Using a large rocket to pierce the atmosphere, a small capsule could be delivered to a low orbiting space station resort. (Photo Credit: CC BY-SA/df_btyhoo/Flickr)

Boeing has announced that it is prepared to enter into the upcoming mega-business of space tourism, reports the Houston Chronicle. Despite recently receiving $20 billion in government subsidies for transatlantic aerospace travel endeavors – a move labeled a violation of international trade law by World Trade Organization judges – Boeing is now knocking on President Obama’s door again. Now, the company wants the administration to increase funding for commercial spaceflight.

By 2015, Boeing wants space tourism to be a reality

Boeing’s expectation is that by 2015, space tourism will be possible via a NASA contract that will enable the manufacturer to send astronauts to the International Space Station via a new type of space capsule, the CST-100. The capsule would have enough seats to admit space tourists along for the ride, writes the Chronicle. Brewster Shaw, vice president and general manager of Boeing’s Space Exploration division, has affirmed Boeing’s belief that the CST-100 will make human space commerce possible. Currently, Boeing is partnered with the company Space Adventures, which brokered private flights to the International Space Station aboard Russia’s Soyuz spacecraft.

Boeing has the horses, but it hasn’t won the race yet

Globally, Boeing is the largest aircraft manufacturer in terms of revenue, orders and products delivered, indicates the Chronicle. The company is also the International Space Station’s prime contractor. But a number of hurdles must be cleared before the company comes to dominate the exciting, yet speculative, field of space tourism. It required $18 million to begin development of rockets and capsules to carry NASA astronauts to low-Earth orbit after the space shuttle program retires in 2011. However, plans for space tourism are estimated to be significantly more expensive. Other companies are competing for the business as well, which should force Boeing to push hard.

Obama wants Congress to free up money for commercial spacecraft

The numbers are flying fast and furious when it comes to just how much money the U.S. government is willing to funnel into commercial space flight. President Obama is seeking $6 billion over five years from Congress. The Senate’s latest offer is $1.3 billion over three years, while the House penned a $150 million, three-year version. Clearly there’s a large financial disconnect at work, guided by differing priorities. Without at least the amount of money the president is calling for, Boeing expects progress toward space tourism to be slow at best. If it cost Cirque du Soleil founder Guy Laliberté $40 million last year to fly to and from the International Space Station via Soyuz, imagine what propping up and entire industry would cost.

Sources:

Houston Chronicle

Google Tech Talk on space tourism

WTO judges ruled Boeing is receiving government subsidies that give it an unfair competitive advantage over European rival Airbus. (Photo Credit: CC BY/Andrei Dimofte/Flickr)

Airline travel has taken a huge economic hit during the global recession, which in turn has decreased demand for new airliners to expand fleets. Thus, aircraft manufacturers are willing to resort to any means necessary in order to boost the bottom line, including accepting large – and perhaps questionable – government subsidies. Reuters reports that World Trade Organization (WTO) judges ruled Boeing, the storied American airline manufacturer, received government subsidies that granted the manufacturer an unfair competitive advantage over European competitor Airbus. The $20 billion in subsidies is being challenged by the European Union, according to sources.

The WTO has pointed at Boeing and Airbus

The WTO judge’s ruling against Boeing is currently confidential and will not be officially released until mid-2011. It has been released to United States and European Union officials, however. It is also known that both Boeing and Airbus have appealed various findings in the case already. Reuters indicates that if initial reports of the WTO ruling are accurate, a negotiated settlement between Boeing and Airbus may occur, as the current state of relations in transatlantic aerospace travel is cold at best. Airbus was previously condemned in June 2010 for taking a sizable cash advance in the form of a government subsidy from the EU.

Research contracts, tax breaks and sour grapes

This may be an example of one power crying foul because they were reprimanded for the very thing that the other power is currently attempting to get away with. According to European sources, Boeing took $17 billion in research contracts from NASA and the Pentagon, and enjoyed $4 billion in tax breaks from the corporation’s home state of Washington. WTO ruled that Boeing broke international trade laws by accepting the contracts and tax breaks, even though the government aid is not technically prohibited. The main point of contention on Boeing’s part is Airbus was essentially allowed to get away with a stern glance, they claim. Thus, Boeing felt their actions in accepting government subsidies were acceptable.

Calls for President Obama’s involvement

EU trade spokesman John Clancy told Reuters that “negotiations at the highest political level” will be the only action that will lead to a long term solution to the feud between Boeing and Airbus. However, U.S. officials have opposed coming to the table unless the EU stops subsidizing the production of the Airbus A350, which U.S. officials feel is very similar to support the WTO has ruled against. In a statement to the press, Boeing maintained its position that they have done nothing to distort the transatlantic aerospace market while continuing to point fingers at EU practices with Airbus.

Sources:

Airbus

Boeing

Reuters

WTO and Boeing have had better days

What's a government small dollar loan worth? Nothing more than eagle food, apparently… (Photo: wikipedia.org)

The payday loan industry continues to fulfill the needs of consumers, particularly during the tight times of the recession. On volume, payday lenders are able to make profits that allow them to continue to operate in the majority of states. Thus, the relationship between consumers and payday loan businesses is mutually beneficial.

Now the Government in On the Deal

Did you know the FDIC recently rolled out a Small-Dollar Loan Pilot Program? They’re currently in the middle of a two-year run where they’re studying how traditional banks can offer payday loans at a profit. They’re doing this ostensibly to create an alternative to what payday loan companies offer – and as an alternative to overdraft protection, they claim – but it doesn’t appear they have a strong concept of the difference between black and red ink.

But Profitability is not the “Primary Goal”

Yes, because FDIC and associated banks are such benevolent organizations. Their hearts bleed for consumers, so much so that they use their tax dollars to loan to others without the goal of profitability! According to the Payday Loan Industry Blog, the FDIC Small-Dollar Loan Pilot Program is designed to foster long-term relationships in the communities in which its affiliate banks operate. All because they want to get good marks from those in charge of the Community Reinvestment Act. That means ACORN will be involved, folks. Do we really want to give THEM more of our tax dollars? For all the good they do, their mismanagement and ties to the subprime mortgage mess make them a questionable recipient of our money.

Banks Look Out for Their Interests

Since the bank stands to make so much more with their overdraft programs and there’s no profit to be had with the FDIC’s small loan program as it’s currently configured (more on that in a moment), how long do you think this “community outreach” effort will continue. Not long, I’d wager.

Here are the program features the FDIC has instructed banks to trumpet:

• Consumers may borrow up to $1,000
• Consumers can repay beyond one paycheck cycle
• APRs below 36 percent (we know this isn’t profitable)
• Origination fees that are low or non-existent
• Efficient underwriting
• Applications are processed quickly
• Consumer must have a savings account at that bank (A-ha! But not all participating banks required this.)
• Customers will have access to financial education (Read: Sales pitch for overdraft protection)

Banks Claim They’ll Generate Profit by Volume

Oh really? Is the FDIC going to infuse you with Monopoly money? Because if the small dollar loans operate at a loss, how does that generate profit in the long term? The Payday Loan Industry Blog nails it on the head. By “reaching out” to the community, banks will be appeasing the Center for Responsible Lending (which can easily be traced back or connected to ACORN and the Community Reinvestment Act, by the way). They’ll also have plenty of time to sell consumers over to their more lucrative products like overdraft and NSF fees. Or, if this is a war of attrition, they’ll keep taking a loss until they’ve run their competition – payday loan companies – out of business. Perfectly underhanded capitalism we have there, correct?

What about Overdraft and NSF Fees?

I’m glad you asked. According to Bankrate.com, the national average for NSF penalty fees is $24.46 at banks. A recent study by Moebs Services found that these NSF fees are responsible for 18 percent of banks’ net operating income. That number shoots up to 60 percent for credit unions in Moebs’ study. Take a look at this study by George Mason University’s Executive Director of the Statistical Assessment Service, Donald Rieck. Banks should hate the payday lending industry a great deal.

Customers Prefer the Standard Payday Loan Market

And the FDIC already knows this. Apparently Citizens’ Trust Bank attempted to run a military loans program similar to Small-Dollar Loan Pilot Program in 2008, but they had few applicants and even fewer accepted customers. Reports indicate that the originators of the program felt it was “hampered” by competition (payday loan companies). Citizens’ Trust and their “Community Relief Loan” only drew 574 applications and funded 81 loans (14 percent approval) in the first two months of the program.

Why Only 574 People?

Considering that Citizens’ Trust utilized multiple advertising avenues to promote the program, why were there so few applicants? According to the Payday Loan Industry Blog, it’s because the list of hoops customers had to jump through to actually receive money was prohibitive. From a $48 origination fee, FICO and residency duration requirements to a convoluted system of approval and a requirement (at some branches) that customers have a savings account at that bank, customers had to clear too many hurdles before they could receive funds. With payday loan companies, screening through Teletrack and similar systems is much quicker, while maintaining risk management for the lender.

Payday Lenders Don’t Need Government Subsidies

[apply_button float="right"]

While the FDIC is convinced that funneling taxpayer dollars into banks so they can offer small-dollar loans is a good idea, it seems clear that their pricing model is completely out of left field. If banks are looking to eliminate competition via a war of attrition – if what’s best for the consumer has nothing to do with it – then taxpayers should protest what the FDIC is doing with their money.  All the FDIC would truly have to do is interview customers at participating banks to see that payday loans from outside sources are quick and convenient, which is why people come back for more. The more bureaucracy that’s added to the process, the fewer consumers will be willing to get involved. A payday loan is simple; government subsidies (with our money, mind you) and convoluted approvals processes are not.