Financial System Riskier, Next Bailout Will Be Costlier, S&P Says

The financial system poses an even greater risk to taxpayers than before the crisis, according to analysts at Standard  Poors. The next rescue could be about a trillion dollars costlier, the credit rating agency warned.SP put policymakers on notice, saying theres “at least a one-in-three” chance that the U.S. government may lose its coveted AAA credit rating. Various risks could lead the agency to downgrade the Treasurys credit worthiness, including policymakers penchant for rescuing bankers and traders from their failures.”The potential for further extraordinary official assistance to large players in the U.S. financial sector poses a negative risk to the governments credit rating,” SP said in its Monday report.But, the agencys analysts warned, “we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008.”Because of the increased risk, SP forecasts the potential initial cost to taxpayers of the next crisis cleanup to approach 34 percent of the nations annual economic output, or gross domestic product. In 2007, the agencys analysts estimated it could cost 26 percent of GDP.Last year, U.S. output neared $14.7 trillion, according to the Commerce Department. By SP’s estimate, that means taxpayers could be hit with $5 trillion in costs in the event of another financial collapse.Experts said that while the cost estimate seems unusually high, theres little dispute that when the next crisis hits, it will not be anticipated — and it will likely hurt the economy more than the last financial crisis.

via Financial System Riskier, Next Bailout Will Be Costlier, SP Says.

Catching the Next Big Wave of Revolutionary Wealth Creation

As a student in the 1960‘s there was a whiff of revolution in the air that spread from college campuses to the mainstream media and ultimately to the corridors of power in Washington.  Those were heady times. We felt we were part of the process of making history. More recently as a technology writer I’ve been witness to another kind of revolution – the creation of some game changing technologies and the amazing enterprises that grew out of them.  In 2000, while researching a story on Google, I caught glimpses of this revolution during interviews with Google’s founders, Sergey Brin and Larry Page, and investors, John Doerr, Michael Moritz, Ram Shriram, Andy Bechtolsheim, David Cheritan.  These are the new titans of technology.  They’re all billionaires these days, largely because of their willingness to place big bets during the early stage of the revolution.  Over the last ten years, while interviewing hundreds of venture capitalists, angel investors, bankers and and investment bankers, I’ve learned that there are two questions are ever present on every tech investor’s mind, “What’s the next wave and how can I catch it?”

Beneath the radar, another revolutionary wave of wealth creation is approaching so fast that few yet appreciate it’s true  potential.  Legendary investor John Doerr, who backed Google, AOL, Amazon, Sun and many others, said recently, “Energy is the mother of all markets.” Okay,  but if that’s true, than what’s the “father of all markets?”  What will be the catalyst to the next wave of wealth creation?

Because the money and banking sector is so massive, and so fundamental to all other sectors,  it’s easy to see it as the father of all markets. But this perspective is lost on most tech investors because few of them understand how the money and banking sector works.  Tech investors tend towards a pack investing mentality, investing primarily in what they understand.  Because they are so myopically focused on the echo chamber of retread ideas, will they miss the next big wave of wealth creation?

Bonderman, Stephens Invest in EBay Merchant-Lender Kabbage – Bloomberg

Merchant-lending startup Kabbage Inc., which advances as much as $12,000 to EBay Inc. sellers to buy inventory, raised $6.7 million in venture funding from investors including TPG Capital’s David Bonderman and Warren Stephens of Stephens Inc.

The round of capital, led by BlueRun Ventures with money from United Parcel Service Inc., will be used to expand Atlanta- based Kabbage into marketplaces such as Amazon.com Inc. and Overstock.com Inc., develop software and hire more people, founder and Chief Executive Officer Rob Frohwein said.

Kabbage, which takes its name from a slang expression for money, targets sellers with annual sales of $15,000 to $3 million who are overlooked or rejected by traditional lenders because of their credit scores or lack of collateral.

Stephens, the CEO and owner of Little Rock, Arkansas-based Stephens Inc., said he invested because retailers and merchants need more access to capital.

Kabbage “doesn’t have to dominate a big segment of the market to make the company really successful,” Stephens said in a telephone interview. “It’s very targeted and there’s tons of people in it and if they get just a meaningful share of the market, the company will do very well.”

Stephens was connected to Kabbage through co-founder and Chairman Marc Gorlin, whom he’s known for several years. Stephens also was an investor in a previous company Gorlin co- founded called VerticalOne.

Bonderman, the billionaire who runs Fort Worth, Texas-based TPG Capital, has known Gorlin for years through family connections and past business deals, Gorlin said. Kabbage approached him about a possible investment and he agreed, Gorlin said.

via Bonderman, Stephens Invest in EBay Merchant-Lender Kabbage – Bloomberg.

Inside Philanthropy: Philanthropy boosts marketplace of ideas

In the shadows of the battered U.S. auto industry, United Way for Southeastern Michigan is getting $27.1 million from General Motors to help five area high schools boost their graduation rates and help rebuild the region’s skilled workforce.

In North Carolina’s self-wounded banking capital, a group of seven foundations has pledged a total of $40.5 million for a $55 million effort to improve the lowest-performing schools in Charlotte and Mecklenburg County.

In North Carolina’s politically- and demographically-torn capital, the Greater Raleigh Chamber of Commerce and the Wake Education Partnership have released a consultant’s student-assignment plan for the Wake County schools that aims to balance students’ choice in attending schools near their homes with the need to maintain diversity in the schools.

And in five or six of North Carolina’s poorest counties, the Winston-Salem-based Kate B. Reynolds Charitable Trust for the first time will focus half the $18 million to $19 million in health funds it has to invest throughout the entire state each year, with the goal of strengthening the work of a broad range of local organizations that can help improve health in those mainly rural counties.

All those efforts are rooted in an abiding belief in the very idea of community, the idea that we sink or swim together and that fixing problems requires a broad range of voices, resources and players working for a shared goal.

Trying to spur change in those communities is the philanthropic sector – United Way and a major corporation in Detroit, charitable foundations in Charlotte, business leaders and a local education fund in Raleigh, and a charitable foundation in some of North Carolina’s poorest counties.

The goal of those and a growing number of other philanthropic investors throughout the U.S. is to serve as a catalyst, trying to spur change and make a difference by working in partnership with government, business and nonprofits to address needs that affect the entire community.

via Inside Philanthropy: Philanthropy boosts marketplace of ideas.

The Benefits of Involving Your Children in Philanthropy and Volunteering

Many problems parents struggle with can be improved, if not solved, by involving them in charitable and volunteer activities, according to Richard Morris and Jayne Pearl, co-authors of Kids, Wealth, and Consequences: Ensuring a Responsible Financial Future for the Next Generation (Bloomberg, a Wiley imprint, 2010).

aMany parents worry that their children are spoiled and entitled; others worry their children feel guilty about living a comfortable lifestyle when so many other people are suffering,a say Morris and Pearl. aSome families have a hard time giving as much to charitable causes than they have in the past. Another common problem is that lots of parents feel they donat know enough to teach their kids all they need to know about money, or they are uncomfortable talking about it at all.a

The authors point out that each of these concerns can be addressed by involving children in giving decisions and helping out at community and other charitable causes. For instance, they explain, aParents can inspire their kids to become philanthropic by inviting them to participate in identifying and researching causes the family can support

via The Benefits of Involving Your Children in Philanthropy and Volunteering.

Banks Have Yet to Create the Killer App for Mobile Banking – Bank Systems & Technology

lthough the use of mobile banking has grown from 5% of the U.S. online population in 2007 to 12% in the second quarter of 2010, according to a report released this week by Forrester senior analyst Emmett Higdon, such that 10 million Americans engage in mobile banking today, banks have yet to create the kind of “killer app” that will make mobile banking truly appealing to bank customers.Related ResourcesMulti-Country Deployment: Banking for the 21st CenturyAre banks ready for the next generation customer?Banking on MobileDespite the aggressive adoption of mobile banking — Forrester predicts that by 2015, more than 50 million U.S. consumers will be banking via their mobile phone — “the unfortunate reality weve seen is that consumer interest in mobile banking hasnt moved a lot in the last few years,” says Higdon, who spoke to Bank Systems & Technology in an interview yesterday. “The value proposition is not clear.”In a Forrester survey of online U.S. adult consumers, 37% said they dont use mobile banking because they see no value in it. “That doesnt mean that there isnt value, it means that as weve marketed it so far, some people cant wrap their heads around it, they dont know what it means to bank any time, anywhere. Until theyre on vacation and forgot to pay their mortgage or need to transfer money, perhaps to a son or daughter in college, some people dont see the need for mobile banking. “I encourage clients to think about how customers use other channels today and extrapolate,” he says. “Not every customer is interested in having bank branch in their pocket. But if Im a dyed-in-the-wool funds transfer user and I make eight transfers a month, I might be interested in using transfer functionality down the road on my mobile device.”

via Banks Have Yet to Create the Killer App for Mobile Banking – Bank Systems & Technology.

Here it is … the future … Welcome to ISIS

For the first time, three of the largest U.S. wireless service providers — AT&T Mobility, T-Mobile USA, and Verizon Wireless — have united to build a nationwide mobile commerce network utilizing smartphone and near-field communication (NFC) technology.

By bringing together merchants and consumers, the Isis mobile commerce network will provide an enhanced, more convenient, and more personal shopping experience.

via Welcome to ISIS.