SEED MONEY

Having grown up on the “buckle” of the “bible belt,” I have been exposed to my fair share of the language of evangelicals. One of the coin phrases, especially of televangelist, is to “plant seed money.” Of course, what they’re actually enticing their viewer to do is to send their money to the televangelist with the promise that it will come back “ten fold.” “Ten fold” is also one of the phrases in their vocabulary because that’s what they want their followers to give, at a minimum, out of every dollar that passes through the follower’s hands. Sort of a 10% church tax, as I used to like to think of it.

But, let’s go back to their idea of seed money and consider that under their “snake oil” salesman pitch that maybe we could borrow that phrase from them in regard to our current national, and world, economic dilemma. What if rather than Wall Street Investment firms, and banks paying those obscene bonuses they instead used that money to hire a few more employees, or pay the lower employees a little more, or even used the money to start new businesses that would hire new employees. It would be legitimate “seed money.”

I’ve never understood how big business and the wealthiest of us have missed the point that the key to economic growth and greater income for them as well as the lower and middle class is not tax cuts but, is a growing middle class. The economic principle is simple…the more customers you have the more products you can sell and the more money you can make. Basically, everybody does better when everybody does better. The “cardinal rule” of EVERYBODY WINS! Paying $30 million dollars to a single employee is obscene and it’s happening thousands of times every year in our society. What would be wrong with executives, who by the way were the architects of the financial meltdowns and obviously aren’t worth the big salaries they’re getting, trimming their unjustified salaries back to $10 million a year and using the balance to hire new employees and create new companies that would create new jobs.

But, what we’re left with is Wall Street paying out billions of dollars of over the top bonus and Main Street unemployment topping 10%. It ain’t right! And, let’s keep this all in perspective…paying a 50% or 100% bonus to a $250,000 salaried worker isn’t the same as paying a $25 million bonus to a multi-million dollar executive.

A recently published article out of Time magazine’s September 9th issue by Allan Sloan accurately described the character of these Wall Street firms as having “collapsed out of ignorance fueled by avarice – a particularly toxic combination.” And, this avarice lives on.

The rescue of the financial industry by the Bush Administration and then followed up by the Obama Administration had a few very glaring holes in the plan. Some of this was justified…the plan had to be enacted on a emergency basis and unfortunately we didn’t have the luxury of knowing all the repercussions. However one glaring deficiency which needs to be corrected is there should be a requirement for the money to be lent to the public in the form of consumer, commercial and real estate loans…and not back to the government in the form of T-bill investments. The plan should correct this miscalculation today by refusing to allow the money to be directed back to T-bill investments for the spread between interest rate they got the money from the TARP (Troubled Asset Relief Program) Fund for and what the yield on T-bill is today. That money was to rescue all of us…not just Wall Street.
Let’s use the TARP money and those big bonuses to “seed” the economy. I think it would work.

Additionally, we all need to recognize this is not a problem that can be turned around on a dime any more that an ocean liner could. As a country we need to be smarter than we act like from time to time. It’s as though a builder was hired to build a billion dollar complex and we showed up at the site three months later and wondered why the building wasn’t finished. We need to get real…but, we need to hold commercial and investment bankers feet to the fire. Believe me, I’ve worked with them for my entire profession career and they really don’t get it!