International Countertrade With A Social Purpose

Global trader with a social cause in the making

By Melvin J. Howard

Circumstance has away of preparing you for life without you knowing it. For example when I was in College I got a job that was arranged by my alumni department head. It was working for a major defense contractor in their countertrade division. Little did I know at the time it would play a major roll in my life now? Countertrade is a term used for parallel business transactions, linking sellers and buyers in reciprocal commitments, which usually lie outside the realm of typical monetary trade. Some of the common forms of countertrade transactions include barter, counterpurchase, compensation, buyback, clearing arrangements, offset and switch trading. More than 10% of world trade today involves some form of countertrade.The World Trade Organization estimates that 15% or $8.43 billion  of the $5.62 trillion in international trade is conducted on a non-cash basis.

My mentor was a great teacher he was a Vice President of the defence firm I was working for. I was learning first hand how to do world trade not in the classroom but on the front lines. He took me under his wings and taught me the most basic and the most complicated forms of Trade.  Offsets–an umbrella term for a broad range of industrial and commercial compensation practices required of foreign suppliers under primarily government agency of state-owned enterprise acquisitions–were made a common requirement for the procurement of either military (e.g., fighter aircraft) or high-cost civilian hardware (e.g., commercial aircraft). Both defense and non-military offsets may entail overseas co-production of the procured item, as well as other economically beneficial transfers to the importing country that are not related to the original export. To assist their exporters some industrialized country governments also promoted countertrade under government agreements. For example, the French Ministry of Agriculture signed in 1989 an agreement with the USSR Council of Ministers which provided for exchanges of Soviet commodities for French agricultural and food processing equipment and technologies. Other Western governments, such as those of the United States, Canada, Belgium, Holland, the United Kingdom, and Italy, established special countertrade service units within public agencies to provide countertrade-related advisory assistance to their exporters. The French Government has supported instead the formation of a separate countertrade assistance entity in the private sector. The Swedish Government was until 1990 a major stockholder, through interests by the Swedish Investment Bank, in a private sector company involved in countertrade. Now with trade agreements like NAFTA in 1994, which integrate regional trade, based on free market principles some countertrade has abated somewhat.

International countertrade practices are now increasingly associated with bidding on major defense and non-military government procurement contracts and with project financing–a contract-based, off-balance-sheet finance technique whereby revenues generated from the output of the financed project are directly allocated to service outstanding debt and principal. A variation of the countertrade buy-back contract which links foreign contractors’ repayments to the output products of the production capacity they supplied, project financing relies instead mainly on contractual recourse to the project’s revenue streams. (According to the World Bank, developing countries are now spending around $200 billion a year on new infrastructure investment, one-fifth of their total investment.) High procurement costs and tighter budgets have prompted many emerging country governments in the 1990s to issue new civilian offset regulations (e.g., United Arab Emirates, Kuwait). Civil offset requirements, therefore, are increasingly acquiring a financing rationale in these markets. In a global environment of budgetary constraints, the ability of suppliers to meet offset requirements and/or to provide their clients with financial packages that can best those of competing bidders is a major competitive edge.

International trade in medical services will become increasingly more important. For ensuring quality, well-known medical facilities are likely to invest (commercial presence) in countries. Likely to be the destination of “consumption abroad” mode. Likely to be the supplier of patients mainly due to “poor quality” of medical care rather than the cost of care. International migration of foreign medical graduates will likely to be associated with commercial presence rather than traditional migration. New migration pattern will further encourage adoption of consumption abroad approach for reducing overall healthcare cost in both developed and low-income developing countries. Further expansion of consumption abroad will discourage purchase of expensive health insurance plans. In high medical care cost countries; international trade in health services will encourage purchase of catastrophic insurance plans. Health expenditure in the world in 2005 was about $4.8 trillion ($60 trillion was the global income) $4.0 trillion in OECD countries,  $800 billion in the remaining 160 countries of the world. Globalization has increased trading in health care services. Cost of international communication, travel has declined. Time lag has declined significantly and for electronic transfer of information, it has become almost zero (origin to destination). Cost of obtaining services of similar quality varies significantly among developing countries as well as between developing and developed countries of the world. There are types of medical care services that are extremely time sensitive. Waiting will rapidly reduce the benefit of treatment.

 The benefit function declines rapidly. If the time lag between the onset of the condition and reservation benefit level is shorter than the time needed to travel to a country, the service will be demanded locally. Worldwide, 1.3 billion people do not have access to effective and affordable health care. Low- and middle-income countries bear 93% of the world's disease burden, yet account for only 18% of world income and 11% of global health spending. What governance structures are necessary to encourage the right mix of public and private health care provision? What regulatory framework is needed to induce businesses to provide insurance, provision and finance for health in poor countries? How can the fruits of medical knowledge and technologies be shared among rich and poor countries without destroying incentives to generate more knowledge? What forms of international cooperation are conducive to the finance of health systems in developing countries? What international institutions are required to make health care for the poor an attractive opportunity for business? One thing is clear groups or individuals who think health care is static or promote the status-quo are sticking their heads in the sand. Recent economic conditions highlight the need for new sources of capital to be brought to bear on social problems.

At the heart of the social enterprise movement is the ongoing challenge of accessing investment capital for socially responsible purposes.  Acquiring start-up capital is a common issue for many nonprofits. It's exacerbated by federal tax laws that restrict nonprofits from accessing traditional forms of equity, such as venture capital and, sometimes, commercial debt. For the most part, nonprofits must rely on private foundation grants, government support, and, for some, earned income such as fees for services. To subsidize their earned income, some nonprofits have set up separate social enterprise business sidelines. The for-profit sector faces its own challenges in funding charitable activities because federal tax laws generally restrict private business entities from accessing foundation grants and government assistance. In addition, for-profit investors expect market-rate returns and maximized profits. Their expectations don't align well with social mission-focused entities, which need "patient capital" and typically have slower, more modest growth.

There is a growing body of thought that new business models and possibly new tax incentives or structures are needed to effectively bridge the "sector" gap. These new models would eliminate the need for social entrepreneurs to either choose between the for-profit and nonprofit business models or create and manage both. One such model, could be a form of business that blends attributes of nonprofit and for-profit organizations in order to promote investment in socially responsible objectives. “It’s time we utilize innovative ways to stimulate the economy and create jobs we need to spur the growth of socially responsible business by simplifying partnerships between nonprofit foundations and for-profit investors. Hybrid financial tools can generate a vast pool of investment funds needed to develop companies dedicated to the public good.

There are major lessons learned from the global greed era we are leaving behind to a new era which creates an opportunity for the investment of private capital to further social purposes.

Psychology of our children

In the mind of a child

By Melvin J. Howard

Self-esteem is a major key to success in life. The development of a positive self-concept or healthy self-esteem is extremely important to the happiness and success of children and teenagers. For one reason or another, some children do not develop social skills as easily as others. They may earnestly seek peer relationships and then, having endured rebuffs, if not downright cruelty, retreat to the safety of home, family, and their own company. An understanding of child development is essential, allowing us to fully appreciate the cognitive, emotional, physical, social and educational growth that children go through from birth and into early adulthood. Some of the major theories of child development are known as grand theories; they attempt to describe every aspect of development, often using a stage approach. Others are known as mini-theories; they instead focus only on a fairly limited aspect of development, such as cognitive or social growth. During a child's development from infancy to adulthood, many influences are responsible for shaping their ways of seeing the world, their ideas of their own identity and their place within society. Factors such as environmental setting, family, community and the media all shape a child. In a perfect world, a child would develop successfully into a happily functioning adult, without any problems along the way, however this is not usually the case and many children find that they may struggle throughout the process.

Parents differ on two dimensions' that work together to produce 4 types of parenting styles. These 2 dimension's are demand (made on the child) and response (to the child). Parents who are highly demanding and responsive to their child (accepting, warm and child-centred) are known as authoritative parents. They have an equal relationship with their child and they communicate freely back and forth. Parents who are highly demanding and unresponsive (rejecting, cold and self centred) are known as authoritarian parents and are very controlling, assertive of their power and do not allow the child equal participation in communication. Undemanding parents that are responsive and warm, are known indulgent parents and allow their child to get away with a great deal without attempting to control them. Finally, parents that are undemanding and unresponsive and cold, are known as Neglectful parents and their relationship is indifferent and uninvolved. Parenting style is very important in how the child will behave. Children of parents that use an authoritarian style of parenting tend to lack social competence in dealing with others. They are shy, withdrawn and don't take initiative. They have trouble making decisions and need to look to authority to decide what is right. They lack spontaneity and intellectual curiosity. Children with authoritative parents appear more self-controlled, willing to explore, and more content than children raised in other types of parenting situations. Children of indulgent parents are relatively immature, have difficulty controlling their impulses and accepting responsibility for actions and acting independently.

IN A PERFECT WORLD

In a perfect world, children and teens would grow up to be happy, healthy, functioning adults. However, there are hundreds of influences that they will encounter throughout their early lives that will have an impact on their development - both in negative and positive ways. The following is a brief list of some of the more common problems children and teens may face. There are various issues and disorders that adolescents may face in the turbulent times of their teen years. An adolescent feels all kinds of pressures - from parents, school and peers. They are in a transitional period where they are moving from childhood to adulthood. As well, the influence of peer pressure and the introduction of such pressures from drugs, alcohol and the opposite sex take their toll on any teen.

DIVORCE

Parents should be alert to signs of distress in their child or children. Young children may react to divorce by becoming more aggressive and uncooperative or withdrawing. Older children may feel deep sadness and loss. Their schoolwork may suffer and behavior problems are common. As teenagers and adults, children of divorce often have trouble with their own relationships and experience problems with self-esteem. Children will do best if they know that their mother and father will still be their parents and remain involved with them even though the marriage is ending and the parents won't live together. Long custody disputes or pressure on a child to "choose sides" can be particularly harmful in the long run for the youngster and can add to the damage of the divorce. Research shows that children do best when parents can cooperate on behalf of the child. Parents' ongoing commitment to the child's well-being is vital. If a child shows signs of distress, the family doctor or pediatrician can refer the parents to a child and adolescent psychiatrist for evaluation and treatment. In addition, the child and adolescent psychiatrist can meet with the parents to help them learn how to make the strain of the divorce easier on the entire family. Psychotherapy for the children of a divorce, and the divorcing parents, can be helpful.

Anxiety

Anxiety is the fearful anticipation of further danger or problems accompanied by an intense unpleasant feeling (dysphoria) or physical symptoms. Anxiety is not uncommon in children and adolescents. Anxiety in children may present as:

Separation Anxiety Disorder: Excessive anxiety concerning separation from home or from those to whom the child is attached. The youngster may develop excessive worrying to the point of being reluctant or refusing to go to school, being alone, or sleeping alone. Repeated nightmares and complaints of physical symptoms (such as headaches, stomach aches, nausea, or vomiting) may occur.

Generalized Anxiety Disorder:  Excessive anxiety and worry about events or activities such as school. The child or adolescent has difficulty controlling worries. There may also be restlessness, fatigue, difficulty concentrating, irritability, muscle tension, and sleep difficulties.

Panic Disorder: The presence of recurrent, unexpected panic attacks and persistent worries about having attacks. Panic Attack refers to the sudden onset of intense apprehension, fearfulness, or terror, often associated with feelings of impending doom. There may also be shortness of breath, palpitations, chest pain or discomfort, choking or smothering sensations, and fear of "going crazy" or losing control.

Phobias: Persistent, irrational fears of a specific object, activity, or situation (such as flying, heights, animals, receiving an injection, seeing blood). These intense fears cause the child or adolescent to avoid the object, activity, or situation.

ABANDONMENT 

Many children experience abandonment issues when they're forced to cope with the absence of a parent, especially when it appears that the absence is voluntary. Sadly, parental abandonment, and its effects, often leave children with lingering questions about their own self worth. As the remaining parent, you can have a huge impact on your child's self-esteem and ability to cope with the absence of the other parent by being alert to the following effects of abandonment in children. Children with abandonment issues may reject everything about the absent parent.  In some cases, children who have been abandoned by one parent will make an effort to completely reject him or her. You'll see this when a child expresses the desire to be the exact opposite of the absent parent. Children with abandonment issues may develop poor self-esteem. Children who have experienced parental abandonment may also be prone to developing poor self-esteem and a sense of shame surrounding the parent's absence. They may even question whether they could have contributed to the absence, whether they somehow "deserved" to be abandoned, or whether the absent parent believes he or she is better off without the "burden" of a child.

What Is A Parent To Do:

·         Affirm your child's own unique qualities.

·         Allow your child to share his or her thoughts and opinions.

·         Instead of arguing over your child's rejection of the absent parent, simply respond with a benign statement, such as "I can understand why you might feel that way right now."

·         Be very clear in telling your child, repeatedly, that he or she is not at fault.

·         Be specific when you praise your child.

·         Provide opportunities for your child to develop relationships with other adults, whom you trust, who can also convey genuine, positive messages about your child's abilities, character, and contribution to others.

·         When your child does express an emotion, affirm that you still love him - even when he's angry, sad, or frustrated.

·         Be trustworthy. Make a special effort not to share your child's confidences with friends and acquaintances.

·         Provide regular opportunities to connect with your child, creating an atmosphere where he or she will be free to open up when the time is right.

“Sometimes you need something bigger then yourself to get up in the morning and move mountains for me it's my children.”

Healthy Curiosity

PROBABILITIES OF LIFE

By Melvin J. Howard

Math a scary and boring subject for many but math given the right variables could give you a probable outcome to just about anything. Events can be quantitatively described as probable or improbable when compared to the total number of possible outcomes. But when the total number of outcomes cannot be specified, there are no grounds for calculation. Intuitively, it seems like a very improbable event that I would unexpectedly meet an old college girlfriend in a British airport. But how can I quantify this probability? Do I include all of the other people I have ever known and the total number of people in British airports? Improbable events and coincidences occur all the time even though they occur with low probability. Given a high number of possible improbable events, it is highly probable that some of them will occur. We only notice the "coincidences" that do occur, not the ones which do not occur. The occurrence of improbable events does not necessarily require paranormal or supernatural explanations.

Additionally, some coincidences are more probable than we might expect due to our lack of appreciation of actual probabilities. The probability of two people not having the same birthday is 364/365 (multilpying the 364 days remaining for the second person times the 1/365 probability of the birthday of the first person). 1 - 364/365 = 0.275% chance of having the same birthday. But for 23 people there is a greater than 50% chance that at least two of them will have the same birthday because

P(same birthday) = 1 - (364/365)(363/365)...(343/365)  0.5

Although flipping a coin or rolling dice are treated as random processes they are not. Whether a coin comes up heads or tails is determined by the trajectory of the coin, the speed of rotation, the angle of rotation, air resistance, material characteristics of the surface on which the coin is thrown, the force of gravity in the location, etc. The same can be said for a roll of dice. There are so many variables, the variables are so hard to measure and the interaction of the variables is so complex that the flipping of a coin or rolling of dice are practically speaking "random". Said another way, the processes can be treated epistemologically as being random although metaphysically they are not -- they are deterministic.

In 1961 a research meteorologist at MIT named Edward Lorenz was using a set of equations to model weather on a computer when he discovered that rounding his initial numbers to three decimal places produced dramatically different results from those obtained by using six decimal places. Systems so sensitive to small variations in initial conditions have been called "chaotic", but they are more accurately described as pseudo-random -- just as so-called random numbers generated by computer are called pseudo-random. Again, the phenomena are metaphysically deterministic, but their unpredictability renders them epistemologically random no different from rolling dices or flipping coins.

In arguing against the Copenhagen Interpretation of Quantum Mechanics Albert Einstein made the infamous remark, "God does not play dice with the universe." I call the remark not logical because it is usually quoted to display how irrational Einstein's beliefs were when it came to spookiness at a distance. Which Einstein could not get his head around when it came to quantum physics?  Neils Bohr, Werner Heisenberg and others in the Copenhagen School proposed that randomness is a metaphysical condition of subatomic particles, whereas Einstein argued that randomness as a phenomenon is an artifact of our ignorance of underlying deterministic processes and forces limitations on our knowledge. Probability bridges the gap between descriptive statistics (average, standard deviation, histograms, etc.) and inferential statistics (decision-making statistics).

Decision-making is based on the probability of an event occurring times the payoff of the event - a cost/benefit decision. More formally:

Expected value = probability X payoff It would seem advantageous to wager $1 on the chance of winning $10 by rolling a snake-eye (one) with a single die because the expected value is probability X payoff = (1/6) X $10 = $1.67 which is greater than the $1 cost. But there is a 5/6 chance of losing the $1, which could be critical if you need the money to buy bus-fare. Non-monetary factors are often important in cost/benefit calculations - with benefits more often being more difficult to quantify and calculate than costs. I believe that I have learned a great deal about myself  by observing the world around me I also believe that I have grown as a person in learning to control my impulsiveness and impatience. I have learned humility in the face of my many false forecasts.  Life survival is a process of risk management. I believe the universe is teaching me wisdom and good judgment that has helped me (and, hopefully, others) in managing many many areas of life. I still have lots to learn. The learning is on a very deep level of personality much deeper than factual knowledge because in many cases I already know the mistakes but have not gain enough mastery over myself so as to not make them. Which is what life is all about no matter the profession Doctor, Lawyer, Judge, Fireman, CEO, homemaker. We all make mistakes the question is do you learn from them?

China Gets A Shot In The Arm From Private Health Care

The New China’ Private Health Care System

By Melvin J. Howard

The U.S. Trade and Development Agency, the U.S. Department of Health and Human Services and the U.S. Department of Commerce joined with China‘s Ministries of Health and Commerce to announce their support for the establishment a new public-private partnership in the healthcare sector.

Twelve U.S. companies and six supporting organizations will participate in this partnership, alongside the supporting U.S. and Chinese government agencies. The partnership will be organized around U.S. healthcare industry strengths and government capabilities to foster long-term cooperation with China in the areas of research, training, regulation and the adoption of an environment that will increase accessibility to healthcare services in China.

Through programs supported by the initiative, Chinese participants will gain greater access to U.S. private sector expertise and ingenuity and better awareness of new technologies and results-oriented regulatory processes, U.S. officials said.

One of the supporting organizations, the Alliance for Healthcare Competitiveness, which represents both for-profit and non-profit U.S. healthcare employers, and whose stated mission is to open global markets to U.S. healthcare exports, has provided an outline of China’s healthcare market and potential.

With the growth of China the government is actively encouraging private capital to enter the health care industry. China will give preferential tax incentives to help ensure everyone had equal access to health care. The government of China has announced that it is to encourage the development of the private healthcare sector in the country. The news paves the way for foreign firms to gain greater access to the Chinese private healthcare market in a bid to meet the growing demand for healthcare services in the country. The new policy will provide overseas healthcare companies, with more flexibility in establishing a new business within the private health sector.

The move by the Chinese government is designed to encourage investment from overseas business to meet the increasing demand for private healthcare services in the country stemming from its rapidly expanded economy. Economic expansion has brought increased affluence among the population of China, which in return has led to a growth in demand for private healthcare. Currently Chinese regulations only allows foreign firms to enter the private healthcare sector in China through a joint venture with a Chinese partner, together with a cap on the level of capital which may be held in a Chinese operation. However, the recent announcement by the central government in China will mean a gradual easing on the level of investment permitted by a foreign firm in the private healthcare sector. The new policy also supports the use of social funds to participate in government hospital reforms, with the conversion of some government run hospitals into private medical facilities.

The Chinese authority’s decision to cut the red tape in the planning process for foreign companies engaged in the provision of healthcare in China is intended to ensure that the country’s healthcare needs are met partly by easing some the pressure on the Chinese public healthcare system. As constraints are eliminated, the intention is for foreign healthcare providers to establish larger-scale hospitals throughout China – to be run alongside smaller healthcare facilities – leading to an overall improvement in medical services across the country. Also the provision of foreign-run hospitals is planned to play an important role in meeting the needs of patients seeking higher standards of healthcare services.

As the new policy is implemented and a positive effect on the Chinese healthcare sector is delivered, patients will be rewarded with a better choice of medical care, with benefits to be gained from overseas expertise. 

The proposed policy reforms – enabling increased foreign investment in the private healthcare system in China – will mean more competition and an improvement in medical standards through overseas firms looking to capitalize on the opportunities being implemented by the Chinese authorities.

BUT ALL IS NOT SO WELL IN THE LAND OF THE RISING SUN

Unfortunately, the record on support for private healthcare is spotty. As China began to loosen healthcare restrictions at the beginning of the past decade, a decision was made to allow the sale of selected hospitals to private investors. Health authorities hoped this would allow local health bureaus to offload underperforming facilities and provide an opportunity for state-owned enterprises (SOEs) to divest non-core assets while at the same time seeding a private medical system that would alleviate strain on crowded public hospitals. Over the next several years, significant numbers of mid-size/county hospitals and SOE hospitals were privatized. In some cases, facilities were granted to the staff, with all employees receiving shares, but in many instances, hospitals were sold to real-estate developers with no prior experience in healthcare. Many hospitals, once privatized, placed significant emphasis on short-term profits, often at the expense of service quality (and, in some cases, medical ethics). Sales of medicines were a key source of those profits and there was a built-in incentive to overprescribe and charge high premiums to patients.

In China, physicians are licensed to practice at a single facility. According to regulations, doctors choosing to practice at private hospitals had to forfeit affiliation with their government facility thus exiting the path for promotion through physician ranks as well as ending the process of academic advancement. Top-ranked physicians such as department chairs and recognized experts, already comfortable with their position were understandably reluctant to leave their posts. Moreover, physicians in the middle of their careers and even talented younger practitioners the rising stars were similarly disinclined to enter private practice and render stagnant their careers.

Leaving some to say China's first attempt at private healthcare can be seen as a complete failure a system comprised of poorly managed facilities staffed by medical personnel whom the vast majority of patients had no interest in patronizing. By taking a portion of public hospitals "offline" and creating private hospitals which Chinese medical consumers actively shunned, a plan to create a private sector of medical facilities to ease demand on public resources had in fact resulted in just the opposite: more patients now crowded into even fewer facilities. Burdened with poor management and staffed by physicians with no reputation, private healthcare in China quickly earned a dismal reputation among medical consumers one that it has yet to successfully shrug off. High drug prices also tainted the public's association with private healthcare and reflected poorly on the industry image.

Many have speculated about the role of private healthcare, including foreign-invested private healthcare, under this new medical system. Although the original language of the healthcare reforms does mention private healthcare (and commercial insurance), it is only within the past several months that regulators have begun to more fully articulate their position on private medical facilities. At this juncture, there are strong signs that the government is preparing for a re-boot of private healthcare and this time, they intend to get it right.

Opinions on further lifting restrictions to private hospitals," co-authored by the National Development and Reform Commission (NDRC), Ministry of Health (MOH), Ministry of Finance (MOF), Ministry of Commerce (MOC), and Ministry of Human Resources and Social Security (MHRSS). The opinion offers a number of regulatory enticements to encourage private investment in healthcare facilities including the opportunity to participate in basic medical insurance reimbursement systems and favorable tax policies. It also paves the way for 100 percent foreign-owned healthcare facilities. 

GETTING PHYSICIANS ON BOARD

Allowing top-level physicians to retain their positions and standing in government hospitals while practicing part time in private settings is the key to the future of private healthcare in China.  Going forward, physicians will likely be required to spend a certain portion of their time in grassroots settings, but they may also be allowed to enjoy some of their newfound freedom practicing in private clinics and hospitals. The most recent and significant development in this vein comes from the Beijing Municipal Health Bureau, which has allowed licensed physicians to work simultaneously at a maximum of three hospitals.

Healthcare authorities are no doubt hoping that an upper-tier private health system will emerge to lure more affluent medical consumers away from public institutions, thus freeing more resources for patients relying solely on basic government insurance programs. The MOH and other government agencies have repeatedly mentioned their intention to encourage commercial health insurance. This will also ease the burden on public/government medical institutions, and may well enable a larger population to access private healthcare

A CREATIVE PARTNERSHIP TO FINANCE YOUR HEALTH CARE PROJECT

HEALTH CARE PARTNERING WITH A NON BANK LENDERS

By MELVIN J. HOWARD

The advent of non-bank lending institutions, whose only business is making loans. Have opened new doors for Physicians and Hospitals who need capital to start, build and grow their businesses. Medical facilities in businesses that do not typically qualify for conventional financing have discovered that non-bank lenders offer a viable alternative. Medical facilities such as specialty clinics, physicians practices or small regional hospital centers that are difficult for banks to finance because they are single use properties, or the medical facility fall’s outside the bank's risk profile. Although it might seem that banks and non-banks would be rivals competing for Small Business customers. Increasingly conventional banks and non-banks are collaborating to benefit both the customer and themselves.

Partnering with a non-bank lender benefits the conventional lender in several ways. Perhaps most significant is that such a partnership can provide a bank an opportunity to say "yes" to a prospective borrower. Banks receive numerous loan inquiries through their broad networks of branches and business development officers. Many requests are turned down because they do not fit the bank's desired risk profile. However, these same prospects are likely to have deposits and/or other banking needs, both of which are desirable to a bank for its operations and overall profitability. Loans referred to a non-bank lender provide an opportunity for a bank to outsource loans it cannot approve while maintaining the profitable, non-credit portion of the relationship.

Non-banks can also serve as an outplacement resource for a bank's existing credit situations that no longer meet its desired risk profile. For example, as a result of a merger or acquisition, a bank may find that it now has a number of loans that do not fit its risk profile. A lender may also wish to outplace a loan that is performing, but is no longer desirable due to changes in loan-to-value, covenant violations or changes in operations. A non-bank lender may be able to refinance the loan, usually over a longer term and without covenants, thus improving the customer's cash flow and stability and removing the risk from the bank's balance sheet without impacting the remainder of the bank relationship.

A partnership between banks and non-banks ultimately benefits the customer. First and foremost, a non-bank often provides access to financing that is not available from a conventional lender. Furthermore, the customer's borrowing needs are met in a permanent way. Term loans do not have to be balloon payments, eliminating the need for a borrower to refinance the loan in 5 or 10 years. Therefore, the costs associated with a long-term loan (i.e. appraisals, environmental reports, and legal costs) are incurred just once.

When working with a non-bank lender, a customer can be assured that the lender is focused entirely on the loan transaction. Because a non-bank lender is interested only in the loan transaction, there is no need for a customer to unwind its banking relationship or move its deposit accounts. Many non-bank lenders have earned "preferred" lender status enabling them to provide quick turnaround on loan decisions with a high level of expertise in the loan process, thus providing a customer with painless fulfillment of it financing need.

Key to understanding how the bank and the non-bank work together, is an understanding of how they are different. Aside from the organizational or structural differences, how does a non-bank lender differ from a conventional bank? First, non-banks' only business is that of making loans. They do not take deposits or sell other services such as payroll, cash management, etc.

Contrary to popular opinion, non-bank lenders are not necessarily more aggressive in their evaluation of a loan request. However, because their loans are not funded by deposits and because they are not subject to the same set of regulations as banks, the non-banks can and will consider industries and situations conventional lenders will typically shy away from. Examples of industries that non-bank lenders will consider include gas stations/convenience stores, auto body shops, car washes, restaurants and the hospitality industry (hotels/motels). In addition, non-bank lenders are willing to consider situations, such as start-up businesses or businesses/individuals with problematic credit histories, which are generally perceived as being higher-risk.

Non-bank lenders can also be flexible in other ways. For example, non-bank lenders are typically long-term lenders, with a desired loan term of seven to 25 years, depending on the use of loan proceeds. In addition, many non-bank lenders lend nationally and are not restricted to a particular region or "footprint." Lastly, non-bank lenders often take a more holistic approach to a loan request, particularly with regards to collateral. As business assets may be insufficient to adequately secure a loan, a non-bank lender will often look to the availability of other assets as part of the entire collateral pool.

As we often hear, small and regional clinics and hospitals are the backbone of rural communities. They are often also the backbone of a bank's branch deposit base and overall profitability. By partnering with a non-bank lender, a bank can benefit both itself and its health care commercial customers.

The Constant Dependence On Fossil Fuel And The Hidden Cost To Public Health

And The Insurance Industry As Well As Society That Will Eventually Pay

It’s not easy being green

By Melvin J. Howard

Let’s discuss the relationship between fossil fuels, the future of the world's most powerful cartel, the changing climate and the powerful industry that loses big bucks on changing weather patterns. Many of the environmental problems we face today result from our fossil fuel dependence. These impacts include global warming, air quality deterioration, oil spills, and acid rain. Can we touch on that ever important "oil price range" that target price range per barrel of oil within which both producers and consumers are happy to continue "business as usual". But we can't discuss that without also talking about that thing at the heart of the oil markets so despised in all our free market teachings the cartel in this case, the OPEC cartel, of course. Given what's happened in Iraq with Iran not too far behind and continuing US policy towards OPEC countries, we might see where OPEC might be headed in the future. Indications are predicting that the OPEC cartel may face tough times ahead and the outlook for the fossil fuel industry in general.

Despite skepticism, the huge global insurers and reinsurers accept climate change as fact. Furthermore, they accept that climate change is induced by human activity. And, climate change is costing them big bucks. As powerful advocates of the Kyoto Protocol and with Trillions of dollars to vote with in the capital markets, the insurance industry has both the motive and the power to do something about climate change for the first time in history. Let's define what a cartel is a cartel is formed when a dominant group of suppliers or producers of a product conspire to keep prices artificially high. Basically, they conspire to hold back supply so that prices are held above where they would fall if you allowed full competition between these producers. The most powerful cartel in the world is, of course, OPEC the Organization of Petroleum Exporting Countries. It consists of 11 countries altogether and they are Saudi Arabia, Iran, Iraq, Qatar, UAE, Kuwait, Nigeria, Algeria, Lybia, Indonesia and Venezuela. For various reasons, OPEC does not want the price of oil to get too high, either. And so the price of oil ends up being managed within a certain magical price range.  What will happen to it now that America the world’s largest oil consumer is at the table?" Isn't it bizarre that, for the first time ever in the history of big cartels, the biggest customer of the cartel, the United States, actually has a seat at the table of the cartel?

These days, it's not just the environmental movement and the health care industry and some concerned shareholders that are going into battle against the oil giants. Another set of equally formidable industry giants the global reinsurance companies are starting to flex their muscles in this global battle for green fuels over fossil fuels. Reinsurance companies basically provide insurance to the direct insurance companies that we are more familiar with, who insure our houses, cars and businesses. The two biggest of these the European based Swiss Re and Munich Re - provide insurance to insurance companies all over the world, to limit the losses of those insurance companies, just like we limit out losses by buying insurance on our house.  Just like you have to go to Texas to talk oil, you have to go to Switzerland and Germany to talk about important worldly insurance issues. Apparently, not all insurers are quite so active in this mission to stem climate change, and it seems that some of the US insurance companies are not so serious about slaying the fossil fuel dragon.

The Future

Quite undeterred by the finding of the UN Panel on Climate Change and the 30 years of study at the big reinsurers, some consultants and researchers in the oil industry are determined to believe that fossil fuels do not cause climate change. Many oil industry analysts see the demand for, and use of, oil continuing to increase for decades to come and can't see how transportation can get away from the fossil fuels. But, then again, so people with wood chip cars and buses early in the twentieth century might have once thought about their dependence on chopping down trees for transport. Where is the status of renewable energy to some people's amazement, the environmental community is starting to work more with the investment community in the battle against global warming.

The method of allowing the market to cut emissions quickly where it is cheapest and easiest to do will presumably have the least detrimental effect on the health of the economy and people. I am very mindful of the our environment but I am also an advocate of using the market and science to solve society most complex issues. I am an advocate for Clean Development Mechanisms which means funding "clean energy" projects in developing nations. Many people fear that credit accumulation or emissions offsets gained under some market methods may be the most wide open for abuse and therefore may not bring about real change in the battle to stem the release of greenhouse gases into the atmosphere.

Back in 2000 working with the State of New South Wales Forestry Department and also closely with the forest investment divisions of global financial institutions such as US-based John Hancock Insurance Company, the stage was set for the first international market in carbon futures, backed by the trees in new and growing forests in Australia. These carbon-based instruments were to be based on the quite controversial provision in the Kyoto Protocol whereby "Carbon Sinks" such as certain forests and forest management practices, can be used to accumulate credits in carbon emissions trading programs. However, this world-first futures market collapsed, mainly due to the controversial nature and uncertainties surrounding the definition of Kyoto Forests and Carbon Sinks. A senior research scientist at the National Oceanic and Atmospheric Administration (NOAA) Geophysical Fluid Dynamics Laboratory, and more marked effects are likely to come, according to models developed by climate scientists around the world. Projected effects of global warming on precipitation throughout the world can be summarized in a single sentence, areas that already get a lot of rainfall such as the equatorial and subpolar rain belts will get more, and areas that get little such as the subtropical dry zones will get less.

The Hidden Cost

Fossil fuels, coal, oil, and natural gas are America's primary source of energy, accounting for 85 percent of current US fuel use. Some of the costs of using these fuels are obvious, such as the cost of labor to mine for coal or drill for oil, of labor and materials to build energy-generating plants, and of transportation of coal and oil to the plants. These costs are included in electricity bills or in the purchase price of gasoline for cars. But some energy costs are not included in consumer utility or gas bills, nor are they paid for by the companies that produce or sell the energy. These include human health problems caused by air pollution from the burning of coal and oil; damage to land from coal mining and to miners from black lung disease; environmental degradation caused by global warming, acid rain, and water pollution; and national security costs, such as protecting foreign sources of oil. Since such costs are indirect and difficult to determine, they have traditionally remained external to the energy pricing system, and are thus often referred to as externalities. And since the producers and the users of energy do not pay for these costs, society as a whole must pay for them. But this pricing system masks the true costs of fossil fuels and results in damage to human health, the environment, and the economy.