The Choate-Weinberg Report

Stiffing Small Business Not A Good Idea

President Obama’s message Tuesday night was an interesting combination of tossing candy to the crowd while telling them that rich people would pay the tab.

In many ways, it is exactly as disingenuous as the Republicans who adopted the Wall Street mantra that you can eliminate risk if you just let 25-year-old geeks run their algorithms and place their bets.

The fact is that there is plenty of blame for our current economic situation to go around.

Democrats who wanted banks to make loans to everybody without regard to their actual ability to pay them back and enabled Fannie Mae and Freddie Mac to buy those loans.

Republicans who actually believed the crap that Wall Street bankers dished out along with campaign contributions.

Americans who were willing to commit to mortgages they knew damn well they couldn’t afford.

And investors who thought it would never end.

Now, we have a great big mess and, since the liberals are in control of the checkbook, we are going to attempt to spend our way out of it.

I have to be honest.

Since I’m in the advertising business, chances are that I stand to benefit. Any goosing of the retail market always benefits advertising.

But I’d infinitely prefer that any government money used would be used to directly help the backbone of the American Economy which is small business. Small business creates 80% of the jobs in America.

The six of 29 employees I laid off this year would have killed to keep their jobs, even though we don’t pay the kind of pay that big companies do and provide the kind of benefits.

But a small business doesn’t get TARP funds or loans at favorable rates like, say, the Bank of America or General Electric.

What happens to small business is that General Electric gets a bail out and they, in turn, cut our credit lines so we can’t buy the supplies we need.

The reason for this, quite frankly, is that GE has bigger and better lobbyists than little guys can afford.

Now, I’m not picking on GE. And President Obama did make a passing reference to helping small business.

But the devil is in the details.

Right now, if we need a mortgage to refinance a high interest rate on one of our buildings, it is simply not available. So, we struggle.

If we need a receivables loan to make the next payroll because our customers are having troubles of their own and not paying as quickly as they used to, well, tough.

The problem is the 80-20 rule.

Eighty per cent of your business comes from 20 per cent of your customers which means that it is a hell of a lot easier for the Government to worry about GM, GE or the Bank of America.

Small companies are harder to deal with because it takes roughly the same amount of work to make a $500,000 loan as a $5-Billion loan.

So, small companies don’t get the kind of attention that the generators of 80 per cent of America’s employment deserve.

Maybe Obama wasn’t kidding. Maybe he really intends to make small business lending a priority. If he does, great.

But we’ll just go along on the assumption it was lip service.

Because the harder we work, the luckier we seem to get.

FRED WEINBERG

At Least They Should Have READ The Bill

Last week, in the run-up to the so-called stimulus bill, I saw National Economic Council Chair Larry Summers tell Fox News Channel’s Chris Wallace "There are too many jobs at stake — the basic economic security, the ability to meet their needs for too many families are on the line for this to become a — for this to become a traditional political football. It’s got to happen. It’s got to happen, and it’s got to happen very fast. And there’s no reason why it can’t happen very fast with good will on all sides."

Well, it happened so quickly that nobody who voted on the bill actually read it. The bill lards out about a billion dollars a page. And as the late Everett Dirkson once said, "

A billion here, a billion there, and pretty soon you’re talking about real money."

It occurs to me from my experience in covering government since I was 13—that’s 43 years—that a comment like this one is exactly what’s wrong with the very government which Barack Obama got himself elected to run on the basis of "change".

What Summers—who has been at this long enough to know better—essentially said is that the actual details aren’t really as important as passing a stimulus bill and doing it now.

Well I’m here to tell you that the actual details are critical and if you go out and piss away a trillion dollars of money which has yet to be printed the consequences can be horrendous—especially if you are not one of the chosen few Wall Street egomaniacs or big bankers who stands to benefit from a tax-funded lard-fest.

The truth is that there is an assumption that it is the Federal Government’s job to "fix" an economy which was laid low by the stupidity of a bunch of people who, in private, called themselves "masters of the Universe" while they manipulated the mortgage markets so they could make money and everyone else would lose.

You see, these guys actually thought that they could loan money to anyone, that it would not matter if the loans were paid back or not as long as the "risk" was "appropriately priced".

That’s right. The clowns who are now being bailed out with our tax money actually made bets on whether or not deadbeats would pay back mortgages they never should have received in the first place.

And they layered these bets in such a manner that the resulting defaults could temporarily bring our financial system to a halt.

Back in the good old days—say in the 80’s and the 90’s—banks and savings and loans took depositors’ money, loaned it out for more than they paid for it and made those loans according to various formulas which usually meant that they would loan some percentage of the value of a piece of real estate so that if there were a default, they could foreclose and get their money back.

Banks didn’t sell most of their loans off to investors, they kept those loans on the books. They made their money on the difference between the amount of money they paid to get the money they loaned out and the amount of interest the borrower paid for the money.

They had a strong incentive to make good loans because if they made a bad loan, it came right out of their profit margin.

Wall Street ended that relatively safe method of making mortgage loans by creating the mortgage backed security where the banker no longer had to worry about whether or not the loan was paid back because it was sold to investors by the masters of the universe who took a cut.

So we had an orgy of loan-making—some of which went to people who had no intention of paying them back.

That—and the side bets called "credit default swaps"—almost cratered the banking and finance system.

And now, Larry Summers tells us that the object isn’t to get a fix right but to get it fast.

I can’t help but thinking that the people who are designing the new fix are the people who also designed the old problem.

Folks, we didn’t need fast. We needed intelligent.

And I seriously doubt we got that from Harry Reid and Nancy Pelosi’s congress. Not with the likes of Larry Summers egging them on.

FRED WEINBERG

Harry Reid Just Another Seedy Politician

Harry Reid is singlehandedly responsible for the economic problems of Northern Nevada.

There is simply no other way to put it.

The announcement that NV Energy is shelving its plans to build a coal-fired power plant near Ely is simply an admission from the company that they don’t want to roll an egg uphill with their noses while Harry is busy dumping concrete on their heads.

Any time an announcement is accompanied by those dorks at the Sierra Club gloating, you know that the real people who inhabit this state just got screwed.

In this case, Reid was all in favor of the coal-fired plant until his conversion from a reasonably conservative Democrat who actually represented the citizens of Nevada to a hard left shill who is now a national big shot.

We remember a time when Harry beat John Ensign by slightly over 400 votes and we all mostly felt it was a fair result, that Harry was representative of Nevada.

Now, we have to ask how Las Vegans of all political stripes are going to feel when Harry’s actions cause their power bills to double.

You see, coal is still the most economical way to generate power.

And the jobs that the plant would bring to White Pine County are important to the future of rural Nevada.

Harry used to care about jobs—even in counties which vote Republican.

That’s because Harry used to represent Nevada.

Now that Harry is a national figure, he must figure that he’ll have so much money trying to keep him in office that it doesn’t matter.

Well, Harry is figuring wrong.

Ask Tom Daschle.

The Harry Reids of the world, slightly seedy political social climbers all, are legion in number and not particularly beloved by even their own.

If Harry were to follow the fate of Tom Daschle, the Democratic establishment would not miss a beat. He would be replaced instantly with nary a tear. The Harry Reids of the world are fungible. One seedy politician is just about the same as the next seedy politician.

But the people of Nevada, quite justifiably, expect more from their elected representatives.

It’s not like Harry has this large reserve of good will.

Further, it’s not like Harry is even getting us a lot of pork. Nevada’s numbers—even in the larded up so-called "stimulus" bill are slightly below the rest of the nation on a per capita basis. And, the last time we checked, Harry’s vaunted national status hasn’t stopped Yucca Mountain—although stopping it is probably a waste of effort.

In short, Harry has forgotten where he’s from and who he is.

He’s a shiney pants, seedy politician who was elected by people in Nevada who sent him to Washington to do their bidding.

He is not only no longer doing our bidding but actively working against the interests of the people who sent him to Washington.

That’s exactly what happened with Tom Daschle and that’s what’s going to happen to Harry Reid.

FRED WEINBERG

Why Don't We Just Rid Ourselves Of ALL Businesses?

Times are tough.

The Nevada State Legislature has to deal with a lack of tax income which has been generated by a decline in real estate values, a decline in the number of people who want to pay outrageous hotel room rates while they gamble, a decline in the amount of "stuff" people want to buy and in general, a decline in the perceived disposable income of its customers, us.

Now I know that it’s not considered politically correct to characterize mere taxpayers as "customers" of the people we elect to govern us, but it is a fact.

They run a government store which sells services to us and we are not only their shareholders but their customers.

Among the services they sell us is road construction, education, law enforcement, and a host of lesser services which always seem to be well funded when times are good.

Now Jim Gibbons, who we can think of as the CEO of Nevada, Inc., a company we all own, has proposed one way of dealing with this lack of income.

He wants to, among other solutions, cut employee pay six per cent.

The employees—many of whom are represented by unions—are, of course, outraged.

Well, here’s a thought. If you don’t like the realities of the moment, why don’t you go out and get a job in the private sector?

Oh, that’s right.

In the private sector, when a company has a decline in income, people are sent packing. Pay cuts are usually an option proposed by employees who want to find a way to keep their jobs.

When did jobs in Nevada’s state government become lifetime appointments where the terms of employment can never be changed?

I’ve read the state’s constitution and I can’t find that section.

Now, in general, the folks who work for the state are very good people.

But they’re no more special than, say, the folks who work in the mines up and down Interstate 80. Or the dealers in the casinos which cover the state. Or the health care workers who care for you when you get sick.

And none of those groups has any special protection from the economy.

I said this last week and I’m going to keep saying this.

There is no reason whatsoever to raise taxes to avoid cutting the services which the state sells us.

What the state’s legislature should concentrate on is improving the economy. On making it more attractive to do business here.

Because, then, they will have more taxable sales.

And anybody in business will tell you with a great degree of certainty that revenue follows sales.

Conversely, if you make it unattractive to do business here, people won’t.

That is the risk of a Barbara Buckley-Steve Horsford run legislature being egged on by the employee unions.

Let’s go after business, will be their battle cry.

That’s the same thing as saying, let’s kill any hope of an economic recovery.

Or, put another way, "let’s chase business to a state which wants it."

FRED WEINBERG