Young people embrace financial literacy; learn ins and outs of adult …

Prior to her “shopping expedition,” Penny sat around a table with fellow seventh- and eighth-graders from Friendship Blow Pierce Public Charter School in Southeast staring intently – frowning at times – at a Samsung Galaxy tablet trying to figure out how to make her modest salary stretch. The students, divided into several smaller groups, received instructions, researched a family budget and then wrestled with how best to spend their money.

One instruction adult volunteers gave the group was to spend or save all of their income.

Penny, a 13-year-old eighth-grader, said after participating in a four-hour financial literacy simulation that the experience gave her a better appreciation for the sacrifices and challenges her parents make in caring for her and her siblings.

For this exercise, Penny played a butcher with no children, making $30,000 a year before taxes and operating with a $2,500-a-month budget. She, unlike several others, didn’t have a spouse to share the financial load.

“I’m budgeting and saving, and I have to stick to the budget. I have to stay within my budget or end up with a small amount of money,” she said with a smile. “The first time I came, I didn’t apply what I learned, but now I will because it has an impact on your life.”

Ed Grenier III, president and CEO of Junior Achievement of Greater Washington, said that that’s his organization’s goal. In a society that has seen widespread economic and financial turmoil not seen in decades, Grenier explained, financial literacy has gained added currency.

“Junior Achievement was founded in 1919 to teach kids how business works,” he said. “It evolved into financial literacy, entrepreneurship and work readiness for middle and high school kids. “We’ve broadened the focus. We give them the fundamental basis to be successful in a global economy.

“We recruit adult volunteers from companies or individuals. We teach our program through adult role models who bring their own experiences. The kids learn personal budgeting, lessons on transportation, health care, recreation, dining out. Teaching and training is a big part of what we do.”

About 53,000 teens in the Washington metropolitan region have gone through the Junior Achievement program, and 4 million young people in total have been served. The financial literacy program is available in 125 countries, where 10 million children enjoy the program. In the US, 120 chapters are devoted to teaching young people to become comfortable and proficient with budgeting and finance, debit and credit, compound interest, taxes and investment portfolios.

After the welcome and introductions by Junior Achievement staff in the auditorium, the big reveal turned out to be opening two large wooden sliding doors to the mall populated with storefronts of some of the region and country’s most recognized businesses. Some of them include Clark Construction, CVS, Omega World Travel, Volkswagen, Goodwill, Dominion Light, Northern Virginia Community College and Monumental Sports Entertainment.

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UPDATE 1-New Ally CEO eyes expansion in subprime auto loans, retail banking

(Adds details on Allys stock price, retail banking focus)

By Peter Rudegeair

NEW YORK Feb 5 (Reuters) – Ally Financial Incs
new chief executive said on Thursday that the auto lender plans
to boost its revenue through steps including making more loans
to riskier borrowers and offering more retail banking products.

Jeffrey Brown, in his first public remarks as Allys top
boss, said that over the past few years the company has fallen
short of subprime auto lending targets set by the board and that
it was an area he was looking at to grow.

Brown, speaking on a conference call with analysts, said
that over time he expects subprime borrowers to account for
somewhere between 12 to 15 percent of the loans Ally makes, from
its current level of around 9 percent.

Much of the growth will come from Allys increased focus on
used car lending, which is particularly important after the
company lost an exclusive lease agreement in January with
General Motors Co. Used car borrowers
tend to be less creditworthy than new car borrowers, but the
market is two times larger, Brown said.

The company, the largest US auto lender, is ramping up its
risk-taking even as some government officials grow increasingly
concerned about the area. Ally is one of several auto lenders
that have received subpoenas in recent months from the US
Department of Justice over subprime lending practices, an area
that prosecutors are examining for fraud and other abuses using
lessons they learned from crisis-era cases.

Unlike other lenders, Ally had been prohibited from using
deposits at its bank to fund subprime auto loans because it was
still under partial government ownership. But after fully
repaying taxpayers in December, Ally can now make the loans
through its bank, cutting its funding costs by around 45
percent, Brown said.

Brown said Ally may expand the number of retail banking
products it offers beyond its online deposit-taking platform,
though he did not give any specifics. Unlike many of its
competitors of similar size, Ally does not offer credit cards,
home equity loans or mortgages.

We havent scratched the surface in retail banking, Brown

Allys shares were up 2.5 percent in morning trading. Since
it went public last April, Allys shares have fallen around 17
percent compared to a roughly 1 percent fall in the KBW index of
bank stocks.

Brown said he was disappointed in the recent share
performance, adding that some people are underestimating the
power of this franchise.

(Reporting by Peter Rudegeair; Editing by Meredith Mazzilli)

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WB mayor touts savings from bond refinancing

WILKES-BARRE While he didnt have the overall debt owed by the city at hand Thursday night, Mayor Thomas Leighton had the savings from a recent bond refinancing committed to memory.

The city saved $1.8 million in the sale of $30 million in bonds to refinance those issued in 2005 and 2007, he told city council at its regularly scheduled meeting.

Just to give you an example of where we are and where we were, that money we had to use back in 2005, we had no credit rating. The bond insurance cost $1,376,300. The bond insurance on this recent issue $47,602. That tells you how important your credit rating is, he said.

Leighton, as he has done before, touted the value of the A- with a positive outlook from Standard Poors Credit Rating Services. An obvious benefit is the ability to borrow money at a lower interest rate, he noted.

Thats something Ive been stressing for the last 11 years as mayor that we would restore our credit rating so we could restructure our debt and save the taxpayers money, he said.

Councilman Tony George, who was excused from the meeting, voted against the refinancing last year. Leighton did not include him in his praise for the others who voted for it Vice Chairman Bill Barrett, George Brown, Chairman Mike Merritt and Maureen Lavelle.

You just saved the taxpayers $1.8 million and I want to personally and publicly thank you, he said.

City resident Sam Troys disagreed with the mayors approach.

I think generally speaking taxpayer accountability has been totally lacking on the part of council members here. Theres no commitment to trying to cut expenses to pay down that debt. It does exist, mayor. Maybe youll tell me there is no debt. I dont know, Troy said

Leighton did not answer Troys question about the extent of the debt.

If youre disappointed that this administration, this mayor, this council just saved the taxpayers $1.8 million, Leighton said, I dont understand what youre missing there.

Thats what you say, Troy said.

He was more receptive to assistant city attorney Bill Vinskos report that there is movement on the citys being able to recoup the $575,000 it cost to secure and later demolish the Hotel Sterling in 2013.

As a result of the demolition, the city positioned itself ahead of all other lien holders, Vinsko said.

I will tell you that the results of that first lien position are going to be something that youre going to be proud of very shortly. I cant go into any more detail on it at this time, Vinsko said.

Council voted unanimously to approve four resolutions on the agenda, including:

The sale of vacant land at the rear of 36 S. Grant St. to Charles Crumbley for $500

The purchase of a recycling packer truck for $164,000. The cost to the city is $16,400 from the Liquid Fuels account

Designating Wilkes-Barre Township police as the first responder department to the city in the event of an emergency.

Reach Jerry Lynott at 570 991-6120 or on Twitter @TLJerryLynott

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Clarion takes first in FASTech competition

Clarion University students won the second annual FASTech Competition at the Technology
Tools for Today conference in Dallas.

John Owens of Nesquehoning, Chelsea Zola of Pittsburgh, and Zack Horner and Mike Smith,
both of Clarion, participated in this years event. They won the most difficult portion
of the competition, the case study competition.

For the case study, students were asked to create a fictional financial advising firm
to assist in financial planning for a couple using MoneyGuide Pro tools, which is
a partnering company for the competition. They then had to create a brand for the
firm, including core values and a mission statement.

At the conference, the students met face-to-face with judges who interviewed them
about the firm they created. The Clarion students firm won first place, earning them
a $5,000 prize for the university and a trophy that will be presented during an upcoming

We did not place last year in the case study portion of the competition, said Jeffrey
Eicher, professor of finance, advisor to the students. The students worked on creating
their firm during the fall semester and into their winter break and their hard work
paid off.

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Obama strikes important blow for retirement savers

Illustration: Lu Ting/GT

For the past six years, US President Barack Obamas administration has, more often than not, sided with the interests of big banks on financial-sector policy. But last month, announcing a new proposal to prevent conflicts of interest in financial advising, Obama seemed to turn an important corner.

From the outset of his first presidential term, Obama maintained the approach taken by George W. Bushs administration. Large financial firms benefited from the provision of massive government support in early 2009, and their executives and shareholders received generous terms. Citigroup, in particular, benefited from this approach, which allowed it to carry on with substantially the same business model and management team. And the Dodd-Frank financial-reform legislation of 2010 could have done much more to curtail large banks power and limit the damage they can cause.

Most recently, in December 2014, the administration abandoned an important part of the Dodd-Frank reforms – a move that directly benefited Citigroup by allowing its management team to take on more risk (of the kind that almost broke the financial system in 2007-08). Among financial-industry lobbyists and House Republicans, the knives are out to roll back more of the constraints imposed on Citigroup and other big banks.

But now, in an abrupt and commendable turnabout, the Obama administration put the issue of conflicts of interest in the financial sector firmly on the table.

The specific context involves the investment advice given to people saving for retirement.

The decisions these savers must make are complex and can have profound consequences. Getting it right is difficult even under the best of circumstances. What will interest rates be? How long will you and your spouse live? What will your commitments to your children be, and for how long?

But perhaps the most important question is whether you can trust your financial adviser. Some financial advisers in the US are paid not on the basis of how their clients do, but according to what financial products they persuade them to buy. Dennis Kelleher of Better Markets, a pro-reform group, recently summed up the current situation well: Advisers can recommend investments that generate lucrative commissions for them, even though their clients get stuck with high fees, subpar performance and unacceptably risky products.

Kelleher has been an effective critic of the administration in recent years, pushing long and hard to address all potential conflicts of interest in finance. And now his analysis and recommendations are being echoed in a new report issued by the Council of Economic Advisers (CEA). Such fee structures, the CEA warns, generate acute conflicts of interest: the best recommendation for the saver may not be the best recommendation for the advisers bottom line.

And the CEA goes further, estimating that conflicted investment advice leads to a one-percentage-point drop in return. In todays low-interest-rate environment, thats a huge potential loss. (The actual impact will also depend on what happens to equity prices in the coming years.)

The CEA report provides a useful primer on the issues and data. I wish they weighed in more frequently on finance-related issues, rather than deferring to the US Treasury. Or they could just listen to Senator Elizabeth Warren as she speaks out repeatedly on a broad range of financial-reform issues. (Warren joined Obama in unveiling the proposal to protect retirement savers.)

Not surprisingly, at least some people at the US Securities and Exchange Commission have reacted negatively – this is stepping onto their turf, after all. And the lobbyists are, naturally, out in full force.

But with sufficient White House willpower, the administration can see this through. What is needed is a change in the rules set by the Department of Labor, which has jurisdiction over retirement-related issues.

No doubt industry defenders will claim that current practices benefit small investors – a point disputed directly by the CEA. The broader and more interesting question is: where are the statesmen in the financial industry? Where are the leaders who push for a race to the top, by better serving their clients best interests?

Jack Bogle, who built his investment-management company, the Vanguard Group, on exactly this principle, with a clear focus on lower fees at every opportunity, has come out strongly in favor of the administrations proposal. Unfortunately, his remains a lonely voice.

Everyone who provides investment advice to retirement savers should act solely in their clients best interests. And, judging by the high number of distinguished and honorable professionals in the industry, many advisers, if not most, already do.

But there also are too many people being exploited, which harms them individually and discourages savings more broadly. That is why the law should be amended to eliminate as many potential conflicts of interest as possible, by requiring all retirement advisers to act in their clients best interests at all times.

Such a requirement would be a promising start, but there is still a long way to go. All retail investors, not just retirement savers, deserve the same legal protection. Until they get it, the best investment advice may be to assess your adviser carefully, bearing in mind a well-tested performance metric: where are the customers yachts?

The author is a professor at MITs Sloan School of Management.

Copyright: Project Syndicate, 2015.

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Financial Advisors Haven’t Bridged The Gender Wage Gap

By Cyril Tuohy

The worst-paying job for women in the US is that of financial advisor. Lets just repeat that and let it sink in: The worst-paying job for women in the US is that of financial advisor.

Before heading for the exits to wage another skirmish in the gender wars, perhaps we should qualify that statement.

The financial advisory profession is the worst-paying job for women when compared with what men earn in the same position, according to 24/7 Wall Street, using the most recent data based on the Current Population Survey from the Bureau of Labor Statistics (BLS).

So, yes, the financial advisory profession is the worst-paying job for women but only in relative terms, not absolute terms.

Among financial advisors, women earned only 61.3 percent of what men earned last year, according to the 24/7 Wall Street analysis, a disparity that that harks back to levels last seen in the 1970s.

On average, the wage gap for all occupations was much narrower as women made 82.5 percent of what men earned in 2014, according to the findings.

Ariane Hegewisch, a study director at the Institute for Womens Policy Research, which was not involved in the latest 24/7 Wall Street research, said that when it comes to income, women financial advisors trail their male counterparts to an extent.

Among financial advisors, the earnings ratio between men and women often fluctuates from one year to the next, but in 2014 the earnings gap for financial advisors was especially low, she said.

Its staggering that (the wage gap) is changing so slowly, especially because there have been attempts to deal with bias in the distribution of accounts, Hegewisch told InsuranceNewsNet.

We were pretty taken aback and if you look at class actions, youd think it would change because large firms were involved, she added.

BLS data indicate there were 335,000 workers employed in the financial advisor profession with median weekly earnings of $1,337, a figure that doesnt include self-employment.

Male financial advisors, of which there were 201,000 in 2014, earned $1,637 a week. Women, of which there were 134,000 in 2014, collected $1,004 a week.

Hegewisch said the financial advisory profession has always been an occupation with one of the widest wage gaps. Previous surveys have shown women earning 65 percent or even 67 percent of what men make, but its always below 70 (percent), she said.

Still, this year its particularly low, Hegewisch added.

Susan L. Combs, president of Women in Insurance and Financial Services (WIFS), said the results were unexpected.

I was surprised by that but Im also wondering what the pool was, Combs said in an interview with InsuranceNewsNet.

Outcomes could have been skewed, she said, particularly if they measured income generated by women who find themselves in administrative and support roles.

Those roles, while they may qualify as financial advising for statistical purposes in the eyes of the Labor Department, dont really qualify as a financial advisor or producer, she said.

Women financial advisors make a heck of a lot more than the $1,004 a week indicated in the survey, said Combs, president of the insurance brokerage Combs amp; Co. in New York City.

If youre earning $52,000 in Missouri, youre doing all right, but in New York City $52,000 puts you in a support role, not a production role

Pay gaps generally are wider in traditionally high-paying occupations. Similar to those occupations, revenue generated by a financial advisor is contingent on commissions, bonuses and merit pay, and sometimes all three.

But with commission rates for financial advisors more or less equal, whether men or a women close the sale, the wage differential between the sexes in the financial advisor profession is still very high.

Karen Roberts, former WIFS president and financial advisor with Emerald Financial Group in Deerfield Beach, Fla., called the differential a ridiculous number considering that we all have the potential to make the same amount of money.

I wonder if the difference is that more women work in corporate and men are more independent and get higher payouts because men want to be entrepreneurial and women are scared, Roberts said.

If I sell a product, I get paid the same (as a man). But depending on who I work for, that changes the percentage payout.

Roberts also said the earnings gap could be due to women not working as much as men because of family obligations such as children or elderly parents. It also could be due to the fact that women still dont negotiate contracts for themselves as favorably as men do, which means women often settle for less.

Still, a nearly 40 percent difference between what women and men make is a big difference, no matter how commissions, bonuses and merit pay are calculated.

Women need to become better negotiators and pay attention to what they are making or not making, Roberts said.

Despite the horrible gender gap numbers, Roberts said the financial advisory profession remains as good a match as any for women because the profession ultimately rewards hard work, yet allows for the flexibility that many women look for in life.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email#160;protected].

copy; Entire contents copyright 2015 by Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from

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Swiftpage and TNG Partner to Enhance Act! Adoption in the Cloud

Swiftpage, which created Act! has announced a partnership with Canada-based TNG Networks, a leading provider of cloud solutions. Under this agreement, TNG will take on the development and distribution of particular tailor-made versions of Act! for different industry verticals, such as accounting, financial advising, Franchise in a Box, and Small Business in a Box. They will be routed through the TNG Cloud Workspace and the global team of Act! Resellers known as Act! Certified Consultants (ACCs). Connections will also be offered on premier software, including Microsoft Office 365TM and QuickBooksTM.

A Fortune 500 Cloud-based platform, TNG’s Cloud Workspace will now be available to the ACCs as a quick and hassle-free access point, allowing them to work securely on a customer’s database from any device connected to the internet. They can offer complete desktop versions of Act! Premium on a per month subscription-based pricing model. In addition to providing a common platform for connecting with and offering consulting solutions, this engagement will also create new revenue streams for the ACCs.

In an article in PR Newswire, H. John Oechsle, president and CEO of Swiftpage, said, “This partnership is tremendously beneficial for Swiftpage, our customers and our partners (ACCs). It increases our footprint with small and medium-sized businesses (SMBs). Additionally, it gives our customers a faster, stress-free way to get started with a full desktop version of Act! securely in the cloud on a subscription basis. TNG Networks supports our ACCs by providing them with an easy transition to the subscription-based model of selling which follows our new strategy.”

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$350 Million Might Not Be Enough to Save Las Vegas

Emily Wilson/The Downtown Project

LAS VEGAS–Theres been a lot of hubbub about the effort tech whiz Tony Hsieh and his crack team of acolytes have put into revitalizing downtown Las Vegas.

In case you missed it, Hsieh, the CEO of Zappos, in January 2012 announced that he was putting $350 million into the Downtown Project, which would fund new businesses in an economically depressed part of the city seven miles north of the Las Vegas Strip. He also wanted to create a tech hub in a city better known for gambling and tourism, which some journalists dubbed the newest techtopia.

Hsieh’s money has already made a big splash downtown, where the Downtown Project has begun to alter the 60 acres Hsieh bought. There’s Container Park, an outdoor hangout space and shopping center made out of shipping containers where Sheryl Crow played a live concert last year, new restaurants which will serve food as diverse as handmade Cajun sausages and vegan pizza, the new independent bookstore that just opened, founded by Scott Seeley, who is imported from Brooklyn and once ran Dave Eggers 826NYC.

But the last six months have showed that even $350 million might not be enough to revitalize a city.

This fall, the Downtown Project laid off 30 employees. Some Downtown Project employees who hadnt been laid off left of their own accord. David L. Gould, who had been a professor at the University of Iowa until Hsieh convinced him to move to Las Vegas and take the title Director of Imagination, wrote a public resignation letter blaming the layoffs on “a collage of decadence, greed, and missing leadership.”

“While some squandered the opportunity to ‘dent the universe,'” he wrote, “others never cared about doing so in the first place. There were heroes among us, however, and it is for them that my soul weeps.”

At the same time, local and national media seized on the suicides of three separate entrepreneurs who worked for the Downtown Project or whose projects had been funded by it. One of the startups, Ecomom, had a particularly nasty and public crash.

Still, visit downtown Las Vegas today and you’ll see little sign of this tension. Yes, there are still boarded-up buildings, some owned by the Downtown Project, but there are also new restaurants and bars opening, and more planned throughout the spring. Theyre not all funded by Hsieh–other business owners have opened bars called Park on Fremont, and Commonwealth, nearby, for example, and the area is slowly becoming one of the hippest in the city.

“We used to come downtown and you just never came into this area [on Fremont Street] unless you were looking for crack or something–it was honestly, so absolutely unsafe,” Donald Lemperle, the chef and owner of VegeNation, a new vegan restaurant opening with Downtown Project funding, told me. “The changes have really been drastic.”

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The hiccups and the successes illustrate whats difficult about changing a city, and raise questions about just how far money can go. After all, downtowns, especially these days, would seem a good bet, what with the preferences of Millennials and Boomers alike to spend time in walkable areas. And Las Vegas is a city where people like to spend money, especially on new experiences or hip areas of town.

But creating a whole new industry hub from scratch, especially in a town with few anchor institutions save casinos and hotels, may be a little more difficult.

The regions going to be a difficult sell as a tech haven because the numbers dont bear out, said Robert Lang, a professor of urban affairs at UNLV and the director of Brookings Mountain West. You really need all kinds of startup firms and a culture that region-wide nurtures innovation.

The downtown Container Park (Emily Wilson/The Downtown Project)

* * *

For a long time, Scott Seeley immersed himself in the literary world of Park Slope, Brooklyn, rarely venturing far from the borough and its world of books, culture, food, and intellectuals. Seeley, who is tall and bearded, like half of Brooklyn, was the co-founder and executive director of 826NYC, the Dave Eggers brainchild that taught creative writing to kids.

Then Tony Hsieh and the Downtown Project invited Seeley and his husband Drew Cohen to visit Las Vegas, and offered them money to start their own independent bookstore. It was an easy decision–Seeley told me hed been wanting to move somewhere completely different for awhile.

They moved to Las Vegas a year and a half ago and their bookstore, Writer’s Block, had its official opening in February, complete with a ribbon-cutting ceremony with Las Vegas mayor Carolyn Goodman. The store, located in an old tattoo parlor, has traces of 826NYC: They teach kids writing in the back, and the space doesn’t spare on the whimsy, with an artificial bird sanctuary, and a ‘bird adoption agency’ near the checkout counter.

On a much smaller scale, it does remind me of what Brooklyn was going through 15 years ago when nobody really wanted to live there–it was just the cheapest place, he told me, about downtown Las Vegas. I really respect the visionaries behind it.

Inside Writers Block (Alana Semuels)

I visited the store on the day of its official opening, and was surprised at the crowds. Inside the store, which is next to an auto-body shop and a boarded-up motel, a woman read her children a book in one corner of the store, a man browsed the well-stocked fiction category in another. In the back, a handful of of people from small businesses also located downtown served free food and drink: A man with tattoo sleeves watched as two women sampled tea from a startup called Tealet, a nationally-ranked barista (yes, there are barista rankings), poured specialty coffee.

This is exactly what Hsieh envisioned when he first decided to invest in Las Vegas’s downtown. The idea first came in 2012, when Hsieh was looking for a place to move his expanding company, Zappos, then headquartered in Henderson, a Vegas suburb. Hsieh wanted to create a campus for Zappos’ 1,500 or so employees, much like Google or Apple had in Silicon Valley.

“One of the things he didn’t love about those campuses was that they were very exclusive,” Maria Phelan, a Downtown Project spokeswoman told me. “He liked the idea of more of a NYU-campus feeling–you don’t know for sure where the campus ends and begins.”

Stores in the downtown Las Vegas Container Park (Alana Semuels)

Hsieh learned that the Las Vegas city government had moved out of the old City Hall, and decided to move his company there. But he wanted downtown to be a place where his employees felt comfortable living and working, somewhere they’d want to spend lots of time before, after, and during work. He launched the Downtown Project in 2012 and started investing. Of the $350 million: $200 million went to real estate development, $50 million to tech investments, $50 million to arts and education investments and $50 million to small businesses.

If you’re not familiar with the city, here’s a quick primer–the Strip, where most tourists go, is seven miles south of downtown. The airport is south of that. Downtown lies at the intersection of four freeways, but few companies are headquartered there: It’s instead an array of government buildings, parking garages, and a dated neon area called The Fremont Street Experience, with a few hotels and casinos.

Hsieh’s goal, in terms that perhaps arent out of place for a guy who wrote a book called Delivering Happiness, was to “help make downtown Vegas a place of Inspiration, Entrepreneurial Energy, Creativity, Innovation, Upward Mobility and Discovery,” according to the Downtown Project’s website.

Now, there are dozens of businesses opened thanks to Hsieh’s investments: a boutique hotel, a private school, and hostel, a toy store, numerous bars and restaurants. In a document about the project, Hsieh wrote that he employs more than 900 people across the various entities “affiliated with myself and/or the Downtown Project.” The businesses have spread from the Container Park down Fremont Street, and down Las Vegas Boulevard toward Neonopolis.

The Writers Block, in downtown Las Vegas (Alana Semuels)

The various investments of the Downtown Project may seem haphazard, but one of Hsieh’s big ideas is investing in people–whether or not they have expertise in the matter at hand. If people come up to him after he speaks at a conference, or run into him on the street, or meet him through a friend of a friend of a friend, and have a good idea, he or his staff will recruit them to join the Downtown Project. These connections are what Hsieh calls “collisions,” and he says that being in a walkable-downtown area allows for more collisions between people.

It’s an idea that may seem challenging in Vegas, where everyone drives, and even young people still seem interested in homes in the suburbs.

Indeed, the city of Las Vegas had tried to revitalize its downtown for decades, with little success. As early as 1986, Mayor Oscar Goodman created a redevelopment agency to focus on downtown, but it initially chased after office buildings and other projects that would not have benefited an urban, walkable core, Steve van Gorp, an urban planner who was a senior planner with the city of Las Vegas, told me. In the late 1990s and early 2000s, the redevelopment agency focused on attracting more residential development, and promoted new urbanism principles such as walkable, tree-lined streets. The city adopted a Centennial Plan in 2000 that laid out areas of investment for the downtown area, and 45 residential projects were entitled for downtown, van Gorp told me.

Only about 10 percent of those projects were built before the recession hit. In 2008, everything ground to a halt, and the grand plans for Las Vegas’s downtown all but ended, van Gorp said.

But Hsieh’s money has jump-started the process, and made investors scared off by the recession think again about putting money into downtown.

“His investments have really been the major investments in the downtown over the last two-plus years,” van Gorp told me. “The Downtown Project has really given a surge of confidence to the downtown area.”

The reasons the retail aspects of the Downtown Project have worked are pretty obvious. People visit Las Vegas to spend money, to eat and drink, to buy things to bring home. Not all of them want to spend all of their time in the casino haze of the Strip. Some want to have a different experience than their friends, others want to try new restaurants.

Many of the downtown investments create that new, fun experience: There’s a giant praying mantis statue, imported from Burning Man, that breathes fire, giant board games in the backyard of a lounge called the Gold Spike, and theres one live music venue and another in the works.  

It’s not just tourists who are visiting, either. The Downtown Project has tried to make the area family-friendly, putting a giant jungle gym in the middle of the Container Park and couches for sitting, attracting toy stores, BBQ restaurants, and cake shops.

A park in the middle of the Container Park (Alana Semuels)

The funding Hsieh is offering attracts all sorts of people who have lived in Vegas for years and have wanted to break out from the casinos and start their own ventures. That includes Donald Lemperle, the chef of VegeNation. He’d worked at a restaurant at the MGM Grand for a long time, but decided to put together a business proposal after hearing that the Downtown Project was looking to fund restaurants. After he cooked them a 12-course vegan meal, they agreed to fund him with the traditional Downtown Project funding model: a loan, which Lemperle will pay back, and after the business is in the black, Lemperle will split the profits 50/50 with the project.

Many of the investments thus far have been food and drink enterprises like Lemperle’s. Theres O-Face Doughnuts, EAT, Perch, Nacho Daddy, and Carson Kitchen. And the Container Park, which is owned and operated by the Downtown Project, is a landlord to dozens more stores.

“It you want to revitalize a downtown core, you want to bring families downtown,” said Maggie Hsu, a Downtown Project staffer. “Why will they come downtown? It’s often to eat and drink and hang out.”

* * *

But as Las Vegas knows all too well, a city based solely on shopping and eating and drinking can struggle when people aren’t spending money anymore. One of the reasons Las Vegas was hit so hard by the recession was that tourism numbers dropped and people started spending less on gambling. Fewer conventions were held there during the recession, and that meant less business for Strip restaurants and hotels, which led to layoffs, and in turn foreclosures.

“Everything is driven by tourism,” Mike Montandon, the former mayor North Las Vegas told me. “We try very hard as policymakers to diversify the economy, but no matter what, our base is one-third tourism, and it never really changes.”

Part of the Downtown Projects plan was to try and diversify this mix, creating a tech hub that could drive the economy, much in the same way startups are now thriving in places such as Pittsburgh. It doesn’t seem like that much of a stretch, after all, Zappos has thrived in the region. Nevada has no income tax, which could be appealing to entrepreneurs looking to relocate. And there are a host of call centers located in the Las Vegas area, which provides experienced workers for a certain kind of business.

But it’s much more difficult to build a whole new industry from scratch than it is to install a handful of restaurants and stores in a city that loves to spend. Few home-grown startups come out of Vegas, and many of the ones located there have come for Hsiehs money or for the cheap cost of living, not because they need to be there to access talent.

“It’s not a nurturing space–the region, in general, is not an interesting space for tech, the larger numbers are in gaming or tourism,” Lang, of UNLV, said.

Las Vegas residents at a Downtown Project community meeting (Alana Semuels)

There are other cities that have focused on replacing disappearing industries such as steel or autos with technology, but they have big research universities or hospitals that naturally feed students and startups, Lang said. Pittsburgh, for instance, has Carnegie Mellon, which has focused on turning campus ideas into new businesses. And Cleveland has the Cleveland Clinic, which has spurred the creation of medical device startups. But Las Vegas has UNLV, which has not yet had a track record for exiting startups.

Even a place like Orlando, which is also strong on tourism, has more startup infrastructure than Las Vegas does, Lang said. That’s because Orlando has big entertainment companies such as Universal Studios and Disney World, where there is game development and entertainment.

Orlando puts Vegas to shame in tech, Lang said. Theres less technology here than the boosters would lead you to believe.

Ultimately, Las Vegas’s downtown may succeed as a tourism destination, Lang said, but it will have a much harder time driving a tech sector.

“It’s like a lifestyle enclave,” he said. “It’s not an innovation district yet, it’s not like Pittsburgh, which has legitimate innovation.”

Many entrepreneurs seem to see Vegas as a place to grind their teeth and work hard and save money. The money and advice from the Vegas Tech Fund are a powerful lure, even for people who would rather be surfing every day, like Elyse Petersen.

Petersen moved her business, Tealet, to Vegas from Honolulu because she knew she needed to be located on the mainland, and because she received funding from the Vegas Tech Fund. She rented a house on what she calls “Startup Block,” because there are other entrepreneurs living near her, and often holds tea parties for the friends she met there. Is Las Vegas her favorite city in the world? No.

But “I’m here for a purpose, she told me. This is not my dream place, but right now, I know I need to be hustling and traveling and making things happens, and this is the place I need to be doing that.”

Residents sample tea from Tealet in the back of the Writers Block store (Alana Semuels)

It’s true that $50 million goes far when spread over many early-stage tech investments, especially in a city like Las Vegas where the cost of living is relatively low. The Mill, founded last year with Vegas Tech Fund money as an idea accelerator, gave $5,000 to a new entrepreneur ever week, along with access to mentors and a co-working space. Eight of the 44 received funding from the Vegas Tech Fund or other investors after the initial contract period. It’s now adding on a startup accelerator that will dole out even more money.

“There is this air of opportunity here–people come out here knowing if there isn’t something here, they can build it,” Sara Hill, the CEO of The Mill, told me. “It brings out special people with a certain tenacity and resilience.”

Still, many of these people may see Vegas as a short-term place to get some funding and perhaps live for a few months or years, but once they get funding, they often leave. There just isn’t the developer pool and tech talent in Las Vegas that there is in other cities, including the Bay Area, or really even a knowledge economy in Vegas, said Chris Leinberger, a fellow at the Brookings Institution.

People watching a concert in the downtown Container Park (kennejima/Flickr)

Downtown Project-funded Rumgr, for instance, an app that allows people to sell used items to one another, was sold to eBay in October, and its founders moved to the Bay Area to continue to work on the business. Of the startups that received funding after going through The Mill, only three are still in Las Vegas. Romotive, a personal-robot service also funded by The Vegas Tech Fund, also moved from Las Vegas to Silicon Valley after receiving funding.

“As we scale over the next few years, our focus will be on working in close proximity to strategic partners and hiring brilliant senior talent,” the CEO, Keller Rinaudo, said in a farewell letter. “That’s the reason that we have decided to move to the Bay Area.”

I asked Vicki Zhou and Herbert Moore, who relocated their company, WiseBanyan, from New York City in November, whether they planned to stay in Vegas for the long run. Although they were talking to me in front of a Downtown Project spokeswoman and the guy in charge of giving them money, they didnt commit to staying. It wouldnt necessarily make sense for their whole company, which does financial advising, to be outside of New York, they said.

* * *

There’s one other factor that could play into the fate of the Downtown Project: the desire of people, young and old, to live and work somewhere more walkable. It’s been a trend that’s been slower to take hold in Las Vegas, but developers are taking note.

The way Hsieh has invested in real estate downtown has spurred other developers to spend money there, too. An Arizona company that has owned a piece of land downtown since 2008 is finally putting up an event space there, and it’s already taking bookings.

Vegas is famous for land speculation, and Hsieh has taken advantage of that, leaking information about deals so that other developers will jump on buying up land downtown and building on it.

“He’s really good at effectively leveraging his money,” said Montandon, the former North Las Vegas mayor. “And of course he’s leveraging Millennials, too, creating something that old gray hairs like me don’t understand.”

A man sits in the Container Park in downtown Las Vegas. (Alana Semuels)

Part of the idea of the Downtown Project was to recognize that not everyone wanted to be part of the sprawl of Las Vegas, Hsu said. And thats the part that seems to be succeeding. Not just because Millennials want to be downtown, but because many people in the fast-growing city want the feeling of a community that a downtown can bring.

The population of Las Vegas is expected to continue to boom for the next decade, which can only be good for business. But that boom, and the way the regions economy is headed, will probably favor service and retail businesses more than it will tech-heavy startups. That could mean parts of the Downtown Project succeed, while others fail.

After all, Hsieh’s statement about the downsizing of the Downtown Project talked about “streamlining our operations,” which indicates theres little patience left for endeavors that dont make money. And tech startups are notoriously slow to do so.

Lizzy Newsome was involved with the Austin tech scene before moving to Vegas to open a toy store, Kappa Toys, which is funded by the Downtown Project. When the fall layoffs happened, she said, her inbox was blowing up with friends wondering if shed made a horrible mistake.

But her business, which opened in August, is already making money. She loves living close enough to her store, which is in the Container Park, to be able to walk to work.

Its impossible not to notice that people are leaving, she told me. But I think its good, because more people showed up than there was room for at the table.

Lizzy Newsome in her new store, Kappa Toys (Alana Semuels)

Newsomes store is a colorful mix of quirky toys and paper dolls and bright colors that always seems busy. International tourists from the Strip and locals in Las Vegas have come to check it out, she said, and even to spend money. The big spenders who have started coming back to Las Vegas are one reason that Hsiehs retail projects may continue to thrive, even if his tech investments dont.

“A toy store is going to succeed if the toy store is good–the community doesn’t really attach us to the Downtown Project,” she said. “If this project is going to succeed, it’s more about Las Vegas than it is about Tony and the tech scene.”

If people in Las Vegas stop spending money, though, it’s another story. The first endeavor to revitalize downtown Las Vegas dried up during the Great Recession, after all. If the tech industry doesnt take off in Vegas, then this downtown project could be just as dependent as the last one on residents and tourists in Nevada continuing to spend.

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TRLPC: Leveraged refinancing craters due to higher yields

NEW YORK, March 6 (Reuters) – Refinancing rates in the US
leveraged loan market are at their lowest point in six years as
higher spreads and yields are deterring opportunistic borrowers
from trying to cut borrowing costs. At $20 billion in the year
to date, refinancing volume is a whopping 90 percent lower than
the first quarter of 2014, according to Thomson Reuters LPC

The US leveraged loan market has had a slow start to the
year with volume of $71 billion in the first quarter so far,
which is the lowest level since the first quarter of 2010 and 75
percent lower than $293 billion a year earlier.

Only a quarter of US leveraged loans have been for
refinancing in the year to date, down from 50 percent in the
fourth quarter, from 66.5 percent a year earlier and from 77
percent two years ago.

Most US leveraged loans this year have backed higher
levels of MA activity and around 69 percent of loans have been
new assets for investors, but some refinancings started to
re-emerge this week as a handful of companies including hospital
operator Community Health Systems extended maturities.

Higher pricing is the main reason for the sudden drop in
activity. Overall yields in January widened to 6.33 percent,
levels not seen since July 2012, which were considerably higher
than 4.62 percent a year earlier.

The huge falloff is because spreads are too high and thus
it is uneconomical for most borrowers to refinance now, said
Bram Smith, executive director of the Loan Syndications
Trading Association (LSTA).

This has given opportunistic companies little incentive to
refinance, particularly as most have already tackled any
impending maturities. Leveraged loan maturities have mostly been
extended until 2017-2019, which gives most issuers the luxury of
time to wait until pricing tightens again.

Conditions are now stabilizing in the US leveraged loan
market after a jittery start to the year. The market was in
price discovery mode in January and February, when most deals
were pricing wide or narrow, but now seems to have hit its

Thin dealflow and strong investor demand in 2015 so far is
pushing pricing higher in the US secondary market, which is
exerting downward pressure on pricing in the primary market.
Yields on institutional term loans tightened slightly to 6.16
percent in February from 6.33 percent in January as investors
scrambled to invest in scarce credits.

Retail mutual funds turned positive for the first time in 31
weeks in mid-February before turning negative again in late
February and early March. More positive inflows and CLO issuance
could push yields tighter again, which could boost refinancing


Some refinancings started to launch this week for companies,
including Australian iron ore producer Fortescue Resources
. The most favored use of refinancings is to extend
maturities, but some companies are opting to refinance bonds
with loans to get flexibility and remove call protection and
other companies are revising their capital structures to
accommodate acquisitions.

Many of the companies refinancing now are extending their
maturities, Bram Smith said.

Fortescue is extending the maturity of an existing $4.89
billion term loan and is also raising a new $2.5 billion term
loan which will refinance unsecured bonds. Both loans will have
new seven-year maturities.

The new loan and extended loan is expected to be priced
higher at 425-450bp with a 1 percent Libor floor, significantly
higher than the existing term loan that was based on a pricing
grid ranging from 275-350bp and opened at 325bp over Libor.

A clutch of smaller refinancings edged out earlier this week
including a new $192.8 million senior secured term loan for
diversified industrial manufacturer Wabash National Corp.

The deal pushes maturities out until 2022 from 2019 and will
repay the outstanding balance on the companys existing senior
secured term loan.

The company said that the deal will lower balance sheet risk
and provide flexibility to execute its capital allocation
strategy of maintaining strong liquidity, deleveraging its
balance sheet, returning capital to shareholders and investing
in the business.

Surgery centre operator Surgical Care Affiliates
launched a $600 million deal to refinance its senior secured
debt, which it attributed to increased development activity. The
company said that it was increasing its borrowing capacity to
support a pipeline of acquisitions and projects.

Kindred Healthcare is also raising a $150 million
add-on to an existing term loan due in 2012 which it will use to
pay down borrowing on its asset-based lending facility and
Community Health Systems increased its term loan refinancing to
$1.7 billion from $1.66 billion as it extended its maturity to
December 2018 from January 2017.

(Editing By Jon Methven)

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The Wintrust Business Lunch: Robo-investing, Facebook fixes and paying more …

Steve Bertrand hosts the Wintrust Business Lunch. First, he speaks with Terry Savage ( about the trouble with do-it-yourself financial advising. Scott Kleinberg, social media manager of the Chicago Tribune, joins Steve to discuss social media etiquette and the Like button. Finally, Steve is joined by Maura Calsyn, director of health policy at the Center for American Progress. They discuss what we should know about employers and healthcare insurance.
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