That's All I Can Stand, I Can't Stands No More…

Hello, good morning Mr. Obama, this your wake up call

Popeye, one of my favorite cartoon characters growing up as a a kid, was one of the good guys, but he had his breaking point. The quote at the top seems to pop up in my mind each time I hear stories like  those that follow:  

We got a call in our office today from a gentleman who wanted to know if his Workshop Handbook order had been processed and sent yet. He was concerned that his credit card was declined because his credit card company had contacted him to inform him that his credit line with a balance of $5,342 and credit limit of $11,500 had been cut all the way down to $5,400(nice round number) leaving him a whopping $58 left on his credit line. Not because he had defaulted on his mortgage and was in foreclosure, he’s not. Not because he missed a payment or had been late, he hasn’t been late on anything in 10 years. The explanation was “because of the bad economy.”

Lisa had a home equity line of credit for $320,000 that she had not tapped into at all, it was there as a cushion just in case she ever needed it. Her brother was taken seriously ill and Lisa’s blood was a perfect match for medical procedures that were required. She took time away from work and began traveling to Houston using advances on the home equity line for expenses and to pay some of the bills and after a few months had run the balance up to about $58k…all of a sudden the bank informed her that they were cutting the line of credit from $320k all the way down to $60k.

The Griswolds lease was up on their “family truckster, ” they had paid U.S. Bank for 60 months, as agreed, always on time thanks to the convenience of the payment being automatically deducted from their checking account. The residual value/buyout on the lease was about $15,500, the wholesale book value was about $15,000 or they could just turn it back in and go get something new. Clark offered U.S. Bank $11,000 to buy the truckster thinking they would laugh at him…in 60 seconds they accepted his offer. His payment on an $11k loan would be half what he had been paying U.S. Bank for the last 5 years, no brainer right? After two weeks of back and forth, tax returns, etc., etc….declined. The Branch Manager says, “I’ve been doing this for over 20 years and never seen it like this, they (U.S. Bank) have taken all the lending authority out of the branches and centralized the decision making, I can’t get a loan approved for people even if they’re gold plated.”

Meanwhile, we have artificially low rates which is allowing the banks to borrow from the fed at 0% and buy treasuries(that would be gov’t debt) and make 300 + basis point spread? OK, I get that part of the plan to help banks recapitalize, but Joe Lunchbucket on Main Street is dying.  Merideth Whitney ,who was very early in her call on the mortgage meltdown and financial crisis when no one was listening 2-3 years ago said she “has 100% conviction that the consumer is not getting better.”

The bill of goods we were sold in the Trillion plus bailout program in the fall of 2008 (yes trillion, $700 billion is just the “headline” number, kind of like 10% unemployment is a “headline” number) was that we needed to “unseize the credit markets and keep credit flowing.” The TRUTH, to date credit lines on just credit cards alone have been cut by $1.5 trillion. Once again reality just doesn’t square with the facts. No jobs, no credit means no consumer spending which means no economic recovery… it really is that simple despite what the TV says.

What about Small Business

These are just individual consumers, with good credit, at least for now. What about small businesses that are experiencing the same thing… almost 50% of the jobs in America can be attributed to companies with less than 50 employees. In fact, only 17% of jobs involve companies with 500 or more employees.

Washington and Wall Street want Americans to “take a pill” with more government plans that are poorly thought out, address only symptons, and fail because of miserable execution. Let’s say we take $50 billion(that’s billion with a B) of taxpayer money and poor it down a “black hole” called General Motors, GM employs just slightly more than 100,000 people in North America(last I checked that includes Canada & Mexico too). The first thing we do is get rid of CEO Rick and replace him with CEO Fritz and then 8-9 months later we get rid of Fritz and bring in _________(fill in the blank as if it matters). Simple math in my head puts that at about $500,000 of your money PER EMPLOYEE of GM in the name of “job preservation” at an American icon. Good idea? Good business decision? NO…Its insanity, but hey there are 535 people in Washington that we voted into office running this circus.

If you look at the various “deals” Paulson, Geithner, Washington et al cut with various firms/industrys and asked would a real business person, say a private equity firm have ever agreed to something like this? In almost all cases the answer is resounding No. I know of at least one company in upstate NY, solid product line, starving for working capital, that with an extra $500,000 would immediately create a dozen new jobs in a community still reeling from an Air Force base closing.  Lynn Tilton, CEO of Patriarch Partners ,  has a mission and a plan to help American overcome its “plague of joblessness.” American needs an injection not a pill. That injection needs to be capital and credit with a laser-like focus on small and medium sized businesses. She is not a government wonk or “think tank” schill. She “gets it.” She has been trying to get Geithner’s attention for months, but apparently he doesn’t want to hear about real world solutions. After all part of the problem is we don’t make anything here in the U.S. anymore. We need people who understand how a business is run and/or have run one before, we need a strategy focused on small and medium sized businesses, that is where the needed jobs will come from, they must. If more people in Washington, thought like Tilton and understood what she understands, the economic reaction or recovery may not quite rise like Popeye’s strength after downing that can of spinach, but we’d have a fighting chance.

People are waking up, sentiment is changing, in the foreclosure courts judges are asking questions they never asked in the past sua sponte.  On Main Street, people are paying more attention to what is going on in Washington even if they are not in foreclosure, in some cases because they are “underwater” in their house through not fault of their own. People are spending their money at the locally owned businesses rather than the big corporate chain. They are closing their bank account at Bank of America or U.S. Bank and opening one at the local community bank or credit union, who didn’t play in the mortgage meltdown, but now are being asked to foot the bill through higher FDIC fees to replenish a fund decimated by the “big banks.”  

I would often take the kids to a local family owned diner after church on Sunday. A while back, down the street a Bob Evans Restaurant(read:big corporate chain for those of you not in the midwest) opened up right in front of the new Wal-Mart and one Sunday my younger daughter Kassidy said, “Dad, lets go to Bob Evans, let’s go to Bob Evans.” To which my older daughter Kendall replied, ” Kass, we can’t go to Bob Evans, that would be like going to the Ohio State game and rooting for Michigan.” God love’em even my kids are rooting for small business…guess the apple doesn’t fall far from the tree afterall.

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