Garcia Media Life

It’s a horrendous vicious cycle.  Major corporations, including banks, have the largest cash reserves on record waiting for an economic upturn to happen that will never occur if they don’t spend the money they’re hoarding to hire people and lend to homeowners and small businesses.

It is a self-defeating psychology.  Absent the political leadership that could potentially inspire business leaders to do what’s right, not only for the American people, but for the health of their own businesses- the cycle may wipe us out.

In the U.S., the efforts have been half-hearted.  On December 14, 2009, President Obama called the leaders of the American banking industry into the oval office for what was billed as a good old-fashioned visit to the woodshed.  I blogged about it here that day.  What became of it?  Absolutely nothing. 

All the right words were said.  The President lectured the banking leaders that it was their responsibility to give back to the American taxpayers  who bailed them out of the problems the banks themselves caused back when they were lending money like drunken sailors and creating phony and creaky investment instruments that brought the American economy to the brink of another great depression.  

The bankers left the oval office after having their tea and cookies and proceeded to continue not lending, to hoard cash, and to help build up those liquid reserves by nickel and diming their poor and increasingly jobless customers with invented fees and skyrocketing overdraft charges.

It’s hard to overstate the importance of banks in our current economic situation.  They lend money to small businesses who hire about 60% of the American work force…and they are not writing loans.   The housing market has now entered its second recession because homebuyers with good credit and sterling backgrounds are being turned down by banks.  So-called lending institutions have gone from predatory practices and inflating people’s financial assets and salaries to denying loans to families with solid credit scores and legitimate stability.

It’s not all banks.  Major non-financial corporations are stashing money under the mattress too.  They are not investing in new tools or products or hiring people.  And if you’ve checked out interest rates lately—they’re practically at zero.  Corporations are not exactly getting a good return on all the cash they’re hoarding these days.  It’s a stupid strategy.

The time to start lending and investing and hiring is NOW.  There is no greater bully pulpit in the world than the oval office and it’s high time the President exercised leadership and used some of that vaunted soaring oratory that got him elected in the first place to charm, cajole and otherwise inspire America’s business leaders into doing what’s right for their country, and in the end, what’s good for their own bottom lines.