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Sallie Mae Bank Review

Sallie Mae Bank

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Sallie Mae Bank Review

Insight:

Sallie Mae offers several account options for short and long term savings. This bank can be a good option if you’re looking to grow your emergency fund or everyday savings with a solid rate, but it has a few shortcomings compared to other major online banks.

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Advantages

  • High Yield Savings offers competitive rates with no monthly fees and no minimum balance requirements
  • Money market accounts come with check writing access
  • Competitive rates

The inconvenients

  • Minimum balance requirement of $2,500 for certificates of deposit (CD)
  • Low customer ratings
  • Fees may apply for certain account activity
  • No way to access your funds at an ATM

Additional details

  • No minimum balance requirement for savings and money market accounts
  • Minimum deposit of $2,500 for CDs
  • Your account may be closed if it is inactive for more than 12 months and you have less than $100
  • No monthly account fees
  • CD terms are available from six months to 60 months
  • Access your accounts online or via mobile app
  • Certain other fees may apply depending on your use of your account: insufficient funds fees, stop payment fees and early withdrawal penalties, among others.
  • Sallie Mae also offers student loans and co-branded credit cards
  • Sallie Mae deposits are FDIC insured

Editorial independence

We analyze and review banks without the influence of partnerships or advertising relationships. For more information on our scoring methodology, Click here.

Full balance sheet of Sallie Mae Bank

You may know Sallie Mae best for her student loan and refinancing products, the bank also offers a few different accounts to grow your savings, including a high-yield savings account, money market account, and certificates of deposit (CDs). Each of Sallie Mae’s deposit accounts is FDIC insured and you can access them online or through a mobile banking app.

Savings accounts

The Sallie Mae High Yield Savings Account has no minimum balance requirements, no monthly fees and a competitive interest rate it’s competitive with other major online banks today.

You can make transfers and withdrawals by electronic transfer, direct deposit, mobile check deposit or postal check.

You may be charged a fee for outgoing transfers ($20 each), returned checks, and expedited check delivery. And although there is no minimum balance requirement, if you have an inactive account with a balance of less than $100 for 12 months or more, the bank may close your account.

In addition to high-yield savings, Sallie Mae’s SmartyPig online account (also with no minimum balance and no monthly fees) is designed to help you achieve specific financial goals. It’s an escalating interest account that rewards you more the more you save. However, these rates are variable and the levels may vary. Right now, for example, the APY you’ll earn is the same for all balance tiers.

Money market accounts

Sallie Mae’s Money Market Account is similar to her High Yield Savings, but offers a slightly higher interest rate and access to checks you can use to withdraw from your account.

Check writing capability comes with additional potential fees to watch out for: $5 for checks ordered after account opening, $15 to stop payments, and $19 if a check cannot be processed due to insufficient funds.

Otherwise, the same transfer and withdrawal options apply, and there are no monthly fees or minimum account balance requirements either.

Certificates of deposit

Sallie Mae offers a few high-yield certificates of deposit (CDs) with tenors from six months to 60 months. You will need a minimum deposit of $2,500 to open a CD, but there are no fees. You can fund your CD by check or electronic transfer.

Your CD will renew at the end of the term, unless you choose to close the account or move it elsewhere during the 10-day grace period after the CD has expired. If you want to withdraw your money before the CD matures, you will have to pay a penalty based on the length of the term. Early withdrawal penalties are equal to 90 days of interest on the amount withdrawn for CDs with a duration of 12 months or less and 180 days of simple interest on the amount withdrawn for durations greater than one year.

Others products

While Sallie Mae offers credit cards and student loan products in addition to deposit accounts.

Student loans

Sallie Mae is a private student loan manager offering loans for undergraduate, graduate and vocational training courses or trade certificates. There are also options for student loan refinance. Loans are capped at 100% of school-certified tuition. Sallie Mae’s student loans also have no set-up fees and you can get four free months of Chegg study.

Credit card

Sallie Mae’s Threesome credit cards with no annual fee all earn money on everyday purchases and allow you to redeem your rewards for your student loans. Depending on the card you choose, you’ll earn different amounts of cash back in different categories or spending requirements.

Client experience

There are a few communication and customer service challenges that can be a drawback of banking with Sallie Mae, depending on your goals.

Sallie Mae is an online bank only, but you will have the option of banking through an online account or mobile app. There’s no access to an ATM or branch and no way to deposit money directly, but you can cash checks using remote deposit and send or receive checks via job.

Unfortunately, Sallie Mae’s mobile banking app receives mixed reviews, including an average rating of 1.8 out of 5 stars on Google Play and an average rating of 1.5 stars out of 5 in the App Store. Across various reviews of the app, customers complain about lack of customer support and constant issues when trying to log into their accounts.

Sallie Mae has several options for contacting a representative, including a phone line available Monday through Friday during business hours, a mailing address, or an online chat. The online chat feature can be a big advantage over some other online banks. You can use to get answers to basic banking questions during normal business hours. However, the chat feature requires you to answer a series of questions before you can chat with a live customer service agent.

Accessibility

According to its website, Sallie Mae “endeavours to develop and update website content in accordance with “Web Content Accessibility Guidelines 2.0 Level AA, an international standard. You can also contact us via a dedicated email address for any questions or for assistance.

We’ve reached out to the bank for more information about accessibility features, but haven’t received a response as of press time. This article will be updated if more information becomes available.

Is Sallie Mae Bank for you?

Sallie Mae Bank offers a few different banking products which can be simple savings options. Both the High Yield Savings Account and the Money Market Account can help streamline your savings, while CDs may have a slightly higher barrier to entry with the minimum deposit of $2,500.

Nevertheless, each of these accounts today pays competitive interest rates among other banks.

The biggest hurdle for some customers may be how Sallie Mae compares to other banks we’ve reviewed when it comes to customer service and account access. Its mobile apps – which are one of the main methods of accessing your account – have very low ratings, and no money deposit options can be limited depending on your individual circumstances.

Frequently Asked Questions about Sallie Mae Bank

Does Sallie Mae have savings accounts?

Sallie Mae offers high yield savings accounts, certificates of deposit (CDs) and money market accounts.

Is Sallie Mae a federal student loan?

Sallie Mae only deals with private student loans, not the federal government.

Is Sallie Mae an online-only bank?

Sallie Mae is an online bank only. You can access your account online or through the bank’s mobile banking app.

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What to know if you applied for student loan forgiveness https://condenetint.com/what-to-know-if-you-applied-for-student-loan-forgiveness/ Fri, 18 Nov 2022 19:23:19 +0000 https://condenetint.com/what-to-know-if-you-applied-for-student-loan-forgiveness/

NEW YORK (AP) — President Joe Biden plan to award up to $20,000 in federal student loan forgiveness has been blocked by two federal courts, leaving millions of borrowers wondering what will happen next. On Friday, the Justice Department asked the Supreme Court to overturn one of the lower court rulings, warning that many Americans will face financial difficulties if the plan remains blocked.

Here’s what to know if you’ve applied for relief:

WHAT HAPPENS NOW?

Whereas the waiver request has been withdrawn on the federal student aid website, applications already filed are pending while the appeal progresses through the courts.

“The courts have issued orders blocking our student debt relief program,” the Department of Education said on its site. “As a result, at this time, we are not accepting applications. We are seeking to rescind these orders.

A Texas federal judge ruled that the plan exceeded the authority of the White House. Prior to that, a federal appeals court in St. Louis temporarily suspended the plan while it considered a challenge from six Republican-led states.

Still, lawyers believe the administration will succeed in court.

“We’re really confident that they’ll find a way to write off people’s debt,” Katherine Welbeck told the Center for the Protection of Student Borrowers.

Experts say student loan forgiveness has the potential to end up in the Supreme Court, meaning it could be a long process.

WHEN DO PAYMENTS RESUME?

Most people with student loan debt have not been required to make payments during the coronavirus pandemic, but payments are expected to resume, along with interest accrual, in January.

Biden had previously said the payment break would no longer be extended, but that was before the courts halted his plan. He now faces increasing pressure to continue the break while legal challenges to the program unfold.

WHAT IF I HAVE ALREADY MADE A REQUEST FOR RESCUE?

More than 26 million people requested the cancellation in less than a month, according to the Ministry of Education. If you’re one of them, you don’t have to do anything else right now.

About 16 million people have already had their candidacy approved, according to the Biden administration. Yet, due to legal actions, none of the reparations were actually awarded.

The Education Department “will quickly process their redress once we win in court,” White House press secretary Karine Jean-Pierre said.

WHAT IF I HAVE NOT YET ASKED FOR REPAIR?

For those who have not yet applied, the debt cancellation application is no longer online. But there is still steps people can take to make sure their debt is canceledif the call is successful, according to Welbeck.

“People should always check their eligibility,” she said. “As the news changes, people should look for updates from the Department of Education.”

You can sign up to receive the latest news from the Federal Student Aid website here.

WHO QUALIFIES, SHOULD THE CALL SUCCEED?

The debt cancellation plan announced in August would cancel $10,000 of student loan debt for those earning less than $125,000 or households with incomes below $250,000. Pell Grant Recipientswho generally have greater financial needs, would obtain an additional debt forgiveness of $10,000, for a total of $20,000.

Borrowers are eligible if their loans were disbursed before July 1.

According to the administration, about 43 million student borrowers are eligible for debt forgiveness, of which 20 million could see their debt entirely erased.

ARE THERE OTHER WAYS OF CANCELLATION?

For those who have worked for a government agency or non-profit organization, the civil service loan cancellation program offers cancellation after 10 years of regular paymentsand some income-driven repayment plans cancel a borrower’s remaining debt after 20 to 25 years, according to Welbeck.

“Borrowers should ensure they are enrolled in the best income-based repayment plan possible,” Welbeck said. In July, the administration will review and adjust some of the accounts enrolled in these plans. You can read more about these plans here.

Borrowers who have been defrauded by for-profit schools can also seek borrower defense and receive relief on that basis, Welbeck said.

DO I HAVE TO RESUME PAYMENTS WHEN THE PAYMENT BREAK IS LIFTED?

Lawyers, including the Student Borrower Protection Center, are still urging the president to extend the pandemic-era payment freeze, arguing that students are entitled to the promised cancellation before the January refund date arrives.

That said, Welbeck recommends logging into your account, making sure you know who your repairer is, your due date, and whether you’re enrolled in the best income-based reimbursement plan, when you start making repairs again. payments.

The Student Loan Protection Center regularly hosts webinars on how to keep track of policy developments over the coming months. You can register here.

If your budget doesn’t allow you to resume payments, it’s important to know how to handle the possibility of default and delinquency on a student loan. You can read more about these here. Both can hurt your credit rating, making you ineligible for further help.

If you are in a difficult short-term financial situation, you may be eligible for a deferral or forbearance. With either of these options, you can discuss with your processor ways to temporarily suspend your payments. You can read more about these options here.

WHAT ELSE SHOULD I KNOW?

Beware of scams and obtain information only from reliable sources such as the Department of Education’s Federal Student Aid site.

IS IT POSSIBLE THAT THE DEBT WILL NOT BE CANCELLED?

Yes. The issue of debt cancellation is now before the courts.

The administration does not say whether or not it is exploring other options to cancel the debt if it loses its appeals. But advocates point to other ways to cancel the debt, including through the Higher Education Act.

HOW CAN I PREPARE FOR THE RESTART OF STUDENT LOAN PAYMENTS?

Betsy Mayotte, president of the Institute of Student Loan Counselors, encourages people not to make any payments until the break is over.

“I told people to pretend to pay their student loan, but put it in an interest-bearing account for now if you can,” she said. “Then you kept the habit of making the payment, but also earning a bit of interest. There is no reason to send that money to student loans until the last minute of the zero percent interest rate.

Mayotte recommends that borrowers use the loan simulation tool on StudentAid.gov Where the one on the TISLA website to find the repayment course that best suits their needs. Once you enter your information, it tells you what your monthly payment would be under each available plan, as well as the amount of long-term costs.

“I really want to focus on the long term,” Mayotte said. “A lot of times I see people who might be struggling financially. They’ll find a lower monthly repayment option and then, ‘Set it and forget it.’

Mayotte encourages people to switch to higher payments if their financial situation stabilizes, so that the loan does not cost more in the long run.

Other useful tips that can reduce costs for borrowers:

— If you sign up for automatic payments, the repairer takes a quarter of a percent off your interest rate, according to Mayotte.

— Income-driven repayment plans are not for everyone. That said, if you know you’ll eventually qualify for forgiveness under the Public Service Loan Forgiveness Program, it makes sense to make the lowest monthly payments possible, because the rest of your debt will be forgiven once. once this decade of payments is over.

— Reevaluate your monthly student loan repayment at tax time, when you already have all your financial information in front of you. “Can you afford to increase it? Or do you need to decrease it? says Mayotte. “Always look at your long-term student loan management strategy.”

– Spread out payments however you like, whether it’s two installments in the month, so it’s not a big lump sum at the end or the beginning, or putting side of cash in designated purpose envelopes.

“Even if it’s $5 or $20 more per month, it’s a good strategy,” Mayotte said. “If they can afford to pay a little more per month, the more you pay and the faster, the less you’ll pay in the long run.”

Mayotte gave an example of a debt-ridden higher education borrower in the six figures. She recently got married and she, her husband and children decided to put away every five dollar bill in a cookie jar to fund the loans.

“It was a few hundred dollars more each quarter,” Mayotte said. “Everyone has a different financial personality. There are those who are really good with budgets. There are people who need to play games and be wrong. And people shouldn’t judge other people’s financial personalities.

___

The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reports aimed at improving financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

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Best and worst case scenarios for planning your financial future https://condenetint.com/best-and-worst-case-scenarios-for-planning-your-financial-future/ Tue, 15 Nov 2022 19:07:54 +0000 https://condenetint.com/best-and-worst-case-scenarios-for-planning-your-financial-future/

Alex Brandon/AP

The uncertainty surrounding the cancellation of student loans, including lawsuits in six states and a ‘stay’ granted by the 8th U.S. Circuit Court of Appeals over the Biden administration’s loan cancellation plan, leaves many people wondering about their financial future.

Student Loan Forgiveness: Main deadlines for winter 2022
Student loans: Will Biden extend repayment pause as relief program stalled?

Andrew Griffith – CPA (NY) and Associate Professor of Accounting at Iona University’s LaPenta School of Business – described some of the best and worst student loan forgiveness scenarios and how borrowers can prepare for any eventuality.

Protect your credit in the worst case scenario

“The worst-case scenario,” he said, “is that student borrowers who ask for forgiveness will not have their loans forgiven and may have to pay interest and penalties on any missed payments.” He recommends continuing to make payments, if possible, to avoid this eventuality.

“A potentially negative credit report entry can result in increased interest rates for future borrowing. Some insurance companies consider their subscriber’s credit history when evaluating their rates, and some “Employers don’t offer jobs to applicants with poor credit records. These risks can be avoided by pursuing required payments,” Griffith said.

If you continue to make payments, according to StudentAid.gov, and reach your 120 eligible payments for a direct public loan, you can apply for a forgiveness under the Public Service Loan Forgiveness or Expanded Public Service Loan Forgiveness temporary. This option exists regardless of the status of the legislation under review. Additionally, if you made payments during the payment break – which runs from March 13, 2020 to December 31, 2022 – you may be able to get a refund on those payments. These payments will still count towards your 120 payments required for rebate.

Plan for a more secure financial future

Griffith also spoke about the best case scenario for borrowers. “Their debt is forgiven and none of it is federally taxable income,” he said.

If this happens, borrowers have the opportunity to prepare for a more secure financial future.

“You might want to use your extra money for a luxury trip or a shopping spree. There’s nothing wrong with indulging yourself, but you shouldn’t spend all your freed up money on non-essential things” , advised Aidan Kang, CFA and CEO of house of debt.

“A budget is a very useful tool,” he said. “It allows you to have a clear vision of your needs, guiding you in your decisions. Review your financial goals and plans. Where did you split your income? What other debts do you have and what financial milestones did you intend to reach? Reassessment can help you maximize the extra money from student loan forgiveness. »

Almost every expert has recommended setting up an emergency savings fund if you don’t already have one.

Also, start focusing the money on other debts. “Most of the people who would benefit significantly from student loan forgiveness will have many similar destinations for their money,” said Melanie Hanson, editor-in-chief of EDI refinancing. “Whether they’re paying off car loans, medical debt or more student loans, or they’re starting to build their savings for home ownership, investing that money in long-term financial security is a good idea. idea.”

Student loans: Biden to appeal federal judge’s decision to cancel debt forgiveness program

Many experts have also suggested creating or starting retirement savings accounts. “Investing for the long term through index mutual funds and similar securities is a great idea here. Maximizing your 401(k) or IRA contributions is a good idea if you’re going this route,” Hanson said.

Putting more pre-tax dollars into a retirement account can also help if student borrowers face a third, more likely scenario.

Meeting in the Middle – A Likely Scenario for Many Borrowers

Full student loan forgiveness may not be the most likely scenario, according to many experts. “Somewhere between these two scenarios is the most likely scenario of some, but not all, of their student loan debt being forgiven. This canceled debt is taxable income at federal, state and local income tax levels on their tax returns for the calendar year in which it is cancelled,” Griffith said.

If this happens, borrowers should prepare for a larger than expected tax bill the year their student loan debt is forgiven. It may be a good idea to consult a tax accountant or tax lawyer to discuss ways to reduce tax liability.

What future borrowers can learn from student loan forgiveness

Hanson pointed out that even if the student loan forgiveness guidelines pass, they are still, essentially, putting a temporary band-aid on a larger problem.

“Until the actual costs paid by students to attend college come down, we will continue to produce deeply indebted graduates who will need financial assistance to succeed in our current economy,” she said. .

Take our poll : Do you think student loan debt should be forgiven?
After: How Gen Z plans to avoid student loans

Until then, Griffith advised, incoming students should research their options and evaluate their career choices before taking out loans to pay for their education. “If someone is borrowing money to pay for their education, that borrower should make sure that the program they want has sufficient probability of leading to immediate job opportunities after graduation with a sufficient increase in earnings to be able to pay off student loans in less than five years. If this is not the case, a different program should be considered,” he said.

More from GOBankingRates

This article originally appeared on GOBankingRates.com: Student Loan Repayment: Best and Worst Case Scenarios for Planning Your Financial Future

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Reading: White House, Treasury and state officials discuss U.S. bailout investments in manufacturing through the state’s Small Business Credit Initiative https://condenetint.com/reading-white-house-treasury-and-state-officials-discuss-u-s-bailout-investments-in-manufacturing-through-the-states-small-business-credit-initiative/ Fri, 28 Oct 2022 22:05:37 +0000 https://condenetint.com/reading-white-house-treasury-and-state-officials-discuss-u-s-bailout-investments-in-manufacturing-through-the-states-small-business-credit-initiative/

Thursday, October 27e 2022, officials from the White House, Treasury Department, Arizona, Michigan and Minnesota met with stakeholders to discuss key investments from the American Small Business Credit Initiative (SSBCI) Rescue Plan (ARP), which are expected to bring billions of dollars in funding to small businesses involved in manufacturing and critical supply chain initiatives.

Since taking office, the administration has bolstered manufacturing with the creation of nearly 700,000 manufacturing jobs, the most of any president on record, and nearly 100,000 jobs above pre-pandemic levels. Companies are choosing to do more in America, and we see the industries of the future growing with more than $200 billion in new investment in electric vehicles, semiconductors, and other critical industries. Major manufacturers such as GE Aviation and Siemens Energy are make new commitments to help their small and medium-sized manufacturers to modernize.

More than 90% of manufacturers are small and medium-sized enterprises, which employ more than 40% of workers in the sector. They are essential anchor employers and engines of economic development in communities across the country. With nearly $10 billion from the U.S. bailout, SSBCI will fund programs administered by states, the District of Columbia, territories, and tribal governments that will play an important role in helping small and medium-sized manufacturers grow as the Biden-Harris administration is continuing its work to build a bottom-up and middle manufacturing economy.

SSBCI is expected to catalyze up to $10 of private investment for every dollar of capital funding, meaning SSBCI-powered investments will result in billions of dollars in public and private funding for small manufacturers, as well as investments key in several other national priority areas. . At the meeting, state officials from Arizona, Michigan, and Minnesota detailed how their states’ SSBCI-funded initiatives are supporting investment in the manufacturing sector. Their comments are summarized below.

Michigan:
The state is expanding three successful lending programs rolled out in 2010 in the wake of the Great Recession. The three loan programs include: a program that offers loan guarantees, a loan participation program where the state buys a share of loans, and a program that will provide collateral support to help borrowers qualify for loans. These last two programs target industries with high potential economic impact, including manufacturing. Michigan allows all three loan programs to support revolving working capital lines of credit. This approach is particularly important for manufacturers who supply parts or tools to the automotive industry, where the development of new tools can take months before these investments generate cash flow from sales to upstream manufacturers. Flexible capital is important because manufacturers typically face a cash shortfall where they need to invest in people, processes, and equipment before generating revenue from order fulfillment.

Arizona:
Arizona intentionally developed very flexible SSBCI programs after recognizing that manufacturers would benefit from programs with less rigid guidelines. State officials noted that different lending models within a broad continuum of programs can provide options that businesses need, especially Arizona manufacturers facing ever-changing financing challenges in response to changes in supply chain demand.

Additionally, Arizona is a state that has built strong relationships with Small Business Development Centers (SBDCs), partners often identified by states as beneficial to their SSBCI programs and manufacturers in particular. State partnerships with SBDCs have taken various forms in different states. Arizona, for example, requires the SBDC to target small businesses, including manufacturers. The Arizona Commerce Authority houses the Manufacturing Extension Partnershipanother important source of technical support for manufacturers.

Minnesota:
The state has seen a marked increase in requests from industrialists, local economic developers and financial institutions to support the financing of state-of-the-art equipment for industrialists. Minnesota stakeholders emphasized the need for capital to support the purchase of equipment that improves processes, upgrades technology, and increases efficiency and productivity. Traditional financial institutions have indicated that it is difficult to underwrite state-of-the-art equipment using prudential lending standards, resulting in a funding gap. Another obstacle is that while investments in high-tech machinery and equipment may lead to increased productivity and improved competitiveness, they may not lead to the increased job creation needed to meet the requirements of existing loan programs. funded by the state.

With SSBCI funding from the American Rescue Plan, Minnesota is developing a new loan participation program to fill this funding gap. The Automation Loan Participation Program (ALPP) offers a complementary loan to private financing provided by a bank, credit union, community development financial institution, nonprofit lender, or vendor. Loan participations can total up to $500,000 to purchase machinery, equipment and software designed to increase manufacturing efficiency. The program complements an existing state program that funds worker training in the use of new automation equipment. A final expected benefit is that the ALPP is expected to increase the number of relocated manufacturing operations and allow companies to move some outsourced activities in-house. The program targets established manufacturers.

* * * *

Participating States as of October 27e The meeting clearly highlighted SSBCI’s potential to support small manufacturers across the country. This work from Arizona, Michigan and Minnesota builds on SSBCI’s proven track record of manufacturing support, having invested more than $2.5 billion in federal and private funding through more than 2,500 loan or investment transactions through the previous version of this SSBCI 1.0 program and making manufacturing the industry that received the most support.

The ARP-funded SSBCI will build on this proven success by providing both debt and equity capital. This can help businesses overcome the challenges they face in securing capital investment, working capital, and financing for equipment and facility upgrades. Recognizing these varying needs, individual states have designed SSBCI loan and capital programs to support some or all of these uses, based on the specific needs of manufacturers in their states. Traditional financial institutions are keen to provide financing to manufacturing companies, but gaps in collateral may limit the amount of credit they can provide. This may cause some manufacturers to turn to more expensive forms of financing.

To help states maintain the momentum of expanding manufacturing jobs and investments made under the Biden-Harris administration, the Treasury has begun hosting meetings for states to share best practices with each other and collaborate to support small manufacturers. These meetings collectively brought together more than a dozen states. Soon, the Administration will release a report highlighting program initiatives that can serve as models for other jurisdictions.

Presenters and representatives from the Biden-Harris administration included:

  • Gene Sperling, Senior Advisor to the President and US Bailout Coordinator, White House
  • Michael Negron, Special Assistant to the President for Economic Policy, White House
  • Zach Butterworth, Director of Private Sector Engagement, White House
  • Jana Platt, Public Engagement Analyst, White House
  • Adair Morse, Deputy Assistant Secretary for Access to Capital, U.S. Department of Treasury
  • Jeffrey Stout, Program Director, State Small Business Credit Initiative, United States Department of Treasury
  • Ron Kelly, Outreach Manager for the State Small Business Credit Initiative, United States Department of Treasury
  • Christopher Cook, Managing Director – Access to Capital, Michigan Economic Development Corporation
  • Sandra Watson, President and CEO, Arizona Commerce Authority
  • Ken Burns, COO, Arizona Commerce Authority
  • Steve Grove, Commissioner of Jobs and Economic Development, Minnesota

If you would like to learn more about the SSBCI programs offered by your state and the points of contact, please visit the SSBCI website.

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Multi-Family Real Estate Investment | The bank rate https://condenetint.com/multi-family-real-estate-investment-the-bank-rate/ Tue, 25 Oct 2022 21:01:49 +0000 https://condenetint.com/multi-family-real-estate-investment-the-bank-rate/

So you are thinking of investing in real estate. Whether you dream of becoming the next real estate mogul or just want a duplex to help pay your mortgage, there are plenty of compelling reasons why you might want to target a particular type of property: the multi-family home. .

As the name suggests, multi-family homes house more than one group of people in a single building or complex (as opposed to a single-family home). They offer a lot of potential for income and property appreciation, but there is also more liability and risk

Let’s take a look at how investing in multi-family homes works, along with the pros and cons.

Multi-family houses consist of several separate housing units under the same roof or complex. Each unit has a unique address with an entrance and living areas separated from the others. There are many different households/tenants, but only one building owner, who can be an individual or a legal entity.

According to the latest data from the US Census Bureau, multi-family homes make up over 30% of housing in the United States, so there is plenty of potential for growth and investment opportunities. For the investor, these types of homes are income-generating, providing stable cash flow through rents paid by tenants. There is also the potential for real estate to appreciate in value over the years.

Types of Multi-Family Homes

Multi-family homes come in a wide variety, with the number of units ranging from two to 2,000. The different types of multi-family homes you can invest in include:

  • Duplextriplexes and quadruplexes. These properties have two, three or four units respectively. You may be able to “hack home» this type of property by living in one unit and renting out the others. Often these qualify for regular mortgages or homeowner financing.
  • Apartments. Apartment towers have multiple units and belong to a single entity. Management is usually on site. You will need a commercial loan to finance this type of property.
  • Condominiums. Condos often look like apartments, although they can also take the form of townhouses or townhouses. Unlike apartments, which tend to be rentals, condos are individually owned, although common areas are shared and managed by a owners association (composed of condo residents).
  • Mixed use. A multi-family mixed-use unit combines housing with retail, commercial, entertainment, or cultural space.
  • Student housing. Built near universities, these complexes are designed to meet the needs of students.
  • Restricted by age. Typically, these types of multi-family homes limit occupancy to people age 55 and older. Buildings, amenities, features and activities are geared towards people in this age group.
  • Limited income. Subsidized housing helps low-income people afford housing. The federal government often works with developers to build these units. You may be able to accept Federal Housing Choice Bonds if you invest in this type of property.

Investing in multifamily properties – known as multifamily investing – is not for the weak, nor is it passive. It’s a lot of work, and there are some important things you’ll need to consider before investing your hard-earned cash in a multifamily property.

One key thing to know, first of all: multi-family homes can be considered either Residential Where commercial real estate. Small multi-family homes, those with four units or less, are classified as residential properties; commercial multifamily property has five or more units. The difference can be significant when it comes to funding.

How to finance a multi-family property

Financing a multifamily property depends on how many units there are in the property you are buying.

For four units or less, you may be able to finance the property by single family Home with a traditional loan. That means mortgage market officials Fannie Mae and Freddie Mac will back, and possibly buy, the loan, ultimately making it cheaper to offer lenders. You may also be able to fund it with a FHA loanmeaning you can deposit less money than the conventional 20% required by most private lenders.

If the property you want to buy has five or more units, however, you will need a business loan. Commercial mortgages have different terms than residential mortgages. They tend to run shorter, for one thing. In addition, the lender will take into account projected rental income taking into account the amount they are willing to lend you, as well as the interest rates they will offer you.

Management

Proper management of a rental property is essential. But with multiple units comes a lot more responsibility. Although this will reduce your profits, you may want to hire a professional property manager to oversee things, and – unless you’re good with your hands – and a superintendent or maintenance staff member on site. At the very least, you may want an accountant to keep the books.

Insurance and taxes

Multi-family properties will lead to higher costs everywhere – and that includes owner insurance and property taxes. But while you should be prepared for a higher tax bill, there are also more opportunities to offset taxes with multifamily properties.

“Taxes are another big reason why people should invest in multifamily housing,” says Ryan Pineda, real estate investor and CEO of Tykes. “There are opportunities to separate costs, bonus depreciation and rezoning to significantly increase value.”

Zoning by-law

Zoning by-law will determine where properties can be located and what you can do with them. Zoning laws will allow multi-family properties in some areas of the city and not others. You’ll also want to keep zoning ordinances in mind if you’re considering converting a property (such as apartments to condos or commercial properties to residential housing).

Multifamily real estate offers distinct advantages over other types of investment properties.

Generate income

Multifamily properties are built for cash flow. The space in each unit is used as efficiently as possible to attract more tenants and more profit. They can offer much more income than renting a single family home.

Build your real estate portfolio faster

If you are looking to become a serious real estate investor, multi-family properties could allow you to accumulate a large number of units more efficiently.

“You have the ability to invest in larger deals and acquire more units quickly, which makes management much easier,” says Pineda. “Instead of having to buy and repair 30 single-family homes and manage 30 different loans, you make a purchase of a multi-family property with 30 or even 300 units in one transaction.”

Strategically increase property value

Multifamily ownership also offers investors the opportunity for capital appreciation, should they ever decide to sell. “Multi-family properties are great investments since the value of the property is based on the net operating income you have, not the sale price of the neighboring apartment,” says Pineda. “You are rewarded for the money you can make and there are strategic ways to be creative to generate income and increase property value, such as reducing vacancy, increasing rents or improving the property. “

Lower your cost of living

Investors in multifamily properties with four or fewer units often live in one of the units, which qualifies them for homeowner financing (which is similar to a regular residential mortgage and comes with a lower interest rate) . And of course, they don’t pay rent (or pay it to themselves).

Less risk than other investments

Multifamily properties generally offer investors stable cash flow and less risk, even during economic downturns. People still need a place to live, after all. Other types of real estatesuch as industrial, commercial and office spaces, carry more risk, as recessions affect them more deeply.

If you are considering residential real estate, the great alternative to investing in multi-family properties is invest in single-family homes. Obviously, the multi-family option is more complex than the single-family one, but there are also greater rewards. Here is an overview of the advantages and disadvantages of each property category.

Single-family homes

Advantages The inconvenients
Easier for novice investors Not as much rental income potential
Fewer tenants to manage Spread nature of properties (if more than one house is owned)
Strong upside potential More competition for properties
Loans are easier to get Potential waste of time dealing with tenant issues
A larger pool of buyers when you’re ready to sell Income concentrated in one tenant/property
Renters tend to stay longer

Multi-family houses

Advantages The inconvenients
Higher earning potential; stable income stream Requires more capital to invest
Can offer a place to live as well as an investment Higher maintenance costs/expenses
You can benefit from a mortgage loan, constitute a capital with the rents perceived Requires a commercial loan (properties with 5+ units)
Increase property value by increasing income May be more difficult to find buyers
Less competition for properties

Final Word on Investing in Multi-Family Homes

Investing in multi-family real estate offers an attractive way to expand your investment portfolio and generate income. But it takes a lot of money and an incredible amount of work. It’s best suited to “experienced investors, of course,” says John Antretter, a licensed agent for The Agency in New York. If you’re new to it, “better start small before you have multiple tenants to manage. A tenant would not be as overwhelming as being a landlord for many.

That said, if you have deep pockets and are willing to hire professional management help, you might want to seriously consider multifamily housing.

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Oz loans an additional $1 million to his Pennsylvania Senate campaign https://condenetint.com/oz-loans-an-additional-1-million-to-his-pennsylvania-senate-campaign/ Sat, 22 Oct 2022 17:11:00 +0000 https://condenetint.com/oz-loans-an-additional-1-million-to-his-pennsylvania-senate-campaign/



CNN

Mehmet Ozthe Republican candidate for the U.S. Senate in Pennsylvania, loaned his campaign an additional $1 million on Oct. 20, according to a filing with the FEC.

Oz loaned his campaign money from his personal fortune throughout his candidacy – including $7 million in the most recent third trimester — and his latest loan of $1 million brings his cycle total to over $22 million. Earlier this month, his opponent, the Democratic Lt. Governor. John Fettermanclaimed that none of his catch came from his personal bank account.

Oz has been consistently outclassed by his opponent and Fetterman is banking on his financial advantage over Oz to pull him through the final weeks of the midterm campaign and securing one of the Democrats’ best chances of flipping a Senate seat. Adding to Fetterman’s edge, President Joe Biden and other notable party members, including Minnesota Senator Amy Klobuchar, raised money for the Democratic nominee this week.

In the third quarter, from July to September, Fetterman raised $22 million, while Oz raised about $8.9 million in addition to the $7 million he loaned to his campaign.

At the end of the quarter entering October, Fetterman had a slight lead over Oz, from around $4.2 million to around $2.5 million. And in the final two and a half weeks of the race, Democrats are expected to outspend Republicans by about $25.6 million to $18.7 million on air, according to AdImpact’s latest totals.

Despite the significant fundraising advantage, Fetterman finds himself in a close race with Trump-backed Oz. After some polls found the Democrat with a double-digit lead over the summer, an average of CNN polls earlier this month showed Fetterman had the support of 50% of likely voters compared to 45% for Oz.

With nearly two weeks left until the midterm elections, Fetterman and Oz have focused on undecided women voters in suburban Philadelphia where Biden edged out Trump by nearly 300,000 votes.

The two Senate candidates will square off in their first and only debate on Tuesday.

“I conceded everything so that he could participate in this debate. It’s the only one he would accept. It has closed captions – everything it needs,” Oz said on Fox Saturday. “I just want him to show up on Tuesday so we can talk to Pennsylvania about our policies and let them see how extreme his positions have been.”

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Student Loan Repayment: What Happened? https://condenetint.com/student-loan-repayment-what-happened/ Wed, 19 Oct 2022 22:33:51 +0000 https://condenetint.com/student-loan-repayment-what-happened/

Washington DC – President Joe Biden announced at the end of August a proposal forgive up to $20,000 of student loan debt (assuming one received the Pell grant – $10,000 if one did not receive the grant). This proposal originally included the cancellation of student loans held by private companies, as well as those lent by the federal government. However, President Biden’s administration was forced to backtrack on this proposal after the US Department of Education issued a Press release stating that the estimate of this would result in a reduction in government cash flow over the ten-year period to the tune of $305 billion, which is estimated to be approximately $379 billion in 2022 dollars, although this estimate is based on a highly unknown economy and market value.

The Department of Education assumes that 81% of borrowers (through federal student loans) will take the necessary steps to get their relief (up to $20,000 for those who received the Pell Grant).

Thanks to student debt relief, millions of borrowers will no longer have to repay their loans and millions more will be able to significantly reduce their repayments. The Department estimates that over the next 10 years, the program will cost an average of $30 billion per year. The cost over ten years in terms of reduced cash flow to the government will be approximately $305 billion.

Information from the US Department of Education – 2022

So what exactly happened? The original publication of the articles did not differentiate between federally owned loans and federally backed private loans (Federal Family Education Loans Program). However, this is no longer the case, as borrowers who have government-backed federal student loans, but are owned by private lenders, will now be excluded from this one-time relief. This should affect some 770,000 people.

However, some are unhappy with the decision to forgive up to $20,000 in student loans. Six states have filed lawsuits against the Biden administration over the legality of the mass pardon. According to Associated press“The states of Iowa, Kansas, Missouri, Nebraska and South Carolina have joined Arkansas in filing a lawsuit. Iowa has a Democratic attorney general, but the Republican governor of the state, Kim Reynolds, signed on behalf of the state.States argue that the Missouri loan manager faces a ‘number of ongoing financial harms’ due to Biden’s decision to cancel the loans Other states that have joined the lawsuit argue that Biden’s pardon plan will ultimately disrupt state coffers revenue.

“It is patently unfair to burden hard-working Americans with the debt of those who chose to go to college.

The Department of Education is required by law to collect the balance owing on the loans. And President Biden doesn’t have the power to override that.

Leslie Rutledge – Arkansas Attorney General, 2022

The one-time student loan cancellation is also the subject of legal pressure from the Job Creators Network Foundation. They argue that “the Biden administration violated federal procedures by failing to seek public input on the program“. The main argument is one that has already been seen – that President Biden does not have the legal authority to reverse what should be an act of Congress. Another objection to forgiveness is that it would disproportionately help people of color, rather than helping everyone equally.

This bailout is going to affect everyone in this country because of the massive size of the program,” she said. “And everyone should have the opportunity to give their views to the government.” She added: “These universities must be held accountable for this student debt crisis.”

ELAINE PARKER – PRESIDENT OF THE JOB CREATORS NETWORK FOUNDATION, 2022

President Biden’s administration claims to have used a law passed after the events of September 11, 2001, which gives the administration “supreme authority” “to reduce or eliminate student debt during times of national emergency,” said the Department of Justice in an August legal opinion. The administration cited the COVID-19 pandemic as its urgency.

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Mobile loan apps: shared or destructive future in Nigeria https://condenetint.com/mobile-loan-apps-shared-or-destructive-future-in-nigeria/ Mon, 17 Oct 2022 19:01:07 +0000 https://condenetint.com/mobile-loan-apps-shared-or-destructive-future-in-nigeria/

Before any living being can thrive, the survival aspect of life must be addressed. Food, water, clothing, sleep, and shelter are all necessities for animals and humans. Besides sleep, which is naturally on the list, others cannot be obtained without a little money. Money, whether borrowed or earned, remains the most important factor in acquiring necessities. Earning and accessing money is not always easy depending on the environment due to the disparity that exists within the population. This is the main reason for various political and economic policies aimed at closing global income disparities. Business leaders aren’t taking a break from developing financial products and services, especially those focused on technology, as political leaders and civic space participants continue to develop strategies to bridge the gap .

However, as new fintech products and services are introduced daily, concerns about the effectiveness of the offerings are growing. Nigerian policymakers and the government have repeatedly warned citizens not to patronize illegal fintech businesses. Despite the warning, interest in business is growing. Our analyst’s string search on the Google search engine for “mobile app loans in Nigeria” yielded over 5 million results.

Using the same search term, numerical observational analysis reveals that people interested in using business lending apps ask a number of questions. Questions like which app can borrow 200k from me in Nigeria? Which app can borrow money from me instantly? Which application gives 50,000 loans? Which App Grants the Highest Loan Instantly in Nigeria? Who can help me with emergency money in Nigeria? Can the loan app block my BVN? What app can I borrow money without asking BVN? Which loan app is the best and most reliable in Nigeria? and How do I get ready apps to stop calling my contacts? have been found.

Tekedia Mini-MBA (September 12 – December 3, 2022) started; registration continues. register here. The cost is N60,000 or $140 for the 12 week program. Beat the early risers for free books and other bonuses.

In addition to these analyses, our analyst examined the behavior of Nigerian Internet users when seeking information between 2017 and 2022. The analysis reveals that the desire to learn and understand loan applications began to increase in 2018 , as well as the desire for quick money. The data, however, indicates that turning to banks for urgent cash can be more effective than using loan applications. This also applied to loans. The data also shows that in 2019, internet users in Nigeria who needed emergency money and wanted to borrow would have approached the apps for their needs. A small but noticeable disparity was seen in the data for 2020.

Data shows that during the year, internet users who wanted to borrow met their needs through apps rather than going to banks. Meanwhile, the close relationship that existed between cash interest and banks suggests that netizens went to banks to withdraw their money or borrow from banks. Our data also shows that the information-seeking pattern displayed by internet users in 2018 is no different from what was seen in 2022, where interest in cash and banking was slightly aligned while interest for loan applications was remote.

Exhibit 1: Information Seeking Behavior of Nigerian Internet Users in the Context of Credit and Lending

Source: Google Trends, 2022; Information analysis, 2022

Like political leaders, business leaders want to help people who need financial help to have the necessities of life. Borrowers are usually informed of certain guidelines, conditions and rules when the money is made available through the apps. Based on the book by Shoshanna Zuboff The Age of Surveillance Capitalism, this shows how willing lenders are to provide borrowers with a positive shared future. In other words, by providing quick access to the money they need, mobile loan companies help Nigerians achieve their desired future as soon as possible. In some cases, some of the companies specifically state that unsecured loans will be given, according to our verifications. “In reality, all you have to do is register by providing your personal details. After registration, you can borrow as low as N1,000 or up to N200,000 with considerable interest,” underlines part of the terms and conditions of one of the applications.

Although it is possible to argue that the borrowers have entered into a legal agreement with the companies based on the agreed loan repayment terms, it is instructive to note that the collection, aggregation and automatic contact with personal contacts of borrowers for the purpose of alerting relatives, co-workers, family members and friends when borrower default equated to a destructive common future, is common practice. This, according to Zuboff, is non-contractual. Therefore, the shared future that Nigerian money lenders have promised in their many marketing and communication materials is being violated. Failure to disclose the use of personal connections to make the repayment amounted to embarrassment and reputational damage to the borrowers.

Exhibit 2: Mobile loan apps in the midst of Shoshanna Zuboff’s era of surveillance capitalism

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You get some student loan debt wiped out, but what about the rest? https://condenetint.com/you-get-some-student-loan-debt-wiped-out-but-what-about-the-rest/ Sat, 15 Oct 2022 18:25:00 +0000 https://condenetint.com/you-get-some-student-loan-debt-wiped-out-but-what-about-the-rest/

By Cecilia Clark

Whether you need smaller payments, want to pay them back faster, or work in the public service, make a plan now before the holidays.

This article is reprinted with permission from NerdWallet.

According to an August press release from the White House, twenty million people, or nearly 45% of federal borrowers, will see their debt wiped out by the cancellation of President Joe Biden’s student loan. However, for the 23 million borrowers who still have debt, now is the time to develop a repayment plan.

“January will be here before you know it,” says Damian Dunn, certified financial planner and vice president of corporate financial wellness platform Your Money Line.

Payments resume in January 2023. But, Dunn says, with the holidays coming up, by January, spending and borrowing time are the biggest for many people. As a result, many borrowers can be overburdened in January if they don’t plan now.

They won’t just pick up where they left off in March 2020, when payments and interest were halted. Payment amounts and options may vary.

Borrowers can expect the remaining balance of their loan to be re-amortized after cancellation. This means that their cancellation amount, either $10,000 or $20,000, will be deducted from the total they owe. Their payment term will not change, but they will receive a new monthly invoice based on the recalculation of the remaining balance. Many borrowers will see a smaller bill as a result.

Here’s what to do next.

If you work in the public service

Prioritize Public Service Loan Forgiveness Waiver, or PSLF, if your job makes you eligible. The Department of Education can count more payments toward the 120 needed for pardon under the waiver. This means you could see full forgiveness much sooner.

The last day to apply for the waiver is October 31.

You can still apply for the PSLF after the waiver ends, but the terms won’t be as generous.

If you are comfortable with your regular payments

If you made regular payments during the pandemic pause without financial strain, keep doing it. Continuing to pay during the pandemic means you saved money because your dollars went straight to the main balance.

However, if you haven’t made payments during the pandemic, start setting aside your payment amount now to make sure it will fit into your budget. By doing so, you could pay a three-month lump sum once payments resume.

If your student loan bill is smaller after the cancellation is applied, continue to make your original payment if you can. This way, you’ll save money on interest charges and pay off your debt faster.

Making room in your finances gives you time to adjust your budget if necessary. But you have other options if you can’t make it work.

Read: Have your student loans been forgiven? Here’s where to put some of that extra cash now

If you need small monthly payments

If you know you’ll have trouble making your monthly payments, contact your servicer to discuss income-based reimbursement, or IDR, options. Four income-driven repayment plans currently set your payout at 10% of your Discretionary Income. Payments could be set at $0 if your income is low.

These plans also wipe out your remaining balance after 20 or 25 years.

Borrowers can also expect a new income-based repayment option, announced alongside the cancellation. The new plan will reduce the amount of income considered discretionary and halve the payout percentage to 5%. It will also reduce the forgiveness period to five years for those whose original total loan balance was $12,000 or less.

As unpaid interest continues to accumulate and capitalize under existing plans, the government will cover unpaid interest with the new IDR. That means borrowers who want to cut their monthly payments — potentially by half or more — and who don’t mind extending their repayment term could benefit the most from the new plan.

However, high-income borrowers may not see lower payments with income-driven repayment.

Related: Moving forward with federal student loan relief — what’s next?

If you want to pay off your debt faster

If you want to pay off your debt faster and don’t want to refinance with a private lender, the best strategy is to:

Consider refinancing if you have private student loans or federal debt carrying higher rates.

With student loan refinancing, borrowers replace their existing loan with a new one. Ideally, the new loan will have a lower interest rate and more favorable repayment terms.

Student loan refinance rates have increased, but borrowers with the strongest credit profiles can still find a lower rate.

Borrowers should not refinance until at least 2023 – once the cancellation is applied to their account and the interest-free forbearance is over. If you refinance, your federal student loans will become private and will no longer be eligible for federal benefits, like forgiveness and IDR.

The decision to refinance should come down to long-term financial benefit, says Clark Kendall, certified financial planner and president of Kendall Capital Management. For example, if you can go from a 7% rate to a 5% rate, you can save that 2% or increase your 401(k) contribution.

See also: Your $10,000 student loan debt has been forgiven. Should you pay your credit card bill or take advantage of the falling stock market?

Dunn also warns borrowers to consider their risk of losing federal benefits. “I would double-check the math and make sure you’re in a better position,” he says. “Maybe a slightly lower payout doesn’t outweigh the overall benefit of having federal protections.”

More from NerdWallet

Cecilia Clark writes for NerdWallet. Email: cclark@nerdwallet.com.

 

(END) Dow Jones Newswire

10-15-22 1425ET

Copyright (c) 2022 Dow Jones & Company, Inc.

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Credit Suisse isn’t the Lehman moment you’re looking for https://condenetint.com/credit-suisse-isnt-the-lehman-moment-youre-looking-for/ Fri, 07 Oct 2022 06:54:42 +0000 https://condenetint.com/credit-suisse-isnt-the-lehman-moment-youre-looking-for/

Generals always make the last war, they say, and right now it seems like a lot of people are looking for the next Bear Stearns or Lehman Brothers. They are only half right.

The 2008 crisis that killed these investment banks started with subprime mortgages and complex credit products, but turned into an epic disaster due to a rapid loss of funding for large parts of the banking system.

This cash drain was so deadly because too many banks (and their twin investment vehicles) were too reliant on short-term funding. Today, corporate treasurers and money managers can still quickly withdraw their cash from many places if they get finicky, but not from banks to the same degree as 14 years ago.

The flood of post-crisis reforms has given banks much greater protection against funding disruptions. Many financial and market players may not yet fully understand this, but that’s at least in part because these security measures have been dressed in the inscrutable language of deep specialists and are expressed in ratios with no obvious meaning.

Credit Suisse Group AG can tell the world that it has a liquidity coverage ratio of 191% and the vast majority of auditors will be puzzled. An analyst might further explain that this means the bank has high-quality liquid assets that are nearly double its 30-day net cash outflow forecast in a stress scenario — hats off to Simon Adamson, long-time banking specialist at CreditSights. But for many, it probably raises even more questions than it answers.

The fact that not all financially savvy people are banking specialists makes discussing liquidity dangerous if done poorly. Just before Christmas in 2018, then-Treasury Secretary Steve Mnuchin answered a question no one had asked him by suddenly tweeting that he had called every major US bank to see him and they all confirmed that they had sufficient liquidity! Cue another leg down in the stock market and a leveraged loan selloff that played out throughout December.

Ulrich Koerner, recently appointed managing director of Credit Suisse, would have done better to remember this episode when he affirmed the bank’s “strong capital and liquidity position” in the same breath as the phrase “critical moment”. in a September 30 memo to staff. and investors.

But there’s a much simpler way to look at all of this, not just for Credit Suisse, but for any lender. Liquidity coverage ratios and net stable funding ratios are sophisticated tools that are (hopefully) useful to banking regulators. Most investors can, however, reassure themselves about the differences between 2008 and today by examining a single page of the banks’ annual reports: their ordinary balance sheets and more particularly their liabilities.

Just compare the proportion of long-term debt and deposit funding now with 2007, for example: at Credit Suisse, long-term debt – the name tells you that it cannot be withdrawn quickly – was 22 % of its funding, compared to 12% % in 2007. Deposits now represent 53% of its funding compared to 25% in 2007. Deposits, of course, can be withdrawn in the most adverse scenarios; however, the guarantee programs protect ordinary consumer deposits up to 100,000 Swiss francs ($100,000) in Switzerland, which should really save the panic. Moreover, Credit Suisse’s demand deposits – those that can be recovered most easily – currently represent only 26% of its funding.

At the other end of the scale, less stable funding such as short-term borrowing from banks and markets, as well as trading commitments, now accounts for 13.5% of Credit Suisse’s funding, compared to 44% in 2007.

Now look at Lehman Brothers’ balance sheet in its 2007 annual report. It had no deposits because it was not a Federal Reserve regulated bank or a member of the Federal Deposit Insurance Corporation. His clients had cash balances in trading accounts and these disappeared quickly in 2008 – but they were initially small as a part of his balance sheet. However, Lehman had a lot of short-term borrowings from other banks and markets, as well as trade liabilities and other money it owed customers, and these made up 77% of its funding base. Long-term debt was only 18%.

Lehman Brothers was more vulnerable to cash losses than Credit Suisse was in 2007, and even less than Credit Suisse is today.

To be perfectly clear, very bad managers could still break a bank today – and that is as it should be; regulation is not intended to make private enterprise totally infallible. Poor executives might choose terrible assets, fail to understand or manage risk, or lose the trust of their staff and clients. Yet the industry – and especially the biggest banks – have been forced to change their balance sheets and funding sources in ways that make it much harder for a bank to blow up in a very quick and chaotic way.

The banks’ direct exposure to each other through loans is significantly lower than before 2008 and their funding is longer term. They must own a much higher proportion of easily salable assets, especially government bonds and central bank reserves. Both of these reduce the risk that a bank will be forced to quickly sell other types of loans or corporate bonds in a way that results in losses throughout the financial system.

If there is a next Lehman moment, it is much more likely to have its epicenter elsewhere in the financial markets.

More from Bloomberg Opinion:

• The Bank of England promotes moral hazard — Again: Marc Rubinstein

• Credit Suisse’s Hong Kong bankers deserve some love: Shuli Ren

• No, Credit Suisse is not on the brink: Paul J. Davies

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. Previously, he was a reporter for the Wall Street Journal and the Financial Times.

More stories like this are available at bloomberg.com/opinion

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