Leasing News

( posted daily at www.leasingnews.org and sent “free” by e-mail by subscription

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BOSTON---HPSC, Inc. (AMEX:HDR) reports that its new financing contract originations (excluding American Commercial Finance Corporation (ACFC)) for the month of July 2002 reached a record for that month of $28.2 million, a 36% increase over its originations in July 2001 of $20.7 million.

Said John W. Everets, Chairman and Chief Executive Officer, "Having achieved record originations for July, we are well on our way to having an excellent year for new financing business. We are particularly pleased with these results given the difficult and volatile economic climate in which we are operating."

Based upon its results for July, HPSC expects to meet or exceed analysts' estimates for the third quarter. In the second quarter of 2002, the company's new financing contract originations (excluding ACFC) rose to $74.2 million, a 17% increase over originations of $63.6 million in the second quarter of 2001. For the first six months of 2002, the company's new originations (excluding ACFC) increased 10% to $135.0 million from $123.1 million for the comparable period in 2001.

HPSC Inc. (AMEX:HDR) is a leading non-bank financial services company providing leasing and financing opportunities to the medical and dental professions in all 50 states. Through its asset-backed lending subsidiary, American Commercial Finance Corporation, the company provides asset-based lines of credit to manufacturing and distribution companies throughout the eastern United States. For more information, please visit the company's website at www.hpsc.com.

READING, Pa. - Senior Federal Reserve officials said on Wednesday the current low level of borrowing costs should foster continued economic expansion, albeit a halting one, a sign the central bank is in no rush to cut interest rates.

In their first public comments since the central bank last week left interest rates unchanged at four- decade lows, Fed officials conceded the recovery so far had been slower than expected, but said the central bank should not try to smooth out "every bump" in the road to recovery.

U.S. Treasury bonds sold off after the remarks dashed traders' lingering expectations for a rate cut in the near term.

The Fed officials also played down the risk of deflation, or a broad- based decline in prices, in the U.S. economy, saying the stagnation that has plagued Japan for a decade was exacerbated by structural problems unique to that country.

"I believe the Fed's current monetary policy stance is appropriately supportive of the recovery process," said Federal Reserve Bank of Philadelphia President Anthony Santomero, a voting member of the Fed's interest-rate setting committee.

He told a business breakfast here that he expected economic activity to gradually pick up through the rest of the year and return to trend growth of 3.0 to 4.0 pct in 2003, adding it was "most unlikely" the United States would fall back into recession.

The policymaking FOMC last week opted to keep borrowing costs unchanged at 1.75 percent, but shifted its balance of risks to say weakness was the greatest threat facing the economy today.

This left the door open for the central bank to add to the 11 interest rate cuts it made last year, but the FOMC signaled it was in no hurry to lower rates by saying the current level coupled with underlying growth in productivity -- or output per worker -- "should be sufficient" to foster growth.

The cautiously optimistic tone was echoed by Chicago Federal Reserve President Michael Moskow, who said he expected the U.S. economy to keep growing.

But he warned excess capacity throughout the economy, especially in telecommunications, could drag on investment and the path back to potential growth could be rocky.

"The Fed cannot -- and should not -- try to smooth out every bump," Moskow told the Fox Valley Chamber of Commerce in Appleton, Wisc. He is not a voting member on the FOMC this year.

After a bounce back at the start of the year, economic growth slowed sharply in the second quarter to a 1.1 percent pace, and more recent economic news on employment, manufacturing, consumer confidence and weekly store sales has all been weak.

A growing number of analysts believe the Federal Reserve may lower rates again before the end of the year to kick start the recovery. The FOMC has three more scheduled meetings in 2002, the next one on Sept. 24.

Separately, San Francisco Fed President Robert Parry said the Fed has lowered interest rates enough to help the economy.

"To me, I have great difficulty characterizing this period as a period of a credit crunch," Parry told news wire Market News. "So it seems to me that action on the part of the Federal Reserve is not called for."

Both Moskow and Santomero said the risk of deflation in the United States was low, though Moskow added this was something the Fed must monitor.

Though prices are falling across a number of goods categories, the huge services sector still has rising prices.

"The possibility of deflation is very very low. The U.S. economy is responding to relatively aggressive monetary and fiscal policy," Santomero said in response to a question after his speech.

He added that inflation generally declines in the early phase of economic recovery, and that is what the U.S. economy is experiencing now.

Santomero said Japan's situation was "quite distinct" from the U.S. one, saying the decade spent in and out of recession there owed much to "unique" structural issues. The aggressive monetary and fiscal easing in the U.S. since early 2001 has had an effect, with government spending lifting real demand and consumers responding to low interest rates, he said.

The Philadelphia Fed president said he did not agree with those who worried that with interest rates already at four-decade lows, there was not much more room left to ease if necessary. "I am confident the tools we have available will be effective in leading us to recovery," he said.

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Leasing News in an anti-virus up-grade had five computers working fine, but when it came to the mail server, the process of the up-grade became convoluted,

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Santa Barbara Bank & Trust's policy has been the same for over 15 years as follows:

If we receive an inquiry directly from a customer outside the Bank's footprint, we first determine if it is an existing lessee. If so, we contact the original broker on the prior transaction. If not, we refer them out to one of our sources in the customer's geographic area.

If the direct inquiry is within the Bank's service footprint (the coast of California between Ventura County and south Santa Clara County) and is not an existing lessee, we refer them to our local relationship manager.

If any conflict arises, which is rare, we try to do the right thing in honoring relationships. Indirect leasing is our primary business.

Unlike many others that responded in their defense, LeaseNOW had not done much business with Republic Leasing over the years despite having a great

deal of respect for Dwight Galloway and his staff. Like Charlie Lester, we learned long ago that you pick 2 or 3 sources and develop your program around their criteria. If you do this well enough, even niche programs become "portable" and can be moved to other funding sources if the need arises.

I found myself in this position after our two main funding sources exited the business in fairly short order last year. Fortunately I

had a sense of what was going to happen so I had begun discussions with Dwight Galloway well in advance so that we would

I have now been selling our small portfolios to Republic for about 7 months now. During that time we have made an effort to learn their system and they have made an effort to learn ours. Dwight, Charles and their staff have made every effort to

accommodate us and, for the first time in many years I can honestly say that I actually feel as though I am in a partnership with Republic.

Our backlog is steadily growing and fundings are increasing each month. Last month, we achieved an 82% funded to approved ratio. That is up from 54% 7 months ago. Our approve to submit should be above 90% by the end of the third quarter. I believe that we are both making money because of the effort that we have put into this relationship. That is the way it should be.

For whatever reason, I had not considered Republic to be a viable funding source for our business, prior to last year because our program is generally seen as "different" from that of the normal lessor/funder relationship. I was not sure that they were equipped to handle funded transactions that would be sold to them on a flow basis. As I recall Dwight wasn't that sure either. I will publicly admit that that was an error in my judgment and not any shortcoming that existed at Republic Leasing. I learned once again that analysis and understanding is always better than superficial judgment and assumption.

By the way, Charles Randall is the best kept secret in the funding source cadre that currently exists in the industry. He and Dwight operate like "Mr. Outside and Mr. Inside". In the last seven months I have developed an excellent relationship with

Charles and I wish that I had known him better before. In fact the whole credit staff at Republic seems to understand that none of us make any money unless we actually approve and fund transactions. The addition of Rich Viola rounds out the management team positioning it to be one of the best we have seen in small ticket leasing in a long time.

While the last seven months have not been "bump free", it is the willingness of the partners to work on the relationship that has made the entire endeavor worthwhile. I don't know their reasons for letting 100+ brokers go. However, if it improves their efficiency and operations, hopefully, this will in turn be reflected in lower costs to those third parties who help them remain efficient. I applaud them for having the business sense to make the cuts. If they had not done this then their most efficient customers would be subsidizing the inefficient ones. As many of your readers know this situation existed for many years in the

"volume" driven leasing world that is defunct, at least temporarily. To the best of my knowledge, Republic Leasing was always an "operationally" driven company. This is obviously why they have not only survived but now have the opportunity to emerge at the top of the industry.

home prices continued to rise in July -- though the sector does show signs of leveling off.

The median price for all homes in the nine Bay Area counties reached a record $417,000 in July, according to DataQuick, a real estate information service based in La Jolla (San Diego County). That figure surpassed last July's median of $382,000 by 9.2 percent but represented a more meager 0.2 percent increase over June's median of $416,000, the previous record.

The number of homes sold soared 19.7 percent, from 8,459 in July 2001 to 10, 122 in July 2002. Sales were particularly robust during that same period in San Francisco and San Mateo counties, which saw jumps of 38.7 percent and 32.4 percent, respectively.

DataQuick researcher John Karevoll said historic low mortgage rates have helped keep demand strong and payments affordable. The typical monthly Bay Area mortgage payment totaled $2,008 in July, up $16 from a year ago.

"There's just a back to basics, general demand for homes in the Bay Area," Karevoll said.

Through July, more than 66,800 Bay Area homes have sold this year, up 26.2 percent from the first seven months of last year. Karevoll said that represents the highest sales volume since 69,200 homes were sold from January to July 1999.

But while the overall figures showed gains in both prices and sales, some segments of the home market seem to be flattening out. In the past several weeks, area agents say the market has cooled, with some homes -- particularly those priced at more than $1 million -- sitting on the market for months and some buyers offering substantially less for properties that would have sold for far above asking prices during the dot-com glory days.

"It's a crazy time right now," said Pat Patricelli, an agent at Herth Real Estate in San Francisco. "I'm definitely getting what I perceive to be fewer offers. People seem to be hesitating, and I don't know whether people are on vacation or whether they're waiting to see what's going on."

The slowdown comes amid declining prices for rental housing, a volatile stock market and evidence that the economy has reached a standstill.

The median price for new homes in the Bay Area dropped 1.5 percent, from $454,000 in July 2001 to $447,000 last month, according to DataQuick. The falloff was steepest in Alameda and Santa Clara counties, where new-home prices plunged 13.3 percent and 11.3 percent, respectively.

In addition, the number of existing condos sold fell in Contra Costa, Marin and Napa counties. Prices, however, remained on the upswing.

Karevoll said prices and sales of new homes and condos "are volatile to the point of not being very relevant for identifying trends."

Still, as concerns swirl about the economy, many experts are closely eyeing the housing market. While the sector's buoyancy has staved off wider economic downturns in some areas, enormous price gains have spurred talk of a housing bubble akin to overheated dot-com stock prices in the late 1990s.

Such theories aren't limited to the Bay Area's housing market. Washington, D.C.; Tucson, Ariz.; Chicago; and Baltimore have also experienced huge price increases.

"We consider the San Francisco metro and San Jose metro areas as being highly overpriced, where prices aren't supported by the underlying economic factors," said Celia Chen, senior economist at Economy.com.

During the next six months, Chen believes the economy may start to improve, interest rates will edge up and prices will begin to moderate and show small declines on a quarter-by-quarter basis. However, if prices continue to soar and the economy weakens, "the risk of a crashing bubble would become more real. "

"At some point, expectations become so divorced from reality it becomes a very fragile market and any retreat could cause a more rapid decline in prices, " Chen said.

Karevoll said his group is closely monitoring the data for evidence of a bubble. So far, he said, there is "no indication of any danger on the horizon."

( The on line version is “click on headline and go to the story.” www.leasingnews.org. It is now posted around 11am, PDT.

BT.

Bill Thorpe <bthorpe@homefirst.net>

Thank you for the compliment. My answer as to the motivation: I don’t know.

This really started several years ago when I wrote a newsletter to colleagues

about what was happening in the leasing industry. It was personal. Maybe

three or four and it grew to a dozen, the more, and somehow got up to a couple

of hundred. Maybe more. Then it got to be more often. In April, 2000, I started

to save them, instead of delete them. After sending out the list, originally from

Sierra Cities to their salesmen to call on lessees from the list of defunct leasing

companies. I thought my friends would prefer the reports in html, as they

were getting longer and longer, and a website would be easier to read. And

for liabilities and advise, I incorporated and formed an advisory board---who

should get a lot of credit for the direction and the reason there are now 5,000

readers, many whom send “leads,” information, provide “inside news,”

and that’s what makes us different. I take care of the leasing list myself, adding, correcting, and removing, when requested. Except for the web version, I do everything. We have no money. Our goal was not to make money, just as

readers send us news, not for the money or the glory, as many want their

name “with held.” It is for the sake of our industry, perhaps the original

spirit of the internet.

But what is my motivation? To inform, to education, to bring some humor into the business world. Other than that answer, I don’t know.

Grounds, for which I've never heard the explanation of how it was named. The Polo Grounds were in Manhattan.

other changes. It is right before I proof Leasing News, I was confused as it was late at night. I always hated the Yankees, as I was a Dodger fan, and my brother at Giants fan. and since the Giants were from the Bronx, I got it mixed up. My father took us to the Dodger games and my grandfather to the Yankees games, as he also lived in the Bronx/

directly across the Harlem River from the Yankees' current Manhattan home, the Polo Grounds ( they shared it with the Giants until they moved

I am a long-time reader, but a first-time writer. A few weeks ago, you published an article on the different leasing associations available in our industry, as well as several commentaries from their respective officers stating why it is important to join and belong to their particular association (even though it is arguable that not much is gained by being a member).

Then, last week there were several days worth of stories reporting on the Franchise Tax Board and their intention to tax certain leasing transactions and assignments. Since this tax appears to be negative for our industry (and will require a fight), and the different leasing associations who represent us seem to have fragmented agendas and influence (as well as declining memberships and disproportionate lobbying clout), I was wondering if anyone has thought of them combining into one Power-Association to concentrate our voices and promote our causes.

I believe a single, concentrated, and united leasing association would be more powerful and have a stronger common front in its lobbying efforts, as well as have a larger war-chest to fight governmental and regulatory issues we believe detrimental to our industry. Can you tell me if the presidents of the 4-5 major leasing associations have ever met to discuss a merger among them? I would be very interested to know. Thank you, and keep up the great newsletter.

It’ll never happen. The associations can’t even get an “interassociation” committee together to work on coordinating the many conferences. The

support the Equipment Leasing Association. Join this organization, as they are the only ones who will get it done. http://www.elaonline.org. Perhaps I will get static from the other leasing associations, but in reality, ELA is number one when it comes to governmental issues.

I have to agree with Robert Kieve. Let us acknowledge the courage of many people; offer a prayer for those we lost; and move forward.

We continue to put ourselves into the hands of the terrorists, and limit ourselves. Yes we need to reflect, but not to the extent of stopping our

The Task Force on State & Local Taxation of Telecommunications & Electronic Commerce established by the National Conference of State Legislatures (NCSL) is scheduled to meet in conjunction with the NCSL Executive Committee in Ogonquit, Maine from 9am-5pm on Friday, October 4. The NCSL Executive Committee will meet on Saturday, October 5.

I expect this may be the last review by state legislators of the Interstate Agreement emerging from the Implementing States meeting in September before it is issued as a model bill. For information on the meeting send a request with your name and company/organization to me at dbrown@elamail.com. Respondents that are members or prospective members of the State Government Affairs Council (SGAC) will also receive details of an SGAC event during the meeting.

Still trying to build our magazine library. I would like to start putting a “picture

from the past” in the on line version from the magazines. They also have background and other information for current stories/

Mark Your Calendar for the
National Association of Equipment Leasing Brokers Regional Meeting

FRESNO, Calif. –– Grape growers from across California's Central Valley picketed an E. & J. Gallo Winery to protest the low grape prices offered this year by the world's largest winemaker.

About 50 growers from Merced to Bakersfield blocked trucks loaded with wine grapes for about 30 minutes on Wednesday, carrying signs that read, "Gallo wines made with growers' blood."

Growers say they can't survive on the $65 per ton Gallo offered for this year's Thompson grapes, the most common grape grown in the valley. Gallo and other wineries offered $75 per ton last year, and between $115 to $150 per ton in 2000, depending on the variety.

They say Gallo's size – $1.1 billion in sales last year – makes it such a dominant force in the market that it effectively leads a price-fixing conspiracy. Other San Joaquin Valley wineries often wait to hear what the Modesto- based Gallo is offering for grapes before making their own deals.

"The government should do something about it," grape grower Marvin Horn said. "You can't have all the other wineries follow suit behind it. It's a disgrace for the free enterprise system."

Even more frustrating for San Joaquin growers, who provide about 60 percent of California's wine grapes, is that they have been offered just $100 per ton for chardonnay grapes, while growers in the more prestigious Napa Valley receive about $2,500 a ton.

Gallo said the company is a "very minor factor in the pricing of Thompson seedless grapes," and all California grape growers are facing a severe surplus and reduced demand.

"We sympathize with the plight of all California grape growers, but the problem is really beyond our control," said Milo Shelly, a vice president.

Wine industry experts say one reason prices are low is oversupply. Growers will harvest 3.3 million tons this year, 8 percent more than 2001, according to the state Agricultural Statistics Service.

Wine industry analyst Eileen Frederickson said the valley also grows more grapes used in boxed wines rather than higher-end wines, such as merlot or chardonnay, which have better sales now.

"The problem in the valley is not Gallo. The problem is that there are too few wineries that make the kind of wine for which the San Joaquin Valley traditionally has been known," she said.

With 500,000 acres of wine grapes, California is the fourth largest wine producer after France, Italy and Spain, according to the California Association of Wine grape Growers.

BOSTON (AP) A national survey has found that workers in many parts of the country are growing more unhappy with their jobs and nowhere more so than New England.

Only 51 percent of the 5,000 people surveyed said they were satisfied with their jobs, compared with 59 percent in 1995. The mail survey was conducted in March by the New York-based Conference Board, which did not provide a margin of error.

The survey suggested most Americans find their jobs interesting and are even satisfied with their commutes. But the survey said only one worker in five was satisfied with their companies' promotion policy and bonus plans, while nearly two in five were content with their wages.

Job satisfaction in the northern Midwest, Prairie and south central states Kentucky, Tennessee, Alabama and Mississippi have dropped below 50 percent since 1995. But it was lowest in New England at only 44 percent, compared with 56 percent in 2000 and 65 percent in seven years ago.

''I'm personally happier but I observe more people that are more miserable,'' said Marc Greenbaum, 50, a professor at Suffolk Law School. ''There's more pressure on them to produce, more problems with maintaining a boundary between work and family, even maintaining a boundary between work and the outside because of things like e-mail, voicemail and the Blackberry. They can't get away.''

Job satisfaction was highest in Rocky Mountain states, though the percentage dropped from 63 percent in 1995 to 57 percent this year.

Lauren Trout, 23, a bicycle messenger in Denver, said she could always do with a higher salary. ''But otherwise, as far as the work goes, I like it. I'm pretty happy with it,'' she said.

The survey found that job satisfaction increased with income levels, but even among higher-earning households it dropped from 67 percent in 1995 to 55 percent in 2000 and again this year.

Less than 48 percent of people aged 35 to 44 were satisfied with their work, compared with nearly 61 percent in 1995. The most satisfied age groups were those under 25 and over 65.

George Walker, 66, who lives and works in Denver, said he was happy with his salary but wished some things at work could change.

''I'd like to be more active,'' he said. ''I'd like to have more say. I'd like to feel like I had more power. I'd like to feel like I was more in control.''

New England (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, Vermont): 1995, 65 percent 2002, 44 percent.

Middle Atlantic (New Jersey, New York, Pennsylvania): 1995, 53 percent 2002, 50 percent.

East North Central (Ohio, Indiana, Illinois, Michigan, Wisconsin): 1995, 59 percent 2002, 51 percent.

West North Central (Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas): 1995, 61 percent 2002, 45 percent.

South Atlantic (Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida): 1995, 58 percent 2002, 49 percent.

East South Central (Kentucky, Tennessee, Alabama, Mississippi): 1995, 58 percent 2002, 46 percent.

West South Central (Arkansas, Louisiana, Oklahoma, Texas): 1995, 60 percent 2002, 51 percent.

Mountain (Montana, Idaho, Wyoming, Colorado, New Mexico, Arizona, Utah, Nevada): 1995, 63 percent 2002, 57 percent.

Pacific (Washington, Oregon, California, Alaska, Hawaii): 1995, 59 percent 2002, 56 percent.

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While most of the high-tech industry hunkers down, financial software maker Intuit Corp. is muscling up. In the past year, the company behind popular software including TurboTax, Quicken and QuickBooks has expanded its product line, spent $490 million on six acquisitions and built one of the industry's most successful online subscription services. The burst of activity for Mountain View-based Intuit follows Steve Bennett's January 2000 arrival as chief executive.

HOUSTON –– The first former Enron Corp. executive to admit to crimes in the company's crash acknowledged Wednesday that he raked in ...

WASHINGTON (AP) Philip Haynie recalls walking into the agricultural loan office in Heathsville, Va., in the fall of 1998, seeking a loan that would enable him to keep farming. He was greeted by an account executive holding a handgun.

SAN FRANCISCO (AP) The lead negotiator for shipping lines locked in a contract dispute with West Coast dock workers said Wednesday he opposes a federal cooling-off period if the talks reach a true impasse.

SAGINAW, Mich. (AP) Delphi Corp. on Wednesday announced the appointment of two new executives.

HOUSTON (AP) A list of the accounts and properties listed in the criminal complaint filed against former Enron Corp. executive Michael Kopper.