It amazes me how politicians disconnect their acts from the results they think they want.
Folks like Congressman Jim Sensenbrenner criticize President Barack Obama for the government’s investment in Solyndra, a “venture capital” failure. I agree with the Congressman. But he conveniently forgets that his party under President George W. Bush created the exact program in 2005 that Obama used to fund stimulus money into “green” industries.
And Sensenbrenner is quiet on the awful CAPCO program sponsored by Wisconsin Gov. Scott Walker, or similar frauds in Rick Perry’s Texas, Haley Barbour’s Mississippi, Mitch Daniels’ Indiana or Bobby Jindal’s Louisiana. Sensenbrenner says that he doesn’t comment on state issues, but he does when he can make a partisan point. .
All of these “venture capital” deals reward the shim sham supporters of both parties. The promise these deals make is that they will create jobs, but the system is set up so that the only jobs CAPCO deals create are for CAPCO. These deals are non-partisan boondoggles, approved through false promises, lobbying and political contributions to elected officials who do not know how businesses get started and thrive (or fail). State Senator Glen Grothman deserves credit for “outing” these deals.
If we want to solve the problem of capital for small and mid-sized businesses, there are easier, better and faster routes to take.
For example, Steve Grossman, Massachusetts’ Treasurer, uses his state’s free cash by making deposits in local financial institutions who agree to make loans. He wants the same market rate returns that the state would get from money markets. Grossman comes from a family business background and has used his experience there to solve problems. His program has had successes in his home state because he knows that small and mid-sized businesses need access to capital. Tax breaks are only useful if you have profits.
Another example is the U.S. Small Business Administration’s 90-percent loan guarantee without “points.” Banks love these ‘non-risk’ loans. The program has expired and should be extended.
A third approach would match the low interest rates that the Federal Reserve has with common sense underwriting and a limitation on bank use of leverage to arbitrage with Federal Reserve money. This will take some effort on the Federal Reserve’s part to retrain regulators to be reasonable.
These steps ought to be effective in getting working capital to small and mid-sized businesses. Money is tight now, and many suppliers are not extending credit for purchases. I believe the enforcement of regulations is good, and I lobbied our elected officials in 2006 to do so. Now regulators have gone to the other extreme and need to come back to a middle ground.
Lastly, our elected officials need to understand that limiting stem cell research – one of Wisconsin’s most promising new industries – will kill what we have here. It is a classic example of government butting its nose where it does not belong. If Wisconsin’s economy is to grow, can we afford to chase away the cream of our intellectual “capital”?
There is a place for government to help business. Research & development funding, Small Business Innovation Research (SBIR) grants, special tax incentives for purchasing equipment, and a “one stop” for all paperwork for business are examples of what I refer to. But CAPCO is not one of these steps. Haven’t we learned that by now?
Bob Chernow is a local Milwaukee businessman.