Remarks of the Honorable Kenneth E. Bentsen, Jr.,
President, Equipment Leasing and Finance Association
47th Annual Convention
New Orleans, Louisianna
October 14, 2008
Let me first thank all of our sponsors for their generous support of this successful event, and also thank all of our members for taking time away from your business and family to attend the 47th Annual Convention.
More than a year ago, at the August 2007 meeting of the ELFA Executive Committee, officers and directors noted that economic storm clouds were forming and advised that the Association take a conservative approach with the coming budget year.
That was prescient counsel. In January, when the Equipment Leasing & Finance Foundation convened its annual Industry Future Council at the ELFA offices, a number of the participants expressed deep concern regarding the state of the financial markets and the possible effect on the equipment finance sector.
At the same time, others reported continued availability of credit and business demand holding steady, if not increasing.
Throughout the winter and spring the Association experienced mixed demand for ELFA products while our indices indicated a slackening of new business volume for the first quarter of 2008.
We then witnessed the near collapse and then Fed-induced sale of Bear Stearns, and while startling, to say the least, few if any believed it to be a predictor of things to come.
By mid-year the MLFI-25 began to show year over year growth in new business volume even as the credit crunch widened and two large ELFA members exited the business.
By fall, the federal government had seized Fannie Mae and Freddie Mac, the venerable Lehman Brothers failed, global insurance behemoth AIG became the recipient of government financing, and the Congress approved the Bush Administration's $700 billion financial rescue package.
Wall Street was radically re-aligned and the credit markets came to almost a complete halt with the Federal Reserve becoming the lender of last resort for the commercial paper market.
As we come to the end of 2008, we look back in awe at the change that has been wrought on the global financial system and the breath taking upheaval in the financial services industry.
The governmental response and intervention in the markets is unprecedented, with little assurance of what the future will bring.
To paraphrase Dorothy, 'we aren't in Kansas any more', but I'm not so sure about Oz.
No sector of financial services has been immune from this year of turbulence, including equipment finance.
While our member companies have continued to provide capital to American businesses at home and abroad, we cannot insulate ourselves from the ills of the broader markets.
Nor has the ELFA been immune as we have experienced a decline in revenues from conference and product sales and we expect that to continue into the next year.
In addition, merger and acquisition activity in the industry has and will continue to significantly affect association membership and participation.
With more than fifty completed or announced mergers during 2007 and into the first few months of 2008, according to the Monitor, and such notable companies as Merrill Lynch Capital and Citicapital having left the scene being absorbed by other organizations, we can expect continue pressure on Association finances.
But, the Association benefits from an extremely strong leadership team including our outgoing Chairman Bill Verhelle and incoming Chairman Jim Ambrose and our very engaged and committed officers and directors.
This engagement, and that of our Business Councils and standing committees, provides great direction for the Association staff .
Amidst all the turmoil, the Association achieved its historic membership renewal rate of 87 % in 2008, even in light of a dues increase, and recruited fifty-five new members.
While conference attendance has been varied; conferences such as Equipment Management, Legal and Operations and Technology exceeded budget expectations. Others such as Accounting and Financial Institutions have lagged behind 2007 levels.
Even this convention, with its strong program and outstanding keynote speakers is twenty percent below last year.
But staff has been diligent to cut spending to make up shortfalls in this and other areas.
We have also experienced declining participation in our staple - Principles of Equipment Leasing and Finance - for the first time in its history.
But we grew our web-based seminar business by doubling the number of offerings.
And, ELFA just recently launched our web-based Fundamentals of Equipment Leasing and Finance.
This new course, developed in collaboration with member company business and human resources executives, is exactly the right kind of tool our member companies need to increase productivity across a broad group of employees at a very low cost of time and money, particularly during a time of constrained training and travel budgets.
To help our member companies attract a strong workforce, we recently launched a new online job board dedicated to the equipment finance sector, the ELFA Career Center.
Through a collaboration with other financial services trade associations, the ELFA Career Center allows our member companies to reach a broad pool of potential talent interested in the financial services sector, including ours.
In addition to providing business and professional development programming, the Association continued to confront a growing list of public policy issues at the federal, state and international levels. This is a critical function of our association.
There is a Washington saying: If you don't have a seat at the table, then it's a safe bet you're on the menu.
The ELFA has certainly strived to have a seat at the table.
The ELFA staff, working closely with our members, was instrumental over this past year in ensuring that our voice was heard in the legislative and regulatory arenas, often with success. At the Federal level, we continue to address long-standing policy issues in the tax and accounting areas. And we've added issues related to aviation, energy, health care, marine and rail to our portfolio.
In the past year we established a Legal Committee subcommittee on Air, Rail and Marine as well as a Health Care Finance Committee.
The Board of Directors also recently approved the transformation of the Credit and Collections planning committee into a full standing committee to address the growing policy issues in these areas.
We expect that in the next Congress we will confront a full load of tax and regulatory changes, particularly related to the oversight of the bank sector and delivery of credit.
Our earlier successes, along with our efforts to increase advocacy and brand development among federal policy makers, will be tested in the next year.
The level of legislative and regulatory activity at the state level also continued to increase in 2008, and our added investment in resources dedicated to state policy has paid off.
Our combined efforts with member company executives around the country is extremely important to the success of our efforts as we meet and work with state policymakers on their ground.
Whether it's about electronic recycling or an issue such as gross receipts tax, we can expect to have to deal with more of these type issues in the states, not fewer.
In the coming year we expect the states, like the federal government, to experience severe fiscal deficits requiring additional tax revenue, while many will be seeking to impose their own form of prudential regulation in response to the financial crisis.
This year we also determined the need to go beyond the traditional legislative and regulatory approach to the states and federal government with the creation of the Public Sector Finance Committee.
Many of our members have long provided capital and services to the government sector and it is incumbent upon the ELFA to become engaged in the policy issues related to procurement at the federal, state and local level.
We continue to see international affairs as a growth area for the Association, Staff has worked closely with the U.S. Department of State on impacting the proposed Unidroit Model Leasing Law and with our counterparts across the globe on the proposed FASB/IASB lease accounting project.
Because of the growth and importance of foreign markets to U.S. manufacturers and our member companies, we are looking for ways to build beyond serving as go between with federal export finance and international agencies and increase our data and research in this area.
ELFA research, and that of our affiliated Foundation, continued to set the pace for the industry.
This year we had the largest participation in the annual Survey of Equipment Finance Activity (formerly the Survey of Industry Activity) and expanded media and analyst coverage of the MLFI-25.
The Foundation continued to put out top-drawer research at an increasing rate.
Combined, ELFA continues to be the principal source of industry information.
ELFA continues to believe that our broad membership affords us the platform to expand our research offerings through best practices forums.
For several years we have convened the CFO Roundtable and two years ago began the Human Capital Roundtable.
This year, we hosted our first Captive Finance Roundtable with great success and in the next year we will adding an Independent sector roundtable.
The Association has also been successful in continuing to establish the equipment finance sector's brand identity with key audiences, including financial analysts and media.
Increasingly, key financial media seeks the views of our members on both the business and its broader economic impact.
The Association and our members are more on the minds of financial reporters than ever.
Publications such as the Wall Street Journal, Financial Times, American Banker, Barron's, Newsweek, Dow Jones, Bloomberg and Reuters now cover our industry and its activities.
And, the stable of financial analysts with whom we now communicate regularly has increased dramatically.
And we will continue to grow this outreach into the next year, which is greatly enhanced by the work of both the ELFA and Foundation research.
I'm especially enthusiastic about the work done this year involving our business council steering committees.
This is really the brainchild of Bill Verhelle, who came up through the business council structure.
Bill sought to move us away from just process and worked hard to build a strong structure of communication and engagement between the committees, the board of directors and staff that will benefit the Association.
As we complete 2008, perhaps with a sigh of relief, and look to 2009 with anticipation, it is more important than ever that we take stock of our mission and role as it relates to the industry we serve.
Our members, small and large, will continue to face pressure from the fall out in the financial markets.
We likely will witness more consolidation and member companies exiting the business.
Internally, we have cut our forecast for attendance at meetings and conferences in anticipation of further cost reductions at member firms.
The Association's operations in this coming year cannot just rely on re-selling the same programs and products, but rather we must prove our relevance to our members.
To that end, the Association will continue its efforts to build out our public affairs, advocacy, industry data, and research at this critical juncture of transforming financial markets with an increasing public sector role, and a changing of the guard in Washington with a new presidential administration.
While the political watchword this year has been "change", frankly we are already in the midst of change and should expect a great deal more affecting our industry, our market, the economy and the legislative and regulatory framework.
Now more than ever, we will need to be organized, not only to respond to this change, but to effect it as well.
This means more, not less, advocacy and branding of the economic rationale of our industry to policy makers, the media and opinion leaders.
Further more it is reasonable to expect that the capital markets and investors will demand increased market data and research, perhaps in a more standardized form, and the Association must be prepared to meet that need.
We must also respond to the economic conditions and changing nature of our member companies and their workforce through our conference and product offerings.
While we will to continue hold our historically successful meetings, we will proceed at a pace with our move into web-based delivery of information and products such as web-seminars, web-based training and professional development. And, we will continue with the expansion of our industry best practices to take full advantage of the broad swath of the industry our membership captures.
In tough economic times we understand that managers must make critical choices, and the Association must insure that the services and products we provide our members are indeed critical.
Our mission -- to be the forum for industry development; the platform to advocate for the industry; and the principal source for industry informationÑ is unique to this Association and the industry we serve and in time of economic strife and market dislocation more important than ever.
On behalf of my colleagues on the staff of the ELFA, we stand ready to meet the challenges and provide the service that is our core mission.
Thank you for your continued support of the Association.