NYT: Walt on small businesses
Thursday, July 29, 2010 at 08:29 AM
Walt spoke to the New York Times on June 15 about the recession and how to help the recovery of small businesses.
Walt on how small businesses are essential for economic recovery:
"It’s the small businesses who want to expand who normally drive a recovery. I think the biggest reason why the recovery appears to be faltering is that there are collectively enough of these small businesses who do have logic for expanding who can’t get any money from their community banks or other familiar and local sources of credit."
Walt rejects deficit spending as a solution:
"What my businesses say is, “Quit throwing money at the problem. Balance its budget. Quit digging the deficit hole deeper.” They’ve all been through that, and they see the federal government as the only one that’s defying the law of economics, and they get real nervous about what’s happening in Greece. The beneficiaries of the pump-priming are the ones that most want the federal government to quit spending money that it doesn’t have."
Walt explains why loans are scarce for small businesses:
"I have 31 banks headquartered in my state — 12 are under regulatory supervision and must reduce their outstanding loan portfolios. Those 12 banks are effectively out of business. It doesn’t matter if one of their customers comes in with an absolute bullet-proof expansion opportunity, they are not in the business of making new loans. And at least half of the remainder are afraid they’re going to be, so they’re extremely conservative. This pressure on the commercial banking system, outside of money-center banks, is starving small business for credit in this country."
Walt explains his bill to encourage banks to make small-business loans:
"The bank that’s struggling to write down their commercial real estate assets is having to take a hit to capital, and this provides replacement capital on very, very favorable terms. So it deals with the left side of the balance sheet; my bill deals with liquidity and concentration on the right side of the balance sheet. It’s essential, because liquidity without new capital for a bank whose problem is both doesn’t solve the bank’s problem."
To read the rest of Walt's interview, click here.
