Financial Mines

News and notes from the business reporters for the Connecticut Media Group.
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Archive for December 3rd, 2012

Rising college costs could generate $20 billion a year in loans

Monday, December 3, 2012 by:Rob Varnon
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Student loan debt could be rising. File photo for D.C. Occupy protest 2011 by AP

SNL Financial is predicting the cost for higher education will leave students about $15 billion to $20 billion a-year short in funds opening the door for a small number of big lenders to profit on student loan originations.

In a post election analysis if the student loan market, SNL found that Sallie Mae, Discover and Wells Fargo are the dominant private lenders in the market since the U.S. Department of Education started making direct loans, instead of allowing private lenders to offer government-backed ones in 2010.

For the current school year, $108 billion in federal direct loans were originated and $7 billion private loans, SNL said, citing Standard & Poor’s data.

While there continues to be a demand for education, which allows schools to increase prices, debt burdens and defaults by newly-minted grads is taking its toll and presents challenges for the lending market, schools and students. Much of the problem remains the job market, where the youth of America are getting pummeled as they seek entry level career-building jobs while facing competition from experienced workers who were washed out of other positions by the bad economy and are now starting over themselves.

The concern going forward is whether continued defaults and lagging jobs will squeeze credit availability and ultimately erode the employment situation in universities which will have to make choices about what courses of study are most profitable and in demand as well as what price to charge.

Despite the headwinds, SNL predicts the gap between what students have to fund their education and what it costs, will be about $15 billion to $20 billion a year, leaving a sizable market for the key players.

And there continues to be a secondary market for these loans, including the legacy ones that were backed by the government, SNL said.

Sallie Mae’s portfolio alone for the third quarter totaled $171.9 billion, of which 23.4 percent was private education loans and 76.4 percent legacy government-backed loans.

Pitney Bowes selects ex IBMer as new CEO

Monday, December 3, 2012 by:Rob Varnon
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Incoming Pitney Bowes CEO and President Marc Lautenbach

Incoming Pitney Bowes CEO and President Marc Lautenbach. Contributed photo

Pitney Bowes announced Monday former IBM executive Marc B. Lautenbach has been installed as the president and and chief executive officer of the Stamford-based business technology company.

Pitney Bowes, best known for its mail machinery, has been transitioning into a technology-focused business rolling out software and hardware communication solutions for business customers of multiple sizes.

Lautenbach, who has had a 30-year career at IBM, most recently served as managing partner of IBM North America Global Business Services. He has also held executive positions involving global and Asia-Pacific operations for IBM.

He succeeds Murray D. Martin, who is retiring as Pitney Bowes chairman, president and CEO. Martin has resigned from the company’s board of directors, but will continue to work with Lautenbach on an effective transition.

Shares of Pitney Bowes were up 3.53 percent to $11.61 in early afternoon trading.

NU job cuts finally annoy AG

Monday, December 3, 2012 by:Rob Varnon
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So, it’s not just a procedural problem? Who would have thunk it?

Attorney General George Jepsen is questioning Northeast Utilities’ compliance with a state agreement requiring the utility to notify officials of any layoffs that occur as a result of the merger with Mass.-based NSTAR.

The AG, with State Consumer Counsel Elin Swanson Katz, filed an objection with the Public Utility Regulatory Authority over NU’s response to questions about its Connecticut staffing levels. In March, NU agreed to provide notification to the state of layoffs or closings related to the merger with NSTAR. In exchange, the state approved the merger.

According to the AG’s filing, NU has confirmed 319 people have left NU since the merger and some of these departures were involuntary.

NU, upon questioning from PURA in October, said the job cuts did not meet the threshold of the agreement so no notification was necessary.

Today, the AG seems to disagree and is no longer giving NU the benefit of the doubt regarding this matter.

Back in September, when Hearst Connecticut Media contacted the AG and NU after receiving tips about 33 job cuts, Jepsen saw this as a procedural issue that needed to be corrected by establishing a reporting system:

“The Attorney General was not notified about any layoffs. The Office received several inquiries and as a result, we reached out to NU and was advised that approximately 33 layoffs were occurring in Connecticut. We were further told that they are not linemen or in service-related positions, and the company stated that it met the proportionality requirement as set out in the settlement agreement,” the AG’s office said Monday. “However, the fact that we needed to reach out to NU makes clear the need for this Office and the Office of Consumer Counsel, with NU, to develop a reporting process to ensure the terms of the settlement agreement are being met with any job reductions for the future.”

The original post on the mines can be viewed here:

http://blog.ctnews.com/financialmines/2012/09/10/nu-cuts-jobs-might-have-violated-state-agreement/

Starting over: Job polarization tugs economy

Monday, December 3, 2012 by:Rob Varnon
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The Connecticut Labor Department reported Monday the state’s middle-wage jobs have borne the brunt of job losses during the last few years.

While higher income jobs, those earning more than $3,333 a month, saw their share of all wages rise to 49 percent from 39 percent between 2002 to 2010, the take of income for middle income jobs fell.
According to the report, jobs paying $1,251 to $3,333 a month account for 29 percent of wages, down from 35 percent.
Overall employment for all wage brackets was down for the period.

The implications of this reach into the larger economy, where consumer spending could remain weak, but it also leaves households facing the task of starting over as people in the middle fall into the entry level job pool. It’s also left businesses facing a potential leadership vacuum.

With less experienced mid level workers to chose from, businesses will have to rely on less experienced workers for future leadership. That is of course assuming,those in supervisory positions actually retire.

What the Labor Department found is that, like numerous reports here in the Mines and in other outlets have shown, the job market appears to be in a tug-of-war between the highest paying jobs and the lowest paying ones, and ultimately ripping the middle apart.