FTC's past focus was directed toward online privacy. Smith explained that their current focus is directed toward the consequences resulting from the misuses of information. Their privacy agenda includes a number of major law enforcement and education initiatives that focus on reducing the adverse consequences to consumers, including:
* The creation of a national "Do Not Call List" for consumers who do not want to be on lists for telemarketing calls
* Proposing restrictions on the use of pre-acquired account information to reduce the risk of unauthorized billing
* Beefing-up enforcement against misleading spam
* Targeting pretexting, in which "information brokers" misrepresent themselves to financial institutions in order to obtain confidential personal information
* Enforcing privacy promises made by businesses
* Pursuing violations of existing privacy statutes and prosecuting perpetrators
* Fighting identity theft
* Seeking to encourage accuracy in credit reporting
Wanda Borges, Esq., Borges Donovan, Bruce Nathan, Esq., Davidoff & Mailto, and Charles Tatelbaum, Esq., Cummings & Lockwood, led a panel discussion regarding the proposed bankruptcy legislation, and provided interesting updates of several newsworthy bankruptcy cases.
One such case, of course, is the recent Chapter 11 filing by Kmart. Bruce Nathan explained Kmart's Trade Lien Program. To entice trade creditors to continue extending trade credit to Kmart on the same terms as they had established before its bankruptcy, Kmart is offering trade creditors a security interest in Kmart's inventory. If the trade creditor satisfies the requirements of the lien program, they are offered a junior inventory lien. However, if the creditor deviates in any way from the requirements of the program, they lose their security interest.
Kmart has complete control in this situation. If a creditor doesn't like the risks involved by extending credit, and would instead like to sell to Kmart on cash terms, Kmart has the right to refuse to do business with that vendor, Nathan said. If the trade creditor does satisfy all of the requirements and is accepted into the program and Kmart fails, the lien is uncertain because the vendor is behind Kmart's Chapter 11 secured lenders. Of course, this is very bad news for the general unsecured creditor, for there's not going to be much left--if anything. If they do receive something, they are going to have to wait a long time after the bankruptcy case is resolved, which could take years.
Nathan also discussed Kmart's critical vendor program. Under it, certain select critical vendors obtained payment of their pre-petition claims in exchange for their agreement to continue extending Customary Trade Terms during Kmart's Chapter 11.
Wanda Borges discussed the business justification standard for approval of actions by a Chapter 11 debtor's management.
Representative Neil Abercrombie (D-HI) was the luncheon speaker. He stressed the importance of the credit profession within the nation's economy. "You may be the most important people in the country right now in terms of the economic stability of the nation," he stated. He urged attendees to visit with their local member of Congress and educate them on what they should do in terms of legislation to restore the confidence of this nation.
NACM and CLLA's joint legislative conference provided attendees with the opportunity to learn about the latest developments in Washington in regards to important issues, such as the war on terrorism and the current state of the economy, as well as offering deeper insight into economic and political events which have taken place over the last year. NACM is hopeful that those who used the conference opportunity to voice their concerns to their representative on Capitol Hill regarding what kind of legislation is needed to restore confidence in the economy will see results over the course of the next year.
RELATED ARTICLE: A letter from Debra Grable, Credit Manager, Coast Crane Company
NACM Members:
I would like to thank everyone for the opportunity to attend the NACM an CLLA Joint Legislative Conference. When I received the telephone call from Don Conklin advising me that I had been awarded the scholarship, I was so surprised. This was the first time I had eve applied. When people ask how I won it, always state, all you need to do is apply for it--they're out there for you.
The entire time we were in Washington DC, I still could not believe I was there--not just being in an area of such great history but also being in the same buildings that house our elected officials, who pass laws that effect all of us. In meeting with the Senators or Representatives, I realized that these people really did care why we were there. Our goal was to discuss the need to bring the bill back to life for Bankruptcy Reform. At first, it was a little intimidating meeting them, but by the time Sherry Wood started explaining our concerns, it all fell into place. As a credit manager for Coast Crane Company, who has had dealings with the largest bankruptcy case (ENRON), the issues were something we need to have in place for our business.
In attending all the sessions, which were all presented by very well known attorneys on bankruptcy issues, I felt like I was given the most current information available. By meeting some new people from several different types of businesses, I became aware that some only had small bankruptcy experience, and were amazed by the impact large bankruptcies have on businesses.
This was the most educational and productive conference I have ever attended. I am planning to attend next year and look forward to it.
Again, I would like to extend my thanks to NACM.