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February 28, 2001
Headlines: Studebaker Worthington Leasing Sold to State Bancorp LeaseExchange To Receive "Live" Pilot U.S. Capital, Santa Barbara, California--A Mail Box!!! Efinanceworks to Return $150 Million Greenspan Says Economic Downturn Isn't Over Yet, Blames Manufacturing Kropschot Financial Announces Completed Transactions Advance Rental Controversy Continues Earthquake in NorthWest--just happened. Let the bad economic times roll, some say From home and car buyers to employers, slump has its advantages By Kevin McCoy USA TODAY http://www.americanleasing.com/gifs/placards/lemon-lemonade.gif ----------------------------------------------------------------------------------------- State Bancorp, Inc. Announces the Acquisition of Studebaker Worthington Leasing Corp.
NEW HYDE PARK, N.Y., Feb. 28 /PRNewswire/ -- The Board of Directors of State Bancorp, Inc. (Amex: STB), parent company of State Bank of Long Island, today announced the acquisition of Studebaker Worthington Leasing Corp. (Studebaker) in a cash for stock transaction. Studebaker has provided business equipment leasing nationwide for over thirty years, specializing in small ticket leases up to $100 thousand for computers and office equipment. (LOGO: http://www.newscom.com/cgi-bin/prnh/20000727/STBLOGO ) Studebaker will operate as a subsidiary of State Bank of Long Island and will be headed up by Kenneth Paston, a minority owner of the firm and its current President. Mr. Paston will also assume the additional responsibility of CEO due to the retirement of Frederic Weiss, a founding principal of the firm. It is the intent of State Bank's management to retain the Studebaker name and all of its Jericho, New York-based staff. State Bank of Long Island has provided an array of banking services to middle market clients in the New York metropolitan area for over thirty years. According to Thomas F. Goldrick, Chairman and CEO of State Bancorp, Inc., "State Bank of Long Island has enjoyed a twenty year banking relationship with Studebaker Worthington Leasing Corp. and we are delighted to announce this strategic alliance. The acquisition of Studebaker Worthington Leasing Corp. will complement State Bank's current product offerings, including an existing strategic partnership with JCM Leasing for large ticket leasing services, and will provide Studebaker access to the Bank's extensive customer base throughout the metropolitan area." State Bancorp, Inc. recently completed its thirtieth consecutive year of record earnings in 2000 and this partnership with Studebaker will provide additional diversification to the Company's traditional sources of income. State Bancorp's sole subsidiary, State Bank of Long Island, the largest independent commercial bank headquartered in Nassau County, currently operates full service banking offices in ten locations throughout Nassau and Suffolk Counties: New Hyde Park, Jericho, Oyster Bay, Rockville Centre, Garden City South, Huntington, Hauppauge, Farmingdale, Holbrook and East Setauket. In addition, the Bank also maintains a lending facility in Jericho and has two subsidiaries based in Wilmington, Delaware, which provide investment and balance sheet management services to the Company. The Company maintains a World Wide Web site at http://www.statebankofli.com with corporate, investor and branch banking information. SOURCE State Bancorp, Inc. CO: State Bancorp, Inc.; Studebaker Worthington Leasing Corp. ST: New York ------------------------------------------------------------------------------ THIS IS NOT AN ADVERTISEMENT---This is News, Especially for the Leasing Industry American Express is Offerring Free Internet Service to American Express Card holders http://www.amexol.net/ also free eMail/Customer Service/Features-----and Leasing On Line (guess who thru? ) _____________________________________________________________________ Earthquake The Leasing World still turns in the NW. However things could be a mess for a while. My friends in offices downtown were pretty freaked out. Apparently some folks were screaming and crying, but no reports of injury. It was a humbling experience. We are not used to this earthquake stuff! Even the radio announcers were completely freaked out, it was interesting to listen to as it started to happen. I can only imagine how frightening it was to be in a sky scraper. Out here in Ballard (a few minutes north of downtown) it was scary enough. The quake seemed like it last about a minute. Plenty of time to go out into the street and talk with the folks about it as the sidewalk and streets rolled beneath our feet. There were some dust clouds - hopefully from construction sights.... sirens everywhere, many reports of power outages. So far they tell us it was centered 12 miles NW of Olympia and it registered about 7.0. Things fell from shelves and lots of stuff rattled around at Kabot Commercial Leasing. So far we are all fine and hopefully the aftershocks if any will be few and mild. They say it was a deep one - about 30 miles below the surface of our planet, Earth, (for those of you who may reside on other planets), so again hopefully the aftershocks should be few. The lines at Kabot Commercial are troublesome - lots of busy signals. I hope everyone else, especially my NW leasing buddies, have faired well.... slightly shaken and very stirred, your leasing buddy, Theresa Kabot Commercial Leasing Seattle USA - Earth Leasing Associations---Crying the Blues It appears interest in symposium and conferences is down, according to several of the non-profit leasing associations, who also report membership renewals have slowed down. No one wants to go on the record about this, but they are crying the blues. National Association of Equipment Lease Brokers reports new membership is "strong." Their Listserve is very popular. editor ------------------------------------------------------------------------------------ LeaseExchange To Receive "Live" Pilot We have reported that LeaseExchange has been on "auto pilot". Reportedly the Company was for sale, but since the demise of eLease ( Primestreet ), they have decided to start running the exchange generating deals from vendors and the web. They have moved to alive/work studio on Pacific. It will simply be a "brokered" transaction site. As many "on line" leasing companies are also doing, they are seeking business through the traditional methods also. The on line leasing companies have evolved on the world wide web, finding it is not working well enough, and while not abandoning this aggregate funding lease rate chart, are taking to the telephones and the streets to drum up business. --------------------------------------------------------------------------------------------- U.S. Capital, Santa Barbara, California I shared with you earlier our problems for one customer with 3 lease appv'ls for 1.2MM in tractors. That approval was 'pulled' as USCC's investor had second thoughts and reneged on its approval. Further attempts by USCC to 'syndicate' these 3 leases were not successful! What a surprise! When promises to refund the 25M in advance rentals did not happen, our customer flew out to Santa Barbara to track them down 2 weeks ago. Bottom line: their mail address is an executive office suite for mail only. They are not located there. After sweet talking the mgr regarding the purpose of his trip, she gave him USCC's location. This address was a concrete block garage, on the beach, with no windows and the only access was a remote controlled garage door for entry! It is located behind a T-shirt & surf board retail location in Santa Barbara. After surprising one of their employees when he opened the garage door, our customer was there over a 2 day period & finally tracked Ken Nelson down in HI! Ken promised to send full refund that day. 3 days later, customer rec'd 20M and now, with my help, Ken has promised the final 5M to be sent to customer today. Our other deal in for funding for 35M was 'scheduled' to fund on 2-23-01, but neither vendor nor our company have received monies yet. Am continuing follow up here via faxes & phone calls which are never answered. Ken has spoken to me a number of times during this saga with promises, etc, so we will just have to wait & see how this works out. Oh, one more thing. The manager of their mail address did volunteer that USCC was scheduled to move to LA around 3-1-01!! Name With Held --------------------------------------------------------------------------------------------- United Capital I read what Paul from Capital Funding Group wrote about United funding deals starting 3/1. Haven't they been saying that since December? What happened to 1/1? And how are they going to fund deals when all of the funders are gone? There is no one left there qualified to fund deals. If I was Paul, I wouldn't hold my breath. You would be better off finding another funding source. Kit, as for you not knowing Peter consider yourself lucky. There's not much there to know. It's long been rumored that he was reading emails and bugging the phones. At least someone finally admitted that he was. Keep up the good work Kit. Anonymous ------------------------------------------------------------------------------------------- Shutting Down, Efinanceworks to Return $150 Million By David Dankwa (www.venturewire.com) http://venturewire.net/feature.asp?sid=24213 NEW YORK--Efinanceworks, an investment company formed a year ago to focus on financial services startups, said it will return nearly $150 million in capital to its founders, General Atlantic Partners (GAP) and Capital Z Partners, as it winds down all operations over the next 30 to 40 days. GAP and Capital Z committed $300 million to the New York-based firm when it launched last February. Efinanceworks laid off 20 employees last Wednesday. A seven-member transition team, which includes managing directors Doug Woodham, Kelly McGowen, and Gary Stein, will remain to assist in transferring the firm's 13 portfolio companies to GAP and Capital Z, both of which will now take over board seats and advisory positions at the companies. News of the shut down first appeared in Silicon Alley Daily. Mr. Woodham said Tuesday that efinanceworks decided to cease operations because the firm felt its "infrastructure was no longer important to its portfolio companies." He said the company's real estate, marketing, and research services were no longer needed, and it realized that "the early stage venture approach is less important than originally anticipated." Efinanceworks was created to develop e-finance investments opportunities by working with early stage entrepreneurs and in partnerships with established financial institutions. Mr. Woodham said the firm preferred the latter. Deals currently in the pipeline will be channeled to iFormation Group, a General Atlantic Partners affiliate formed last June with Goldman Sachs and Boston Consulting Group, whose strategy is more in line with Mr. Woodham's preference. iFormation works with Global 2000 companies to build online businesses based on their traditional assets. Mr. Woodham said his team will work closely with iFormation Group over the next month in the transition, but wouldn't comment on whether any will join the firm permanently afterwards. Efinanceworks' portfolio includes NeuVis, a developer of enterprise-level Internet rapid application development software; Data Distilleries, which provides analytical customer relationship management products and services; Coverage Corp., an insurance platform; and LandersMadden, a public relations agency that focused on business-to-business and financial services. For LandersMadden founders, Maureen Landers and Machie Madden, who provided PR services for efinanceworks and its portfolio companies, the announcement was bittersweet. "From our perspective we're very excited because this provides us with a direct relationship with Capital Z and General Atlantic, as well prospective clients within their portfolio," said Ms. Landers. On the other hand, Ms. Madden said, "it's been a really wonderful experience working with the partners at efinanceworks." http://www.efinanceworks.com Advanced Rental---FBI I was quite pleased to see Mike's post regarding the FBI investigation of our humble industry. I would welcome the opportunity to help the FBI nail the "fine" individuals responsible for destroying my credibility, stealing commission income, and stealing advance rentals from my customers. This is my 17th year in the industry, and I am quite alarmed by the increase in miracle overnight approvals at "low" rates for both good customers and deadbeats! If more brokers offered their assistance, we might regain some credibility. This is an opportunity for us to clean up our industry before the government cleans it up for us! Maybe I am unusual, but I never collect money until I have credit approval and a complete set of documents for the Lessee to sign. Doug Delack Alternative Finance, Inc. DDelack@USA.NET + + + + I was particularly intrigued by Russ Runnalls' letter on the many techniques used to scam lessees. I guess the more things change, the more they remain the same. I came into the equipment leasing industry through the commercial finance industry in 1971. My company made "The Great Salad Oil Swindle" mandatory reading for newbies. "OPM, Other People's Money" came just a little later. There were others, some not so public, some larger, some smaller. And, of course, there's always been the petty, underhanded kinds of scams that Russ identified, that not only may someday lead to regulation, but are simply wrong. They take advantage of the least sophisticated business people, the folks that work their asses off to make a living, many of them immigrants who want the best that America has to offer, and try to trust the way we do things here. Blue suede shoes may not be in any more, but if the practices that Russ identified are all that prevalent, obviously blue suede shoe tactics still are hot. The more things change, the more somebody out there is bent on ripping people off the old fashion way. I used to know someone who once told me, "Fair is what two people agree on - even if one of them doesn't." The last I heard, from a mutual acquaintance, he was still in prison. Hal Horowitz hal.horowitz@searchwest.com + + + he subject of advance rents has long been a source of confusion for Lessees. We try and get a commitment letter signed whenever possible. In the proposal we call for a "commitment fee", not advance rents. We use all the standard language relative to when the fee is earned, when it will be returned and both when/how it will be applied in the lease documentation.
We also use a commitment fee which is less than the advance rents, and normally a round number. This has helped to eliminate some of the confusion. The Lessee can't be confused between advance rents and the commitment fee since they are different amounts.
We appreciate this sort of dialoque, it's good for the industry. Keep up the good work.
Bob Russell, Pres. of NICHE Capital brussell@nichecapital.com> + + + + A quick question and comment on the "Advanced Rental" debate. I agree with Barry Marks on the agreement for advanced rentals but I think that Ken Greene has a better description when he calls it a "commitment fee" In my agreement we have a clause that states that if we approve the transaction, substantially along the terms of the proposal and the lessee refused the approval then we "earned" the fee. If the lessee agrees to this there should be no question regarding the disposition of those funds. If however we do not approve the lessee according to the terms the fee is returned to them in full or they have the option to sign a new proposal with the amended terms and apply the fee to that. We only use this on larger transactions. Our policy on smaller transactions is to return advance rentals if a transaction falls apart. In my experience it hasn't been worth it to retain advance payments and then have to waste my time arguing or hiding from an angry customer. Russ Runnals also had an excellent summary of the sleazy practices engaged in by the churn and burn application only set. He did however, forget one important technique that was invented by Amplicon and still widely used by most of those that they spawned. This is the "quarterly payment quote". Quote the customer a "monthly" payment which is calculated by quoting a "quarterly" payment divided by three. When the customer accepts this unusually low payment they are informed at the time of funding that there needs to be an adjustment because the payments will be collected quarterly. If Russ adds this one to his list I think he will have them all covered. Bob Rodi LeaseExchange <drlease@leasenow.com> + + + + SO WHEN DID ADVANCE RENTALS BECOME A BAD THING? I am a firm believer in "taking the deal off the street," but this does NOT mean ... that I condone bait and switch tactics, keeping money when it is not earned or, for that matter, doing anything else that requires you to have your "Name Withheld" when you communicate with your fellow lessors. When I started in leasing, we carried lease agreements in pads, inserted the carbons, filled them out by hand, and had the customer sign them. We collected our advance rental check (no one knew about doc fees back then) and told the customer that we would submit it to the credit department and let him know when (and if) it was approved. If we couldn't approve it, we would send him a refund. No problems, no hassle. Then came proposal letters, doc fees, lessee fraud, ethically challenged sales people and companies and all the rest of those things that have led many of you to apologize for being a good businessman by taking a deposit from a customer! I STRONGLY believe that it is perfectly valid, particularly on complex transactions, to request a deposit/commitment fee in order to work on a deal. This is because experience tells us that when the potential lessee has signed a proposal and sent money, he is mentally committed to the transaction. No money = no commitment. If he is mentally committed to the transaction, he will gladly provide required financial information, put up with normal delays in processing and otherwise assist you in your efforts to complete the deal for him. Without this commitment, his cooperation level is significantly lower AND he might even use your approval to shop the deal to others. For this last reason, I advocate wording that clearly states that if you are able to approve the deal under the proposed terms, your commitment fee is earned. Period. It is important to clearly state the terms under which you are accepting these funds. The proposal should include the terms and conditions under which you believe you can get the deal done together with the rate you are quoting for the transaction. Be sure to identify advance rental requirements and any other fees you will be charging. Let them know that the deposit is applied to the advance rentals if the deal is consummated.... and by all means let them know that you will keep it if the deal does not go through no fault of your own. By clearly stating these things, if you are able to come back with an approval UNDER THE PROPOSED TERMS, then you have earned the commitment fee, even if the customer does not elect to close the deal. I think this is fair, reasonable AND ethical. If you can't do the deal under the stated terms, he gets his money back. If you can do it, but under different terms or at a higher rate, he is given the choice whether or not to proceed and a new Proposal agreement is executed. That is not bait and switch. That is intelligent positioning and self protection. All of this can be accomplished in a forthright manner -- or in a sleazy and devious manner -- depending who is doing it. This applies to every other aspect of our business - or anyone else's business. Because there are unscrupulous people in this world does not mean that we should be afraid to honestly protect our interests. I take exception with the people who tell us that we have to be doormats to unscrupulous customers and spend large amounts of time and money working difficult deals in order to "protect the integrity of the industry." Baloney. If the customer lies, cheats or steals (that means , providing false information or not disclosing material facts like it's used, not new equipment) it should cost them. Spell this out in the proposal as well. Throw the rotten apples out if you can, but don't throw out the whole barrel with them..... and don't assume that just because someone beat you out of a deal, he must have done something crooked. Maybe he just outsold you. Ken Goodman, CLP Name Definitely NOT Withheld kendg@email.msn.com + + + Russ Runnals comments are very accurate about some of the unscrupulous practices out there. I know of three company's whose corporate design are sophisticated deception schemes. Sadly, all three have been financially successful, birthing many other small brokerages with the belief that crime does pay. (I prefer sleeping well at night.) They generally prey on strong credit companies knowing that their fine print documentation will protect them when combined with extremely aggressive legal representation that intimidates most small companies. They have found that many duped CFO's of large entities will bury the evidence rather than suffer the embarrassment of being duped. A few additional tricks used are: typing in the payment box "+ tax" prior to funding when they are sure the Lessee didn't make copies. Purchase option notification clauses buried in the fine print requiring the Lessee to notify of their intent to exercise the $1.00 option no sooner than 6 months prior to lease maturity but no later than three. These practices have been going on for many many years. I have tried to assist a couple lessee/victims of these company's who are soured on our industry. Unfortunately, they both found it too costly to pursue and were not confident they would win litigation. I know these practices are intentiional as they were admitted to me by one attorney I know who represents one of these well known entities and from a well known Marketing Executive who continues these practices with his current employer. By the way, this Marketing Executive is a CLP. As the economy continues to tighten, we all need to be more careful. I truly believe that what goes around comes around and these "bad guys" will get what's coming to them. I sure hope so. I also believe those of us who run good operations will prosper. Jeff Rudin Quail Leasing jrudin@quailcap.com> ---------------------------------------------------------------------------------------------- Likes "All the News" Just a quick response to Gary at Western's comments regarding some of the more global information you include in the newsletter. Those types of items are important to what we do. We have been keenly aware that the world is changing fast, and while some things have stayed the same (or come back around) like doing deals that make sense at a reasonable margin, others haven't. My feeling is that not only do I want to know what goes on in the larger marketplace (larger than the small/mid ticket leasing business) because it affects this industry, I also want to see the new opportunities that are coming. I try to continue to educate myself and my staff, increasing our ability not only to service our lease clients, but clients who may be in need of other financing products. It serves not only to improve our revenues, but gives us a whole different place in our clients and our vendors minds. They see us as more of a consultant, ask us for more assistance, and also don't shop us nearly as much, because they can't compare what we provide to the other 16 leasing companies they have heard of. Food for thought. Also, thanks for the discussion on commitment fees and advance payments (two very different things). The kind of things that Preferred and Republic pulled on people have given our industry a black eye, and I am not surprised the Feds are investigating. I agree wholeheartedly with Barry, Barry, Joe and the others. We get signed proposals and commitment fees often, and work very hard to price them pretty close to where we expect the deal to wind up, and I think that's a major difference between whether the customer thinks he is being screwed with and whether or not it is fraudulent. If we can't do the deal the way we proposed it we offer to the customer what we can do, usually with an explanation, and they are usually pretty reasonable about it as a result. If anything good has come out of the "Republic" type model - they only get the customer once. After the customer figures out we were telling him the truth, we get the rest of their business! Keep up the great work, as always. What you do is invaluable to us! Travis Foxx Merchant Capital / Merchant Leasing Need financing for your growing business? Merchant Capital - "Financing for Entrepreneurs" http://www.merchantcapital.net -------------------------------------------------------------------------------------------- The Monitor Beat Us Today ( Whatever Happened to "Favoritism? " We are usually one to two days ahead of Press Release stories ), but our own Advisory Board member gave them a scoop: Kropschot Financial Announces Completed Transactions President Bruce Kropschot announced several recent equipment leasing company acquisitions and financings arranged by Kropschot Financial Services. The firm has long been the leading merger and acquisition advisor to equipment leasing and specialty finance businesses, having arranged the sale of over 130 such businesses in the past 15 years. Kropschot also announced that the headquarters of Kropschot Financial Services was relocated in February 2001 to 116 Estuary Drive, Vero Beach, FL 32963; the new telephone number where Kropschot can be reached is 561-234-4544. The office of Executive Vice President James Billings remains at 309 Windfern Court, Millersville, MD 21108, and Billings' telephone number is 410-729-1800. The Equipment Leasing Company, a small ticket lessor based in Sparks, MD and headed by President Dennis Horner, was acquired in December 2000 by Sandy Spring National Bank, a subsidiary of Olney, MD-based Sandy Spring Bancorp. The Equipment Leasing Company was a unit of Progress Financial of Blue Bell, PA. Kropschot Financial Services initiated this transaction and served as exclusive financial advisor to Progress Financial. Kropschot Financial Services also recently aided the management teams of three small ticket equipment leasing companies owned by UniCapital in their disassociation from UniCapital, which is no longer funding new leases. The former management team of K.L.C., Inc. (dba Keystone Leasing), headed by its co-founder Alan Kaufman, has formed a new equipment leasing business, Keystone Equipment Finance based in West Hartford, CT. With the assistance of Kropschot Financial Services, the management team of Orange, CA-based Saddleback Financial, headed by co-founders Warren Emard and Stuart Kennedy, has arranged for Saddleback's on-going business operations and certain assets to be acquired by a private investment group. Kropschot Financial Services also helped arrange for most of the sales organization of Boulder Capital Group to be taken over by Information Leasing of Cincinnati. Two other recently-completed acquisitions were initiated by Kropschot Financial Services Executive Vice President during the short period of time in 1999 and 2000 when he was affiliated with another firm. Billings aided Greater Bay Bancorp of Palo Alto, CA in their acquisition of Emeryville, CA-based The Matsco Companies, which specialize in financial services for the dental and veterinary markets. Kropschot Financial Services arranged a major financing for Matsco during the acquisition process. Billings also represented small ticket lessor Affiliated Corporate Services of Lewisville, TX in their recent merger with First Commerce Leasing of Birmingham, AL. Bruce Kropschot stated that the current funding difficulties many leasing companies are experiencing may present excellent opportunities for acquirers that have internal or external financing capabilities. Acquisition premiums are much lower than in the booming acquisition period that ended with the credit crunch of 1998, and Kropschot does not expect acquisition prices to improve much until the equipment leasing industry regains some of the credibility it has lost on Wall Street and in the banking community. Kropschot Financial Services helped 9 equipment leasing companies develop new funding relationships in 2000, and Kropschot expects that number to increase in 2001. Leasing companies seeking funding or wishing to explore the M&A market are invited to call Kropschot or Billings. They will both be attending the ELA Funding Exhibition in Chicago from April 18-20, the EAEL Convention in Puerto Rico from April 26-29 and the UAEL Convention in Scottsdale from May 3-6. ------------------------------------------------------------------------------------------------ I get criticism for these stories, but as Archie Julian of Dumac told me, in these times, take advantage of them---market companies who sell refrigeration units, air conditioning units, anything to do with gas or electricity, because an up-grade can save them money. A slump can be turned into an advantage--You know, if they give you a lemon, make lemonade, and if you are smart, sell it for a profit ( one of our placards at: http://www.americanleasing.com/gifs/placards/lemon-lemonade.gif Let the bad economic times roll, some say From home and car buyers to employers, slump has its advantages By Kevin McCoy USA TODAY There's an upside to the national economic down slide. Eager to stop renting and buy a house, Gordon Good feared he might be priced out of the sizzling Silicon Valley market when he checked real estate ads last year. But this month, with the market retreating, the California computer software engineer signed a deal for a three-bedroom, two-bath ranch. Craig Dickinson of Connecticut almost felt relieved when his decision to trade a law office for an Internet start-up left him jobless in December. Sure, the attorney has to land a new job. But unemployment has given him space to rethink his goals and seek a career in human resources, the field he likes best. Good and Dickinson aren't the only beneficiaries of silver linings in the economic cloud. * Homes are becoming more affordable, and bidding wars are dying out. * Recruiting and retaining talented employees is easier as workers reconsider pay and perk demands and think twice before jumping to new jobs. * Some hotel room rates are dropping, and snagging reservations at four-star restaurants is no longer all but impossible. * Buying a new car or truck is less expensive as dealers pile on incentives to combat a 4-month sales slump. * Even previously backlogged contractors are finally scheduling remodeling jobs for homeowners who couldn't get their phone calls returned last year. ''The economy was too tight,'' says Charles Lieberman, a former head of the Federal Reserve Bank of New York's monetary analysis staff who preaches that the Federal Reserve Board's interest rate hikes during the late '90s averted inflation and ''introduced some slack'' that should foster new growth. ''That is the upside,'' says Lieberman, chief economist for Advisors Financial Center, a New York-based financial portfolio management company. So long as the economy doesn't brake to a stop or shift into reverse -- and Lieberman cautions that the Fed's controls are ''an imprecise instrument' -- many Americans may reap distinct, perhaps even cathartic, benefits from the slowdown. Not that it felt that way at first to Dickinson. After years in a long-hours litigation job, the 37-year-old father of two opted to jump to Go4Service.com, an Internet start-up that manages warranties on home wiring, plumbing and other infrastructure. ''Unfortunately, my timing was uncannily bad,'' Dickinson says. He changed jobs last March, one month before the tech-stock crash. When venture capital hadn't materialized by December, he quit and started looking for a new job to pay the family bills.Though unwelcome and unexpected, unemployment enabled Dickinson to slow down, think about his priorities and target a dream career -- not just a new job. ''It's given me a little time to reorient myself,'' he says. ''When you're in the middle of the stream, it's hard to change course. Once you've run aground, it's a little easier to set sail again in a different direction.'' Saner home bids In Silicon Valley, where the once-booming computer economy made housing prices hotter than an August day in San Jose, real estate brokers and buyers welcome an end to the unusual auctions instituted during the buying frenzy of the past few years. As many as 15 or 20 would-be homeowners might have shown up in 1999 or 2000 at what Coldwell Banker broker John Lazar in Palo Alto likened to auditions where bidding would often soar $100,000 or more beyond the asking price. ''It was insane. Buyers were so anxious to get anything,'' says Penny Pompei, executive director of the Silicon Valley Association of Realtors. Prices and profits reaped by sellers in the region remain high, especially when compared with areas of the country where local economies weren't lifted quite so much by the rising financial tide of the '90s. But the slowdown has halted ''extreme overbidding,'' says Leslie Appleton-Young, chief eco nomist for the California Association of Realtors. The shift came at the right time for Good. The 39-year-old Michigan transplant initially braced for the worst after losing a recent bidding war on a Menlo Park home he says sold for nearly $100,000 over the $739,000 asking price. Just days later, Good's $730,000 offer was the winning -- and only – bid for a ranch in nearby Mountain View, a community that's almost as sought after. ''We were pleasantly surprised,'' says Good, who says he hopes to schedule a March moving date. ''I don't think it would have happened this way last year.'' According to the National Association of Realtors, a drop in mortgage interest rates and rise in family income made homes more affordable in the fourth quarter of 2000. The industry group predicts the trend will continue this year if the slowing economy maintains its current course. ''To the extent that you get a little push back, that's healthy,'' says David Lereah, the association's chief economist. ''You can't run all-out on all six cylinders all the time. You'll run out of gas.'' For investors, the slowdown can provide a cathartic pause. ''It offers a wonderful opportunity for people to review their portfolios and analyze what companies they want to own when they feel the market has turned around,'' says Robert Geist, president of the Institute of Psychology and Investing in Newton, Mass. Expanding talent pool Some analysts interpret good news from recent signs of a reversal in U.S. job trends. Manufacturing, the economy's hardest-hit sector, lost 65,000 jobs in January, raising the pink slip tide to about 250,000 since June, the U.S. Bureau of Labor Statistics reported this month. The national unemployment rate rose to 4.2% last month, an up tick from the 3.9% to 4.1% recorded last year. An increase in joblessness expands the labor pool available to growing industries and ''allows the economy to grow'' faster again, Lieberman says. The reversal, driven in part by dot-com layoffs, has also shifted the balance of power back to employers. The availability of talented job candidates ''is quite high compared to a few months ago,'' says Eric Archer, president of the professional recruiting group at Spherion, a Florida-based workforce consulting company. And job candidates' expectations have ''come back down to earth,'' says Vince Webb, senior vice president of marketing and planning at Management Recruiters International, a Cleveland-based executive search firm. The new mantra, he says: ''I'm not necessarily expecting that first $1 million by the time I'm 40.'' Last year, many top law firms raised starting salaries for associates to $125,000 or more as they vied with Internet companies for the best and brightest. Today, the pressure's off, says Angelo Arcadipane, managing partner of Dickstein Shapiro Morin & Oshinsky, a top Washington, D.C.-based firm. Moreover, half of the summer associates who were offered jobs with the firm this year accepted, double the rate just a few years ago. Although the law firm's respected reputation is a clear draw, ''I think it has to be because of the economy, in part,'' Arcadipane says. Jason Bruno, who joined Dickstein Shapiro in September, says he feels lucky to be on a career track with the firm where he worked in 1999 as a summer associate. Not only did the 28-year-old lawyer benefit from the new, higher salaries, he arrived at a time when a traditional legal career gained increased cachet. ''I don't see the downturn in the economy affecting large firms negatively,'' he says. ''Rather than going to a small firm, I think people are going to bigger law firms that are more able to absorb a hit.'' Those who are financially able to weather the slowdown may enjoy some economic benefits. The average daily rate for hotel rooms in New York City dipped 2.6% in December, the first drop in 8 years, according to PKF Consulting, a hospitality consulting firm. ''I don't think prices will come down too much, but they won't go up as much as they would have,'' says John Fox, head of PKF's New York practice. Tim Zagat, the restaurant, hotel and entertainment guide publisher whose books have become a bible in cities across the USA, adds that ''it may be more of a buyer's market in the sense that you'll be able to come into a hotel at the last minute and negotiate.'' Let them eat cake And for those who go out to eat, Zagat says, ''It may be a little easier to get into'' top restaurants with reputations for great food. It may also be less expensive to buy a car. Chrysler recently announced a new round of sales incentives. Ford Motor and General Motors are offering similar rebates and low financing for the Ford Explorer and Chevrolet Blazer sport-utility vehicles. The slowdown also contains an upside for frustrated homeowners. ''It's already easier to find a home remodeling contractor, particularly in the high-end categories such as kitchen work,'' says Bruce Isaacson, an executive at Homestore.com, a Web site devoted to home sales, rentals and services. Over Columbus Day weekend last fall, Alan Hanbury says, his Newington, Conn., home remodeling firm fielded about five calls. That was a drop from the 15 to 20 calls common during other 3-day weekends, says Hanbury, chairman of the remodeling council for the National Association of Home Builders. ''Most of us still have a backlog of jobs, but at least you'll get into the design queue a little quicker now,'' ------------------------------------------------------------------------------------------------ Greenspan Says Economic Downturn Isn't Over Yet, Blames Manufacturing Wednesday, February 28, 2001 Dow Jones WASHINGTON -- Federal Reserve Chairman Alan Greenspan, delivering a sober assessment of the U.S. economy, told Congress Wednesday that the sharp slowdown that began in the second half of last year isn't over yet. Interested in the business climate? Mr. Greenspan, testifying before the House Financial Services Committee, blamed much of the economy's weakness on an effort to cut back quickly on production in the face of falling sales. Although companies are working hard to bring their excess inventories of unsold goods into better alignment with demand, he said, the process may take more time. Excess inventories 'built up in 1999 and 2000 have engendered a retrenchment that has yet to run its full course,' Mr. Greenspan said, in a departure from testimony he delivered to a Senate committee on Feb. 13. Just two weeks ago, Mr. Greenspan told the Senate Banking Committee that consumer confidence 'at least for now, remains at a level that in the past was consistent with economic growth.' In that appearance, he also said the economy did not weaken further in January. The Fed chairman's latest comments sent a clear signal that the central bank, which already reduced interest rates by a full percentage point in January, is ready to do more to prevent the faltering economy from skidding into a recession. 'Even after the policy actions we took in January, the risks continue skewed toward the economy's remaining on a path inconsistent with satisfactory economic performance,' Mr. Greenspan told the House panel. 'Accordingly, to foster financial conditions conducive to the economy's realizing its long-term strengths, the Federal Reserve has quickened the pace of adjustment of its policy.' However, Mr. Greenspan gave no indication that the Fed is inclined to cut interest rates before its next meeting of policy makers on March 20. Wall Street widely expects the Fed to cut its key federal-funds rate target by another half a percentage point, to 5%. 'We have obviously specified implicitly that we prefer to act within our scheduled meetings,' Mr. Greenspan told the House committee. 'There are a number of technical advantages for doing that. But we've also shown over the years that when we perceive that actions are required between meetings, we have never hesitated to move.' The Fed made an intermeeting policy decision by cutting rates on January 3, ahead of its regular meeting at the end of the month, when rates also were trimmed by a half point. U.S. stocks rose sharply Monday amid speculation that the Fed would make another intermeeting rate cut this week, but have since fallen as those hopes faded. Reacting to Mr. Greenspan's latest assessment of the economy, Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the Fed chairman ' acknowledged that things are not quite turning out as planned.' 'While it was unreasonable to expect Mr. Greenspan to be anything like as gloomy as some private forecasters, this testimony did not give the impression that he is in a great hurry to cut rates immediately. He said that the Fed 'has quickened' the pace of rate cuts -- note the past tense -- but he did not add anything that could be construed as a signal that he expects to continue with this rapid pace,' Mr. Shepherdson wrote in a note to clients Wednesday. Mr. Greenspan also suggested he was no longer sure that consumer confidence is strong enough to keep the country out of a recession. 'Changes in consumer confidence will require close scrutiny in the period ahead, especially after the steep falloff of recent months,' Mr. Greenspan said. 'But for now, at least, the weakness in sales of motor vehicles and homes has been modest, suggesting that consumers have retained enough confidence to make longer-term commitments.' But he said the U.S. economy is headed for a patch of well below-average growth, despite two big interest-rate cuts by the central bank in January. Mr. Greenspan added that the stock market, through the 'wealth effect,' has been 'a very prominent factor' in economic growth since 1995. The wealth effect tends to prompt consumers to spend more as they see their stock holdings increase in value. 'Clearly with the market reversing, that process does indeed reverse,' he said. 'Whether it, in and of itself, is enough to actually induce a significant contraction, which in retrospect we would call a recession, is yet too early to make a judgment on,' Mr. Greenspan said. The Nasdaq Composite Index is now trading at its lowest level since late 1998 and has tumbled about 57% from its all-time high of 5048.62 set March 10, 2000. Responding to a question from Democratic U.S. Rep. Barney Frank of Massachusetts, Mr. Greenspan denied that the central bank's campaign of rate increases in 1999 and 2000 intensified the current economic slowdown. 'I think the actions we took were right at the appropriate time,' Mr. Greenspan said Since the end of January, economic indicators have provided little reason for optimism. Consumer confidence fell for a fifth consecutive month in February. Orders for durable goods declined by 6% in January, and new-home sales fell by 10.9%. Wednesday, the Commerce Department revised downward its estimate of growth in gross domestic product growth to a 1.1% annual rate in the fourth quarter, the weakest performance in more than five years.
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