Financial Services

Shared Financial Services

Shared Financial Services

There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created. Finance of states Country, state, county, city or municipality finance is called public finance. It is concerned with Identification of required expenditure of a public sector entity Source(s) of that entity's revenue The budgeting process Debt issuance (municipal bonds) for public works projects.

Financial Economics:

Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance.

It studies:

Valuation - Determination of the fair value of an asset How risky is the asset? (identification of the asset appropriate discount rate) What cash flows will it produce? (discounting of relevant cash flows) How does the market price compare to similar assets? (relative valuation) Are the cash flows dependent on some other asset or event? (derivatives, contingent claim valuation) Financial markets and instruments: Commodities, Stocks, Bonds, Money market instruments, Derivatives, Financial institutions and regulation.

Financial mathematics:

Financial mathematics is the main branch of applied mathematics concerned with the financial markets. Financial mathematics is the study of financial data with the tools of mathematics, mainly statistics. Such data can be movements of securities—stocks and bonds etc.—and their relations. Another large subfield is insurance mathematics.

Experimental finance:

Experimental finance aims to establish different market settings and environments to observe experimentally and analyze agents' behavior and the resulting characteristics of trading flows, information diffusion and aggregation, price setting mechanisms, and returns processes. Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions, and attempt to discover new principles on which such theory can be extended. Research may proceed by conducting trading simulations or by establishing and studying the behaviour of people in artificial competitive market-like settings.

Finance

Finance
Finance

Finance studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. The term "finance" may thus incorporate any of the following:

1. The study of money and other assets;
2. The management and control of those assets;
3. Profiling and managing project risks;
4. The science of managing money;
5. As a verb, "to finance" is to provide funds for business or for an individual's large purchases (car, home, etc.).

The activity of finance is the application of a set of techniques that individuals and organizations (entities) use to manage their money, particularly the differences between income and expenditure and the risks of their investments.
An income that exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary, such as a bank or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.
A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.
A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the stock, the company receives cash, which it uses to expand its business in a process called "equity financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.
Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments, with consideration to their institutional setting.
Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.

Project Finance

Project finance Project Finance

Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a complex financial structure where project debt and equity used to finance the project are paid back from the cashflow generated by the project rather than the general assets or creditworthiness of the project owners. Because of this structure, the debt is said to be "nonrecourse." The financing is typically secured by the project assets, including the revenue-producing contracts. Generally, special purpose corporations (SPCs) are created for each project.
Project finance is more complicated, and more expensive, than alternative financing methods. It is most commonly utilized in the mining, transportation, telecommunication and public utility industries, which are subject to a number of insurmountable technical, environmental, economic and political risks. To cope with these risks, projects in these industries (such as power plants or railway lines) are generally completed by a number of specialist companies operating in a contractual network with each other. The various patterns of implementation are known as "project delivery methods." The financing of these projects must also be distributed among multiple parties, so as to distribute the risk associated with the project while simultaneously ensuring profits for each party involved. Usually, a project financing scheme involves a number of equity investors, known as sponsors, as well as a syndicate of banks which provide loans to the operation. The loans are most commonly non-recourse loans, which are secured by the project itself and paid entirely from its cash flow. A riskier or more expensive project may require limited recourse financing secured by a surety from sponsors. A complex project finance scheme may incorporate corporate finance, securitization, options, insurance provisions or other further measures to mitigate risk. Project finance shares many characteristics with maritime finance and aircraft finance; however, the latter two are more specialized fields.
A basic project finance scheme
Hypothetical project finance scheme Acme Coal Co. imports coal. Energen Inc. supplies energy to consumers. The two companies agree to build a power plant to accomplish their respective goals. Typically, the first step would be to sign a memorandum of understanding to set out the intentions of the two parties. This would be followed by an agreement to form a joint venture. Acme Coal and Energen form a SPC called Power Holdings Inc. and divide the shares between them according to their contributions. Acme Coal, being more established, contributes more capital and takes 70% of the shares. Energen is a smaller company and takes the remaining 30%. The new company has no assets. Power Holdings then signs a construction contract with Acme Construction to build a power plant. Acme Construction is an affiliate of Acme Coal and the only company with the know-how to construct a power plant in accordance with Acme's delivery specification. A power plant can cost hundreds of millions of dollars. To pay Acme Construction, Power Holdings receives financing from a development bank and a commercial bank. These banks provide a guarantee to Acme Construction's financier that the company can pay for the completion of construction. Payment for construction is generally paid as such: 10% up front, 10% midway through construction, 10% shortly before completion, and 70% upon transfer of title to Power Holdings, which becomes the owner of the power plant. Acme Coal and Energen form Power Manage Inc., another SPC, to manage the facility. The ultimate purpose of the two SPCs (Power Holding and Power Manage) is primarily to protect Acme Coal and Energen. If a disaster happens at the plant, prospective plaintiffs cannot sue Acme Coal or Energen and target their assets because neither company owns or operates the plant. A Sale and Purchase Agreement (SPA) between Power Manage and Acme Coal supplies raw materials to the power plant. Electricity is then delivered to Energen using a wholesale delivery contract. The cashflow of both Acme Coal and Energen from this transaction will be used to repay the financiers.
Complicating factors

The above is a simple explanation which does not cover the mining, shipping, and delivery contracts involved in importing the coal (which in itself could be more complex than the financing scheme), nor the contracts for delivering the power to consumers. Minority owners of a project may wish to use "off-balance-sheet" financing, in which they disclose their participation in the project as an investment, and excludes the debt from financial statements by disclosing it as a footnote related to the investment. In the United States, this eligibility is determined by the Financial Accounting Standards Board. Many projects in developing countries must also be covered with war risk insurance, which covers acts of hostile attack, derelict mines and torpedoes, and civil unrest which are not generally included in "standard" insurance policies. Today, some altered policies that include terrorism are called Terrorism Insurance or Political Risk Insurance. In many cases, an outside insurer will issue a performance bond to guarantee timely completion of the project by the contractor. Publicly-funded projects may also use additional financing methods such as tax increment financing or Private Finance Initiative (PFI). Such projects are often governed by a Capital Improvement Plan which adds certain auditing capabilities and restrictions to the process.
History

Limited recourse lending was used to finance maritime voyages in the days of ancient Greece and Rome. Its use in infrastructure projects dates to the development of the Panama Canal, and was widespread in the US oil and gas industry during the early 20th century. However, project finance for high-risk infrastructure schemes originated with the development of the North Sea oil fields in the 1970s and 1980s. For such investments, newly created Special Purpose Corporations (SPCs) were created for each project, with multiple owners and complex schemes distributing insurance, loans, management, and project operations. Such projects were previously accomplished through utility or government bond issuances, or other traditional corporate finance structures. Project financing in the developing world peaked around the time of the Asian financial crisis, but the subsequent downturn in industrializing countries was offset by growth in the OECD countries, causing worldwide project financing to peak around 2000. The need for project financing remains high throughout the world as more countries require increasing supplies of public utilities and infrastructure. In recent years, project finance schemes have become increasingly common in the Middle East, some incorporating Islamic finance laws. The new project finance structures emerged primarily in response to the opportunity presented by long term power purchase contracts available from utilities and government entities. These long term revenue streams were required by rules implementing PURPA, the Public Utilities Regulatory Policies Act of 1978. Originally envisioned as an energy initiative designed to encourage domestic renewable resources and conservation, the Act and the industry it created lead to further deregulation of electric generation and, significantly, international privatization following amendments to the Public Utilities Holding Company Act in 1994. The structure has evolved and forms the basis for energy and other projects throughout the world.

Corporate Finance

Corporate Finance Corporate Finance

Corporate finance is an area of finance dealing with the financial decisions corporations make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to enhance corporate value while reducing the firm's financial risks. Equivalently, the goal is to maximize the corporations' return on capital. Although it is in principle different from managerial finance which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms.
The discipline can be divided into long-term and short-term decisions and techniques. Capital investment decisions are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. On the other hand, the short term decisions can be grouped under the heading "Working capital management". This subject deals with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers).
The terms Corporate finance and Corporate financier are also associated with investment banking. The typical role of an investment banker is to evaluate investment projects for a bank to make investment decisions.
Capital investment Capital investment
Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria. Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate. These projects must also be financed appropriately. If no such opportunities exist, maximizing shareholder value dictates that management return excess cash to shareholders. Capital investment decisions thus comprise an investment decision, a financing decision, and a dividend decision.
The investment decision The investment decision
Management must allocate limited resources between competing opportunities ("projects") in a process known as capital budgeting. Making this capital allocation decision requires estimating the value of each opportunity or project: a function of the size, timing and predictability of future cash flows.
Project valuationProject valuation
In general, each project's value will be estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV) will be selected .This requires estimating the size and timing of all of the incremental cash flows resulting from the project. These future cash flows are then discounted to determine their present value . These present values are then summed, and this sum net of the initial investment outlay is the NPV. The NPV is greatly influenced by the discount rate. Thus selecting the proper discount rate—the project "hurdle rate"—is critical to making the right decision. The hurdle rate is the minimum acceptable return on an investment—i.e. the project appropriate discount rate. The hurdle rate should reflect the riskiness of the investment, typically measured by volatility of cash flows, and must take into account the financing mix. Managers use models such as the CAPM or the APT to estimate a discount rate appropriate for a particular project, and use the weighted average cost of capital (WACC) to reflect the financing mix selected. (A common error in choosing a discount rate for a project is to apply a WACC that applies to the entire firm. Such an approach may not be appropriate where the risk of a particular project differs markedly from that of the firm's existing portfolio of assets.) In conjunction with NPV, there are several other measures used as (secondary) selection criteria in corporate finance. These are visible from the DCF and include payback, IRR, Modified IRR, equivalent annuity, capital efficiency, and ROI.

Finance

Finance Finance

Finance is a field that studies and addresses the ways in which individuals, businesses, and organizations raise, allocate, and use monetary resources over time, taking into account the risks entailed in their projects. The term finance may thus incorporate any of the following:

The study of money and other assets;
The management and control of those assets;
Profiling and managing project risks;
The science of managing money;
As a verb, "to finance" is to provide funds for business or for an individual's large purchases (car, home, etc.).

The activity of finance is the application of a set of techniques that individuals and organizations (entities) use to manage their financial affairs, particularly the differences between income and expenditure and the risks of their investments.
An entity whose income exceeds its expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary, such as a bank or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.
A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.
A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the stock, the company receives cash, which it uses to expand its business in a process called "equity financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.
Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), etc., as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments, with consideration to their institutional setting.
Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.

Real Estate Investing

Real Estate Investing

Real Estate Investing

Real estate investing involves the purchase of real estate for profit. Profits are accumulated slowly by renting out properties in a cashflow method, or are generally improved and resold for a capital gain. In addition, real estate investors may wholesale properties as a means to make profits.
Advantages
There are many gurus out there that contend that real estate is a panacea where you cannot lose money. Although this is false, there are a number of advantages to investing in real estate. The biggest factor in marketability of an investment is supply and demand. The first big advantage is that it is an extremely expensive product. Each sale you make generates more profit potential for this reason.
Leverage, or the ability to borrow based on the value of the property, is probably the second greatest advantage. It is much easier to finance real estate than any other product. While investing in most assets requires the purchaser to have the full purchase price available for the asset, in real estate investing, one only needs to have a fraction of the purchase price available (like 5%, 10% or 20%) as a down payment. Therefore, real estate, although incredibly expensive, is still easier to buy than say, a piece of industrial equipment of the same value. Local advantage is rarely discussed but it stands to reason that you know your neighborhood better than a real estate investing expert would if they were in another part of the world. This creates an advantage the beginner can exploit in his market.
The bulk of the world's assets are in real estate.
One way a beginner can get started in real estate investing without taking on any personal risk is to 'bird dog', or hunt for good deals, for another more experienced investor. This allows the beginner to learn to find and recognize value.
Disadvantages
Real estate is an illiquid investment that needs maintenance and taxes to be paid. A balanced investment portfolio has some liquid assets that can be quickly converted to cash to sustain the real estate when its returns are not sufficient to pay its recurring costs.
During a real estate boom, speculators can be prone to make purchases without precalculating the costs involved in the purchase and for the ongoing costs of a property. The real estate can then sometimes work against them instead of for them, realizing a loss at resale.
There is no guarantee that values will maintain themselves as society changes; megatrends can cause large scale changes. An example is the period from 1815 to 1914 in the U.K., during which real estate values did not increase although the society as a whole made massive economic progress.

Creative real estate investing
Creative real estate investing is a term used to describe non-traditional methods of buying and selling real estate. Typically, a buyer will secure financing from a lending institution and pay for the full amount of the purchase price with a combination of the borrowed funds and his own funds (or his "down payment").
Bird-dogging
"Bird dogs" get paid a referral fee for finding good deals for other investors. This is often where people begin their investing career as there is only time at stake. They are typically paid when the deal closes. Some birddogs will structure companies and partnership arrangements as they're frequently not real estate agents and may not be able to collect a "referral fee" for their services.

Consumer Finance

Consumer Finance

Consumer finance in the most basic sense of the word refers to any kind of lending to consumers. However, in the United States financial services industry, the term "consumer finance" often refers to a particular type of business, sub prime branch lending (that is lending to people with less than perfect credit). This branch of the financial services industry is more extensive in the United States than in some other countries, because the major banks in the U.S. are less willing to lend to people with marginal credit ratings than their counterparts in many other countries. Examples of these companies include HSBC Finance, CIT, CitiFinancial, Wells Fargo Financial, and Allied Business Systems, LLC.
Consumer finance in general
Consumer finance covers a wide range of activities, including loans from banks and indirect finance such as hire-purchase agreements, and loans by specialist retail finance companies. At the most respectable end of the market, consumer finance is an integral part of retail banking and an important source of unsecured loans. However, in many countries some 'consumer finance' companies are little different from loan sharks, offering considerably higher interest rates than those available on other unsecured loans. On another view, however, such companies are beneficial because they offer credit to sectors of society which are otherwise excluded from financial markets, and the credit offered is no worse than the alternative credit cards.
The term as used in the United States
The Consumer Finance industry (meaning branch based subprime lenders) mainly came to fruition in the middle of the twentieth century. At that time these companies were all standalone companies, not owned by banks and an alternative to banks. However, at that time the companies were not focused on subprime lending, instead they attempted to lend to everyone who would accept their high rates of interest. There were many reasons why certain people would: Banks made it difficult to obtain personal credit. Banks did not have the wide variety of programs or aggressive marketing that they do today. Many people simply didn't like to deal with bank employees and branches, and preferred the more relaxed environment of a consumer finance companies. Consumer finance companies focused on lowering the required payment for their customers debts. Many customers would gladly refinance $10,000.00 worth of an auto loan debt at 7 percent for a home equity loan at 18 percent because the auto loan would have to be paid off in 5 years while the home equity loan would have a 20 year repayment plan, making the monthly payments for the customer lower (even though overall the customer would end up paying dramatically higher amounts of interest). However, as the financial services industry evolved and banks and other kinds of financial services companies began offering more consumer credit, consumer finance companies came to serve primarily those with bad credit, who couldn't obtain financing elsewhere. A typical consumer finance office engages in some unsecured, and auto secured, but primarily home equity secured loans. To find new customers, these companies often provide the store financing for furniture stores, pool stores, and other stores where homeowners might shop. When buyers of products at those stores want to pay in installments, it is often a consumer finance company which actually does the loan for that purpose. Since this loan is usually at a high interest rate, the consumer finance company employees will call the customer to offer to refinance the loan as a home equity secured loan at a somewhat lower rate and a lower payment. Besides charging a higher interest rate compensating for their risk, consumer finance companies are usually able to operate successfully because their employees are given more flexibility in structuring loans and in collections than compared to banks.
Controversial practices of the United States consumer finance industry
The more dubious consumer finance companies are held to engage in the following practices. Failing to tell people who ask for a loan from the lender that they really have good credit and can get a better deal somewhere else (a subprime loan is usually more expensive than a prime loan). This is one of the primary criticisms of industry and is implied in many others critiques. For example consumer finance companies have been called racist because of branches they might have opened in primarily African American areas. If their customers all had bad credit they would be working in the same way they would elsewhere, but it is implied that they are preying on the communities' lack of knowledge of lower priced alternatives. Sending live checks through the mail which when used become loans. This can trick some people, and the interest rate is usually purposely high (although disclosed) Charging very high fees on a mortgage refinance. Offering refinance deals that are worse than the previous loan, usually by showing that the new payment will be lower, but not revealing that the new payment does not include taxes and insurance. Selling single premium credit insurance, also financing that into the loan. Critics consider also the concept and geographical placement of consumer finance stores as a form of "redlining". This is because the sub prime lenders in poorer communities will often be the only local store, yet will be higher priced.

Investment

Investment Investment

Investment or investing is a term with several closely-related meanings in business management, finance and economics, related to saving or deferring consumption. An asset is usually purchased, or equivalently a deposit is made in a bank, in hopes of getting a future return or interest from it. The word originates in the Latin "vestis", meaning garment, and refers to the act of putting things (money or other claims to resources) into others' pockets.
Types of investment Types of Investment
The term "investment" is used differently in economics and in finance. Economists refer to a real investment (such as a machine or a house), while financial economists refer to a financial asset, such as money that is put into a bank or the market, which may then be used to buy a real asset.Returns on investments will follow the risk-return spectrum.
Business Management Business Management
The investment decision (also known as capital budgeting) is one of the fundamental decisions of business management: managers determine the assets that the business enterprise obtains. These assets may be physical (such as buildings or machinery), intangible (such as patents, software, goodwill), or financial (see below). The manager must assess whether the net present value of the investment to the enterprise is positive; the net present value is calculated using the enterprise's marginal cost of capital. A business might invest with the goal of making profit. These are called marketable securities or passive investment. It might also invest with the goal of controlling or influencing the operation of the second company, the investee. These are called intercorporate, long-term and strategic investments. Hence, a company can have none, some or total control over the investee 's strategic, operating, investing and financing decisions. One can control a company by owning over 50% ownership, or have the ability to elect a majority of the Board of Directors.
Economics Economics
In economics, investment is the production per unit time of goods which are not consumed but are to be used for future production. Examples include tangibles (such as building a railroad or factory) and intangibles (such as a year of schooling or on-the-job training). In measures of national income and output, gross investment I is also a component of Gross domestic product (GDP), given in the formula GDP = C + I + G + NX. I is divided into non-residential investment (such as factories) and residential investment (new houses). "Net" investment deducts depreciation from gross investment. It is the value of the net increase in the capital stock per year. Investment, as production over a period of time ("per year"), is not capital. The time dimension of investment makes it a flow. By contrast, capital is a stock, that is, an accumulation measurable at a point in time (say December 31st). Investment is often modeled as a function of income and interest rates, given by the relation I = f(Y, r). An increase in income encourages higher investment, whereas a higher interest rate may discourage investment as it becomes more costly to borrow money. Even if a firm chooses to use its own funds in an investment, the interest rate represents an opportunity cost of investing those funds rather than loaning them out for interest.
Finance Finance
In finance, investment is buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets, such as gold, real estate, or collectibles. Valuation is the method for assessing whether a potential investment is worth its price. Types of financial investments include shares, other equity investment, and bonds (including bonds denominated in foreign currencies). These financial assets are then expected to provide income or positive future cash flows, and may increase or decrease in value giving the investor capital gains or losses. Trades in contingent claims or derivative securities do not necessarily have future positive expected cash flows, and so are not considered assets, or strictly speaking, securities or investments. Nevertheless, since their cash flows are closely related to (or derived from) those of specific securities, they are often studied as or treated as investments. Investments are often made indirectly through intermediaries, such as banks, mutual funds, pension funds, insurance companies, collective investment schemes, and investment clubs. Though their legal and procedural details differ, an intermediary generally makes an investment using money from many individuals, each of whom receives a claim on the intermediary.
Personal finance Pearsonal Finance
Within personal finance, money used to purchase shares, put in a collective investment scheme or used to buy any asset where there is an element of capital risk is deemed an investment. Saving within personal finance refers to money put aside, normally on a regular basis. This distinction is important, as investment risk can cause a capital loss when an investment is realized, unlike saving(s) where the more limited risk is cash devaluing due to inflation.
In many instances the terms saving and investment are used interchangeably, which confuses this distinction. For example many deposit accounts are labeled as investment accounts by banks for marketing purposes. Whether an asset is a saving(s) or an investment depends on where the money is invested: if it is cash then it is savings, if its value can fluctuate then it is investment.
Real estateReal estate
In real estate, investment is money used to purchase property for the sole purpose of holding or leasing for income and where there is an element of capital risk. Unlike other economic or financial investment, real estate is purchased. The seller is also called a Vendor and normally the purchaser is called a Buyer.
Residential Real EstateResidential Real Estate
The most common form of real estate investment as it includes the property purchased as peoples houses. In many cases the Buyer does not have the full purchase price for a property and must engage a lender such as a Bank, Finance company or Private Lender. Different countries have their individual normal lending levels, but usually they will fall into the range of 70-90% of the purchase price. Against other types of real estate, residential real estate is the least risky.
Commercial Real EstateCommercial Real Etate
Commercial real estate is the owning of a small building or large warehouse a company rents from so that it can conduct its business. Due to the higher risk of Commercial real estate, lending rates of banks and other lenders are lower and often fall in the range of 50-70%.

Enterpreneurship

Entrepreneurship

Enterpreneurship

Entrepreneurship is the practice of starting new organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. Many kinds of organizations now exist to support would-be entrepreneurs, including specialized government agencies, business incubators, science parks, and some NGOs.
History of Entrepreneurship
The understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter and the [[Austrian economists such as Ludwig von Mises and von Hayek. In Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship forces "creative destruction" across markets and industries, simultaneously creating new products and business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Despite Schumpeter's early 20th-century contributions, the traditional microeconomic theory of economics has had little room for entrepreneurs in its theoretical frameworks (instead assuming that resources would find each other through a price system). Conceptual and theoretic developments in entrepreneurship history. Adapted from Murphy, Liao, & Welsch (2006) Some notable persons and their works in entrepreneurship history.For Frank H. Knight (1967) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture. Knight classified three types of uncertainty. First, RISK, which is measurable statistically (such as the probability of drawing a red colour ball from a jar containing 5 red balls and 5 white balls). Second, AMBIGUITY, which is hard to measure statistically (such as the probablity of drawing a red ball from a jar containing 5 red balls but with an unknown number of white balls). Third, TRUE UNCERTAINTY or KNIGHTIAN UNCERTAINY, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the number of other coloured balls). The acts of entrepreneurship is often associated with true uncertainty, particularly when it involves bringing something really novel to the world, whose market never exists. Before internet exists, nobody knows the market for internet related businesses such as Amazon, Google, YouTube, Yahoo etc. Only after the internet emerged did people begin to see opportunities and market in that technology. However, even if a market already exists, let's say the market for cola drinks (which has been created by Coca Cola), there is no guarantee that a market exists for a particular new player in the cola category. The question is: whether a market exists and if it exists for you. The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. William Baumol has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the American Economic Association. Entrepreneurship is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. Robert Sobel published The Entrepreneurs: Explorations Within the American Business Tradition in 1974.

Enterpreneur

Entrepreneur
Enterpreneur
An entrepreneur (a loanword from French introduced and first defined by the Irish economist Richard Cantillon) is a person who operates a new enterprise or venture and assumes some accountability for the inherent risks. A female entrepreneur is sometimes referred to as an entrepreneuse.
The newly and modern view on entrepreneurial talent is a person who takes the risks involved to undertake a business venture. In doing so, they are said to efficiently and effectively use the factors of production. That is land (natural resources), labor (human input into production using available resources) and capital (any type of equipment used in production i.e. machinery). A business that can efficiently manage this and in the long-run hopefully expand (future prospects of larger firms and businesses), will become successful.
Entrepreneurship is often difficult and tricky, as many new ventures fail. In the context of the creation of for-profit enterprises, entrepreneur is often synonymous with founder. Most commonly, the term entrepreneur applies to someone who creates value by offering a product or service in order to obtain certain profit. While there is social entrepreneurship in most markets, business entrepreneurs often have strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity. Business entrepreneurs are viewed as fundamentally important in the capitalistic society. Some distinguish business entrepreneurs as either "political entrepreneurs" or "market entrepreneurs."

Definition and terminology
An entrepreneur is someone who seeks to capitalize on new and profitable endeavors or business; usually with considerable initiative and risk.
Etymology
The word "entrepreneur" is a loanword from French. In french the verb "entreprendre" means "to undertake", with "entre" coming from the latin word meaning "between". In French a person who performs a verb, has the ending of the verb changed to "eur", comparable to the "er" ending in English. Therefore, an entrepreneur is an undertaker, a person who undertakes a task.
Enterprise is similar to and has roots in, the French word "entreprise", which is the past particple of "entreprendre".
Entrepreneuse is simply the French feminine word for "entrepreneur".

Entrepreneur as a leader
Scholar R. B. Reich considers leadership, management ability, and team-building as essential qualities of an entrepreneur. This concept has its origins in the work of Richard Cantillon in his Essai sur la Nature du Commerce en Général (1755) and Jean-Baptiste Say (1803) in his Treatise on Political Economy. A more generally held theory is that entrepreneurs emerge from the population on demand, from the combination of opportunities and people well-positioned to take advantage of them. The entrepreneur may perceive that they are among the few to recognize or be able to solve a problem. In this view, one studies on one side the distribution of information available to would-be entrepreneurs (see Austrian School economics) and on the other, how environmental factors (access to capital, competition, etc.) change the rate of a society's production of entrepreneurs. A prominent theorist of the Austrian School in this regard is Joseph Schumpeter who sees the entrepreneur as innovator.

Personal Finance

Personal Finance Personal Finance

Questions in personal finance revolve around How much money will be needed by an individual (or by a family) at various points in the future? Where will this money come from (e.g. savings or borrowing)? How can people protect themselves against unforeseen events in their lives, and risk in financial markets? How can family assets be best transferred across generations (bequests and inheritance)? How do taxes (tax subsidies or penalties) affect personal financial decisions? Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement. Personal financial decisions may also involve paying for a loan.

Business Finance

In the case of a company, managerial finance or corporate finance is the task of providing the funds for the corporations' activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability. Long term funds would be provided by ownership equity and long-term credit, often in the form of bonds. These decisions lead to the company's capital structure. Short term funding or working capital is mostly provided by banks extending a line of credit. On the bond market, borrowers package their debt in the form of bonds. The borrower receives the money it borrows by selling the bond, which includes a promise to repay the value of the bond with interest. The purchaser of a bond can resell the bond, so the actual recipient of interest payments can change over time. Bonds allow lenders to recoup the value of their loan by simply selling the bond. Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hopes that it will maintain or increase its value. In investment management - in choosing a portfolio - one has to decide what, how much and when to invest. In doing so, one needs to Identify relevant objectives and constraints: institution or individual - goals - time horizon - risk aversion - tax considerations Identify the appropriate strategy: active vs passive - hedging strategy Measure the portfolio performance Financial management is duplicate with the financial function of the Accounting profession. However, Financial Accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.

Foreign Exchange Rate

Exchange rate
Foreign Exchange

In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 123 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 123 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 2 trillion USD worth of currency changes hands every day. The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. An exchange rate quotation is given by stating the number of units of a price currency that can be bought in terms of 1 unit currency (also called base currency). For example, in a quotation that says the EUR/USD exchange rate is 1.3 (USD per EUR), the price currency is USD and the unit currency is EUR. Quotes using a country's home currency as the price currency (e.g., 0.50593 = $1 in the UK) are known as direct quotation or price quotation (from that country's perspective) and are used by most countries. Quotes using a country's home currency as the unit currency (e.g., $1.97656 = £1 in the UK) are known as indirect quotation or quantity quotation and are used in British newspapers and are also common in Australia, New Zealand and the eurozone.
direct quotation: 1 foreign currency unit = x home currency units
indirect quotation: 1 home currency unit = x foreign currency units
Note that, using direct quotation, if the home currency is strengthening (i.e., appreciating, or becoming more valuable) then the exchange rate number decreases. Conversely if the foreign currency is strengthening, the exchange rate number increases and the home currency is depreciating. When looking at a currency pair such as EUR/USD, many times the first component (EUR in this case) will be called the base currency. The second is called the counter currency. For example : EUR/USD = 1.33866, means EUR is the base and USD the counter, so 1 EUR = 1.33866 USD. Currency pairs are given with four decimal places, except JPY with two decimal places (EUR/USD : 1.3386 - EUR/JPY : 165.29). In other words, quotes are given with 5 digits. Where rates are below 1, quotes frequently include 5 decimal places.
Exchange rate regime

If a currency is free-floating, its exchange rate is allowed to vary against that of other currencies and is determined by the market forces of supply and demand. Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world. A movable or adjustable peg system is a system of fixed exchange rates, but with a provision for the devaluation of a currency. For example, between 1994 and 2005, the Chinese yuan renminbi (RMB) was pegged to the United States dollar at RMB 8.2768 to $1. The Chinese were not the only country to do this; from the end of World War II until 1970, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.
Nominal and real exchange rates
The nominal exchange rate e is the price in domestic currency of one unit of a foreign currency. The real exchange rate (RER) is defined as , where P is the domestic price level and P * the foreign price level. P and P * must have the same arbitrary value in some chosen base year. Hence in the base year, RER = e. The RER is only a theoretical ideal. In practice, there are many foreign currencies and price level values to take into consideration. Correspondingly, the model calculations become increasingly more complex. Furthermore, the model is based on purchasing power parity (PPP), which implies a constant RER. The empirical determination of a constant RER value could never be realised, due to limitations on data collection. PPP would imply that the RER is the rate at which an organization can trade goods and services of one economy (e.g. country) for those of another. For example, if the price of a good increases 10% in the UK, and the Japanese currency simultaneously appreciates 10% against the UK currency, then the price of the good remains constant for someone in Japan. The people in the UK, however, would still have to deal with the 10% increase in domestic prices. It is also worth mentioning that government-enacted tariffs can affect the actual rate of exchange, helping to reduce price pressures. PPP appears to hold only in the long term (3–5 years) when prices eventually correct towards parity. More recent approaches in modelling the RER employ a set of macroeconomic variables, such as relative productivity and the real interest rate differential.
Interest rate parity
Interest rate parity (IRP) states that an appreciation or depreciation of one currency against another currency might be neutralized by a change in the interest rate differential. If US interest rates exceed Japanese interest rates then the US dollar should depreciate against the Japanese yen by an amount that prevents arbitrage. The future exchange rate is reflected into the forward exchange rate stated today. In our example, the forward exchange rate of the dollar is said to be at a discount because it buys fewer Japanese yen in the forward rate than it does in the spot rate. The yen is said to be at a premium.IRP showed no proof of working after 1990s. Contrary to the theory, currencies with high interest rates characteristically appreciated rather than depreciated on the reward of the containment of inflation and a higher yielding currency.
Balance of payments model
This model holds that a foreign exchange rate must be at its equilibrium level - the rate which produces a stable current account balance. A nation with a trade deficit will experience reduction in its foreign exchange reserves which ultimately lowers (depreciates) the value of its currency. The cheaper currency renders the nation's goods (exports) more affordable in the global market place while making imports more expensive. After an intermediate period, imports are forced down and exports rise, thus stabilizing the trade balance and the currency towards equilibrium.
Like PPP, the balance of payments model focuses largely on tradable goods and services, ignoring the increasing role of global capital flows. In other words, money is not only chasing goods and services, but to a larger extent, financial assets such as stocks and bonds. Their flows go into the capital account item of the balance of payments, thus, balancing the deficit in the current account. The increase in capital flows has given rise to the asset market model.
Asset market model
The explosion in trading of financial assets (stocks and bonds) has reshaped the way analysts and traders look at currencies. Economic variables such as economic growth, inflation and productivity are no longer the only drivers of currency movements. The proportion of foreign exchange transactions stemming from cross border-trading of financial assets has dwarfed the extent of currency transactions generated from trading in goods and services. The asset market approach views currencies as asset prices traded in an efficient financial market. Consequently, currencies are increasingly demonstrating a strong correlation with other markets, particularly equities. Like the stock exchange, money can be made or lost on the foreign exchange market by investors and speculators buying and selling at the right times. Currencies can be traded at spot and foreign exchange options markets. The spot market represents current exchange rates, whereas options are derivatives of exchange rates.
Fluctuations in exchange rates
A market based exchange rate will change whenever the values of either of the two component currencies change. A currency will tend to become more valuable whenever demand for it is greater than the available supply. It will become less valuable whenever demand is less than available supply (this does not mean people no longer want money, it just means they prefer holding their wealth in some other form, possibly another currency). Increased demand for a currency is due to either an increased transaction demand for money, or an increased speculative demand for money. The transaction demand for money is highly correlated to the country's level of business activity, gross domestic product (GDP), and employment levels. The more people there are out of work, the less the public as a whole will spend on goods and services. Central banks typically have little difficulty adjusting the available money supply to accommodate changes in the demand for money due to business transactions. The speculative demand for money is much harder for a central bank to accommodate but they try to do this by adjusting interest rates. An investor may choose to buy a currency if the return (that is the interest rate) is high enough. The higher a country's interest rates, the greater the demand for that currency. It has been argued that currency peculation can undermine real economic growth, in particular since large currency speculators may deliberately create downward pressure on a currency in order to force that central bank to sell their currency to keep it stable (once this happens, the speculator can buy the currency back from the bank at a lower price, close out their position, and thereby take a profit). In choosing what type of asset to hold, people are also concerned that the asset will retain its value in the future. Most people will not be interested in a currency if they think it will devalue. A currency will tend to lose value, relative to other currencies, if the country's level of inflation is relatively higher, if the country's level of output is expected to decline, or if a country is troubled by political uncertainty. For example, when Russian President Vladimir Putin dismissed his Government on February 24, 2004, the price of the ruble dropped. When China announced plans for its first manned space mission, synthetic futures on Chinese yuan jumped (since China's currency is officially pegged, synthetic markets have emerged that can behave as if the yuan were floating).
Foreign exchange markets
The foreign exchange markets are usually highly liquid as the world's main international banks provide a market round-the-clock. The Bank for International Settlements reported that global foreign exchange market turnover daily averages in April was $650 billion in 1998 (at constant exchange rates) and increased to $1.9 trillion in 2004 (Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity 2004 - Final Results). The biggest foreign exchange trading centre is London, followed by New York and Tokyo.

Real-Estate Developer

Real-Estate Developer
Real-Estate Developer

A real estate developer (American English) or property developer (British English) makes improvements of some kind to real property, thereby increasing its value. In legal form the developer may be an individual, but is more often a partnership, limited liability company or corporation. However anyone involved as a principal in such transactions is a property developer by occupation. There are two major categories of real estate development activity: land development and building development (also known as project development).
Land developers Land Developers
Land developers typically acquire natural or unimproved land (often referred to as englobo land, raw land, real property with no improvements or infrastructure) and improve it with utility connections, roads, earth grading, covenants, and entitlements. Infrastructure improvement provides a base for further development of built improvements. Covenants define the context in which future development of built improvements may take place (often in the form of deed restrictions on particular parcels: a sort of "private zoning code" limited only to those properties). Entitlements are secured legal permissions from regulatory bodies (typically in the form of permits, but sometimes in the form of re-zoning or planned unit developments). Once these improvements have been made to the raw land, it is typically subdivided and sold piecemeal at a profit to individuals or building developers.
Building developersBuilding Developers
Building developers acquire raw land, improved land, and/or redevelopable property in order to construct building projects. The buildings are then sold entirely or in part to others, or retained as assets to produce cash flow via rents and other means. Some building developers have their own internal departments for designing and constructing buildings (more common among larger developers), while others subcontract these parts of the work to third parties (typical of small developers).
Where do developers come from?

Where do developers come from?
Although there are specific educational programs which are tailored to teaching real estate finance with an emphasis on development (in the United States, typically MBA programs at university-level business schools), most real estate developers enter the business from other professional areas. Most often, persons in related fields (architecture, accounting, law, engineering, construction, planning, etc.) enter into real estate development via personal interest and opportunity, and then choose to make a career out of it if successful. An educational background in finance is typically a prerequisite for obtaining entry-level employment with an established development company, although many development company managers tend to come from architecture, construction, and related fields. Real estate development requires extensive and complex financing arrangements to be successful, as few people or organizations have the money to undertake development projects on their own (see below).
Economics Economics
Real estate development is first and foremost a cash flow business.
Real estate is, by its nature, an expensive non-liquid asset. This means that it costs a lot of money to own it, and it can be difficult to sell. In development activity, there are also the added costs of improvements themselves (typically called "hard costs") and the fees of various and sundry consultants necessary to get the work done properly (typically called "soft costs"). Because expense is high, sale is difficult, and return on investment is delayed, real estate investment is inherently risky. A large part of the work of developers is the management of risk. Since there are significant initial investment requirements, a majority of real estate development projects are financed with a large amount of debt leverage. While more leverage increases potential profit, it also magnifies risks and builds in a periodic negative cash flow (regular payments on the debt). Projects will generally be profitable if the upfront commitment of cash is kept to a minimum and the project can quickly start generating a positive cash flow sufficient to cover debt service.
There are almost as many ways to finance a real estate development project as there are development projects. However, most financing arrangements fall into a few broad categories:

world finance corporation

World Finance Corporation
world finance corporation

World Finance Corporation (abbreviated WFC; it was later renamed simply WFC Corp.) was a financial corporation founded in 1971 and headquartered in Coral Gables Florida. When WFC Corp was headed and controlled by Guillermo Hernandez-Cartaya (a former Cuban banker who was an agent of the CIA, and believed to be an agent of the Mafia, Fidel Castro, and also of various Colombian drug lords) through the WFC Group shell company, it became known for a major financial scandal in which over $50 million was lost. This scandal was the subject of a 60 Minutes segment on 26 February 1978. Cartaya controlled it through a number of shell companies, the most well known of which was the WFC Group.
Founding
The corporation was founded in 1971 by the Cuban expatriate banker Guillermo Hernandez-Cartaya, after he finished serving a Cuban sentence for his participation in The Bay of Pigs Invasion. The New York Times said:
With the formation of WFC, former associates said, Mr. Hernandez-Cartaya hoped to utilize his wide-ranging contacts in the Latin American political and economic world to tap the growing market between American lenders and Latin American borrowers made possible by the 1969 Edge Act.

Overseas loans and banks
In 1975, WFC was designated an "exclusive official agent by the Colombian Government for a loan of $100 million, the largest in the nation's history."
Unibank
Two years previously, in 1973, WFC founded a bank in Panama called "Unibank". It received with unusual swiftness Panama's most liberal banking license, a Class One license. Most of the equity was held by WFC, but a total of %24 (8 per cent each) was held by three American banks- Mercantile International Corporation (subsidiary Mercantile Trust Company of St. Louis), First National Bank of Louisville (subsidiary of First Kentucky National Corporation), and Midatlantic International Inc. (subsidiary of Midatlantic Banks of West Orange, N. S.). Unibank was rather successful- by 1976 it had affiliates world-wide and ~50 million dollars in deposit. Unibank was instrumental in the frauds, as it often diverted loans and loan repayments to WFC, where they typically vanished. Financial fraud was not the only actitiy- it diversified into arms smuggling and circumventing the embargo of Cuba. The deceit could not last forever, and in 1977, the Banking Commissioner of Panama seized Unibank; he had little choice since Unibank was a debtor to the National Bank of Panama, and already $10,000,000 had been lost. Unibank would not be the only bank begun by WFC principals to collapse with great financial loss.
Pan American Bank
In 1976, the Comptroller of the Currency forced Cartaya out of his control of the Pan American Bank of Hiateah in Florida- 2 million dollars had gone missing due to bad overdrafts and uncollected funds. This incident was the reason for the Comptroller's later involvement in the investigation that broke open the WFA scandal.
Also in 1976, US Customs agents intercepted a private plan inbound from Panama. Aboard was thousands of dollars in cash, strapped to a woman associated with WFC's Vice President. On the plane were also that Vice President, Cartaya, and Cartaya's wife.
Ajman Arab Bank
Another bank had been started in the United Arab Emirates's Sheikdom of Ajman, with the collaboration of the Ajman government. It was called the Ajman Arab Bank. It was plagued by the same problems as Unibank, and was shut down May of 1977. Cartaya went to the UAE, apparently to try to explain the missing money, and the authorities confiscated his passport. Cartaya none the less escaped the UAE, using documents brought him by a fellow Cuban.
Investigation and scandal
WFC came to national attention when an investigation in 1976 by the District Attorney of Dade County, Florida, (along with four other governmental agencies; besides the Dade County Public Safety Office, the FBI, the IRS, the DEA, and the Comptroller of the Currency all participated in the joint investigation) revealed that the WFC held the dubious distinction of being the longest running (and largest) launderer of money for Colombian cocaine smugglers; the investigation proceeded for approximately two years. Somewhat ironically, the law enforcement personnel literally stumbled onto lead, when, during an investigation of a pest-control service called King Spray Service suspected of drug smuggling, two agents of the Dade County Public Safety Office (which, under Donald Skelton, led the investigation until the Justice Department took over) were searching through the company's garbage, in which they found financial records of WFC, recording very large transfers of funds between the bank and the company, along with small amounts of marijuana. The investigation ruined WFC Corp, and it closed in 1980. Cartaya used the bank as the centerpiece of an elaborate corporate labyrinth, through which the funds and bad loans (to Cartaya and his associates) were filtered and "laundered". An example of the labyrinth: WFC Corp. was 100% owned by the WFC Group, which itself was owned by Cartaya to the amount of %24.7; another %23.3 was held by "Neo-Floridian Development Company"- of NFDC, %54.4 was held by Cartaya, again. A considerable proportion of the money was funneled through a bank in the Bahamas called the Cisalpine Bank, and from thence to the Vatican Bank to Swiss numbered accounts; this bank was owned by Vatican Bank manager Archbishop Paul Marcinkus and notorious dirty Italian banker Roberto Calvi. Interestingly, the Cisalpine bank seems to have also been laundering heroin profits through the Nugan Hand Bank bank for the Grey Wolves. The bank was involved with a number of prominent Floridians, such as Walter Sterling Surrey, a stockholder in, director of, and lawyer for, WFC Corp. Kwitny recounts,
Surrey says he came aboard mainly to help start a foreign-based mutual fund for an old client, a Cuban exile who helped found World Finance. He says he dropped out in 1976 when the mutual fund deal fell through, and that he was unaware of any criminal or intelligence activities of the company. The investigation and its aftermath were marred and dogged by persistent rumors and allegations of corruption and cover ups by various governmental agencies. Jonathan Kwitny writes this of the Justice Department's head investigator, Jerome Sanford: He says the main investigation was halted by Washington in 1978, after the CIA objected that 12 of the Justice Department's chief targets were "of interest" to it. Sanford says he was told that this meant the men he was investigating were CIA operatives of one sort or another. Florida lawmen who worked with Sanford backed up his story. Two of the suspects were Richard Fincher and Hernandez-Cartaya. In the aftermath, Florida Attorney General Robert Shevin returned $7,600 in contributions from WFC-connected Latin businessmen. Dade County Democratic chairman Michael Abrams resigned from the board of a WFC-backed insurance company. Kwitny and Sanford were not the only ones to detect things amiss; Kwitny offers this extract from a House Select Committee on Narcotics and Drug Abuse staff report:

There is no question that the parameters of the WFC can encompass a large body of criminal activity, including aspects of political corruption, gun running, as well as narcotics trafficking on an international level... It is against this background that our investigation encountered a number of veiled or direct references to CIA or KGB complicity or involvement in narcotics trafficking in South Florida.