The Plight Of New York's Small Business Owners

If the senior Wall Street bankers and Washington decision makers who can move billions of dollars with a single conference call want to understand what is truly happening in the economy, they should sit down with small business people like Peter Elliot, the owner of a clothing store in New York City for the past 35 years. Peter prides himself on the craft of selling and marketing products made in America. He has built his business that way. He is the salt of the earth, a Veteran who retired with the rank of Captain in the Army, rugged but charming, salesman and proselytizer, southern gentleman and New York tough, all at once.

And he is seething with anger. Once he employed 29, now 14. Once he had a solid line of credit with a major bank, now they have cut it off - even though in 35 years, he never missed a payment, and was late - by four days - only once. Once he had faith in the basic decency of the leaders at the major banks and Wall Street firms that allocated capital and stoked the engine of our economy. No longer.

Just to be clear, his anger has nothing to do with the fact that he is now struggling. He is a survivor, and he has built a business over too many decades, seen too many peaks and valleys, had a life filled with the complications we all face, to be thrown off his game by any of those realities. No, it is rather the deep sense of unfairness about how the plutocracy has handled the crisis that eats at him. The sense that we have lost the basic sense of decency that used to define how we addressed issues of national crisis - with a common sense of sharing of both the upside and the down.

Peter grabbed me a few days ago as I was strolling past his store, bathed in sweat from a three-mile run. His store window, on Madison Avenue, was, as always, neatly bedecked with an attractive array of jackets, shirts, sweaters, ties, and assorted accompanying articles of clothing. Understand, Peter has built this store, and a few others, with grit, charm, and perseverance. Through ups and downs, he sold on thin margins, talked up the quality of his domestic products over mass produced imports, took raw college grads and turned them into effective salespeople before they moved on to the world of law or business. He told them that they would learn everything they needed to know to be successful if they could sell on the shop floor - how to read a customer, appreciate value, close a deal, massage an ego.

Once inside, he asked a simple question: How can they do this to me? How can a bank that has received tens of billions of tax dollars - whose very survival was guaranteed by a massive infusion of the tax dollars he and countless millions of others like him pay - how could that bank now rely on a pretext to cut his line of credit so he couldn't finance his ongoing payroll, acquire next season's merchandise, and pay for some expansion plans he had.

Their decision forced him to lay off half his employees and go to his vendors for help. His vendors, with whom he had a relationship for decades, all agreed to work with him - they understood the mutual interest in keeping each other going through the rough patch. But they all agreed - the banks were heinous institutions, and if they could get a pound of flesh out of them, they would. After all, these small businesses had all been playing by the rules, and it wasn't the greed of small business that had led the banks to create credit default swaps, pretend that sub-prime debt was really AAA rated, or originate debt that had no hope of repayment. It wasn't the small business owners who took out gobs of money in bonuses and back-dated options.

After venting the well founded anger that the small businessman feels towards the banks, Peter got more philosophical: "Who creates jobs?" he asked, knowing full well that the question spoke for itself. Yet they - the banks - are cutting off all the small businesses, while they keep shipping money overseas. Somehow dealing with small businesses and helping them through the downturn is too much effort, requires too much care and attention. Couldn't Washington have required the banks receiving tarp money and other assistance at a minimum to keep servicing their existing clients with good credit, rather than just stock-piling our tax dollars? No, they would rather send the money to China in vast piles, invest in mega funds that will build the automotive and aerospace sectors in Asia, fund factories in foreign lands where wages are $2/hour.

I am trying to employ our kids, Peter continued, selling clothing made in America. Yet all the banks do is make it impossible for us to compete. He shook his head sadly, as sounds from the construction of a new bank branch a block south on Madison Avenue - no doubt funded by stimulus money -- filled the air.

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Comments

[oldbutkickin]

There is always a legal loophole to protect the "Big Business" Small Business struggles while "Big Business learns how to manipulate the system. Hiring the top guns. As a Bankruptcy judge explained , ## as a vendor. You lose. "Big Business" cannot balance the books, and we (small business, employees) pick up the expensive tab. Big Business hires the bankruptcy lawyers, finance guys at top dollar. Where's the justice in this?
Spritzer needs probation. Being a public Servant (few of these guys left) left himself wide open for criticism and ethics. Pay his dues and get back in the saddle and learn to "Serve the people" as it was intended. Corp bankruptcy is another way of dumping on the public.
Left a bad taste of justice in our court system and its players. We need to clean up the new Corp bankruptcy laws that protect the "Big Boys".
I've spent hours researching our legal case. Its professional robbery whats happening. Hundreds of pages of legal garbage when it all amounts to "Your screwed" Pay up.
How do you get the laws changed and fair to all. You play with the big boys you deserve the consequences?

[jerrypl]

Mr. Spitzer wrote an interesting piece. Small business is shrinking while the bankstas hoard taxpayer's funding. This is a crime.

http://eye-on-washington.blogspot.com

[iridium53]

This is happening all over.
I had to fire 50.

Obama takes our tax money, gives it to the banksters, so they can cut small business off at the knees.

Obama has abandoned small business America.

That's the America that Axelrod and Obama had in mind with their Change.

It's not a plutocracy, it's kleptocracy.

[roseau]

This is not just the plight of NY small business owners. This is the plight of small business owners all over the country. So many jobs, and the health of local economies, depend on small businesses thriving and yet large banks are simply raking them over the coals right now. In areas like mine where there are good local banks, it's not quite as horrible. But many regions have poor options. The government needs to stop funneling resources (i.e. our tax dollars) [back] to Americans through businesses that take most of the money as their 'cut' i.e. Haliburton, Aetna healthcare, Citibank.

[booboo111]

If Spitzer is no longer "electable", he needs to be appointed to something. His usefulness is being wasted.

[hmargret]

Hey everyone, remember who built these banks & stock exchanges....it was the money invested by the boomer and post boomer generations.

The simple solution? TAKE ALL YOUR PERSONAL AND BUSINESS MONEY OUT OF THE BIG BANKS. BANK SMALL AND LOCAL. TAKE YOUR MONEY (WHAT'S LEFT OF IT) OUT OF THE MARKETS TOO.
CUT THEM OFF AT THE KNEES.

[TJCole]

Astrologically the banks are the Black Holes, while AIG is the Super Massive Black Hole such as we have at the Center of our Galaxy....a black hole that eats black holes..

The purpose of government is to serve the people...

That's up until recently and apparently now, the purpose of government is to serve the banks..!

[robbep]

Sir Timmy to President Obama on the middle class, let them eat green shoots.

[alabaman]

Thanks for your comments, Governor. Please continue to speak out on current events. Also, as Fran Drescher once said, we all live many lives throughout our life. I am confident that you will contribute much to the common good of this country. I wish you well.

[julianne]

Thank you. The President and Congress wiped their hands of our economic ruination, giving it all back to the guilty FED and Legacy Banks to further devour the real economy. The new financial regulations give no systemic, endemic change to hold back the increased powers of the disastrous FED and will not hold back the Rockefeller-Morgan Syndicates, Morgan Stanley, et al. By relinquishing his moral and legislative authority over the economy to the forever-wrong Geithner and Summers, shows Obama to be the poseur he always was. He deceived the electorate and he is not a "good guy". He is the Rich Man's Boy. All his energy and foreign policy won't be sustained because the economy is continuing to be gutted by alien and domestic oligarchs in their hyper-globalist betrayal. Obama has no organic vision of the United States except in mechanical and superficial ways. He is our "Being There" President and the Dems need to begin to seriously challenge him and his economic advisors while looking for his replacement or, no matter how many black voters who got a seat on the bus or how many illegal aliens get to send for their entire families, the Dems are going to lose in the coming elections..

[robbep]

I dont think Obama does black neighborhoods and communities.

[maxfolger]

Well put and it taps into a horrible situation. Readers who are business owners might want to know about the following: http://bit.ly/vmhtb

[teccoord]

Bring this MAN back into Government.
We need him in the SEC and regulation other regulation agencies dealing with the economy and the financial institutions.

When??? Now!!!!!!!

[Swedishgal]

I think Spitzer needs to go after more than a few politicians to get the real word out about what's going on. He is such an awesome investigator and prosecutor. I don't give a crap about the prostitutes, which is what she is or was but I do feel bad for his wife. That rots.

[clockp]

Speaking for my banking friends, tell the "Feds" to back off so we can do our job.

Like the Great Depression, government is bullying capital away from small business. If NY is anything like California, Banks are thoroughly intimidated by aggressive FDIC regulators picking apart their loans. I speak with bank officers regularly in my consulting business; I'm told that loan officers spend most of their time both preparing for audits and being audited instead of making loans. One small bank had 19 regulators descend upon them for a recent audit, previous staff was 2 or 3. If a bank has a "risky" loan portfolio auditors impose requirements to raise capital. Banks are in the business to make good loans; a downgraded portfolio means "bad" loans and lower value for the bank itself. A bank will not make a "bad" loan no matter how much capital it has. It will invest its funds elsewhere, as other commentators have noted.

Unless, of course, your company is big enough on its own, or is tied in with the monopoly power of the government.

Big government meddling crushes growth and freedom, from Kingdoms to Communism/Fascism to Dictators...and to the Great Depression. Guess we have to learn the lesson again.

[Swedishgal]

But doesn't get involved 'til they screw up and that's what the real problem is. Banks have screwed up so many times and with the subprime mortgage lending fiasco they're going to be even more vigilant. That's the banks fault not the consumers fault so unfortunately they bring the additional scrutiny on themselves.

[clockp]

The real problem? Feds are referees and they're throwing flags before plays are made.

Welcome to Obama/Geitner 2009, the fed amateur hour.

Want to watch a game where the ref flags throws a flag before almost every play? That's Obama/Geitner.

Why the flags? "We want to make sure that bad loans never, ever happen again. So before you get this next play off you need to pay a fine for the last plays that we just determined were bad (based on our updated stress test computer model which is updated with new parameters weekly, is retroactive and not subject to any gains in the future), and also pay into a reserve account in case this play doesn't work, and don't ask us about the rules because we're still writing them and may decide to change them tomorrow".

Sure there's gonna be bad loans; but like you and me bankers get ahead by making good loans. And they will, if we let 'em. Remember it's the banks that make loans, not the Feds: witness the subprime mess made by FNMA and FHLMC, which were federally controlled agencies with access to the private markets.

If the Feds get back to referre-in', then the banks can get back to lendin', we get back to borrowin', and my friend's pizza parlor can open up another store. Othewise we're all in line for Obama handouts borrowed from our kids.

[mac33z]

In a plutocracy, there’s only one anthem; “you’re either in the club, or you’re not.”
Everyone else can go to hell!
What a world.

[Bitsko]

What does a multi-mult­i-milliona­ire know about small business?