Posted on 09/29/2008 9:42:02 PM PDT by goldstategop
Ive seen and heard the anecdotes about McDonalds franchises getting denied credit spread everywhere over the past week.
Stop pounding the panic button. Dont blame the bailout flame-out. Memo to the McChicken Littles: The sky is not falling because we refused to fork over $700 billion to failing banks.
The inconvenient truth:
Bank of America said it is not freezing any current or new lines of credit to McDonalds Corp. franchise owners, despite reports citing an internal memo from the fast-food giant advising franchisees of the contrary.
Bank spokesman Larry DiRita said the Charlotte-based bank will continue to honor its obligations to the companys franchise owners, who are spending up to $100,000 to remodel and update each restaurant to accommodate the restaurant chains plans to overhaul its drink options.
There are no credit issues at McDonalds, said Walt Riker, a spokesman for the Oak Brook-based fast-food giant, who added that franchisees have more than 50 other lenders from which they can receive financing. There continues to be more than sufficient liquidity available to our franchisees to fund capital improvements in their restaurants.
The Mother of All Bailouts fails. Life goes on.
Yes, Asian markets are down this morning.
No, you shouldnt jump off a cliff.
More wisdom and perspective from Terence Corcoran at the Financial Post:
it would be unwise to read too much into the Dow plunge, or to link it exclusively to the political circus in Washington. Stocks appeared to be heading lower no matter how Congress voted. Indeed, from the moment congressional leaders announced Sunday they had a deal, filled with anti-market schemes and regulation, stock prices began falling in Asia and Europe. Early yesterday, when it was expected the bailout would be approved, the Dow was down 500 points.
Bailout or no bailout, the stock markets were heading lower as financial markets continue to undergo massive asset revaluations. No matter what elaborate new rescue packages Congress, the Bush administration and the U.S. Federal Reserve bring to the party, the market is going to continue marking stock prices and other assets down until values reach realistic levels.
This is not, nor can it be, the beginning of the end of the U.S. or world financial system. Its simply how the financial market works, how it should work. And it is working, whatever the games being played out in Washington and whatever their belief that governments can resolve the crisis.
Banks all over the world are being knocked down, their stock prices falling and their balance sheets under revision. Troubled institutions are being taken over - Citigroup is taking over Wachovia, AIG is being sold in parcels to groups all over the world, Bank of America bought Merrill Lynch, Lehman is in bankruptcy, Washington Mutual is being taken over by the namesake of the man who held capitalism on his shoulders back in 1907 - JP Morgan Chase. The Japanese banking giant, Mitsubishi, yesterday bought 20% of Morgan Stanley.
None of these deals or markdowns could, would or should have been avoided under Washingtons so-called bailout law. By the time any new version of the law is passed in the days or weeks ahead, more such transactions and takeovers will have taken place.
Doomish comments typically follow such deals. It just seems that there are only going to be two types of banks in existence now, said one portfolio manager, the ones that survive and get market share, or the ones that get gobbled up and have to be euthanized. Thats true enough, but not much help.
Allowed to run their course over time, these market workouts would eventually render the bailout package redundant. As George Bush said of the congressional legislative process, watching markets revalue assets isnt pretty. Markets, over time, will do a much better job of reaching sustainable and realistic values more quickly than any giant state-run rescue effort backed by however many trillions of taxpayers dollars
Now wonder investors were bailing out on the bailout. They had better things to do, such as trying to figure out what the worlds banks and financial institutions are really worth - without getting any help from government.
McDonalds is the third largest land owner in the world, only behind the Vatican and the English Monarchy. And they are close to the the Monarchy (nobody is close to the Vatican, not by a long shot). Of course they can get credit. And if they couldn’t, THEY DON’T NEED IT.
McDonalds has a better credit rating than the US Government.
Our banker assured us that we would have no problems...they have plenty of money to lend to good borrowers.
Did you notice how the talking points have shifted to "no more student loans(!); car loans(!) in the last 24 hours?
McDonald’s franchises are not large corporations. While most are owned by companies that own several stores, the loans are not made to the McDonald’s corporation but to the franchisee.
The reason McDonald’s is involved is that their control over the franchises is so great that they had to be involved in a standardized credit facility. One of my co-workers at BofA prior to the merger went through the training to be able to make these loans, and it even included a visit to the famous Hamburger U.
The pea pickers and commies don’t care. We are going down.
But....but....but if the economy tanks, no one will be able to afford the luxury of the expanded McStarbuck’s new drink offerings...
McD can also stop donating money to support homosexual activist groups.
I have McDonald’s stocks but I'm selling them even at a lost.
I'm going to McD. to spend my last $1. until they stop supporting the homesexuals.
“But it a lousy deal for the taxpayers. If I make some bad investments, the government is not going to bail me out. Especially if I made some careless investments.”
That’s why it should never have been a bailout but a ‘workout’. bailout is not the point - the point was and is to assure liquidity in the markets by getting a market for CDOs. The bill requires treasury to NOT overpay.
Seriously, the taxpayers are the investor class. It was and is a GOOD deal for the taxpayer/investor class, since $1 trillion was lost in ONE DAY and the ‘bailout’ would likely cost no more than 15% of that (or $150 billion).
The market was down almost 400 points BEFORE the vote was taken. The markets HAD fallen anyway. The Asian and European markets went down before the vote, also. Were all those people selling because they knew that the bill would fail hours before the actual vote? No - they were giving the market their ideas of its real value.
“to do is to take government handcuffs like onerous regulations and punitive taxes off the markets.”
While I agree longterm, that wasnt the choice. The choice right now is ‘deal’ or ‘no deal’ on helping the credit markets navigate a situation where multiple banks have gone bankrupt and more are on the way. Doing nothing is a bad idea.
“We don’t know if that is true. I don’t think throwing money at the problem will work. “
It’s not ‘throwing money’. It’s buying distressed assets to help banks clean up balance sheets. Those investments can help support the credit markets and could recoup some or even all the money invested, so its not a money pit.
“Were all those people selling because they knew that the bill would fail hours before the actual vote? “
Actually, yes. Boehner had given indications in the morning that it was in trouble potentially. Had it passed there would have been a relief rally.
The foreign markets were down on Fortis failing, and we had that Wachovia take under.
Wake up folks, banks are falling like bowling pins and people think its ok to be blithe to the crisis.
“You would think the McDonalds owners/franchisees could afford the upgrades out of their own pocket? 100K per store is really not that much.”
There are often advantages to borrowing to make these upgrades, such as deductibility of interest. Yes, I know that deductions are by definiton a subset of actual outlays, but still. Believe me, not every McDonald’s is a “license to print money”. I knew a guy who owned 5 of them, he said only one made enough money to really be worth it. That’s another point; many owners own multiple locations, and the upgrade cost for a slug of 4 or 5 or 8 locations can amount to more cash than the owner is willing to toss out all at once; yet the qty discounts associated with buying that much gear at once can be an economic benefit. Ergo: Big slug of dough req’d; ergo; loan or lease often more desirable than outright cash purchase.
Bottom line: credit-worthy borrowers will still be able to get credit. The way it should be. This entire crisis is due to the imbeciles in Congress pressuring/forcing lenders to lend to people who are lousy risks. These morons can’t even run their own restaurant but they want to micro-manage a multi-trillion dollar economy. God help us all.
Bottom line: credit-worthy borrowers will still be able to get credit. The way it should be. This entire crisis is due to the imbeciles in Congress pressuring/forcing lenders to lend to people who are lousy risks. These morons can’t even run their own restaurant but they want to micro-manage a multi-trillion dollar economy. God help us all.
i don’t care if mcdonalds gets credit or not...ever since they went green, their food sux........
Don’t forget their corporate promotion of homosexuality and gay “marriage”, too.
Any small business owner that will succeed long term won't leave $100K sitting on the shelf. They will leverage it out to $1M or more using lines of credit and invest in growing their business.
And that's a very good thing.
Less money for promoting the homosexual agenda.
There doesnt seem to be a right or wrong side of this. Both sides have strong points. Some of the them are right when they say we need transparency - especially the public. None of us know exactly whats in that 700 billion. We need to know who gets what. Plus, I dont like the Sec of Treasury having a blank check with no oversight person to watch whats going on. That is a door we never want open. We, the public, would never know where the money is going.
One point I see is not being addressed: How is bailing out the banks going to help a homeowner who cannot afford to pay their mortgage payment?
One thing I agree with you one is allowing the market to do its job. I am noticing is how the market is still correcting itself. I see oil dropped to $96 a barrel. House prices will go down and interest rates will go back up. This is how a free market works. Seems our government like any past Kingdom is trying to convince its peasants that they don't know what to do without the King/Queen telling them what to do!
I dont like it when they try to rush things. There is no reason this has to be done overnight. Thats what theyre trying to convince the public.
The big issue Im hearing on reports is if we dont help out the banks they wont be in a position to loan money to companies and in turn companies will have to start laying off people because they dont have money.
Im not sure that this is totally true. Maybe only to badly run companies? Surely small business owners may suffer.
One point I've noticed on MSM that's not being brought up is that a well run company has a good cash flow. They do not have more debt than revenue. Plus, there are banks (mostly local community type banks) that did not dabble in sub-primes and can still do business. They will benefit from this I think.
I dont like the way Repubs & Demrats are putting the pressure on the situation. Im sure they will pass something, but I dont see the rush. Probably trying to impress the voters before Nov?
Where are the economists who know how a free market works? We need their voices, loud and clear.
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