Simon Johnson, on the blog Baseline Scenario (http://baselinescenario.com/2012/03/19/a-colossal-mistake-of-historic-proportions-the-jobs-bill/), has a blog post on the House-passed and Senate pending JOBS act as a "colossal mistake." Johnson quotes professor John Coates in his December testimony on the bill:
"While the various proposals being considered have been characterized as promoting jobs and economic growth by reducing regulatory burdens and costs, it is better to understand them as changing, in similar ways, the balance that existing securities laws and regulations have struck between the transaction costs of raising capital, on the one hand, and the combined costs of fraud risk and asymmetric and unverifiable information, on the other hand."
Johnson then goes on to say:
"In other words, you will be ripped off more. Knowing this, any smart investor will want to be better compensated for investing in a particular firm - this raises, not lowers, the cost of capital. The effect on job creation is likely to be negative, not positive."
We at Compete USA couldn't agree more. How about a good idea for job creation? How about forcing antitrust authorities to consider the impact on US jobs when approving or challenging an antitrust deal? After all, one of the biggest job creation moments in recent memory was the DOJ's rejection of the AT&T / T-Mobile deal. Upon rejecting the deal, T-Mobile has since announced a multibillion push into building out a 4g network to compete with AT&T and Verizon that never would have happened if the deal had gone through. See this WSJ article titled "T-Mobile to Pump $4 Billion Into Network, 4G LTE Buildout":
A "seismic" shift to service-based small businesses away from manufacturing, transportation and construction is stifling economic growth and eroding the negotiating power of companies such as truck makers, according to a PayNet study.
So... the Tea Party hates big banks. Occupy Wall Street hates big banks.
Why can't Congress pass a $61 billion bank tax? The Washington Post highlights this explanation in the Obama budget:
"Many of the largest financial firms contributed to the financial crisis through the risks they took, and all of the largest firms benefited enormously from the extraordinary actions taken to stabilize the financial system. The Budget asks these firms to compensate Americans for benefits they received from these actions and to recoup TARP costs."
This is one tax that just shouldn't be controversial. Politically, very few members of Congress would want to vote against this as a stand-alone bill.
Big banks are too big, and they still aren't lending to small businesses. They still deserve to be punished for pushing the American economy into a deep recession, and community banks that actually lend to small businesses should be rewarded.
Huffington Post: Top 20 Craft Breweries: Business Is Booming
Beer, brewski, liquid courage whatever you may call it, beer is the most popular alcoholic beverage in the U.S. And while the big players like Anheuser-Busch and MillerCoors have seen consistent declines in their billion-dollar sales, regional craft breweries continue to attract a growing fan base of quality, small batch brews.
Beef monopolists are doing a dance of joy now that a key member of the antitrust division at the Department of Agriculture has quit.
According to Frank Morris over at Harvest Public Media, J. Dudley Butler quit last week. He was the head of the Grain Inspection, Packers and Stockyards Administration and was "determined to make litigation against packers easier."
Butler authored an Ag Department rule known as GIPSA that would have "forced beef packers to change the way they do business" by creating more transparency and competition in the cattle market.
But in the end, the monopolist beef packers won. According to Morris, Butler's rule never went into place because the House of Representatives blocked funding for it.
Yet another example of Congress representing monopolists as opposed to the small business, entrepreneur, or worker.
What if big schools developed endowments to recruit entrepreneurship students? In the 2006/2007 school year alone, The University of Tennessee spent $2 million to recruit athletes. Certainly, college athletes can generate a lot of excitement - and a lot of money - for their schools. But entrepreneurs can generate so much more, in terms of jobs and wealth for the U.S. economy. New businesses are job creators. The Kauffman Foundation determined that over the last 30 years, all net new job growth came from companies less than five years old. More entrepreneurs also mean more innovative products and processes for U.S. companies, which make them more globally competitive.
We're still just at the tip of the iceburg on a potential big story, but is the best example of big banks being too big that they are colluding to keep mortgage rates high? We're hearing that JP Morgan and Wells Fargo, now that Bank of America and Citigroup are getting out of the mortgage origination business, are making three times as much money on mortgages now as opposed to when there was more competition. Is this yet another way in which big banks are profiting from fed action while the average US citizen suffers?
While nobody has scooped this story yet, there are some signals, such as this headline on Wells Fargo's latest quarter: "Wells Fargo Posts Record Profit, Citing Mortgage Lending."
According to Gallup, only 30 percent of Americans are satisfied with the size and influence of corporations, while 29 percent are satisfied with the size and power of the federal government. The public's faith in both institutions has been declining steadily since 2002, but there's been a particularly big drop following the 2008 recession. Interestingly, the public's satisfaction level with the federal government has dropped even faster than its satisfaction with corporations.
For many Wall Street refugees, a "logical next step is technology and entrepreneurship," Harris says. That's because the world of tech startups "has some of the same elements as Wall Street," including the adrenaline, the high stakes and — for a lucky few — the outsized returns. Bankers "are accustomed to the prospect of being able to earn a really good living," he adds. "And while entrepreneurship is risky, when it works, it can really pay off."
Anyone following the Republican Presidential primary has probably heard about Newt Gingrich's recent attack on how Mitt Romney made all his money. Conveniently, Romney's response is to focus on the end result—that he is rich—and to claim that Gingrich is making an "attack on free enterprise" or that he is "envious" of Romney's wealth.
What matters here is that the national discussion is shifting to a place in which Republicans and Democrats can distinguish between "good" business that creates jobs, and "bad" business that can destroy jobs. Monopolies are "bad" businesses. Small, local businesses are "good" businesses. So where is private equity? Conveniently, Romney likes to point out that he was a venture capitalist. Now, there is a huge distinction between venture capital and private equity, and the media should not let Romney get away with this sleight of hand. Venture capitalists are, far more often than not, investing in entrepreneurs with a strong interest in the start-up businesses making more money by scaling up and creating jobs. Venture capital, with some exceptions in which the venture capitalist dooms the investment by pressuring the entrepreneurs to focus too much on a financial exit, is a good and important form of financial investment.
To determine whether or not private equity is a job creator or a job destroyer, it is helpful to view corporations as a war. In every corporation there is a war between the CEO, the workers, and the investors. Each group is always fighting the other for a stake of the revenues.
Now, when a company is privately held or owned by the workers, there can be less fighting and each group may receive a more even share of profits. This might seem less of a war and more like a cooperative tension. But as out
As bizarre as I think it is that American Express is now attempting to embrace small business (why don't you just cut your interchange fee?), the American Express Open Forum blog (which I found through a tweet from small business advocate Lorraine Mazyck), introduced me to a website called Taap.it.
Many are calling the site an answer to the Amazon "price check" issue. But, I'm wondering if it's something bigger than that.
As much as people like to say that the internet is the free market solution to everything, it can still be expensive for small businesses to create an online presence and create a secure way to purchase their goods online. Also, small businesses often succeed because they are a part of a local community.
Taap.it seems to provide an open marketplace for small businesses that emphasizes the goods closest to the consumer. The site's tagline is "live local," and the concept is to allow for stores to put their goods online and make it easy for shoppers nearby to find those products. Stores can also create their own deals.
Also interesting is that musicians can upload their music right to the site so that customers can purchase music from local brands.
Reviews are calling the site and iphone app "the new craigslist" and "the new ebay," and the site is a long way from being fully developed with enough eyeballs to really take off, but it's a very interesting concept for an open marketplace.
Compete USA embraces the concept, and we hope taap.it really does become an open marketplace for small business. As the company seeks outside funding, we wonder how long the marketplace will stay open, but for now it seems like a disruptive technology worth watching. Please leave a comment on the blog on your thoughts as to whether taap.it is a gamechanger for small business. Also worth considerin
Banks that are too-big-to-fail are bad for small business and bad for America.
Simon Johnson is spot on in how to deal with big banks in one of his latest blog posts:
"The goal is simple, as Mr. Huntsman said in his recent Wall Street Journal opinion piece: make the banks small enough and simple enough to fail, "Hedge funds and private equity funds go out of business all the time when they make big mistakes, to the notice of few, because they are not too big to fail. There is no reason why banks cannot live with the same reality.""
"Only Teddy Roosevelt could take on the industrial and railroad monopolies in 1901, only Richard Nixon could go to China in 1972, and only Jon Huntsman..."
Walmart cuts more than just prices it cuts small businesses and jobs, according to a new study released by Manhattan Borough President Scott Stringer. Weighing in on the debate about whether Walmart should enter New York City, the study found that between 30 and 41 small retailers would go out of business within the first year of just one Walmart opening in Harlem.
After 12 years with Bank of America and a year with Chase, he's switching all his business accounts to Seattle Bank. Like many small-business owners, he initially joined the big banks for no particular reason other than that they were conveniently located. Bank of America was the closest bank to his office and Chase was the closest bank to his office that wasn't Bank of America. He spent years enduring all the subsequent irritations outdated online banking systems, the revolving door of bank employees, increasing fees, a sense that he was more a number than a name with little more than an eye roll. But the credit line denial was a breaking point.
President Obama gave a speech yesterday modeled after Teddy Roosevelt's New Nationalism speech. Below, we explain why we believe the President has failed to live up to the consensus argument in the speech, and why Woodrow Wilson's New Freedom is a better economic policy and vision for the country.
The first argument of Teddy Roosevelt's New Nationalism is:
We should strive to have an America that rewards work, not privilege.
He makes the point with this quote, among others:
"At many stages in the advance of humanity, this conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress."
In this argument, everyone—liberal or conservative, tea partier or Wall Street Occupier—should be in agreement.
His proposition for creating that America is problematic:
Government should control commerce.
Roosevelt makes that point with this quote: "The citizens of the United States must effectively control the mighty commercial forces which they have called into being."
This is the fundamental difference between the New Nationalism and the New Freedom; between Teddy Roosevelt and Woodrow Wilson (and later FDR in his second term).
Wilson had a better proposition for creating a fairer American economy:
Rules that allow for competition and open markets will lead to an America that rewards work, not privilege.
In other words, rewrite the rules so that competition, not monopoly, defines commerce. Government regulations and control of commerce are unnecessary and unwanted in an America defined by competition and open markets.
Wilson is joined by founders of libertarian thought Adam Smith and Frederick Hayek...
The below businessweek article on craft beers raises a couple of key points that are important for craft brewers and for concerned citizens to understand:
There is no absolute growth for the craft beer industry. Craft brewers never get above 5% of the total market. There is only the illusion of growth. Businessweek makes a mistake by creating the impression that this is a booming industry. A look at the total marketshare of the craft brew industry, despite the so-called boom, is that it consistently hovers around 5%. In other words, statistics in this industry often lie. The more important question is "what is the marketshare of AB Inbev and SAB Miller combined" and the answer is, consistently, 95%. Craft brewers are, in effect, engaged in a constant struggle for each other's 5%. In order to crack into the other 95%, AMERICAN craft brewers will need to take on the foreign-owned AB Inbev and SAB Miller in the areas in which they restrict broader competition, including their controls over distribution and product placement. This duopoly control is compounded by...
While small businesses don't have the marketing budgets of their big counterparts to reach customers, they do have other advantages. "What makes small businesses and niche products special is their customer community," Ad Age reporter Natalie Zmuda said.
One way in which I like to think about bigness, concentration, and monopoly is how they can hold a city hostage. I like to point out the sports industry's monopolistic power when it threatens to leave a town, and the town agrees to finance a new stadium. What for-profit industry is allowed to get 100% of it's office financing from taxpayers? That's some serious power. And what do taxpayers get for their investment? They get to watch owners and players, billionaires and millionaires in their own right, argue over the percentage of monopoly profits that each side has "earned."
Another example of this type of gambit is CME threatening to leave Illinois if the state doesn't carve out a tax exemption for the massive trading organization...
A lot of small businesses are wondering how the Supercommittee failure will hurt them. Lloyd Chapman throws out a pretty scary prediction:
"The next time Congress attempts a deficit reduction plan, I predict that it will likely propose either cutting the SBA's budget or eliminating the agency altogether (probably by combining it with the Commerce department)."
Jeffrey Leonard, published author and CEO of the Global Environment Fund, points out a troubling trend—"many large companies today have simply announced that as a matter of policy they will be paying their bills late—sometimes as much as four months late."
Compete USA is committed to a campaign to ensure fair payment terms for small businesses. Jeffrey Leonard's article...