Corporate America’s wealth

Corporate America’s wealth

My friend Lew Prince finally found a bank willing to give him a $175,000 line of credit.  He had talked to six other banks since the summer of 2010 all of which turned him down because he wouldn’t put up his house for collateral, something they would never ask of a big business.
I tell you this story because what we typically hear from the big banking industry is that the reason they aren’t making more small business loans is because there is little demand for loans or the loan requests they receive are not from credit worthy businesses.  They don’t want to add risky loans to their portfolios.
So let’s look at Lew’s business, a 32-year old family business in St. Louis called Vintage Vinyl.  The business grosses well over $1 million a year, has 24 employees and has paid back on time all previous business loans with never a late payment.  By all accounts Vintage Vinyl is a successful small business with customers worldwide.
Every day across this country small businesses go to Small Business Development Centers, put together financial plans and promptly get them rejected by the banks.  The truth is that the banks, mostly big banks , alone are sitting on $1.6 trillion in reserves (80 times the $20 billion they had in reserve four years ago), money that could quickly jumpstart our economy according to a just released report from University of Massachusetts economists.

If America’s largest banks and non-financial companies would just loosen their death-grip on a chunk of the $3.6 trillion in cash they’re hoarding and move it into productive investments instead, the report estimates that about 19 million jobs would be created in the next three years, lowering the unemployment rate to under 5 percent.

It’s time for Congress to tell our financial institutions, most of whom the taxpayers bailed out to make them healthy, to put most of that cash they have sitting around to work or start paying taxes on excessive loan reserves.  Corporate America can complain all it wants about government being a problem but the reality is that our big corporations have no interest in helping the economy recover.