The subprime mortgage crisis, housing market slowdown and credit crunch have created a full-fledged economic crisis in the last several weeks. Fannie Mae and Freddie Mac have been taken over by the federal government, as has AIG. Morgan Stanley and Goldman Sachs have taken steps toward reorganizing themselves as bank holding companies and will face more regulation by the FDIC.

Lehman Brothers, one of the nation's largest investment banks, has declared bankruptcy. And federal officials are weighing a $700 billion bailout program that could allow the government to take a more aggressive role in assisting failing financial firms. No one in Washington, on Wall Street or in Milwaukee knows where the chips may fall, but what is certain is that we are witnessing a historic event, one that will have long term effects.

David Massart, president of Wauwatosa-based Next Generation Wealth Management Inc., believes that federal officials had no option but to proceed with a large-scale financial bailout. "Chairman Bernanke and the Treasury are doing as much as they can to reassure investors and the American people at this time – quite simply, to stabilize the banks and Wall Street," he said. "The current crisis is as much of confidence as it is anything else. In a perfect world, you would prefer the government not to intervene but this current scenario was (and is) one that we haven't seen before. I believe their process is threefold:  deleveraging of the financial system, adding stabilization and trying to put in place the necessary actions to prevent major dislocations in the markets."

Kurt Bauer, president and CEO of the Wisconsin Banker's Association, said the bailouts of Fannie Mae and Freddie Mac were particularly important.

"If both companies had been allowed to fail, the secondary market for mortgages would have all but disappeared, which would have led to a further decline (perhaps dramatic) in housing values," Bauer said. "The reason is that banks need to sell mortgages on the secondary market in order to replenish their liquid capital. If that market is gone or significantly reduced, then banks would be forced to keep more mortgages on their books resulting in fewer loans being made, which would increase their cost, and make it harder for people to qualify."

However, there will be long-term consequences of the government bail-outs, said Jose Freyre, certified financial planner and founder of Monarch Wealth Management Inc.

"The government intervened and that goes against free-market economics," he said. "This creates a 'no risk of failure' moral hazard that sends the message that no matter what a company does as long as they are large enough to have an big impact in our economy in the event of failure, the government will step in if/when they get in trouble. Where do you draw the line?"

Ultimately, the American taxpayer will not likely recover its investments in the ailing financial firms it has invested in, many financial experts said.

"As for the risk to taxpayers, I doubt that we will recoup our investment," said Greg Myers, managing director with Mason Wells, a Milwaukee-based private equity firm. "We may very well make money on selected transactions, such as AIG given the equity position the government took, but on balance it will be very costly to taxpayers."

Tommy Huie, president and chief investment officer of M&I Investment Management Corp, agreed that taxpayers will likely see some impact from the government intervention. However, there will also be positive outcomes from the federal intervention, he said.

"Taxpayers may feel some impact for a short time before we reach a final accounting of supportive actions through the federal government policy responses," Huie said. "However, there are some less obvious positives that we can take away from the current initiatives – a stable, fully functioning financial system will allow for revived credit to be extended by banks to businesses and individuals, and lower rates overall for these loans (e.g., mortgages, auto loans, small business loans, issuance of commercial paper)."

Most of the impact of the government intervention will be long term, Bauer said, because of the massive liability the United States has taken on.

"The amount of new debt liability the government is assuming in the name of the American taxpayer is almost incomprehensible and will require that an even larger portion of the federal budget be dedicated to debt service," he said. "Future federal tax increases are a very strong likelihood. So are cuts to subsidies, grants and other programs the federal government provides to support state, county and local governments, which may lead to tax increases at those levels as well."

However, many Wisconsin-based companies and consumers are well prepared to weather the storm, Huie said.

"These collapses and subsequent financial support will put greater pressures on the federal budget deficit and impact the real economy by slowing near-term growth," he said. "While business investment may be curtailed, Wisconsin's strengths in manufacturing, construction, and technology should help the state weather this period."

Duncan Solutions to acquire New York firm
Milwaukee-based Duncan Solutions Inc. announced plans to acquire Law Enforcement Systems Inc. (LES), a Long Island, N.Y.-based provider of debt collection and motor vehicle violation fines collection. The acquisition will strengthen Duncan's position as a major provider of debt collection solutions for governmental clients.

"LES has built a solid business providing customers with the data and services needed to increase compliance and maximize revenues,” said Duncan president and chief executive officer Mike Nickolaus. "Together, Duncan and LES will be able to leverage our combined capabilities to deliver even greater value for our clients.”

LES will operate as a division of Duncan Solutions, with Richard Carrier continuing to serve as president and George Moskowitz continuing to serve as chief operating officer. 

"Over the past 25 years, George and I have been proud to lead the entire LES team in the delivery of world-class services to our clients," Carrier said. "We firmly believe that joining forces with Duncan allows us to provide even greater value to our clients in the years to come."

The transaction is expected to close on Thursday. Duncan's headquarters is located at 633 W. Wisconsin Ave.

Actuant to acquire New York company
Butler-based Actuant Corp. has signed a definitive agreement to acquire the stock of the Cortland Companies from an investor group lead by Cortec Group. The purchase is subject to customary regulatory approvals and closing conditions, and is expected to close within 30 days. Total consideration for the transaction is approximately $230 million, which will be funded by Actuant's cash and revolving credit facility.

Headquartered in Cortland, N.Y., Cortland is a global designer, manufacturer and distributor of custom-engineered electro-mechanical cables and umbilicals, high-performance synthetic ropes and value-added steel cable and assemblies. Cortland's products are utilized in critical applications in end markets including offshore oil and gas, marine geophysical survey, commercial diving, marine transport, medical, security, defense and aerospace. With five facilities across three continents, Cortland is expected to generate approximately $100 million in revenue this calendar year.

Commenting on the transaction, Robert Arzbaecher, Actuant's chief executive officer, said, "Cortland represents a great addition to Actuant's diversified business portfolio. Its niche leadership position, strong management team and global customer relationships are an ideal fit with our business model."

The majority of the Cortland businesses will operate within Actuant's Industrial segment. Cortland's Sanlo product line, an engineered cable applications business, will operate as part of Actuant's Elliott Manufacturing business included in the Actuation Systems segment.

Wisconsin insurance commissioner urges caution regarding annuities
Wisconsin Insurance Commissioner Sean Dilweg is urging insurance consumers to be cautious about replacing or liquidating their annuities, particularly those that may be underwritten by the AIG insurance companies, despite the current volatility in financial markets.

"Consumers should understand the full impact of any decisions they may make to liquidate or replace annuities they already hold," Dilweg said. "If you liquidate or replace an annuity you currently own, you may be incurring significant surrender charges or experience adverse tax consequences. My office will be monitoring the suitability of annuity sales for activity that would appear to take advantage of the recent turmoil in financial markets."

Annuities are insurance products regulated by the Office of the Commissioner of Insurance (OCI). OCI licenses both companies and agents and monitors their activities.

Dilweg said state law requires a suitability analysis before the sale or replacement of any annuity product. A suitability analysis should include an evaluation of a consumer's financial position, income needs and cost of liquidating any assets.

Consumers are encouraged to discuss any changes to their financial plan with a trusted advisor or family member before altering their investments.

Consumers should be particularly cautious if they are approached to liquidate annuities issued by an AIG insurance company because of the recent activity concerning AIG Holdings Inc., Dilweg said.

"The AIG insurance companies are separately regulated by state insurance regulators and do not have the financial stress that AIG Holdings, Inc. is experiencing. They are meeting all their obligations to their policyholders. Consumers who feel pressured to replace annuities because of claims the insurer is under financial stress are encouraged to contact OCI," Dilweg said.

More consumer tips regarding annuities are in the Wisconsin Buyers Guide to Annuities, which can be found at http://oci.wi.gov/pub_list/pi-016.pdf or by contacting the OCI at 1-800-236-8517.

Native American tribes to form economic consortium
Representatives from several Native American tribes, including the Forest Band of Potawatomi Nation of Wisconsin and the Oneida Nation of Wisconsin, will gather at the Smithsonian National Museum of the American Indian on Tuesday, Sept. 23, to announce the launch of the first-ever Native American economic consortium.

Called the Native American Group, initial participants also will include the Seminole Tribe of Florida; the Mashantucket Pequot Tribal Nation, Connecticut; the Morongo Band of Mission Indians, California; the Cow Creek Band of Umpqua Tribe of Indians, Oregon; the Ute Mountain Ute Tribe, Colorado; the Oglala Sioux Tribe, South Dakota; and the Spirit Lake Dakotah Nation, North Dakota.

The Native American Group will bring the most economically advantaged tribes - especially those with diverse business interests - together to leverage their collective buying power to benefit all of "Indian Country."

Through a memorandum of understanding with the U.S. Department of the Interior Bureau of Indian Affairs, the consortium has enlisted the support of federal officials to help identify additional tribes to participate in consortium programs.

"Our overall goal is economic development for more than 500 Indian tribes," said Richard Bowers, president of the board of directors of the Seminole Tribe. "We want to spread economic opportunity in 'Indian Country' by encouraging more tribes to get into business and by offering more products and services to each other. The consortium offers a ready-made market for tribes with available products or the opportunity to develop them."

Baird advisors top ranked by Research magazine
A financial advisor team from R.W. Baird & Co. has been recognized as one of the "Top-Ranked Advisor Teams in America" in the September issue of Research magazine.

The team recognized includes managing directors and financial advisors Michael Klein, Gerald Gerndt, and James Schultz; and managing director and senior investment consultant Philip Dallman. The team manages assets for high net worth families and individuals with complex financial needs, as well as business owners and corporate executives. 

"We are very proud that Baird is home to some of the industry's best financial advisor teams such as The Private Asset Management Group," said Mike Schroeder, director of private wealth management. "Teamwork is a key component of our comprehensive approach to financial planning and wealth management, enabling us to provide the best financial advice and service to our clients."

M&I employees volunteer with Habitat for Humanity
On Sept. 13, Marshall & Ilsley Corp. employees volunteered for the 7th annual M&I Community Day, when they painted, installed drywall and hung insulation at six Milwaukee Habitat for Humanity homes in the city of Milwaukee. The project was in conjunction with a grant from the M&I Foundation. "When we learned about Habitat for Humanity's need for volunteers to work on several houses, we knew the project would be a good fit for our annual M&I Community Day activity," said M&I President and CEO Mark Furlong.

The American Society for Quality (ASQ) is introducing two new blended courses: Lean Six Sigma Black Belt for Service and Lean Six Sigma Green Belt for Service. The courses focus on the process improvement approach known as define, measure, analyze, improve and control (DMAIC) to improve transactional service processes. These processes are typically found in service-oriented industries such as mortgage lending and banking or in administrative functions common in corporate operations. Course attendees receive the sophisticated management and analytical skills needed to implement the principles, practices and technologies of Lean Six Sigma. A good portion of the participant's time is spent working through interactive practice exercises and online assessments. The course schedule includes:

Lean Six Sigma Black Belt

Classroom: Milwaukee, Jan. 7-9, 2009

- November 24, 2008 – April 16, 2009
Classroom: Milwaukee, Feb. 18-20, 2009

- March 9, 2009 – July 20, 2009
Classroom: Milwaukee, May 27-29, 2009

- May 13, 2009 – September 21, 2009
Classroom: Milwaukee, July 29-31, 2009

Lean Six Sigma Green Belt

- November 3, 2008 – Jan. 27, 2009
Classroom: Milwaukee, Jan. 12-14, 2009

Both courses are instructed by Mike Kelly, an ASQ Six Sigma black belt and quality engineer, who has more than 15 years of experience in the statistics, quality and engineering profession. As an ASQ master black belt instructor, Kelly teaches and coaches executives, champions and black belts through ASQ programs. In addition, he has coached hundreds of executives, champions, black belts and green belts in the industries where he deployed Lean Six Sigma. For more information or to register for a course, please visit www.asq.org/training/formats/blended/.

The U.S. Small Business Administration has introduced two new free online finance courses to help small business owners with the basic principles of finance and borrowing.   The new self-paced courses, Finance Primer: Guide to SBA’s Loan Guaranty Programs and How to Prepare a Loan Package walk business owners through steps that answer questions about what debt financing is, what loan programs are available, what small businesses should know about borrowing money, how to prepare a loan package and how loan requests are reviewed by lenders.

Financial Executives International Milwaukee Chapter meets on the second Tuesdays of the month at 5:30 p.m., University Club, 924 E. Wells St., Milwaukee. Call Mary at (414) 226-6975.