From the Everett Herald:
The accepted wisdom is that the wealthy, banks and the biggest corporations are job creators. But in fact, too many are job-taker-away-ers. They suck money, our money, out of the economy and hoard it or spend it outside the country. That slows down economic activity right here in our state.
When the housing market burst, and the financial wizkids had to come to terms with their derivative gambling and sloppy math, the economy pretty much ground to a halt. Credit for new businesses was almost impossible to get. Banks that previously sold mortgages on a whim and a prayer wouldn’t loan money for new projects with solid markets and good business plans and demand. So what did these banks do? They got a lot of money from the Federal Reserve, and kept it.
JP Morgan, which took over Washington Mutual and slashed a lot of jobs in the process, now has $434 billion in cash. Add all the money owned by commercial banks stashed away at the Federal Reserve, and it comes up to $1.6 trillion. And that’s the problem: If the commercial banks hoard the money, and don’t make loans to the private sector for new businesses, they don’t create jobs. It just enables financial gambling for Wall Street.
The real job creators have been forced to go elsewhere. One of the biggest job creators is the American Recovery and Reinvestment Act passed by Congress in 2009. This act saved and created a total of over 30,000 jobs in Washington state in 2009, 20,000 jobs in 2010, and 15,000 jobs this year.
Thousands of teachers’ jobs were funded through the Recovery Act. And thousands of private sector jobs have been created with start-up funding from the Recovery Act. In Everett, the recipients of these funds include Everett Shipyard, Seahurst Electric, Five Rivers Construction, the Boys and Girls Club, All Weather Rooftop Solutions, and the list goes on and on.
The only problem with the Recovery Act was that it wasn’t big enough. When you have banks refusing to finance new businesses and new jobs, the government has to step in. The bigger the refusal (in this case, easily a trillion dollar refusal), then government funds must be proportionally larger as well. So rather than blaming this recession on the government, let’s recognize that the government is keeping both the public and private sector above the high water mark.
Here’s an example of how this works in real life. Makini Howell grew up in the family restaurant business. She had a couple of small cafés in Seattle. In 2008 she wanted to start a new restaurant. She went to Washington Mutual, Bank of America and Wells Fargo. They all turned her down.
So in 2009 she approached Community Capital Development. They helped her perfect her business plan and gave her a loan using American Recovery and Reinvestment Act money. Plum Bistro was started and Makini hired 25 new employees. And she sparked up the neighborhood.
In 2010, worried about the threat of a double dip recession and facing unforeseen expenses, she went back to Community Capital and got a $30,000 job retention loan, again from Recovery Act funds. She made the investments to keep Plum Bistro viable, make some money, employ her staff, and serve really good food.
That’s small business at work. The people who eat at Plum Bistro are neighbors. They circulate their money right back into the community, preserving jobs, good food, and the community’s health and wellbeing.
Is this job creation? You bet. Community Capital lends out money all over northwest Washington. They match up entrepreneurs with public funding from the Small Business Administration, the Department of Agriculture and the Recovery Act. They have loaned over $15 million to 388 small businesses, creating or sustaining more than 1,200 jobs.
These businesses can’t rely on JP Morgan. They prosper thanks to government’s strategies and funding, and public/private partnerships, for job creation. That’s the pathway for hope and progress and jobs this holiday season, and into the New Year.