Posted on 09/29/2008 9:42:02 PM PDT by goldstategop
I’ve seen and heard the anecdotes about McDonald’s franchises getting denied credit spread everywhere over the past week.
Stop pounding the panic button. Don’t 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 McDonald’s 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 company’s franchise owners, who are spending up to $100,000 to remodel and update each restaurant to accommodate the restaurant chain’s plans to overhaul its drink options.
“There are no credit issues at McDonald’s,” 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 shouldn’t 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. It’s 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 Washington’s 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.” That’s 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 “isn’t 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 world’s banks and financial institutions are really worth - without getting any help from government.
Here’s a link to an article dated a year ago. There’s words of wisdom in it:
http://www.foxnews.com/story/0,2933,259241,00.html
I use plastic for every McDs transaction—the guy in front of me in any random drive thru line uses credit 50% of the time at least.
I have tried to use credit at Mom and Pop convenience stores and am told I have to make minimum purchases of $5 to do so. If I have the cash, I use it, if I don’t, I walk, and inform them they are breaching the guidelines of their credit card lending policy.
The margins in your local “mom and pop” corner store are often so slim that your use of a credit card for a sale under say $5 ends up costing them money.
Credit cards charge businesses a “per use” charge. At certain levels of sale, it’s a “per transaction” flat rate fee, while for larger sales it’s a percentage.
That’s why I was so shocked when rotten ronnie’s started accepting plastic. They must have gotten some sweetheart of a deal.
You are correct, which is why I avoid going into the Mom and Pops stores! They cut off their nose despite their face! And their prices are usually higher than the places that accept credit cards, so its just a different business model! I think their cash only strategy is probably a simple way out of paying those annoying income taxes.
Not always. Often, even very large and profitable corporations must exercise lines of credit to stay current with expenses. It's about cash flow.
Not too many. McDonalds only started on their second cow last week!
It’s easier to move credit than cash. Kinda like swiping your credit card at the gas pump vs. having to walk in, stand in line, hand the clerk cash, wait for him to make change, and then have a pocketfull of metal rattling around. For McD’s, easier to have a third party say “yeah, we’ll cover that later” than have to move thousands in cash before the deal completes.
¿¿¿Yo que´iro??? ¿¿¿Taco Bell??
It’s 1987 all over again!!!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.