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Congress to the rescue?

BY Ken Clark

Will Rogers had a great line about Congress. They’re very good at two things:

1.) Doing nothing and

2.) Overreacting.

They’ve certainly done something with the passage of the American Housing Rescue and Foreclosure Prevention Act. The question is: What have they done? The National Association of Home Builders, made up of some of the home channel’s biggest customers, seems very happy with the legislation, (click here) and so do many of the nation’s economists, who sleep much easier now that Fannie Mae and Freddy Mac have a lifeline, if needed.

How much might that cost? Good question. Luckily, the independent Congressional Budget Office looked into it and came up with an estimate.

It will cost somewhere between nothing and $100 billion, or possibly more.

(I’m not making this up. Click here to see the actual CBO estimate, and read the middle paragraph on page 2.)

That’s not the kind of laser-sharp analysis that gives me a lot of confidence that Washington insiders know exactly how this legislation is going to affect the housing market.

A straw poll of some of the captains of industry in my Rolodex, gives the clear impression that this industry is generally skeptical of government bailouts

“From my perspective,” wrote Do it Best CEO Bob Taylor via email, “efforts by Congress to craft some type of huge bailout are misguided. So much of this was driven by overzealous speculation, and there should be a cost to the individuals who took those risks.”

In some cases, he added, where fraud or abuse was involved, “some modest assistance for those impacted is warranted.”

Taylor added that the big issue–emphasis on big–today is energy. He recommended all of the following: drilling offshore and in Alaska, easing the permit process for refineries and nuclear plants, exploring alternative fuels and ending U. S. dependence on foreign energy sources.”

One CEO, who spoke on condtition of anonymity, explained that Congressional medicine can often be worse than the illness. “The issue really is the banks’ inability to lend traditional mortgages,” he said.

Kent Porter, vp of Kearney, Mo.- based Porter’s Building Centers, summed up the anti bail-out argument pretty clearly: “If I’m dumb enough to run our company out of business, that’s what I deserve,” he said. “No one will come to our rescue.”

That’s a sentiment that HCN editors have heard expressed many different ways in recent months.

But the American Housing Rescue law will indeed come to the rescue of some borrowers and lenders—including, possibly, some 400,000 homeowners.

In our special section on Orgill, CEO Ron Beal shares some of his thoughts on the topic.

I think foreclosures aren’t the enemy as much as unoccupied houses are the enemy. Empty houses are bad for starts, bad for neighborhood property values and bad for America. (Of course, they’re good for buyers.) If foreclosure laws can be adjusted to allow former homeowners to stay in their homes as renters for a certain period, that could provide relief to industry and families.

Tell us what you think. After all, that’s your Congress spending zero to $100 billion over the next 10 years.

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PRO Group makes key promotions

BY HBSDEALER Staff

Denver-based PRO Group has promoted Brendan Sullivan to director of merchandising, a new position, according to the company.

Sullivan is a 21-year industry veteran who has served in various merchandising and business development positions for Servistar/Coast To Coast and True Value prior to joining PRO Group in 2005.

“Brendan Sullivan’s experience and work style makes him ideally suited to a merchandising director role,” said Steve Synnott, president and CEO of PRO Group, in a statement. “Brendan has worked as a buyer and merchandise manager, and since he joined our company three years ago he has taken a leading role in providing progressive ideas and programs on the merchandising side.”

In addition, PRO Group managing director for the PRO Hardware and GardenMaster divisions, Shari Kalbach, has been named managing director for the company’s Farm Mart division, which supplies independent farm supply retailers.  

Kalbach joined PRO Group in 1997 and is responsible for all of the Group’s distributor relationships.  

“Shari Kalbach has a proven track record as a highly effective executive working with PRO Group distributor members,” Synnott said. “Adding Farm Mart to Shari Kalbach’s scope of work is a natural progression of her role. She excels working closely with our distributor members.”

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Design Within Reach narrows losses

BY HBSDEALER Staff

Design Within Reach, the San Francisco-based specialty home decor retailer with around 70 locations nationwide, saw net losses of $159 million, narrower than the $575 million in losses recorded in the same period last year.

Net sales for the second quarter decreased 3.7 percent to $47.3 million, compared with $49.1 million recorded in the year-ago period.

Still, the retailer saw an improvement in gross margin, a measurement of earnings that takes production and service costs into consideration — gross margin improved to 46.4 percent in the second quarter, compared with 44.3 percent in the same period last year.

In-store sales were $32.6 million, up 2.2 percent from last year. Sales from phone and the dwr.com Web site decreased 17.5 percent to $10.4 million.

DWR also said it predicted that “in light of the challenging economic environment, the company believes revenue will be flat year over year.”

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