Small Businesses & Banks Buried by Regulations

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Business owners rank access to capital as the most important issue for privately held companies, according to a poll of 1,221 owners across the U.S. released by Pepperdine University. Only 17 percent of businesses with less than $5 million in revenue and seeking loans got bank financing last year, according to the survey. Some 48 percent of respondents report they were seeking bank loans as a source of funding, followed by friends and family (21 percent) and private investors (11 percent). According to the Pepperdine study, more than 60 percent of the bankers said they have rejected loans they otherwise would have made to oblige federal regulators.

We all remember when, in December 2009, our typically intemperate President scolded what he called “fat cat bankers” whom he charged were fighting his efforts to revamp financial regulations. While some individual bankers aren’t Obama-like skin and bones, more than 3,200 banks (41 percent) are themselves small businesses—with fewer than 30 employees. Hardly fat cats.

The Federal Deposit Insurance Corporation (FDIC) has 888 banks on its “problem bank” list, according to Investing Answers website July 4. Last year alone, it said 157 banks failed. “About half of all that have failed in the last decade did so in the first nine months of 2010,” it said, adding that 407 of the more than 7,500 banks in the country could be in danger.

Cass Sunstein, Obama’s regulatory czar, in his annual report to Congress released in June, came up with these patently squishy numbers: Regulatory benefits of $18.8 billion to $86.1 billion. And cost of $6.5 billion to $12.5 billion.

In the Washington Post, Sunstein scoffed at the notion that the administration is burying business under loads of regulations. Sunstein falsely claimed that the Obama administration had issued fewer regulations than had the Bush administration. The U.S. Chamber of Commerce pointed to an avalanche of regulations in the pipeline: 159 new panels and agencies under the health-care law, 447 rule-makings under Dodd-Frank, more than 100 under EPA, and 100 rule-makings at the Labor Department, for instance.

A survey of members by the National Federation of Independent Business in June found the outlook for small business remained bleak coming into this year, as fewer and fewer owners sought access to credit. It’s a trend that has continued since 2009. The survey indicated an increase in discouraged borrowers or those who have quit trying to get credit. The survey was of 3,530 small business owners.

Small businesses are central to economic recovery and growth. The length of this past recession and the poor subsequent recovery are largely about entrepreneurs staying on the sidelines, unwilling to expand, invest and borrow. They see a massive expansion of activist government not as an aid, but as a serious threat.

Raymond J. Keating, general council of the Small Business & Entrepreneurial Council, said exactly this: “The length of this past recession and the poor subsequent recovery are largely about entrepreneurs staying on the sidelines, unwilling to expand, invest and borrow. They see a massive expansion of activist government not as an aid, but as a serious threat.”

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  • theleastthreat

    I think we need an environment that yields more opportunity. That would most likely take less regulation and less taxation to get businesses starting up or resuming normal operations. I think I've said here before that regulations like the CRA helped no one and harmed everyone. And subsidies don't necessarily incentivize and when they do, it's not in expected ways. Also, with cheap, abudant energy, you can do anything.

  • Chezwick_mac

    My God, I wish one of these Republican contenders would have the courage to come and say it as clearly and concisely as this:

    "Our economic system is based on FREE ENTERPRISE. It is the goose that lays the Golden Egg, the source of revenue for all those wonderful social programs that liberals love. But instead of nurturing and encouraging it, the liberals want to suffocate it with taxes and regulations.

    "We Republicans want to liberate the system from these constrictions, so it will do what it does naturally: Become an engine that creates jobs that in turn will create the growth that will then create the revenue that will help us pay our way out of our debt crises."

    It's really that simple.

    • dan

      Precisely. The Marxists complain that the FE engine doesn't work, while they constrict both air and fuel and shove nuts and bolts down the combustion chambers. Finally, they then complain about the exhaust of the last 100 years.

    • Steve

      It may be too late. Check out the Conservative Richard Duncan's book "The Corruption of Capitalism" for a detailed macroeconomic analysis of how really terrible the world and USA economies really are. He predicted the 2008 Depression years before the collapse and is of the opinion so many trillions of private wealth was wiped out in 2008 that without major government deficits and spending the whole economy collapses. Very disheartening for conservatives. It's a very important book, along with his website.

  • Steve

    Please check out the ideas of the Conservative economist Martin Hutchinson (“Alchemists of Loss”) for the SEC regulations necessary for a transparent stable financial market that will not crater again due to Wall Street banksters. (Bring back Glass Steagall, outlaw derivatives no one understands while setting up an exchange for the others, outlaw "naked shorting" of equities, require buyers of credit default swaps have a direct insurance need as the counterparty, treat CDS’s like insurance and require reserves to be set aside like every other insurance firm, require banks to continue to have a financial interest in any MBS or CDO products they sell). Also, check out the Conservative economist Richard Duncan's "The Corruption of Capitalism" regarding the madness of unregulated financial markets, and how to create banks "…to regulated to fail". Probably too late, as nothing short of a miricle will stop the terrible deepening of the Millenial Great Depression (2008).

    • Jim

      I must agree with you. It is not over regulation of the banks that created this mess.
      What makes the over regulation theory a joke is that the collapse happened during the rein of deregulation of the banks. The deregulation of the banks was pressed for particularly under Clinton By Robert Rubin , Larry Summers and some Republican economist. named Phil Gramm. He was a person who could say with a straight face"
      "no evidence whatsoever" that the sub-prime mortgage crisis was caused in any way "by allowing banks and securities companies and insurance companies to compete against each other."
      Slippery statement at best. It wasn't the competing ;it was the cheating. They could cheat because they refused to open their books to inspection. Barney's bill is just one big loop whole

      • Steve

        Jim, Richard Duncan in his "The Corruption of Capitalism" mentions the same people you do….but he also names Alan Greenspan for pursuing the monomaniacal deregulation of the derivative markets: now an opaque 700 TRILLION $$$ black hole of corruption, insane leverage, unethical/criminal conflicts of interest, manipulation and who knows what else.

  • taxtherichnow

    "small banks", that statement alone is hilarious.

    I pity you poor naive people, or maybe you're just plain evil instead of stupid.

    • coyote3

      I pity the poor bank banks and oppressed businesses. Why don't we tax those on the lower income end of the spectrum? A lot of them pay no taxes whatsoever. Everyone needs to pay their fair share, during this Second Great Depression. Especially, those who take much more than they produce.

      • Jim

        They pay no taxes because they have no income.
        Goldman Sachs, Bank of America and etc have been given corporate welfare in spite of the fact that they were the bangsters who's dark economy created this mess.
        These well lobbied businesses have taken far more and produced not any thing except economic collapse.

        • coyote3

          Bravo Sierra, that is just a flat out lie. Certainly, there are some people who pay no taxes, because they have "no" income, but those are not the ones I am talking about. I am talking about those who do have income, but there tax liability is zero. Even worse are those, who are able to get refunds in amounts greater than they paid in taxes.

  • Old Maintenance Man

    Who can deny that Liberals(Socialists and Communists) strive unrelentingly to enlarge Government. They cannot point to a single instance in history where Government larger than what is necessary to provide for the three Constitutional duties of the Federal Government has become a runaway Government that soon enslaves it's Citizens. Look at Germany, China, Russia, Indochina and others. As a Founding Father said,(paraphrasing): Bind The Federal Government down with chains.

  • Asher

    Its all in the lie, Hitler embelished lieing. You tell the people you are creating jobs, freedom, and cutting regulations while doing exactly the opposite….More Deception from the Obama administration, laughing while they destroy America.