Susan PennPage 110/09/2018
Kit Menkin’s Leasing News Wednesday, June 20,2001
Headlines—
Greenspan Says Weakening Economy Tightening Credit
Former Cit Ceo Files for $28 Million from Tyco Acquisition
'Financial Destinations' Web Seminar June 27-28 Web Cast
EOriginal—Article 9—In Depth
CIT CEO Files to Sell Shares Worth $28 Million
By Laura Smitherman, Bloomberg
Albert Gamper, who got $16 million of restricted stock to stay at Tyco
International after the company bought CIT Group, filed to sell about 518,000
shares in his new employer. That stock is worth $28 million at the current price.
Gamper was CIT Group's chief executive when Tyco acquired the commercial
lender in an $8.7 billion transaction. The executive agreed to be CEO of the
financing unit of Tyco.
Under a previously disclosed contract, Gamper gets 300,000 restricted Tyco
shares and options for 1.2 million shares to remain with Tyco.
Gamper filed to sell Tyco stock he acquired through the exercise of options,
according to filings with the Securities and Exchange Commission. Tyco shares
fell 61 cents today (6/19/01) to $54.14.
The SEC form used by Gamper signals an intent to sell, and filers aren't
obligated to sell any or all of the shares listed. Gamper last sold nearly 45,000
Tyco shares June 4 for $2.5 million in gross proceeds, according to the filings.
Tyco, based in Bermuda and run from executive offices in Exeter, New
Hampshire, is the biggest maker of electronic connectors.
------
Greenspan not worried about effect of tax cut, consumer confidence
Says Weakened Economy Has Tightened Credit
By Marcy Gordon
ASSOCIATED PRESS
WASHINGTON – Federal Reserve Chairman Alan Greenspan said Wednesday he's not worried that the newly enacted $1.35 trillion tax cut will
plunge the federal budget into a deficit as productivity growth slows.
"I'm not, senator," Greenspan replied when asked by Sen. Charles Schumer,
D-N.Y., at a Senate Banking Committee hearing whether he was concerned
about a potential slide back into government deficit spending.
On another economic issue, Greenspan acknowledged that the recent tide of
job layoffs – which has pushed new claims for state unemployment insurance
to more than 400,000 a week – "has got to be a factor in determining the
propensity of people to spend money" and affects consumers' confidence.
However, he added, there hasn't been "any real serious deterioration" in
spending by consumers, a more important benchmark than how confident
they feel.
During questioning, Schumer and several other Democratic senators needled
the central bank chief to express concern over the big 10-year tax cut, given
the state of the economy and the low savings rate of Americans. The tax cut,
recently enacted by Congress, is the centerpiece of President Bush's
economic program.
Greenspan, in his testimony, said the sagging economy has brought more
problem loans and made bankers fairly tightfisted. He cited problems in
retailing and manufacturing and among California utilities.
Bank regulators "need to be more sensitive to problems at individual banks,
both currently and in the months ahead," Greenspan said at the hearing on the
state of the nation's financial system. He also noted weaknesses in the health
care and telecommunications industries.
"We are fortunate that our banking system entered this period of weak
economic performance in a strong position," Greenspan said.
At the same time, the Fed chief reiterated his statement last month that
bankers and regulators are getting better at reducing risks and breaking a
cycle of tighter lending in a slumping economy and expanded credit in a
recovery.
"It is not an easy road, but it seems that we are well along it," Greenspan said.
In his testimony, Greenspan did not discuss the future course of interest-rate
policy.
To ward off recession, the Federal Reserve has slashed interest rates five
times this year. Many analysts predict policy-makers will make a sixth cut at
the end of their two-day meeting June 27. Economists, however, have mixed
opinions on the size of the reduction, with some predicting another
half-percentage-point cut and others leaning toward a more moderate
quarter-point move.
Greenspan's remarks come as personal debt is at an all-time high, and the
amount of income Americans are dedicating to making payments on it is at
levels not seen in 15 years. Mortgage delinquencies and write-offs by credit
card companies are rising, and personal bankruptcy filings could hit a record
this year.
During questioning by senators at Wednesday's hearing, Greenspan suggested
the problem of Americans' low savings rate – which stood at a negative 0.7
percent of after-tax income in April– is tempered by the "extraordinary degree
of productivity from our savings."
Greenspan declined to express his view on a proposal before Congress to
raise the $100,000 limit on deposit insurance coverage, which he has
previously opposed on grounds it would be a subsidy for wealthy people. He
said he preferred to wait until the Federal Reserve's board of governors takes
an official position on the issue.
Financial Fusion Announces 'Financial Destinations' Web Seminar; Industry Experts Offer Thought Leadership to Financial Institutions
Webcast
BOSTON--(-Financial Fusion Inc. announced today the "Financial Destinations on the Web" seminar to be held in a Web-cast format on June 27th and 28th, 2001. The "Financial
Destinations on the Web" seminar will feature Octavio Marenzi, president of Celent Communications, and Gady Costeff, vice president of electronic commerce at ABN AMRO North America. This Web-based seminar will analyze the choices facing retail banking executives and provide insight into winning strategies for these economically challenging times.
"Financial Destinations on the Web" will address the following:
-
Current trends and adoption rates for banking online;
-
The Celent Report on "Ranking the US Vendors of Internet Banking Solutions;
-
ABN AMRO's perspective on what users really want, and how they selected their strategic e-Finance solutions provider, and;
-
Ways to increase customer retention and "share of wallet" through e-banking.
The "Financial Destinations on the Web" seminar is jointly sponsored by Financial Fusion, IBM and Sideware.
To register for these events, visit or call 617-673-1234. Space is limited, so register today.
About Financial Fusion, Inc.
Financial Fusion, Inc. ( provides enterprise-class e-finance solutions to the world's leading financial institutions, fusing applications and middleware on a single, integrated platform. The company builds complete financial destinations for banking and STP solutions for capital markets. All solutions run on the Financial Fusion Server(TM), a 100% Java based, multi-tier architecture, built to open standards. The company's worldwide support network includes offices in 60 countries. Global alliance partners include IBM, Sun Microsystems, Global Crossing, PricewaterhouseCoopers, e-Profile, Intuit and CheckFree. Financial Fusion is a wholly
owned subsidiary of Sybase, Inc. (NYSE: SY).
Financial Fusion, Inc., the Financial Fusion logo and Financial Fusion Server are trademarks of Financial Fusion, Inc.
CONTACT: Financial Fusion, Inc.
Nicole Rowe
617.673.1209
or
For Financial Fusion, Inc.
Kendra Lombardo
617.520.7085
------
Article 9 --In Depth
Susan L. Penn
Manager-Communications and Public Relations
eOriginal
The Warehouse at Camden Yards
351 West Camden Street, Suite 800
Baltimore, Maryland 21201
410-625-5151
410-659-9799 (fax)
Revised Article 9 – Now, you can control electronic assets, or chattel paper.
You know it’s coming, but what can you do to take advantage of fresh opportunities posed by the UCC’s revised Article 9? Twenty-seven states and the District of Columbia have already enacted the new law, and most remaining jurisdictions are expected to adopt it by July 1. That means equipment lessors should revamp their processes by the same deadline, or risk a host of problems ranging from government fines to customer litigation.
Once enacted, the new Article 9 will apply to all transactions within its scope, even those entered into prior to the statute’s effective date. Fortunately, a one-year grace period allows for the continued perfection of security interests that were perfected before the new law’s enactment.
Lessors wouldn’t need to worry if revised Article 9 contained only minor changes. But such is not the case. The Uniform Commercial Code establishes the legal infrastructure for billions of dollars of commerce, and Article 9 defines and regulates the legal rules for secured transactions -- which include commercial leases. Thanks to numerous provisions that affect the treatment of both new and existing lease transactions, the new law sets major changes in motion for lessors across the nation.
Fortunately, many of these changes will benefit savvy leasing companies. But those unprepared for July 1 will miss critical opportunities tomaintain, not to mention grow, their market share.
In a nutshell, here’s what the new Article 9 does:
- Radically changes the rules for UCC filing;
- Includes security interests in certain types of previously omitted personal property, such as commercial deposit accounts, health-care receivables, and commercial tort claims;
- Covers the sale of certain other intangible property, such as promissory notes and credit-card receivables, subjecting these transactions to the UCC’s perfection and priority rules;
- Significantly expands the types of collateral which require a filed financing statement for perfection of a security interest;
- Allows the documenting and authenticating of electronic transactions;
- Provides that chattel paper may exist in electronic form, and that “control” of electronic chattel paper will fulfill perfection;
- Lists criteria that constitute such control.
Clearly Revised Article 9 brings under its purview many transactions that formerly were not included. More important, perhaps, is that the new law also recognizes the concept of electronic chattel.
Going Paperless
This recognition marks a major milestone for lessors. Prompted by the rapid development of electronic commerce and the acceptance of electronic signatures, the federal government has created rules for the high-tech transactions of business. Not only will lessors be able to electronically sell or syndicate leases; the new law allows leasing companies to reap huge savings by going paperless.
Under Revised Article 9, "control" of electronic chattel paper is deemed to exist only if the records comprising the paper are created, stored and assigned in the following way:
1)only one authoritative copy of the record exists that is unique, identifiable and, with certain limited exceptions, unalterable;
2)the authoritative copy identifies the secured party as the assignee of the record(s); and
3)the authoritative copy is communicated to and maintained by the secured party or its custodian.
But this definition of control is problematic in at least two ways. First, can truly unalterable records even be created? And secondly, without a secured party having control, can a lessor convince a secured lender that he or she should be comfortable with this type of collateral?
A Baltimore-based company may have solved these problems. eOriginal Inc. has created a software solution that enables leasing companies to conduct business paperless, while adhering to all aspects of Revised Article 9 at the same time. Listen to George Deehan, president of the leasing division at eOriginal:
“Most lessors are spending lots of money hiring people and putting costs into their business as they get ready to march down the road to cost reduction. In the meantime, we already have a product that lessors are easily integrating into their existing processes to make them far more efficient, and save them significant amounts of money.”
Because the eOriginal™ system is completely paperless, cost savings add up when document handling, storage space, and mail and delivery charges are eliminated. Explains Deehan, “We’ve done the research, and we understand this legislation. We’ve created a process that starts with an original signature, meets the legal requirements, is insured, and doesn’t have to be handled by 10 to 20 people. We believe our system is the only solution available today that complies with all Revised Article 9 requirements.”
"Revised Article 9 is an enabling legislation that will allow for the electronic sale, securitization and transfer of a lease agreement,” said Cole Silver, vice president and general counsel for Princeton eCom. "That means lessors will now be able to syndicate as well as perfect leases electronically! There is a tremendous opportunity here for early adopters."
To calculate the savings incurred when using its system, eOriginal itemized the costs of processing an electronic document versus the costs of processing a paper transaction. Results were startling: Handling costs per electronic transaction ranged from $20 to $50, while costs per paper transaction ranged from $100 to $350, and higher. Says Deehan, “Technology doesn’t get any better than this.”
Properties of “Paperlessness”
So what makes a lease electronic?
- The lease is executed with electronic signatures rather than blue-ink-on-paper signatures;
- The electronic signatures are unique, identifiable and unalterable by others;
- The document is legally enforceable, negotiable, and fully transferable; and
- It serves as a permanent Electronic Original™ source record in electronic form.
Here’s how the eOriginal™ system works. A strategically designed back-end program accepts document images from existing systems, or generates new electronic documents. Users can then assemble complete electronic lease packages, which are executed with digital signatures (see box).
The eOriginal™ system then creates Electronic Originals™that replace blue-ink-signed paper originals and meet the requirements of electronic signature laws and Revised Article 9. All authorized parties have instant access to these Electronic Originals™, via the Internet, for the life of the lease documents.
Of course, some benefits of the eOriginal™ product are more obvious than others. While lessors slash their handling, storage and paper costs, lessees receive faster service and round-the-clock access to their documents. Also, transactions are funded more quickly because lenders are notified electronically within seconds, rather than waiting for overnight mail. Vendors experience quicker turnaround on their deals, and transactions are automatically protected with third-party insurance. These significant conveniences give lessors and their vendors more time to sell while spending less time on, you guessed it: paperwork.
Training employees on the eOriginal™ system is also fairly simple. eOriginal trains the customer organization’s trainer, and the trainer then trains employees. Individual support is available by phone. “We’ve discovered that traditional training mechanisms aren’t effective,” says Mike White, product manager for eOriginal’s leasing division. Group training usually bogs down when a minority of students have difficulty understanding the material. Thus, one-on-one training that can be done in-house tends to work best.
Implementing eOriginal is quick and easy as well. New customers can usually move from inception to full-time operation in just 90 days. Says White, “That time can be shorter, depending on the customer’s individual circumstances.”
Although the eOriginal product is new, the research behind it took years of hard work. In 1994, a transaction attorney named Steven Bisbee began researching e-commerce for real estate financial services. Bisbee convinced Douglas Trotter, a cryptologist who had managed messaging systems for the National Security Administration, to help him map out the business processes that could be handled electronically.
Together, Bisbee and Trotter chose the tools they would need to replicate their business processes, and then began considering legal issues. Using a combination of open-architecture software, hardware, security protocols and industry-specific procedures, Bisbee, Trotter and others designed a product that would work over the Internet or private networks to let companies meet in cyberspace to do entire business deals quickly and securely – and completely electronically. By 1996, Bisbee and Trotter had formed eOriginal and had perfected a process to enable the electronic creation, execution, transfer, trade, storage, retrieval and syndication of protected Electronic Original™ documents.
How it Can Work for You
Today, eOriginalis helping a number of leasing companies slash costs while adhering to Revised Article 9.
Once contacted, eOriginal analyzes a company to determine whether it has sufficient volume to realize the savings that going paperless will produce. If the volume is adequate and a leasing company commits to using the system, eOriginal then installs its product on a time-and-materials basis into your existing information technology system. Customers pay for either a minimum number of transactions per month, or a minimum monthly fee and subscriber fee. Maintenance and upgrades are included in the cost.