Small Business in a Contracted Economy:

In a shrinking and economically assaulted business world, small business is no less threatened than former Wall Street investment bankers. The line of small business is further blurred by politics and taxation policy of Congress. Recently, John McCain and Barack Obama sparred heavily about small business taxation using the plight of "Joe the plumber," generally observed as an underachiever striving for prosperity through the graces of business. The populist base of Americans and American business with earnings of less than $250,000 became a favorite topic, as McCain and Obama duked it out over the plight of everyday American citizens through the likeness of good old Joe.

In the same light, Congress conducted a hearing today about small business and the economy. However, Congress looks at small business strictly from a taxation standpoint as an entity of less than 500 people, having nothing to do with wealth, prosperity or an arbitrary limit such as $250,000. Instead, that wealth is assumed based on the size of the entity.

At the hearing, the American Bankers Association was proudly represented by the head of LCNB National Bank, Stephen Wilson. Bankers are collectively "looking for solutions, realistic for the present and hopeful for the future."

Mr. Wilson revealed that many bankers have chosen not to participate in ledning to small business, making the point to Congress that bankers don't wish to be forced into loaning to small business. He told a sad tale about the immediate closing of three manufacturing plants in the geographical area of his bank, resulting in the loss of 13,000 jobs. His view was that if government would support lowers banking application fees and government guarantees to avert banking risk, business in American could be saved.

Given the participants in this Congressional hearing, Congress is not considering the true world of small business "where innovation take place." The likes of a bootstrapper like "Joe the plumber" isn't a radar blip on the Congressional business screen. Congress is limiting real business to the taxation definition of the Internal Revenue Service. The discussion between Barack Obama and John McCain is simply politics, exhibiting the dishonest standards of comparison where small business is concerned.

Three business executives from the world of small business were represented at the hearing: Richard Krause with Krause Farm Equipment, Jim Bradbury with Grand Rapids Control and Thomas Franke with Riemeier Lumber, recently closed and bankrupt through banking liquidation. These American businesses were thoroughly dependent

on credit in a tightening market. Two of the firms in recent years had been forced to offshore jobs overseas to keep their banking partners happy. All 3 revealed problems in dealing with bankers while equating small business contraction with suffering. The testimony of the business leaders revealed unrelenting bankers forced business owners into decisions they would not otherwise make.

The only member of the panel that could have represented a more typical American citizen was Margot Dorfman, CEO for the Women's Chamber of Commerce. She revealed the general resentment of her membership behind taxpayer money given to "irresponsible big business." Confidence coupled with the fact that "lenders aren't lending" is the current crisis in small business. "Main Street America is forgotten."

Dorfman revealed that 53% of her constituents were lending to their own companies and that 63% had resorted to the use of high interest credit cards to sustain their business needs. She aptly pointed out the failure of the Small Business Administration, gutted by budget neglect and the failure in serving business needs after several hurricane crises to support business needs.

Based on the testimony given, commercial bankers see themselves as blameless. Yet, all business panelists revealed that bankers aren't interested in doing business during tough times when they are sorely needed. Instead, bankers have bolted, unwilling to take any measure of nominal risk, even with the advantage of fractional reserve power, the ability to create money out of thin air.

All business panelists complained that when successful business needs bankers most, bankers aren't there. Instead, bankers have cut credit lines and loans. The business panelists proclaimed that money given to bankers for financial rescue have been used to support banking losses and in banking acquisition coupled with administrative expansion. Steep declines in Small Business Administration lending is evident, not only from lack of funding, but because of lack of interest on the part of bankers.

Based on the testimony given, commercial bankers proudly separate themselves from their unregulated cousins. Commercial bankers paint the crisis an an unfair comparison between bankers and Wall Street investment firms. Stephen Wilson pointed out that in 2006, 76% of all loans were made by unregulated bankers, which in turn sold much of that debt to commercial banks, later becoming toxic debt. In his view, this "outlines the difference between commission and underwriting by banks." Bankers no longer wish to take business risk. They expect government to take care of banking risk through government guarantees.

Margot Dorfman regaled that "money is not being appropriately used by bankers." The money is not being used in a way that business, much less small business "could benefit from." Instead bankers choose to loan through credit card programs for profit rather than reinvestment.

Stephen Wilson blithely commented that "small business should look to community banks for lending." The business panel cited a lack of direction in the banking community. Loan officers display a lack of authority, believing that they must consult the corporate office. Bankers refuse to make decisions.

Perhaps the current reality of banking is one of proud fear coupled with the avoidance of all risk. That being a distinct possibility, risk-resistant bankers have clearly voided their charter and purpose for existence. In the meantime, small business is forced to operate the old-fashioned way, often under-capitalized and lacking resources. Many commercial bankers have ceased to serve any purpose beyond enriching themselves with government-appointed taxpayer money with the idea of expanding an empire without risk.