The Latest
News
In the Cash Room, the Obama Administration Is All Ears
Robb Mandelbum, New York Times
November 19, 2009, 8:31 am
Lani Hay, daughter of Vietnamese immigrants, retired from the Navy as an intelligence officer, and then with her American Express card and some savings, opened a technology consulting business serving the federal government. By 2007, just four years after it opened its doors, Lanmark Technologies had grown to bring in $12 million in annual revenue and employ 100 people.* Then the recession hit. “Along with L.M.T.’s annual revenues dropping, LM.T.’s line of credit was also dropped, by a bank that bought out the bank that I was working with,” Ms. Hay said Wednesday in a conference in Washington, D.C., convened by the Obama Administration to address the problems small businesses have had finding capital during the recession. Worse, she said, the bank canceled the credit line just before she was to receive $500,000 from the Defense Department — and she had needed the credit to tide her firm over until the government paid its bills.
Ms. Hay’s story, which she recounted to an audience of government officials, small businesses, lenders, and interested trade associations, had a punchline. “That bank is actually here today,” she said. “I’m not going to name them, but they are here.”
The bank, it turns out, was Wells Fargo, which purchased Wachovia in 2008. Ms. Hay’s experience served to highlight a couple of recurring themes from the day. One was that ex-military people can make a lot of money selling stuff to their former comrades. The other, more relevant to the topic at hand, was that even successful small firms are being left in the financial lurch.
At the start of the day, Treasury Secretary Timothy F. Geithner, who hosted the event along with Small Business Administration chief Karen Mills, said that “the president wants us to listen to the best ideas in the country today, to bring those forward to him and give him some concrete options that he can act on.” About 70 people, mostly lenders and advocates of one sort or another but also 17 small-business owners like Ms. Hay, attended the six-hour affair, which comprised a series of panels and smaller breakout sessions over lunch. A couple dozen government officials were there to listen.
Much of the discussion centered on what lenders needed to make government programs more attractive. “As we’ve seen, some banks are very reluctant to come. They’re scared if they come they’ll be stigmatized by taking government assistance even if they’re coming from strength, not weakness,” said Mr. Geithner. Still, he warned, “we are not going to be that friendly to ideas that basically say, ‘Come take off our balance sheets a lot of risks that we took.’ And we are not going to be very friendly to ideas that don’t give us confidence that we’re going to see an incremental change in actual provision of credit.”
What most impressed The Agenda was the seriousness with which government officials took the proceedings. For one thing, Mr. Geithner was there all day, even though he probably had more pressing matters to attend (notwithstanding that, as the administration likes to claim, small businesses created 65 percent of all new jobs in the last 15 years). Throughout the day, Mr. Geithner and Ms. Mills could be seen taking notes at the rostrum.
This attentiveness was also on display at the breakout session I attended, which was moderated by Tom Vilsack, the Secretary of Agriculture, who had come from visiting a school with the first lady. Throughout the hour, he asked the assembled, mostly microlenders, how the government could help.
At one point, James Guttierez, a microlender from California, suggested that the government set up a loss-reserve fund that could be used to entice investors. Connie Evans, president of the Association for Enterprise Opportunity, a microlenders’ trade association, agreed. International investors “will leverage a $20 million loan loss fund five times its value, in terms of making capital available to U.S. microfinance,” she said. “It is a way that we could get more capital on the street pretty quickly.”
“Is that something we could do?” Mr. Vilsack asked his aide. “U.S.D.A. should check on this.”
