Bigger isn't better

Article Abstract:

Bank mergers that arise out of the need for cost reduction efforts of the merging banks often fail. Mergers undertaken based on the perceived cost-cutting benefits to be gained by merging banks usually result in failure. Likewise, mergers that implement cost reductions at the expense of customer satisfaction, while initially generating advantages, will most likely result in failure. Banks planning a merger can apply one of two vastly different approaches, or a combination of both, to successfully implement mergers. One approach is based on the establishment of a calling program to be run by a team of middle market bankers. The other approach, patterned after the retail banking model, works by establishing a prescreening process that uses standard norms and procedures as gauges for the awarding of credits in the determination of merger feasibility.

Commercial Banks, Banking industry, Mergers, acquisitions and divestments, Bank mergers

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The junk bond collapse and business credit

Article Abstract:

The sudden rise and subsequent fall of the popularity of junk bonds, leveraged buyouts, and highly leveraged transactions will have a significant impact on financial markets and the availability and costs of business credit. The consequences of that impact include: more money will be lost on junk bonds; junk bond financing will remain out of favor for a very long time; and tighter commercial credit standards will return. The reactions of financial managers should include: immediate attention to the most likely sources of capital in the current market by those companies needing to borrow in the near future; initiation of discussions with potential lenders before credit needs occur; and directing attention to local, business-oriented banks with a small-business focus.

Analysis, Forecasts and trends, Junk bonds, Commercial credit

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The problem with investment

Article Abstract:

The ability of the United States to remain competitive in the international market is being threatened by its low level of investment. The problem is attributed mainly to a tolerance of inflation and a tax policy that is pro-comsumptive in nature. In its attempts to increase capital investments, the government created Individual Retirement Accounts and instituted the Tax Reform Act of 1986. However these policies, while intending to enhance investments, have only served to produce a negative effect on new savings. The key to generating new investment capital is the adoption of an approach that will expand the amount of money saved relative to the money consumed.

Foreign investments, Economic aspects, Capital investments

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