WHAT SHOULD WASHINGTON DO TO FIX AMERCIA
By Marc Kramer
Lori Ann LaRocco, senior talent producer for CNBC, and one of the most connected and respected business journalist, was feeling like many Americans over the last 12 months and that was frustrated with the progress of the economy. She wondered why the American and world economy at large have a massive heart attack, what could be done to fix the economy and where are the future opportunities? So this journalist did what you hope the President of the United States would do and that is bring together the best business minds in a cross section of industries and ask them what happened, what the government needed to do to make America healthy again and where the opportunities are for investors and working people of all levels.
In her book, “Thriving in the New Economy: Lessons from Today’s Top Business Minds,” published by John Wiley and Sons, the S.U.N.Y. Plattsburgh, Mass Media Communications and Broadcast Journalism major, opened her Rolodex and moving faster than Washington, DC, she interviewed some of the major business leaders such as Wilbur Ross, Jack Bogle, Gerald Greenwald and Abby Joseph Cohen and within a month she completed her book. The following is an interview with Ms. LaRocco.
Why did you write this book?
LaRocco : “I wrote the book because I am lucky enough to talk to the most engaging minds in the economy. During the crisis I started thinking to myself people have to be making money regardless of the circumstances. In capitalism you should be able to make money during the highs and lows. I opened up my rolodex and I realized there was a story here.
“It wasn’t something that could be told on television in a meaningful way. I wanted the rest of the world to get into these great minds. It is the how and why in the strategies these leaders employ that make them so great. To understand their secrets is so invaluable and that is what they share in the book.”
Who should read it?
LaRocco: “This book is for anyone. From a college student, a mom and pop business owner to a corporate executive! I think anybody who wants to be inspired and want to learn techniques on how to handle challenges should want to read this book.”
What did you learn that surprised you?
LaRocco: “There are a couple of things. One was Richard LeFrak President of The LeFrak Organization. LeFrak is a real estate developer and by trait they are optimistic. He said for the first time in 15 years he didn't have one new foundation in the ground. That statement screams volumes on his outlook on commercial real estate. But despite his outlook on real estate, Richard is still thriving and putting his money to work. Be it with his venture with WLR LeFrak and buying up the real estate assets of the Corus Group, to being part of a consortium and owning BankUnited. Richard isn’t standing still. He is still moving forward.
“Another thing that surprised me is the common theme many of my contacts referred to during the interviews. The majority of them said don't get caught up in crisis. Recognize you have a problem, solve it and move on. It didn't matter what industry you were in. None of them got swallowed up in the moment and let it consume them. They had the vision to look past it and move on."
What was the overall consensus for America’s future from your experts?
LaRocco: “They were all bullish in their own way, but they were worried about the populist drum beating in Washington. They all believe Washington should be working with business and not against it. Wayne Huizenga set the tone of the book about Washington. Capitalism is what we are built on and government should work *with* business; not against it."
“It isn’t that capitalism is bad. It was the greed and arrogance that brought down our financial sector. I would also add the lack of understanding of the financial instruments as well. In a capitalistic system, we are going to have ups and downs and you will need leaders in place to go after opportunity. If you don’t have the right leaders then it is an opportunity lost.”
What industries based on your interviews do you think have the greatest chance of success?
LaRocco: “I think the industries that are going to thrive are education and healthcare. Many of the jobs lost this recession will never come back. Ron Baron said this is a great time to invest in these two sectors because many people who lost their jobs are going back to school. DeVry and Strayer Education will attract the blue collar workers for retraining. Ken Langone and Baron are also investing into the R&D side of healthcare because of the innovative tests being created by some companies.
“I think we are going to see a change in the financial markets and I don’t mean because of the 'Volcker Rule'. There is a dynamic trend occurring in the financial services business according to Peter Cohen and Don Marron, who are buying brokerage firms and retooling their businesses to a more client-oriented business. It isn’t going to be about the big institutions, it is going to be about serving the individual customer. Marron and Cohen believe in this trend so much they are putting their money behind their words.”
Are large money centered banks like Citigroup and Wells Fargo, which are really the only banks capable of providing large multi-billion dollar warehouse and credit lines, necessary for the future of America’s large corporations or should they be dismantled?
LaRocco: “I don’t think they should be dismantled. How are you going to do it and do it right? It sounds great in theory, but can you really do it? What is going on in Washington right now is that you have career politicians, depending on staff research and making decisions based on that. Everything is so inter-connected. We need to really think about the unintended consequences. The government thought Lehman was ok to fail. ”
Did anyone think the Obama administration was on the right path?
LaRocco: “Not really. Larry Lindsey summed it up beautifully. He said while the President is a beautiful orator he has not really developed a track record. With Brown winning the Massachusetts Senate seat, the Administration and Congress are seeing that people are voting with their pocketbooks and pink slips. "
What does administration need to do to support the advice your experts give in the book?
LaRocco: “They need to realize tax cuts aren’t a bad thing. Innovation can’t be forecasted. In order to innovate you need to have incentives. Tax cuts are a great way to do that.
“There needs to be tax cuts for research and development, as well as tax incentives for hiring people. Senator Charles Schumer and Hatch's jobs bill is a good start. Wilbur Ross who has sat down with policy advisers to both Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi has a great idea to help spark job generation. Ross has suggested cutting the payroll costs of a new hire employee between 20-26%. The Federal government would send the company a payment equal to the total with holdings from each new employee's pay in addition to the employer contribution.
“This tax incentive would be available to companies who added to their staff since January 31, 2010. Ross uses the example of a worker making $60,000 per year. The rebate would be between $12,000 to $15,600 per job created, costing the government between $24,000 to $31,200. Comparing this to the Obama Administration's $787 billion dollar stimulus program where supposedly 3.5 million jobs were created, that means it took more than $224,000 to create a single job. And that 3.5 million jobs created has been debated around the country among economists for months so the figure could actually be higher. Government needs to be creative.”
The president is publicly encouraging banks to loan to small business, but yet you hear small business leaders saying they can’t access capital. Why is that?
LaRocco: “Some regional bank CEOs have told me while banks are being told publicly by the President to loan small businesses money, the bank regulators are discouraging them from doing it even if it is profitable for them because they are considered "risky". The banks are stuck in the middle.”
It’s hard to predict the future, but what do you think will happen with the economy over the next 12 to 24 months?
LaRocco: “I think until the job picture is solid and the uncertainty is
over when it comes to Washington's plans on job creation, bank tax, financial regulation and healthcare the markets will be up and down. There is too much uncertainty and the markets like certainty. Too many of the plans in Washington can affect a companies bottom line because of the costs associated with them and until businesses know what they will be facing, it is a big question mark."