Your humble reporter here probably reads too much and writes too little.
Lately, I’ve been reading that it’s getting clearer who the majority of the country wants for its future president. It’s probably not the person voters on the High Plains will vote for.
Those who will not vote for that person—and the likely new majority of Senate Democrats that will accompany her—are going to feel like any new legislation passed will be shoved down their throats like a mean mother making a child eat lye soap for cussing.
Still, the opposition will have to work with this new president and the majority to get things done. Stalemate won’t get it done any longer.
While we don’t have much policy detail specific to the area from the person supported by the High Plains majority, other than “I love ethanol,” the person leading in the polls has a hefty policy portfolio, including several ideas concerning rural America. She has also made a few speeches specific to rural parts of the nation whose transcripts are worth rereading.
Over the next few months, instead of examining the horse race, I want to write more on a few issues deeply embedded in those wonkish materials, and expand on them to see where they fall short, give them a dose of reality then allow all of us to have a continuing conversation on them.
The first issue I want to look at concerns small business in rural America, its inability to find capital and reforms to our banking system that could ease the squeeze.
Two things, a study of Census Bureau data by the Economic Innovation Group as reported in The Washington Post and Babson College’s annual “Study of the State of Small Business in America,” create the basis for the rest of this column.
The first study showed while Americans in highly populated areas appear to be treading water in adding start-up businesses, rural areas have seen their business formation fall off a cliff.
“It’s going to get much, much, worse,” said John Lettieri, a former Republican congressional aide who is a co-founder of EIG. “As bleak as these numbers are now, these may be the good years.”
Those high-population areas contain higher-income, more highly educated workers, who appear to have had a much easier time accessing capital in this recovery than workers in the rest of the country.
The Babson College study indicated obtaining capital remains challenging for small businesses. Respondents rely on banks as their primary source of funding, and are about four times more likely to seek funding from financial institutions than any other source.
The Babson study also showed small businesses receive less than half of the amounts they request. Looking across all sources of capital, overall survey respondents apply for a median amount of $100,000, but receive only 40 percent of their ask ($40,500); companies receiving a business and management education are more likely to obtain capital and secure a greater portion of their request; and that to facilitate access to credit, businesses are asking for more flexible loan terms.
After the Great Recession, the EIG study showed, lower-income borrowers were effectively shut out of credit markets, a finding supported by data from the Federal Reserve Bank of New York. Industry groups and many economists have warned that the Dodd-Frank financial regulation act, passed in 2010, has forced smaller banks that often serve rural communities to tighten their lending.
Jason Furman, who chairs President Barack Obama’s Council of Economic Advisers, says his research rejects that view. “There’s very little evidence that Dodd-Frank has reduced lending by community banks,” he said.
I say bunk to that statement. Ask any real-world small town banker, and he or she will tell you compliance with Dodd-Frank is expensive and is causing many banks to sell out to big city banks, since the cost of compliance is about the same no matter how small or big you are.
Leave it to former Secretary of State Hillary Clinton to add to the debate. At a May 12, 2015, roundtable in Cedar Falls, Iowa, Clinton said, “Local banks are being squeezed by regulations that don’t make sense for their size and mission—like endless examinations and paperwork designed for banks that measure their assets in the many billions.
“And when it gets harder for small banks to do their jobs, it gets harder for small businesses to get their loans,” she said. “Our goal should be helping community banks serve their neighbors and customers the way they always have.”
My solution: A new administration needs to loosen the regulations on banks with less than $3 billion in assets. While Republicans have called for an end to Dodd-Frank entirely, that won’t happen. That’s like calling for the end of Medicare.
Every senator has small-town banks in their states. House members should strike a deal and get rural America moving again by working with a new president who wants to fix the problem.
Larry Dreiling can be reached at 785-628-1117 or email@example.com.