Are greedy bosses, stingy bankers stalling economic recovery?

New Media editor Don Fenley casts a big net for hidden gems about and behind the news

Are greedy bosses, stingy bankers stalling economic recovery?

Published Wednesday, October 28 2009 - (0) Comments

Even the most casual news consumers have heard this buzz - if it weren't for stingy bankers and greedy bosses the U.S. economy would be roaring down the recovery track.

There's some truth to parts of that buzz. Employers are not rushing to hire people, and credit is tight. But there's more to the story and it deserves some context.

First let's set the scene:

According to the Bureau of Labor Statistics about 15.1 million people in the U.S. are now unemployed. Another 9.2 million are "involuntary part-time worker." These workers exist in the unappreciated shadows of the U-6 category of employment data.

It's also no secret that employment has not fully come back during the past two recessions. Employers have found ways to be more efficient, technology has made workers more productive and the U.S. has been transforming from a manufacturing based economy to a services and information based economy. Some workers retrain and gain. Others are hard luck stories - that's especially true for those in the 50+ ranks.

That's just as evident in Kingsport as it is anywhere else. Back in June when Kingsport employers had shed about 600 jobs I wrote an update titled Scrubs replacing hard hats in Kingsport. The short version of that blog is: Education and heath care is the big growth segment in the Model City's employment picture. Trade, Transportation and Utilities is NO. 1 with 20.8 percent of the jobs, Manufacturing is declining but still has 18 percent of the jobs while Education and Health Services is growing with 15.8 percent of all jobs. Government comes in next with 13.4 percent of all Kingsport jobs.

Fast forward to the most current employment data that shows Kingsport's employers have cut 956 jobs. Still, if you check the help wanted ads there are jobs available, but only for people with specific skill sets. And there's some speculation that high unemployment may be the new norm..

Four points that seem to support that are:

• The auto and construction industries helped lead the nation out of past recessions. But the carnage among automakers, auto parts manufacturers like TRW and the surplus of new and foreclosed homes and empty commercial properties make it unlikely these two industries will be engines of growth anytime soon.

• The job market is caught in a vicious circle: Without more jobs, U.S. consumers will have a hard time increasing their spending; but without that spending, businesses might see little reason to start hiring.

• Many small and mid-size businesses are still struggling to obtain bank loans, impeding their expansion plans and constraining overall economic growth.

• Higher-income households are spending less because of big losses on their homes, retirement plans and other investments. Lower-income households are cutting back because they can't borrow like they once did.

So much for the greedy bosses. How about those stingy bankers? You know the ones I'm talking about. President Obama scolded them to increase their lending to small business in his national radio broadcast Saturday. And bankers are beginning to push back against taking the rap for the economy's ills.

Credit is tight, that's true. But there's more here than a simplistic case of political scapegoating from the White House bully pulpit about bankers with a strangle hold on credit.

I sure don't want to sound like an apologist for bankers but it's reality that there's a pretty big disjunct between political rhetoric about what's good for small business and what the FDIC is enforcing these days. Least we forget, 106 U.S. banks have failed so far this year. And the FDIC has a 416 "problem lenders" on its watch list.

No banker wants to see his institution on the weekly
FDIC's Failed Bank List.

Here's the way is sounds from the other side. There's local money available to borrowers who can show they can service the debt. While politicians say bankers need more skin in the recovery game, the people seeking loans need to get used to the idea that they need more of their own working capital in the game.

Back in days when the economy was strong 100 percent loans to small businesses, developers and builders were no big deal. But that was then and now is now. The current business landscape is littered with the savages of past abuses that created the worst economic upheaval since the Great Depression.

But does that mean there are not some bankers who may be trying to game the "more FED bailout money is coming down the pike" equation? Probably not.

I've heard several local contractors swear that's what some local governments did with projects already planned and funded, but put on hold for stimulus money.

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