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.
See huffingtonpost.com/new-york for more New York news and blogs
Robert Teitelman: How Should We Think About Bank Lobbying?
Reporters: Lay out the interests and report the bank lobbying and the money. Do it until readers nod off, which may be soon. It ain't pretty, but it's all we've got.
Patricia Martin: Dear Barney Frank: Sponsorship Policies for Bailed Out Banks
I salute your questioning Northern Trust, Mr. Frank. But who will get around to investigating Bank of America's pricey deals with NASCAR? And the next deal after that?
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
You don't blame a dog for digging up a garden. You blame its owner for not taking care of it.
You don't blame a bank for greed. You blame the regulator for not curbing its natural instincts.
A reminder to Mr. Spitzer...
check out the huge post about the SEC and some of the insider allegations that are starting to surface.
thank you.
It is the same story in NC, we tried to put a $1 million property as collateral still the BOA and Wachovia didn't want to give us $150,000 to start a solar factory in the US. They provide loans only for the top rich and overseas like you said.
Try an SBA loan. The paperwork is pretty onerous (I helped some friends work through theirs), but with patience, and a good plan, they finally worked through the red tape.
Thanks Rumplestilskin, will try the SBA Loan route.
I really enjoyed this article!!!
I don't usually trust articles that use a "teaching by allegory" approach, but it was appropriate here, as this banking fiasco is complicated. It was refreshing to have a human face put on the details.
I am not a historian, but I am curious. Has there ever been a similar era in history, where the bankers controlled everything and made it impossible for honest hard-working citizens to make a living?
The Biritsh instituted this capitalist system into India to keep cash flowing to UK. The debt burden on small farmers and workers were so onerous that several generations stayed in debt continuously. The government of free India cancelled all the debts, nationalised all the banks and started to give small loans to people on favourable terms to get things moving and India creaked forward. The national government was punished by US and UK for making this move and India ended up being labelled on to the wrong side of the western cold war in spite of stated neutrality.
And to think so many Americans think we're the 'good guys'. God, if we got punished for every misdeed done in our name, our country wouldn't exist.
Dear President Obama:
Yes indeed, you have a lot on your plate but I have great news for you!
I understand that one of your biggest messes is the problems with our banks and the shenanigans on Wall Street. The great news is that Eliot Spitzer is available and he would be perfect as the SEC commissioner.
Please give him a call and beg him to take the job.
Thank you.
deadhead
I LOVE your idea
It would be nice and, frankly, I like the idea and your optimism. But it won't work. Spitzer is too practical and North America has its balls held by China. I really wonder how we can bring back home manufacturing and self sufficiency, and therein, self respect.
Honestly, I really deplore short-sightedness. Ahh..it's that old greed thing. The fun part about that greed $hit, ignorance, etc., is seeing the perpetrators get shot in their a$$es. Too bad things have to be driven down the bloody terlet for people to wake up. And that it takes so long.
Sure. That way, he can use FEDERAL assets owned by the FBI or some other agency to spy on his political rivals. They have so much more reach than the New York State Police and would do a far better job of spying on people he doesn't like. Wise choice!
your comment is noted about the NY state police matter and I too disagreed with then Gov. Spitzer's involvement in that matter.
Having said that, I'll trot out the old cliche about none of us being perfect as well as the biblical "let he without sin cast the first stone."
Summarily, the fact of the matter is Mr. Spitzer is the most qualified individual in the USA to take on Wall St and bank shenanigans and clean up the mess. I suspect the second time around, Eliot will use his enormous intelligence to avoid miscues that he may have made the first time around.
PS...Mr. President.
I AGREE! I always thought ES was one of the greatest investigators of fraud. Sorry about his personal life but then.....R
So YES I think he would be great as an investigator into the traitorous behavior of banks with regards to lending to small businesses. GO ELIOT GO!!!!!!!!!!!
Mr S, small business(SB) 99% not aware, media does not address horror.We mid 60's, small Mom/Pop sized wiped out, by "CH11 Death Star", it, hunts-destroys small business". AKA Bankruptcy CH11 P547c, Avoidance". Any can look up "legalize", plain English Ver. Company officers contacted us for services, signed contract, we performed to contract, god paid, they filed CH11 days later. TWO years later, summoned to FED CH11 Court 800 miles away. Long story short, they got ALL money back, by law, there is NO defense, $10BIL investor firm took us and 600 others to "Court". Lawyer est $25-60K more then pay back. They were small company, CH11 shut down plants, cut off retirements etc, "Batched filed" on 600 like us. We were set up, prior to contacting us, company had hired "CH11 experts",destroyed as recession hit business to zero, now this NOTE now "Record CH11 filings" AKA thousands SB;s wil be wiped out, law allows 2 years to file the Death Star. Congress will not reply to fax, calls, letters.
Contact Ed Schulz at MSNBC and be clear about what happened and how this law was put into place and exactly what happened to you. Small businesses need to be aware of this law and to beware of signing contracts with such businesses. Might be a good idea for to get attorneys to put in clauses to protect small business owners before SM owner signs contract.
Mr. Spitzer, I cannot thank you enough for all that you have said. When I studied at Syracuse U and got a degree in Surface Pattern Design, I couldn't wait to get back home here where there was a thriving and booming local industry in textiles. I caught it in time. But I knew, sitting on my bed, in my first year at Syr U, reading the NY Times and just observing things around me that things were going to blow somehow in 25/30years. The excess, greed and mindless consumerism. I knew that all that was not sustainable in the long run. So I came home, landed 2 great jobs in the schmattah biz, saw a wonderful self sustaining system within the manufacturing sector that inevitably fed the whole local system. And, in turn, created a society with a sense of self worth and self respect. I was biting my nails sometime around the early '90's. I knew it was a matter of time before the manufacturing sector and employment would dry up what with the loosenings up with the asia duties and such. It's a pity. For short term gain, we have lost our self respect and our identities.
Now I don't know what to do. Designing is my passion and my life. And I really wanted to have my own business in manufacturing ever since I was a kid. Maybe I should take up organic farming!
Thank you, again, for posting this blog.
This is not just the "plight of the New York Business Owner" - it's the same story here in Idaho. Business owners I know tell similar stories about credit lines being cut even though they rarely used them or always paid on time.
Banks have unlimited power partly because they have access to the funds we want to borrow. And the rest of their power comes because we gave it to them. We didn’t demand better terms. We didn’t read the fine print.
There is a phrase that appears on a bank’s promissory note or statement that says “if we deem ourselves insecure with respect to your account” YOU (the borrower) will be in default. Just think about that. The bank says “hey we don’t feel so good about your future, so guess what, Mr. Customer, YOU are in default and you owe us the balance right now!”
In my prior life as a commercial lender, I used to read this statement to my clients before allowing them to sign the promissory note. We used to laugh it off and joke that would never happen. No one is laughing now.
The only way the economy is going to recover is through the efforts and success of small business owners. These are the folks that produce more jobs than all the Fortune 500 companies combined. And every business owner was once a small business owner. We are a country of boot-strappers. Let’s find a way to pull ourselves up once again.
I have admired you more than you can imagine throughout your career. A nobody from a flyover state has a hero in the East. A guy who goes after the crooks despite the nudge, nudge, wink, wink, that had gone on for years before.
Nothing has changed as far as I'm concerned. You always fulfilled your public duties with enthusiasm, conviction, and effectiveness.
Damn the torpedoes. Full speed ahead.
You have a lot more to accomplish.
A brilliant hypocrit is still a hypocrit - regardless of the topic, sir, why should anyone give you the time of day?
Get a life.
See Iris Erlingsdottir's Profile
Apparently you think Mr. Spitzer's writing is worth your time and effort, or you wouldn't be on this page pontificating.
In your world; humans need not apply
The money-mad banker image is an easy straw man to attack, but in all due respect Mr Spitzer, just because its power, not money, that drives your ambition, you are in an odd position to preach morales.
On the subject of protecting the little guy from more powerful interests, i have a personal story to tell as I also am a NY small businessman. In 2002, my company's worker's compensation payments to the State lapsed for 3 months. It was a clerical error that was soon fixed and payments restarted the following quarter. I wasn't made aware of this error until 2006, years after the fact, when I received a letter from the State demanding a $1,600 penalty for non-payment and a outrageous $20,0000 in late fees! I was more than willing to pay the penalty as I accept my mistake, but cannot understand how your administration could enforce rules demanding years of late fees (I believe it was $250 every 10 days dating back four years) without ANY prior notice. No regular business would ever be able to impose these tactics on their networks. Tellingly, each tax official I pleaded with instructed me to "speak with Elliot Spitzer's office" for the decision to so strictly enforce this onerous law on New Yorker's
I reject your portrait of the stereotypical fat-cat banker when it comes from a stereotypical hypocrite politician whose has no interest in "the little guy" beyond them providing a public soapbox to preach from.
The irony is that if you look at the Islamic banking system in Malaysia you'll see how much more ethically driven it is. They won't even charge interest on a loan because they consider any form of usury to be a violation of Islamic principles. I seem to remember in the Bible something about Jesus throwing a bunch of bankers out of a temple. For a so-called "Christian" nation maybe we'd do well to look at how an "Islamic" nation handles its banks. Because if they start offering loans for cars and houses in the U.S. I have no problem giving our banking system the finger and going to them.
But if a hungry man steals an orange, they have no problem cutting off his hand. So, on balance, I'll take my loan--with interest.
Considering that our country has the highest prison population in the world, tortures prisoners of war, is fifth in the world for most executions (behind Saudi Arabia, Iran, China, & Pakistan), has the highest drug use in the world, has started two wars in the last decade that not only killed hundreds of thousands of people but also weren't necessary (the Taliban in Afghanistan offered to give us bin Laden but we turned them down), and just recently sunk the entire world into a great recession because our financial industry is too stupid to know when it's sh**ting itself, I think I'm okay with hand-cutter-offers. Especially since:
A. Malaysia's legal system doesn't do that. (Try Pakistan, Iran and Nigeria.)
B. I don't steal oranges.
C. I want to bank there, not live there. I mean, you don't have to follow Japanese law when you buy a Honda Civic, right?
You make a great point about ethics, but the big banks make mincemeat of anything that looks like real competitionn
Can you imagine how horrified our congress wld be if your idea went thru? What wld they tell their banking masters?
How about "the American people are fed up with you and us, the politicians, for letting you get away with it." That'd be a great place to start. I guarantee you that if an Islamic bank wanted to open a business here, most of us that know about the usury thing would flock to them so fast for a loan it'd make your head spin. The right wingers would stay away, which would be another plus.
Finally, a real "Small Businessman" speaks out about the injustice of it all! When the talking heads say "small business" I usually translate that into the CORPORATE OLIGARCHY, and just figure that they are blowing the usual smoke up the a-- of the people listening!!
We lost a clear thinking economic realist when Spitz took the fall. It's really a shame. I'm glad, tho, that he continues to speak out, focusing his insight on the banking crisis.
Please keep on thinking and writing the truth, Elliot. After all, what can they do to you now?
My owner is a small businessman but never has borrowed money and no bank will have him by the gonads, and as part of his management team, it fills me with reassurance as well as motivation to keep the sales and profits going upward. It CAN be done, folks.
"my owner is a small businessma
You must be logged in to comment. Log in or connect with
