“Too big to fail.” (President Obama)
“…(Then US Treasury Secretary Alexander) Hamilton regarded the national debt as ‘a national blessing,’ for it permitted the clustering of resources into the hands of a small group of enterprising men who would invest and not just spend it.” (Founding Brothers by Joseph J. Ellis)
It’s no news that President Obama has faced a huge challenge to revive the US economy, precipitated by the banking crisis of the past two years. He’s had to answer a lot of tough questions that have affected millions of Americans. What courses of action will save and create the most jobs? Should he have bailed out failing companies like Citigroup, Chrysler, AIG, and others? What about residents who were losing their homes? Do they get modified loans or do they go into foreclosure? Some companies were “too big to fail,” while some “Main Street” residents had the required qualifications to get bailed out too. It all really boiled down to one question: how should government capital best be allocated to serve the common good now and in the future?
US Treasure Secretary, Alexander Hamilton, had a similar dilemma in 1790 after the Revolutionary War. The US government was broke and its debt was at a startling $71M. It couldn’t meet its obligations without borrowing (sound familiar?); it couldn’t even compensate its own troops with cash. The soldiers were issued war bonds as payment for military service, and there was little hope the government would be able to pay those back. Speculators began to buy the war bonds at five to ten cents on the dollar hoping for a (very profitable) miracle. Meanwhile the government was worried about utilizing its meager finances to stay solvent.
The popular plan was to just default on the war bonds. The US government didn’t have the money anyway! Then the issue of fairness came up. “Why would we fund the bonds when the money is not going to go to the soldiers that it was intended for?” Essentially, the heated discussion that ensued was one that still stirs debate today; should the government endorse any plans that just make “the rich get richer,” while doing nothing directly for the common citizen?
However, Hamilton felt paying the war bonds was a great opportunity! The fact that the speculators were getting the money was a great allocation of capital. They were the entrepreneurs of this start-up nation, the risk-takers. They would be the ones starting businesses, hiring people, and building the economy from the ground-up. With their intellects and hearts, Hamilton felt America could achieve greatness. Funding the speculators was the best investment this country could make.
Obama’s capital allocation plan has been about saving huge corporations and struggling homeowners. The entrepreneurs and small business owners in the middle have been frozen out. Could the projected “jobless recovery” be a product of this? The SBA’s oft-cited statistic is that American small business creates 90% of the country’s jobs. Is an “entrepreneur-less recovery” even possible?
When I talk to my friends that are small business owners here in Charlotte, we are hamstrung. The government programs for small business are a joke; many banks don’t participate in SBA loans, or if they do, force us to qualify at heightened requirements that we can’t reach. Meanwhile, banks of all sizes (TARP and non-TARP recipients alike), are still cutting our credit lines. I’m not saying we are all going out of business (because that’s not true), but I am saying that our impact on this economic recovery will be minimal at best. We are being forced to hunker down, and have been doing so for the past two years.
And, yes, Hamilton got funding for the war bonds to pass Congress and our nation went from near-bankruptcy to a world power through the past two hundred years. If Obama wants the US to stay there, he’ll have to find a way to involve us entrepreneurs as well.
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company” (http://www.bdfrealty.com/ and http://www.renttosell.com/). You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://twitter.com/bdfrealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.renttosell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
“…(Then US Treasury Secretary Alexander) Hamilton regarded the national debt as ‘a national blessing,’ for it permitted the clustering of resources into the hands of a small group of enterprising men who would invest and not just spend it.” (Founding Brothers by Joseph J. Ellis)
It’s no news that President Obama has faced a huge challenge to revive the US economy, precipitated by the banking crisis of the past two years. He’s had to answer a lot of tough questions that have affected millions of Americans. What courses of action will save and create the most jobs? Should he have bailed out failing companies like Citigroup, Chrysler, AIG, and others? What about residents who were losing their homes? Do they get modified loans or do they go into foreclosure? Some companies were “too big to fail,” while some “Main Street” residents had the required qualifications to get bailed out too. It all really boiled down to one question: how should government capital best be allocated to serve the common good now and in the future?
US Treasure Secretary, Alexander Hamilton, had a similar dilemma in 1790 after the Revolutionary War. The US government was broke and its debt was at a startling $71M. It couldn’t meet its obligations without borrowing (sound familiar?); it couldn’t even compensate its own troops with cash. The soldiers were issued war bonds as payment for military service, and there was little hope the government would be able to pay those back. Speculators began to buy the war bonds at five to ten cents on the dollar hoping for a (very profitable) miracle. Meanwhile the government was worried about utilizing its meager finances to stay solvent.
The popular plan was to just default on the war bonds. The US government didn’t have the money anyway! Then the issue of fairness came up. “Why would we fund the bonds when the money is not going to go to the soldiers that it was intended for?” Essentially, the heated discussion that ensued was one that still stirs debate today; should the government endorse any plans that just make “the rich get richer,” while doing nothing directly for the common citizen?
However, Hamilton felt paying the war bonds was a great opportunity! The fact that the speculators were getting the money was a great allocation of capital. They were the entrepreneurs of this start-up nation, the risk-takers. They would be the ones starting businesses, hiring people, and building the economy from the ground-up. With their intellects and hearts, Hamilton felt America could achieve greatness. Funding the speculators was the best investment this country could make.
Obama’s capital allocation plan has been about saving huge corporations and struggling homeowners. The entrepreneurs and small business owners in the middle have been frozen out. Could the projected “jobless recovery” be a product of this? The SBA’s oft-cited statistic is that American small business creates 90% of the country’s jobs. Is an “entrepreneur-less recovery” even possible?
When I talk to my friends that are small business owners here in Charlotte, we are hamstrung. The government programs for small business are a joke; many banks don’t participate in SBA loans, or if they do, force us to qualify at heightened requirements that we can’t reach. Meanwhile, banks of all sizes (TARP and non-TARP recipients alike), are still cutting our credit lines. I’m not saying we are all going out of business (because that’s not true), but I am saying that our impact on this economic recovery will be minimal at best. We are being forced to hunker down, and have been doing so for the past two years.
And, yes, Hamilton got funding for the war bonds to pass Congress and our nation went from near-bankruptcy to a world power through the past two hundred years. If Obama wants the US to stay there, he’ll have to find a way to involve us entrepreneurs as well.
Brett Furniss is the President & Owner of BDF Realty, “Charlotte’s Most Innovative Property Management & Investment Company” (http://www.bdfrealty.com/ and http://www.renttosell.com/). You can follow his Twitter thoughts on the Charlotte real estate market by clicking on http://twitter.com/bdfrealty. He is the author of the FREE E-Manual entitled “How to Rent-To-Sell Your Own Home” (http://www.renttosell.com/RTS-Book.html) which details how to get the most potential buyers to your home in this challenging real estate market.
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Good insights Brett! Love the history of your article. Unfortunately the administration does not think the same way as you do...
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