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

[WillCodeForCookies]

Very sad indeed. Given the avaricious behavior of banks in recent history, what makes the administration think that a trickle-down approach would work in the interests of small business, especially one whose downward path flows through the veritable kleptogarchy of financial institutions? Witness especially how Citicorp has been cementing the exorbitant salaries of its employees by a salary increase of 50%. These thieving companies know no bounds in their disgusting misappropriation of taxpayer money.

[eomonroe00]

i was wondering the way the federal government is treating the bankers, the rich , the powerful, the too big to fail, it seems much like the whites were treated before civil rights seperate but not equal,

Just like the blacks had a legal precedence to fight the laws based on seperate but not equal, discrimination, dont we americans also have the same law behind us, women had to fight for equal status under the law, as did blacks, gay people are currently fighting, those are obvious attributes that we can see;

why cant the middle class and poor also file lawsuits against the government for discrimination,and fight for equal protection under the law???

any lawyers in the house , seriously.
ian
www.nationsofrumi.blogspot.com

[wolfgangmo]

My eyebrows just crawled over the top of my head.

Great idea.

Is this legally feasible?

[Swedishgal]

OMG, that's a great idea. I mean, weren't we left out of the bailout process and stimulus money as well? Something has to be done and there should be a consumers bill of rights and a small business owners bill of rights also. They got all this money and promptly turned around and started sticking it to the American people and the unions at GM, Ford and Chrysler got it stuck to them too although they've been giving concessions for years. There has to be some redress of these issues.

[Indra]

Well banks have always treated small business owners in a shabby manner. What else is new?

[LMPE]

We need to realize that small businesses help our economy. They put money into the community. The opposite is what happens when Wal-Mart and its ilk move in.

[msemkiw]

While it may feel good to blame the banks, and they deserve some blame, it's the regulators that are forcing banks not to lend. They are telling banks they have to shrink their balance sheets so that their capital requirements go down, what's te easiest way to do that? Call loans on good customers that can get loans somewhere else, you can't get rid of bad loans by calling them, all you can do is charge them off. And the regulators first choice on any bad loan, no matter if the bank has known a customer for 20 years and wants to work with the borrower, is to forclose. Make no mistake the regulators have all the power, if they wanted banks to lend, banks would be lending.

[ruralwannabe]

It sounds as though a loan that the banks gave up on (charged off) shows favorably on their balance sheet whereas one that is just in arrears is unfavorable? One is a liability while the other just went away? Doesn't some kind of score for charged off/ bad loans fit somewhere into their balance sheet?

Here's a new question: when banks acting as insurance companies for financial deals don't have the money to pay off their customer in the event the insurance is required, why isn't that fraud? Why would there need to be a new regulation for a judge to say 'you knowlingly made promises you couldn't keep, go to jail'. The world needs a mother to tell us right from wrong.

[jerichoj8]

You are missed by many across the country Mr. Spitzer. When they assemble the new "Pecora" Commission, I hope they include someone as vehemently opposed to corporate corruption as you.

[grateful4thedead]

Mr. Spitzer:

I write again to you to compliment you and urge you to continue sharing your wisdom. I'm a mid 50's upstate Repub. who supported you for Gov and do not regret it for one second.

I'm hoping Obama wakes up and reaches out to you in regards the banks/wall st matter, specifically, getting you involved with the SEC, preferably as the Commissioner, or as the ombudsman. I still remember when as AG you took on the title industry (I was in it at the time with the big one) and you had them shaking in their boots, I can promise you that.

One other thing...I imagine you are familiar with zero hedge, the most sophisticated financial blog out there...if not, please read it. I guarantee it is right up your alley.

Please continue and as is your style, never let the naysayers keep you down.

Thank you and best to you.

[stellapurdy]

So now we're down to 3 days before the Senate convenes to tend the crops without doing any of the states business for two weeks. There are a myriad of bills that need to be passed before they take their sabbatical.

It's damn shameful that we are paying these people to represent us and they are fighting like children in a sandbox.

[IDIOTA]

That was well written in terms of laying out the basic facts for lay people like me. It was a succinct recap of everything that pisses me off about the financial industry.

[FirstBiteBooks]

Excellent article, Mr. Spitzer! Thank you for this intelligent insight into the economy.

[olivine]

I agree....I don't understand. I have a very small boutique, but it generates thousands of dollars a month in sales taxes for the state of Texas, and the same in taxes that support local schools, police department, etc. If many small businesses can't keep going, where is the money going to come from for these things?Small businesses are the backbone of economies, so why does it seem that they are being overlooked and dismissed ?Luckily for me, my shop is an amusing hobby, but the money it generates is real . When the time comes that the pressures outweigh the joys, I will close shop and garden or something. Has anyone in Washington ever had a real job? Maybe former small business owners should start running for office.

[trunk65]

When Americans are finally in the streets in the numbers we see in Iran, it will be because corporate greed has driven them there.

[Swedishgal]

Let me know when you wanna go and protest because I wanna be there too.

[mountainweb]

If you think it is bad now just wait until the "brain dead democrats" pass the carbon tax.

[Scent]

Oh yea, right. Let us enjoy what the planet has to give - willingly or not - a little longer. It will be our children who have to deal with what`s coming if we push the problem away far enough. - And who gives a sh*t about THEM?

[Swedishgal]

It's funny because every time somebody from, I'm assuming here, the other side says something that is going to happen if we do something to protect the environment or whatever, it never does. You guys are WRONG like everytime you open your mouths so maybe you should just be quiet and let the good times roll.

[socialtalker]

excellent article. catherine ann fitts solari.com has pushed for localizing the money, bringing it back to main street and taking it away from wall street. wall street borrows our savings/money at 2-4% and loans it back to us at 20-36% .

[Swedishgal]

That's a great idea and another way to give Wall Street the finger. I'm all for it.

[ncmom54]

Thanks for writing this... it is the story of Small Businesses across the country.

We need YOU to advise the SBA! ... they obviously don't have a clue what we're up against.

comparing TARP to the SBA ARC program http://tiny.cc/Y2TzN
If Wall Street was a 5 alarm fire, Main Street is a controlled burn.