plumbing

America’s Poorest County

by AP on February 13, 2011

ZIEBACH COUNTY, S.D. — In the barren grasslands of Ziebach County, there’s almost nothing harder to find in winter than a job. This is America’s poorest county, where more than 60 percent of people live at or below the poverty line. At a time when the weak economy is squeezing communities across the nation, recently released census figures show that nowhere are the numbers as bad as here – a county with 2,500 residents, most of them Cheyenne River Sioux Indians living on a reservation. In the coldest months of the year, when seasonal construction work disappears and the South Dakota prairie freezes, unemployment among the Sioux can hit 90 percent. Poverty has loomed over this land for generations. Repeated attempts to create jobs have run into stubborn obstacles: the isolated location, the area’s crumbling infrastructure, a poorly trained population and a tribe that struggles to work with businesses or attract investors. Now the tribe – joined by a few entrepreneurs, a development group and a nonprofit – is renewing efforts to create jobs and encourage a downtrodden population to start its own businesses. “Many, many people make these grand generalizations about our communities and poverty and ‘Why don’t people just do something, and how come they can’t?’” said Eileen Briggs, executive director of Tribal Ventures, a development group started by the tribe. “It’s much more complicated than that.” The Cheyenne River Indian Reservation, created in 1889, consists almost entirely of agricultural land in Ziebach and neighboring Dewey County. It has no casino and no oil reserves or available natural resources. Most towns in Ziebach County are just clusters of homes between cattle ranches. Families live in dilapidated houses or run-down trailers. Multicolored patches of siding show where repairs were made as cheaply as possible. Families fortunate enough to have leases to tribal land can make money by raising cattle. Opportunities are scarce for almost everyone else. The few people who have jobs usually have to drive up to 80 miles to tribal headquarters. The nearest major population centers are Rapid City and Bismarck, each a trip of 150 miles or more. Basic services can be vulnerable. The tribe’s primary health clinic doesn’t have a CT scanner or a maternity ward. An ice storm last year knocked out power and water in places for weeks. And in winter, the gravel roads that connect much of the reservation can become impassable with snow and ice. Nearly six decades after the reservation was created, the federal government began building a dam on the Missouri River, but the project caused flooding that washed away more than 100,000 acres of Indian land. After the flooding, the small town of Eagle Butte became home to the tribal headquarters and the center of the reservation’s economy. “There are things that have happened to us over many, many generations that you just can’t fix in three or four years,” said Kevin Keckler, the tribe’s chairman. “We were put here by the government, and we had a little piece of land and basically told to succeed here.” But prosperity never came. The county has been at or near the top of the poverty rankings for at least a decade. In 2009, the census defined poverty as a single person making less than $11,000 a year or a family of four making less than $22,000 a year. Eagle Butte has few businesses and the handful that do exist struggle to stay afloat. The town has just one major grocery store, the Lakota Thrifty Mart, which is owned by the tribe. There’s also a Dairy Queen, a Taco John’s and a handful of small cafes. There’s no bowling alley, no movie theatre. But a few entrepreneurs are trying to break the cycle of failure, with mixed results. Stephanie Davidson and her husband, Gerald, started a plumbing-and-heating business in 2000 with a single pickup truck. Eventually, D&D Plumbing started to grow, and they hired several employees. But the reservation economy, which was never strong, has been hit hard by the economic slump. Many customers don’t have the money to pay for work upfront, and the Davidsons have struggled to get contracts in new construction, such as a nearly $85 million federal hospital being built to replace the aging clinic. They’ve laid off employees and filled empty space in their building by adding a bait shop and then a deli. Nothing has worked. “People think you’re a pillar of the community because you have a business, and that part of it is good,” Stephanie Davidson said. “We don’t feel that way right now because we’re having such a tough time.” Nicky White Eyes, who owns a flower shop on Main Street, says there are days when she doesn’t sell a single flower. Most of her business comes from families who get help from the tribe to buy flowers for a relative’s funeral. “We’re getting by with nothing extra,” said White Eyes, who said she hasn’t taken any salary in the months since she quit another job to run the shop full-time. “But no, I have too much heart in it to let it go quite yet.” The nonprofit Four Bands Community Fund has invested in both businesses and people in Eagle Butte. The group teaches residents basic financial skills – how to open a checking account, how to save money on a budget and how to develop credit. “You have the most complicated little world here,” said Tanya Fiddler, Four Bands’ executive director. Without a viable private sector, federal money permeates every part of life here. The federal government pays for the Bureau of Indian Affairs, the Bureau of Indian Education and the Indian Health Service, three of the reservation’s largest employers. Businesses rely on the federal money that comes into the reservation. Federal stimulus dollars are paying for the new hospital, which will create about 150 permanent jobs when it opens this year. Other federal contracts bring sporadic jobs, too. One tribal success story is Lakota Technologies, which has attracted call-center and data-processing work and trained hundreds of young people since it started more than a decade ago. The company now employs a handful of tribal members on a State Department sub-contract, even though most of its cubicles remain empty. But other businesses owned by the tribe have run into trouble. Last year, a buffalo-meat processing company was sued by a rancher in federal court. The lawsuit accused the company, Pte Hca Ka Inc., of not delivering on contracts. A federal judge ruled against Pte Hca Ka for $1.1 million when it did not respond to the lawsuit. Keckler, the newly elected tribal chairman and a former business owner, has pledged to try to fix the problems. He said previous officials have rejected overtures from outside investors because they feared the loss of tribal control or the risk of losing their positions. “It’s difficult for us to get people to come here and have faith in us as a government,” he said. “We just had a new election, and there was discussion about, ‘Oh, people want to give away things.’ Those are kind of the issues that we have.” Still, there are small reasons to hope. Later this year, the tribe will start to receive payments from a $290 million settlement with Congress related to the farmland that was lost to the Missouri River flooding. The tribe will receive annual interest on the settlement money starting this fall. This year’s payment could be as much as $75 million, according to one tribal estimate. A Department of Treasury spokeswoman says the final amount hasn’t been determined yet. That money can be used for infrastructure improvements, economic development and education. Raymond Uses The Knife, a rancher and tribal councilman, wants the reservation to be “accessible for other companies to come in and invest their money right here.” “We have to attract business. Regardless of how much money we have, we can’t set up our own businesses,” he said. “We also have to realize that we’re all not experts.” Meanwhile, groups like Tribal Ventures and Four Bands continue to look for ways to bring in jobs and help those who are fighting the decades-old obstacles here. “You can have all the heart you want, but you have to have actual cash and resources,” said Briggs, of Tribal Ventures. “All those things play a part in our being able to basically use our greatest asset, which is our people.”

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America’s Poorest County

Alicia Morga: Where Are the Women Entrepreneurs?

by on January 25, 2011

Silicon Valley has been batting around the question, where are the women entrepreneurs? There are women entrepreneurs. In fact, women-owned businesses contribute close to $3 trillion to the U.S. GDP, according to the Small Business Association. But these ladies aren’t on the radar of Silicon Valley because they don’t have venture funding. It’s easy to see why many women don’t have venture funding. You only have to understand what it takes to obtain it. Most women owners of small-to-medium sized businesses don’t go after venture capital because they don’t know anybody employed by a venture capital firm — part of what is required to gain entry. The venture capital community, for all the power it yields, is small and insular. That’s not to say it can’t be cracked, but if you don’t live in Silicon Valley, New York, Boston, Colorado, Austin or Los Angeles, you’re going to have a hard time building the relationships it takes to get a meeting. There is, however, another way. You have a big idea with a large potential return on investment. The critique of women is often that they don’t think big enough, but the critics forget the practical realities of aiming for the fences. It’s risky. Many of the women who start businesses often get their companies to a place where they are making more money than perhaps they thought they’d ever see — probably right around $250,000 a year in take home pay. At that income level, they can put their kids through college, buy a home and manage their lives. For all the risk inherent in entrepreneurship, it’s a comfortable outcome and doesn’t make the owner any less of an entrepreneur. It is not a number, however, that excites venture capitalists. Many of these businesses actually could be bigger and more interesting to VCs, but at least three things would have to happen — and they’re not unique to women owned businesses. First, the owners would have to have access to capital to expand. It’s nearly impossible these days to get a small business loan and you can see here the classic chicken versus the egg conundrum. Second, the businesses would have to be centered on technology. Venture capitalists, in general, are uncomfortable with non-technology focused businesses, even though non-technology focused businesses make up greater than 50% of the stock market. Third, the owners would have to acquire new skills. It’s one thing when you’re the plumber. You can generate a certain amount of revenue doing most of the plumbing yourself. But in order to expand, the plumber has to become a manager, has to build systems, an organization and these are difficult things to do when you’re trying to actually get work done at the same time. Even if all these criteria are met venture capital investment may still not make sense for the business. And there are plenty of women who are smart enough to know that and therefore do not seek it. Yet, Silicon Valley doesn’t recognize these ladies as entrepreneurs. To fit Silicon Valley’s myopic view of an entrepreneur women business owners would have to raise venture capital which a certain percentage don’t need, some don’t qualify for, and others don’t even know is possible. Still, if we want more venture-backed women led businesses, we can start by inspiring women to first become entrepreneurs. We can do this by touting all women entrepreneurs, regardless of their type of business or financing. Further, we can educate young women about the venture capital industry. It’s easy to forget when you’re in Silicon Valley, but many young people, future business leaders, have never even heard of venture capital. Exposure can help shape the form of dreams. Finally, the venture community itself could benefit from meeting women entrepreneurs where they find them. Innovative financing models, such as extracting a return through dividends and smaller, paced investments alongside a broadening of the types of businesses funded, might not only support a more balanced landscape but also restore venture capital as a viable asset class. The reality is there are a number of women entrepreneurs out there who have built successful businesses — often, one dollar at a time. These ladies are my heroes and from my vantage point, I see them everywhere.

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Alicia Morga: Where Are the Women Entrepreneurs?

Thain’s CIT Resurrection May Provide Second Chance After Exit From Merrill

February 10, 2010

By Christine Harper and Linda Shen Feb. 10 (Bloomberg) — John Thain and CIT Group Inc. are giving each other something that ousted chief executive officers and bankrupt lenders usually don’t get: a second chance. Thain’s record of success at Goldman Sachs Group Inc. and NYSE Euronext was marred by his exit from Merrill Lynch & Co. last year, when he was pilloried for $27.6 billion of losses, $3.6 billion of bonuses and $1.2 million of decorating expenses for his office. CIT, once the biggest independent commercial lender in the U.S., sought court protection last year, a move that’s usually a death sentence for a financial firm. CIT, which survived its reorganization, and Thain, its new CEO, are counting on each other to burnish their reputations. John Reed , the former Citigroup Inc. co-CEO who recruited Thain in 2003 from Goldman Sachs to the New York Stock Exchange, says it’s a good match. “He’s learned a lot,” said Reed, who was the Big Board’s interim chairman. At the time, Reed said he thought Thain, a fellow graduate of the Massachusetts Institute of Technology, needed to broaden his horizons after 24 years at Goldman Sachs. “He is today a different person than when he came over and first joined me, and a more capable person. He’s more mature.” The CIT job gives Thain, 54, a chance to fix a public company whose business — which includes lending to more than 3,000 small- and mid-sized businesses — is tied to the heart of the U.S. economy. To rescue the company, Thain must find lower- cost sources of funding, lift restrictions on its banking unit and win over regulators wary after the bankruptcy wiped out a $2.3 billion Treasury Department stake. ‘Big Difference’ “It’s clearly an opportunity to make a big difference and you can see why John would find it attractive,” said Paul Deighton , a former Goldman Sachs colleague who is now CEO of London 2012 Ltd., the organization that’s running the London 2012 Olympics. Thain had previously arrived at new jobs with a track record of success. He became CEO of the NYSE after helping to build Goldman Sachs into the world’s leading investment bank. When he took the helm of Merrill Lynch four years later, Thain had modernized the exchange, doing deals that transformed it into an electronic, international and publicly traded company. As the financial crisis deepened in 2008, Thain sold Merrill Lynch over a weekend, only to be fired by his new boss and criticized for the firm’s losses, bonus payments and office redecoration. Erasing the ‘Blot’ “He wants to find a way to erase the blot on his career from the ending of the Merrill Lynch saga, and what better way to do that than to take a very visible public company and turn it around,” said Douglas J. Elliott , a former JPMorgan Chase & Co. investment banker who is now a fellow in economic studies at the Brookings Institution in Washington. “If he does pull it off, he’s a hero.” Thain’s arrival at CIT was well-timed. On Feb. 8, his first day on the job, the company officially became free of limitations on compensation and other activities imposed on companies that received money from the Troubled Asset Relief Program, or TARP. “Contingent value rights” that the U.S. Treasury received in CIT’s bankruptcy were “terminated and cease to exist,” according to a CIT regulatory filing. “While the U.S. Treasury no longer has an investment in CIT, we are generally endeavoring to apply Treasury governance best practices,” CIT spokesman Curt Ritter said in an e-mailed statement Feb. 8. MIT, Harvard Thain, the son of a doctor, grew up in Antioch, Illinois, population 13,400, a town 60 miles (97 kilometers) from Chicago. He didn’t visit the East Coast of the U.S. until he arrived at MIT in Cambridge, Massachusetts, to study electrical engineering. From MIT he went straight to Harvard Business School and then directly to Goldman Sachs, where he worked in investment banking and traded mortgage bonds. In 1993, Thain moved into the administrative side of the company — known as operations, technology and finance — or by its nickname “The Federation” after the fictional organization in Star Trek, according to a Goldman Sachs executive who worked with Thain and spoke on condition of anonymity. Thain became chief financial officer and eventually ascended to president and chief operating officer under then-CEO Henry Paulson . Several former colleagues from Goldman Sachs credit Thain with leading the effort to build the firm’s risk-management processes and infrastructure over the next decade, saying he excelled at understanding the plumbing of the organization and recruiting talented executives to join a department that is dismissed at many Wall Street firms as “the back office.” ‘Real Contribution’ “The very fact that you had one of the best people in the firm running it, which made it a breeding ground for other good people, you could see this was a place that you could make a real contribution,” London 2012’s Deighton said of his decision to move from investment banking into operations under Thain in 1993. Bradley Abelow , who worked under Thain in the operations business for about a decade, said Thain was crucial to building a risk-management department at Goldman Sachs that could act as a check on the firm’s traders and bankers. He said Thain was also adept at collecting information from a variety of sources so that he didn’t rely too heavily on his deputies. “I always wanted to surprise him, to tell him something he didn’t know — I viewed that as an extreme challenge,” said Abelow, a founding partner of New York-based private-equity firm NewWorld Capital Group who previously served as chief of staff to Jon Corzine , the former governor of New Jersey. “I don’t know that I ever succeeded in that.” Sept. 11 Thain distinguished himself on Sept. 11, 2001, when terrorists struck the World Trade Center a half mile away, former colleagues say. Thain, who was the highest-ranking executive present at Goldman Sachs’s 85 Broad Street headquarters, turned his office into a crisis control center, established teams to locate Goldman Sachs employees and secured telecommunications for the firm. “He’s just a very level head, very cautious, and has absolutely excellent judgment both on people and situations,” said Deighton. In the crisis that brought down Lehman Brothers Holdings Inc. in September 2008, Thain succeeded in persuading Bank of America Corp. to pay $29 a share for Merrill Lynch during a single weekend, a 70 percent premium to the shares’ closing value the previous Friday. “He basically sold the company for a lot more than it was worth at a time when that was the right thing to have done,” Reed said. Bank of America Merrill Lynch’s losses accelerated after the sale and Ken Lewis , who was then CEO of Bank of America, fired Thain three weeks after the transaction closed. Thain found himself facing accusations that he’d failed to do enough to keep Bank of America apprised of the losses and that he’d accelerated bonus payments to Merrill staff. Information about Thain’s $1.2 million redecoration of his Merrill office, which took place when Thain joined in late 2007, was provided to the press at the same time. In April 2009, Lewis was stripped of his chairman title at Bank of America after investors rebelled against his handling of the Merrill Lynch takeover. He later resigned from the company. Last week, New York Attorney General Andrew Cuomo filed a civil fraud case against Bank of America, Lewis and former Chief Financial Officer Joe Price. The case alleges that they deceived investors and taxpayers in 2008 by not disclosing losses at Merrill Lynch before shareholders voted on the firm’s pending takeover, and used those losses to extract more bailout funds from U.S. regulators. ‘Without Merit’ Bank of America, based in Charlotte, North Carolina, has called the charges “totally without merit” and lawyers for Lewis and Price have denied wrongdoing. Cuomo’s lawsuit said that “from the moment the merger was announced, Merrill was transparent with Bank of America management about the losses Merrill was incurring.” The lawsuit “stands on its own and I’m glad that the truth has come out,” Thain said in an interview on Feb. 7. “I’m focused on CIT and I’m focused on moving forward — that is history to me.” Thain said he’ll start his job by studying CIT’s businesses and determining what kind of funding model can be most successful. Naming new senior managers will be a priority, Thain said. On Feb. 1, CIT Chief Operating Officer Alexander Mason became the fourth executive to announce a departure, saying he would leave on Feb. 26. That came on the heels of CEO Jeffrey Peek’s exit Jan. 15, and after CIT said in December that Chief Financial Officer Joseph Leone would retire in April. Chief Risk Officer Nancy Foster stepped down Dec. 31. Nelson Chai At Merrill, Thain assembled a management team largely by recruiting colleagues from Goldman Sachs and NYSE Euronext. Thain recruited Nelson Chai , chief financial officer at NYSE Euronext, to be CFO at Merrill. He said on Feb. 7 that Chai would probably be a candidate for the CFO position at CIT. Thain will also have to adapt to a very different culture at CIT than he was used to in his Wall Street jobs, said Brookings Institution’s Elliott. “This may be significantly harder for him than even he thinks because he hasn’t really run this type of company before,” Elliott said. “It’s easy to think that because you’re good at finance in general that you’d be good at every single aspect of it. But lending to small businesses is quite a different business.” Factoring Concern Some of CIT’s clients who rely on the company to provide financing that enables them to ship their merchandise to retailers are concerned that Thain doesn’t have enough understanding of that side of the business, known as factoring, said Vano Haroutunian , a partner at law firm Ballon Stoll Bader & Nadler PC in New York, which advises clothing and accessory companies that are customers of CIT’s. “They don’t see the logic of going with someone who’s from investment banking rather than someone who would be a little bit more familiar with asset-based lending and factoring,” Haroutunian said. “The concern is not about him personally, although there is some of that because of his record at Merrill Lynch.” To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net ; Linda Shen in New York at lshen21@bloomberg.net

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Pound Declines Against Dollar, Euro on Speculation BOE to Cut Deposit Rate

September 24, 2009

By Morwenna Coniam Sept. 23 (Bloomberg) — The pound fell against the dollar for a second day on renewed speculation the Bank of England will cut the rate it pays financial institutions on deposits. The U.K. currency also snapped a two-day gain against the euro after the Daily Telegraph said the central bank called economists to a “crisis meeting” next week to discuss the British currency’s decline and its so-called quantitative-easing policy. The Bank of England made no mention of changes to the deposit rate in minutes of its Sept. 10 policy meeting released yesterday. “The press reports regarding the economists’ meeting next week could be indicating that issues such as the deposit-rate cut, which was mooted by King last week but wasn’t mentioned in the minutes yesterday, are back on the table,” said Jeremy Stretch , a senior currency strategist at Rabobank International in London. The market is “putting two and two together and seeing the plumbing or the pipes of the U.K. financial system are still a little gummed up.” The pound fell 0.6 percent against the dollar to $1.6244 as of 9:02 a.m. in London. The U.K currency also weakened 0.8 percent to 90.97 pence per euro. The yield on the two-year gilt dropped 6 basis points to 0.78 percent. The yield on the 10-year bond declined 5 basis points to 3.69 percent. The difference in yield between the two securities was 290 basis points, within two basis points of the widest since at least January 1992. To contact the reporters on this story: Morwenna Coniam in London at mconiam@bloomberg.net

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