Archive for September, 2011

Operation Twist Will Not Help Main Street…

Thursday, September 22nd, 2011

Borrowers who can refinance probably already have since rates just prior to Operation Twist were the lowest in six decades.

Interest income for those who depend on bank deposits such as retirees, or those who need to be liquid are seeing the lowest interest rates in history, reducing their income.

Those who have a mortgage that is underwater or a Loan-to-value that is too high to qualify will not be helped by this program, and are not able to refinance, a fact that hurts the general economy as one in five homes are in this condition.

If we can stipulate that the economy is not suffering because of high rates, then why are we taking this action at this time, which will neither create jobs, nor create any confidence in the economy?  Banks have more than $1Trillion dollars sitting on the Fed’s Balance Sheet at near zero percent interest, so liquidity is not an issue either.

Banks do not lend because the demand is not there, or they don’t see profitable opportunities in the market place, namelylending to borrowers who do not demonstrate an ability to repay the loan.  This is the definition of “pushing on a string.”

While the Federal Reserve is apparently doing all it can to help the economy; acting alone, or without the policy makers in Washington supporting its actions with concrete plans to jumpstart the economy with a laser focus on Jobs and Growth creates this lopsided approach which will have many unintended consequences, and will not soothe the markets.

For more information see the following related articles…



Want to Hear What Small Business is Saying?

Monday, September 19th, 2011

There is so much noise in the media and the marketplace today that it is virtually impossible to hear one of the most important voices that need to be heard if we are truly interested in a meaningful economic recovery. Small Business usually plays an indispensable role in the need to create new jobs, and is the first to initiate capital formation for new businesses.

 The consistency of the message is very compelling. Here is what they are saying to us:

1st. We need leadership in government with a clear and consistent message…

The recent debt ceiling debacle and the lack of a unifying message from our government is eroding confidence in our small business leaders. The message should be simple; Jobs and Growth!!

Every decision should be filtered through these two initiatives. Everything else should be at a different priority.

2nd. Do no harm…

The recent onslaught of increased regulatory pressures, especially those aimed at the financial industry and the constant back and forth over whether or not, and who will be taxed more is creating an uncertain environment for small business owners. Talk about eliminating the home mortgage tax deduction, or millionaires taxes for those making significantly less, or regulations which institute price controls do not instill confidence. Equally damaging is all the talk (and action) about cutting government, jobs, and programs all in the name of reducing a fiscal deficit that does not directly affect a small business owners’ day-to-day decision making. In short, we need a “jobs now, deficit reduction later…” or unbalanced approach to jump starting the economy.

3rd. Simplify everything…

We live in a complicated environment. Whether it is the discussion on the status of foreclosures or the Euro crisis, most feel overwhelmed by the complexity of the issues. Real time media, and ever increasing news outlets supply more information than is needed by most small business owners. It is important to keep it all in perspective and ask “what does this mean for me, or my business” and filter out the rest of the noise. Are customers still buying my product? Breaking down any issues and putting them in context of the things we can control, and those outside of our control, will allow for a simple fact based Q&A on the important issues.

4th. It’s all about demand or the lack thereof…

Constantly hearing about banks that won’t lend, or companies that won’t hire is a clear issue of demand… Our economy is not “central planned” and does not react to “pushing on string.” Everyone with a stake in helping our economy should remember that without demand there will be no hiring, or employment of capital.

In conclusion, most business owners still believe that the US remains the greatest economic power in the world, and would not trade places with anyone, anywhere else. With that foundation of support, we should look to build the confidence required to attract investment that will in turn create the growth we need to fix our economy…