So Long Usury; Who Needs ya?

Years of lost investment opportunity, lost jobs and lost banks can’t be regained, but at least Arkansas’ financial institutions are in a better position to compete following the appeals court ruling that finally rids us of the archaic bank usury law.

The 8th U.S. Circuit Court of Appeals in St. Louis upheld the test case ruling by U.S. District Judge Franklin Waters. The courts ruled that a 1999 federal law supersedes state constitutional limits.

Most of us expected this outcome, but it took a test case and these rulings to give the financial community the final go-ahead to move forward.

Arkansas never had a chance to be home to regional or national banking operations. Banks were not able to assume much risk in lending because margins were tight on low-interest loans, so the opportunities for speculative loans went to out-of-state banks that could charge more to help minimize the risk.

In addition to banks moving out, other Arkansas companies previously had to set up financing operations out of state. Dillard’s Inc. based its credit card operations in Arizona, and Fairfield Communities moved its financing operation before leaving Arkansas altogether.

Consumer groups always have been concerned about the potential effects of removing interest rate limits from the Arkansas Constitution because of fears that rates would skyrocket. They always overlooked the fact that there was a sizable untapped market for people who needed loans but couldn’t get them anywhere because it wasn’t worth the risk to banks.

Rates will certainly go up for high-risk loans, but at least the borrowing opportunities will be available — and will grow. Competition and credit unions certainly will provide balance and generally keep rates in check for most loans.

It’s a change whose time had come — years ago, actually.

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I was extremely disappointed and frustrated by the reaction and stock selloff by investors in the aftermath of the Sept. 11 terrorist acts.

Some of the activity was certainly warranted in certain sectors like airlines, insurance and media that are greatly impacted and financially impaired. But, most of companies didn’t deserve the level of punishment their stock prices received.

Fortune magazine published a chart that shows how the markets reacted after major events of war, politics and stock crashes. Across the board, the six months following a sharp selloff brought double-digit positive returns.

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Publisher Walter Hussman and his management staff say Arkansas Democrat-Gazette employees won’t be allowed to fly on commercial airlines for business purposes until further notice.

Meantime, the newspaper accepts thousands of dollars in airline and travel agency advertising as the travel industry desperately works to get people back to normalcy.

I can understand liability concerns about international travel, but not domestic travel.

Three separate Northwest Arkansas Business Journal employees recently flew commercially to the East and West coasts for previously scheduled vacations. They had enjoyable trips and returned safe and sound.

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Our Little Rock office was a victim of the “Nimda” computer virus and a couple of other viruses recently despite our best firewall efforts and careful e-mail practices. Server and e-mail operations were sporadic for a few days, and it created a lot of frustration around the office.

The situation reminded me about how dependent we’ve become on e-mail for both internal and external communications. While productivity in a company can be reduced because of employees handling personal e-mail, I think we more than make up for it through the time saved in rapidly exchanging information and avoiding informational meetings.

All of us in business need to continue to learn how to balance our methods of communication and understand what’s appropriate for in-person meetings, phone calls and e-mail. But I know that e-mail is vital to the mix, and I couldn’t live without it.