Author Archives: Emily Holbrook

About Emily Holbrook

Emily Holbrook is a former editor of the Risk Management Monitor and Risk Management magazine. You can read more of her writing at EmilyHolbrook.com.
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GM Files for Bankruptcy

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And another one bites the dust. Or, at least files for protection from completely biting the dust.

This morning, General Motors announced that it would file for bankruptcy with the U.S. Bankruptcy Court in the Southern District of New York. This came as no big surprise to many, as the Obama administration has been pushing for this outcome — just as it’s doing with Chrysler.

Under the proposed restructuring, about 60% of the new GM would be owned by the United States, about 12% by the governments of Canada and Ontario, a union health trust would own 17.5%, and the company’s current bondholders would get 10%.

The U.S. government has already invested $20 billion into the failing auto giant and they plan to invest another $30 billion during and after the GM bankruptcy process. But will all this save this once mighty flagship of American car manufacturing?

GM is much larger and has a more far-reaching scope than that of Chrysler, which makes this restructuring plan a gargantuan task. But Chrysler seems to be on the right path for reorganization — a federal bankruptcy judge has approved the sale of most of Chrysler’s assets to Italian automaker Fiat.

And I leave you with one last piece of automaker news: If you’re looking for GM on the Dow, you won’t find it. The company’s listing has been replaced by Cisco, marking an end to GM’s 89-year run on the coveted list of 30 U.S. companies.

Today marks the day we have witnessed the largest industrial bankruptcy in U.S. history. Let’s hope we don’t see another company break that record anytime soon.

GM's former CEO, Rick Wagoner, was aked to step down in late March by the Obama Administration.

GM's former CEO, Rick Wagoner, was aked to resign in March by the Obama administration.

The Bat Colony’s Bubonic Plague

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Bats. They’ve always gotten the short end of the stick. No one wants them as pets, people run in their opposite direction and they’re genuinely creepy. But bats also act as a natural insecticide and farmers rely on them as much as they would an irrigation system or tiller.  

So the fact that a rare disease is killing off millions of the tiny, winged creatures has farmers downright worried. Much of the bat population has become infected with a fungal disease known as white nose syndrome, which manifests itself as a powdery substance on the face of the bats.

The following states have experienced severe bat decimation:

  • New York                                      bat1       
  • Vermont
  • Massachusetts
  • Connecticut
  • Pennsylvania
  • Virginia
  • West Virginia

The problem has gotten so bad that more than 60 organizations have urged congress to approve funding for research of the syndrome.

The Forest Service estimates that the die-off from white nose syndrome means that at least 2.4 million pounds of bugs will go uneaten.

Why should you care? Because fewer bats means more pesticide use on farms, meaning more costs to farmers and hence, higher costs to consumers. The environmental effects of pesticide use are even worse.

Will the East Coast bat population survive this killer disease? Stay tuned.

An End to the Recession in 2009?

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That’s what economists are saying. And not just any economists — a panel of 45 economists from the National Association for Business Economics Outlook (NABE). In the report issued yesterday, the panel stated:

  • They expect a further decline in economic activity during the second quarter, making for the most severe economic contraction in over half a century.
  • The near-term weakness is largely due to a sharp retrenchment in business investment.
  • Rising government spending will provide vital support to the economy, as the only major expenditure area posting positive growth in 2009.
  • A modest second-half rebound in real GDP is still expected.
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  • Growth in 2010 is slated for a return to near its historical trend, with real GDP rising 2.7% on a fourth quarter- to-fourth quarter basis.
  • Labor productivity remains impressive and is expected to improve.

Chris Varvares, NABE’s president, stressed that though economic recovery is in sight, the economy will continue in a downward spiral for the next several quarters.

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According to the report, the key downside risks remain continued large job losses, no improvement in credit conditions and further sharp declines in home value.

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“The good news is that the NABE panel expects economic growth to turn positive in the second half of this year, with the pace of job losses narrowing sharply over the remainder of this year and employment turning up in early 2010,” Mr. Varvares said.

Though the report claims the next several months will remain challenging for businesses and consumers, let’s hope Mr. Varvares and NABE are correct in their long-range future predictions.

What do you think? Do you agree with NABE’s forecast?

shutterstock_recovery2

A Revolution in Risk Modeling

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Let’s hear it for Jesper Andersen and Toby Segaran, two geniuses who saw an opportunity after AAA-rated companies began to fail in the midst of the economic collapse. Their solution?  Sounds obvious — a more effective corporate credit risk modeling system.

So the two entrepreneurs and analytics gurus put their heads together to form freerisk.org, which is:

a project with the goal of making freely available the data, algorithms and tools necessary to perform risk modeling. We believe that risk management is too important to society to be an arcane subject or competitive advantage.

And the risk management community screams “Hallelujah!”

Most of the numbers are crunched by a team of volunteer finance fanatics who rate companies using crowdsourcing. The site even offers an open application programming interface (API), which lets users design their own risk-crunching models.

Will this site serve to forever correct the corrupt and biased ratings of agencies such as AM Best, Moody’s and Standard & Poor’s?  Maybe not, but it’s a great alternative.