Consumer Credit, Taxes, a Russell Rant, and who was...
… John J. Boyer?
Consumer credit growth is decreasing; it’s the slowest growth in two years.
That is good Good News. It only has a small impact on the Fed’s decision to raise rates, but it shows that consumers are wary of taking on new debt.
That means they think the economy is going to slow down.
Hmm. Maybe that’s bad Good News.
Initial jobless claims were only slightly higher than expected, but about 6% higher than the previous week. Things are slowing down…
The ADP report shows a sharp drop in new hires; however, they do cite weather as being a factor.
Who wants to start their first day on the job when it’s 4 degrees outside and you can’t get to the job?
Consumer sentiment climbs to a 13 month high. This is the University of Michigan survey and encompasses 500 households.
The average Joe and Josephine are feeling better about the next year, but only marginally.
The expectations are that inflation will average 4.2% next year.
However, consumer confidence was down the previous week. This is a survey of 3000 households and is published by the Conference Board, a non-profit organization.
Yep, things are slowing down.
IRS is hiring… and other Tax News.
5,000 customer service operators.
Last year, 13% of callers to the IRS reached a live person.
This year, Janet Yellen is looking to raise that to 85% and cut the hold time in half.
Given that, along with no changes to taxes or forms, this could be a less unhappy tax season for your friendly neighborhood CPA.
Covid tax breaks are done.
Alert!! 80% bonus depreciation on eligible asset purchases in 2023.
That goes down to 60% in 2024.
K-Servicing Files for Bankruptcy – Why does that name ring a bell? That is the loan servicing arm of Kabbage.
No surprise there.
Background: K-Servicing is part of Kabbage, the Fintech Lender that sold their portfolio and license to use the Kabbage name, to American Express.
The purchase did NOT include any PPP loans, showing even American Express knew what a cluster the PPP portfolio was from Kabbage.
Having done over 220 PPP forgiveness applications for PPP borrowers (including one currently in process with K-Servicing), I can tell you that K-Servicing, along with other FinTechs, has no idea how to run a lending business.
They have plenty of ideas of why to start one, but no idea how to keep it going.
<WARNING: Russell Rant impending!>
If anyone, anything or any company that is involved with money approaches you and states they are a disruptor, run. They are disruptors, but not in the way they think it means. “Disruptor” has been said so often, that in the words of Enigo Montoya “You keep using that word. I do not think it means what you think it means.”
A disruptor in the financial sector simply means a new company founded by a single or group of twenty-something idealistic ivy league or silicon valley semi-graduate social justice warriors that are able to talk venture capital funds out of hundreds of millions of dollars on the basis these funds will be responsibly lent out to an underserved customer base that they have uniquely carved out based on a new algorithm virtually guaranteeing repayment. Hundreds of thousands of borrowers will be serviced by chatbots with limited programming and millions in profits will be made because of the scale involved by having 13 employees running the entire company due to wonderful efficiencies created by amazing technologies without even considering that there isn’t a customer service phone number. And why would there be? That’s what the chatbot is for and no one working there has a clue what service means.
That’s the “disruptor” part.
Then they will sell the company to “insert name of national bank here.”
Theranos. FTX. Frank. And many more “disruptors”.
<NOTICE: Russell Rant completed; you may continue the Report>
If you happened to have a PPP loan with Kabbage and you have secured forgiveness, I would really hang on to that paperwork.
The reason they are filing for bankruptcy is that the federal reserve thinks they are owed some money from K-Servicing due to fraudulent lending. How much, you ask?
Would you believe $2 million? Nope.
Would you believe $20 million? Nope.
Would you believe $200 million? Well, getting warmer, but still no.
They owe the Federal Reserve Bank… $540,000,000.
They are currently still facing investigations by the House Select Subcommittee on the Coronavirus Crisis, the Federal Trade Commission, the SBA, and two U.S. attorneys according to the bankruptcy documents. These investigations are surrounding claims that they improperly approved PPP loans that did not comply with SBA requirements or were blatantly fraudulent.
Hey, it wasn’t their fault; the algorithm made the decisions.
You know, the more I think about it, I’ll bet they actually believe that.
This has stalled 60,000 loans (as of October of last year) in the forgiveness cue.
Who was John J. Boyer?
He was born in 1936, the fifth of 12 children on a Minnesota farm; his father was a farm equipment business owner.
At an early age, he set up a basement science lab, aspiring to be the next Thomas Edison.
He studied mathematics and computer science.
He married and lost his wife after only 4 years to ALS in 1977, causing him to sink into a depression.
He credited his recovery to counseling and his Roman Catholic faith.
Then, he developed software known as Liblouis, free and open sourced, now widely used around the world.
It translates text into Braille.
He also created BrailleBlaster, an interface that facilitates, among other things, the creation of Braille textbooks.
Why his interest in Braille? Mr. Boyer was born blind, and was deaf by the age of 10.
He passed away last month at the age of 86.
These are just a few of his accomplishments.
So the next time you or your business hits a wall, at least you saw it coming.
Per Mr. Boyer:
“My working relationship with the Lord is that I do what is possible, and He will do the impossible.”
I think we’ll make that our Quote of the Week.
