Chairman Bernanke and Sheila Bair are talking about the cycle of banks and lending and balance sheets and hiring and how lending is contingent on small business balance sheets. Banks don’t want to lead for fear the business will not be there tomorrow. Small businesses cannot grow because they don’t have the cash to invest in their business. Hence nothing is being done. Growth is not happening. Commericial real estate is depressed. Look at your local strip mall for the clues.
It is my thought that the focus should now be squarely on the larger corporations who have had access to capital markets, whose balance sheets are flush with cash, who have done the employee cutting which has had a trickle down effect on main street. It is time for them, to start to take some of the cash and hire again.
Employees are cheap(er). Efficiency earning growth to higher stock prices are over. Earnings will not come from the expense side but from the revenue side. Growth has to come from growth in the economy, not cost cutting.
Jobs stimulate spending. Spending stimulates more spending. Look to create jobs. Creating jobs will ease the burden on over-worked employees and start the trickle up that ends on main street. Then the small businesses can start to find stimulus from the banks again.
Stop the freebies from the government. Stop the “save everything/everyone mentality” that was required back then in 2008-2010, but not needed now. Focus on solving the problems by using the cash on the balance sheets of those who have made it through - especially if those gains were from the government.
Jamie Diamond from JP Morgan/Chase was on CNBC yesterday talking about paying out a dividend with all the cash they have accumulated - once the bank stress test is done that is. Meredith Whitney, the ”Banking Analyst Guru”, suggested investing in banks overseas instead.
Great (sarcastic “great”). Take free money from the government, take guarantees on housing and loans, and take that free money and give it to the people who likely have jobs in the form of a stock dividend. Alternatively, if he were to do what Meredith Whitney suggests, he should use it to hire people outside the USA. What will that do in the US other than raise the stock price possibly and provide a small stimulus from those stockholders who may spend the dividend (the dividend is likely to reinvested in stock anyway)? If it is used to buy an overseas financial institution, that is even worse. Pay those workers with US free money. No wonder Meredith Whitney thinks municipalities will default on debt at an alarming rate. No jobs here, means no tax base, means no money to pay the bondholders.
Mr Diamond, do the right thing and take the cash you have been given for FREE in the USA, and look to hire someone in the USA instead who can somehow, someway grow your business. I know… what job is there?
Maybe there is that extra teller at your branches. Maybe it is opening all day Saturday (with new workers involved). Maybe it is increasing budgets instead of cutting budgets, and asking managers to put the extra money to work and while they are doing it, prove they used it to increase the bottom line of their department. Maybe it is a technology product. Maybe it is hiring the people to service the people who want a mortgage work-out so they can feel a little more better and stay in there house.
Will it maximize shareholder wealth? Who knows. If the economy grows and jobs are added, you can argue that burdens can be lifted, housing can be absorbed by new workers who save up and buy that house, and in the process the economy and the bank earnings rise in the process. Banks can start to make loans (like they are supposed to do) instead of buying US government bonds.
As long as the US focuses on saving the world, the opportunity of creating business and earnings will be lost. Small businesses need big business stimulus to get them out of the rut. IMHO.
