The Plight Of New York's Small Business Owners

The struggles of a New York clothing store owner underline the problems small businesses face with banks.
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If the senior Wall Street bankers and Washington decision makers who can move billions of dollars with a single conference call want to understand what is truly happening in the economy, they should sit down with small business people like Peter Elliot, the owner of a clothing store in New York City for the past 35 years. Peter prides himself on the craft of selling and marketing products made in America. He has built his business that way. He is the salt of the earth, a Veteran who retired with the rank of Captain in the Army, rugged but charming, salesman and proselytizer, southern gentleman and New York tough, all at once.

And he is seething with anger. Once he employed 29, now 14. Once he had a solid line of credit with a major bank, now they have cut it off - even though in 35 years, he never missed a payment, and was late - by four days - only once. Once he had faith in the basic decency of the leaders at the major banks and Wall Street firms that allocated capital and stoked the engine of our economy. No longer.

Just to be clear, his anger has nothing to do with the fact that he is now struggling. He is a survivor, and he has built a business over too many decades, seen too many peaks and valleys, had a life filled with the complications we all face, to be thrown off his game by any of those realities. No, it is rather the deep sense of unfairness about how the plutocracy has handled the crisis that eats at him. The sense that we have lost the basic sense of decency that used to define how we addressed issues of national crisis - with a common sense of sharing of both the upside and the down.

Peter grabbed me a few days ago as I was strolling past his store, bathed in sweat from a three-mile run. His store window, on Madison Avenue, was, as always, neatly bedecked with an attractive array of jackets, shirts, sweaters, ties, and assorted accompanying articles of clothing. Understand, Peter has built this store, and a few others, with grit, charm, and perseverance. Through ups and downs, he sold on thin margins, talked up the quality of his domestic products over mass produced imports, took raw college grads and turned them into effective salespeople before they moved on to the world of law or business. He told them that they would learn everything they needed to know to be successful if they could sell on the shop floor - how to read a customer, appreciate value, close a deal, massage an ego.

Once inside, he asked a simple question: How can they do this to me? How can a bank that has received tens of billions of tax dollars - whose very survival was guaranteed by a massive infusion of the tax dollars he and countless millions of others like him pay - how could that bank now rely on a pretext to cut his line of credit so he couldn't finance his ongoing payroll, acquire next season's merchandise, and pay for some expansion plans he had.

Their decision forced him to lay off half his employees and go to his vendors for help. His vendors, with whom he had a relationship for decades, all agreed to work with him - they understood the mutual interest in keeping each other going through the rough patch. But they all agreed - the banks were heinous institutions, and if they could get a pound of flesh out of them, they would. After all, these small businesses had all been playing by the rules, and it wasn't the greed of small business that had led the banks to create credit default swaps, pretend that sub-prime debt was really AAA rated, or originate debt that had no hope of repayment. It wasn't the small business owners who took out gobs of money in bonuses and back-dated options.

After venting the well founded anger that the small businessman feels towards the banks, Peter got more philosophical: "Who creates jobs?" he asked, knowing full well that the question spoke for itself. Yet they - the banks - are cutting off all the small businesses, while they keep shipping money overseas. Somehow dealing with small businesses and helping them through the downturn is too much effort, requires too much care and attention. Couldn't Washington have required the banks receiving tarp money and other assistance at a minimum to keep servicing their existing clients with good credit, rather than just stock-piling our tax dollars? No, they would rather send the money to China in vast piles, invest in mega funds that will build the automotive and aerospace sectors in Asia, fund factories in foreign lands where wages are $2/hour.

I am trying to employ our kids, Peter continued, selling clothing made in America. Yet all the banks do is make it impossible for us to compete. He shook his head sadly, as sounds from the construction of a new bank branch a block south on Madison Avenue - no doubt funded by stimulus money -- filled the air.

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