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Where Public Policy and Small Business Meet
Anyone who has read this blog knows that I have significant issues with corporate executives’ ignorance of the implications of their actions on their employees and communities they serve. My patience is shortest with the financial institutions whose greed led to the collapse of the worldwide economy. I still wax poetic about the days when a family or a business could go to their local bank branch, and their credit was assessed based both on their financial situation as well as their social capital. Historically, default rates drop significantly when social capital is factored in to underwriting decisions.
Obviously I was naive, but when we, CubeSpace, started trying to negotiate with our landlord, US Bank, in August 2008, I had assumed that since they had accepted TARP money, they would show some flexibility to their tenants who were also being impacted by the economic downturn. Instead, they turned a deaf ear to our repeated requests for negotiation for 10 months before threatening us with eviction.
From the outset, our letters to US Bank included offers to use our personal and professional networks to publicly thank US Bank for their cooperation by directing business and good will their way. We once again reiterated our community involvement in what we thought was a last-ditch effort plea for mercy. That was when you all, members of the CubeSpace community, both near and far, proved that social capital remains a force to be reckoned with.
Your unexpected, massive and much appreciated (there really are just not words to tell you how appreciated) response to what I had intended as a farewell post changed the game completely. Not only did US Bank feel the pressure to respond to our letter, but they did so with somewhat reasonable offers. We believe that you, our community, are the ones to thank because of this little paragraph they included in their response:
US Bank does not view your comments regarding issues of public opinion and the Portland business community as productive. Please focus any future correspondence and negotiations on items that will bring the parties to an agreeable resolution.
No matter what comes next or how this story unfolds, you should all pat each other on the backs and raise a toast to yourselves for being a David to their Goliath and using Twitter as your slingshot.
We have received a truly overwhelming number of offers of cash, advice, support, meals and even a bakesale organized by a much beloved community member who is ten years old. We have also been asked some very appropriate questions that we are struggling to answer. Questions like:
The short answer is that we are struggling to answer those questions ourselves. David and I are emotionally drained. Since Tuesday, we have been on an emotional rollercoaster where we were facing a Sophie’s Choice where either option led to certain corporate and personal bankruptcy, and then experiencing an emotionally overwhelming loving and supporting response from you, our community, and being able now to visualize a light at the end of the tunnel.
CubeSpace’s survivability is obviously incredibly important to the community, and we are convening a meeting tomorrow (Sunday) to discuss legal, business and community implications of the two US Bank offers on the table. We appreciate your collective desire to know what, when and how right now. We are there with you. But please, bear with us as we take the time to review our options and make the decision that is best for all of us.
For those of you who have been hesitating to make a donation without more clarity from us, I understand and agree with your concern. We have not cashed any checks or deposited any cash pending our decision. If we decide CubeSpace will not make it, we will return all cash and destroy all checks. This includes any donations made through the savecubespacepdx.com PayPal account. We know many of the donations have come from unemployed folks who really cannot afford to give anything. If we are able to sustain CubeSpace, in some shape or form, we will gratefully accept what we know were heartfelt gifts. If we cannot keep CubeSpace going, we will return all contributions but retain the incredible support and love in which the gifts were given.
Things are going very fast and we will do out best to keep the community updated throughout the weekend.
Eva and David
While he was still President-Elect, Barak Obama made it abundantly clear that he wanted no earmarks to be part of the economic stimulus package. While often perceived as a synonym to “Pork-Barrel spending,” earmarks can serve a useful role. They are a way that congress can designate funding for specific work. They are also a way for the congress to negotiate compromises, which, when done within reason, are actually a useful tool to move decisions forward.
But, there is also a reason that earmarks have earned a bad name. As I mentioned in a previous blog post, TARP, the previous stimulus package, was earmarked for banks, despite the fact that banks were clear, in a very public way, that they had no intention of using it as directed. Negotiating earmarks can also slow congressional decision-making to a halt. The funding pie is never big enough, so not only are people scrambling for a slice, but arguing like little children over whose piece is bigger.
Both the House and Senate are getting very close to agreeing on a stimulus package that President Obama can sign. Everyone involved seems to recognize the urgency of the situation and the need to get money flowing back into the economy. At this point in time, it is looking like both the House and Senate will sign on to the idea of having the jurisdictions that receive the money decide how they will spend it. But not without some parameters from congress. In HB1, the House economic stimulus bill that is currently being debated, there are dates by which the money needs to be released by the federal government (30 days for formula funding, 90 days for competitive funding and 120 days for funding for new programs). In addition, the funds are released conditionally on a “use it or lose it” basis. So if 50-75% of funds are not used by the recipient jurisdictions within a pre-determined time-frame, the money goes back into the pool to be redistributed.
What happens next? Well, according to Sarah Binder of the Brookings Institution:
When this bill passes, a Niagara Falls of money will flow out of Washington and into the accounts of state highway commissioners, governors and legislatures, local school boards, county executives — even mayors
Then local jurisdictions, rather than national legislators, can decide how to best allocate the money to revivify their local economies.
I find the resistance to shifting the decision making to the local level very interesting. From my perspective, localizing the spending decisions promotes greater local accountability because the locus of control is so much more accessible. When funding decisions are made in Washington DC and they are poorly suited for a state, a county, a city or a school district, it is way too easy to blame “those folks in Washington.” The machinations of elected officials in our national capital are mocked as often, if not more so, than they are taken seriously.
However, having lived in two large east coast cities (New York and Philadelphia), a small Californian city (Santa Cruz), as well as our lovely medium-sized city of Portland, I have observed that ordinary people (as opposed to policy wonks like me) actually track funding decisions being made on the local level. When city or county governments are debating whether to pave roads or increase park maintenance or whether to close a community center–citizens pay attention. They pay attention because the decisions being made will impact their day-to-day existence. They pay attention because the money being debated is at a scale that is comprehensible (thousands and tens of millions, rather than billions and trillions). And they pay attention because it is much easier to write letters, call or testify to a legislative body that is driving distance of one’s home.
The opposition I have heard thus far to localizing the decision-making is centered around local jurisdictions’ inability to make sound funding decisions. That will certainly be true in some cases. But, what will also be true is that decisions will be made that align much more effectively with the needs of the local economy than any decisions that could be made at the federal level. My question is whether the stimulus funding that is being allocated by local jurisdictions will be spent more effectively than the TARP funding allocated by congress.
The good news is that we are likely to be able to answer that question within the next couple of years. U.S. Rep. David Obey (D-WI), the chairman of the House Appropriations Committee explains it this way:
We have more oversight built into this package than any package in the history of man. If money is spent badly, we want to know about it so we can hold accountable the people who made that choice.
I am looking forward to this grand experiment in local control. I not only strongly believe that it is the right decision for this time and this place, but I am also optimistic that we, as nation, will learn a lot about how to most effectively spend our public dollars.
Between running my business, tracking the Sam Adams story and everything else on my plate last week, I fell behind on my newsfeeds. My feeds have become more important to me because I have been listening to NPR less and less lately. I think the ongoing mantra of layoff numbers is counterproductive to economic recovery. Since their reporting focuses on the problem, rather than the solution, the news only feeds the fear, which then leads to shareholders panicking with the end result of more layoffs. I am appalled at the recent rate of job loss, but until the media refocuses its energy to include more focus on recovery, I am taking a radio hiatus.
One of the very nice things about newsfeeds is the ability to filter out what I don’t care about. This is a critical feature given that my feeds include international media, and I just couldn’t care less about local cricket scores (even though I understand the important role cricket matches play in many communities). Since the $700 Billion Troubled Assets Relief Program (TARP) was intended as a solution to the current economic crisis, I have been tracking how the first appropriation of $350 Billion is being spent.
That is how I encountered this article. Just to refresh people’s memories, TARP was intended to infuse cash into the banking system so that banks would have money to lend to consumers and businesses. Financial institutions received hundreds of millions of TARP funds even when they publicly stated that they were not going to use the funds as intended:
At the Palm Beach Ritz-Carlton last November, John C. Hope III, the chairman of Whitney National Bank in New Orleans, stood before a ballroom full of Wall Street analysts and explained how his bank intended to use its $300 million in federal bailout money.“Make more loans?” Mr. Hope said. “We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”
Despite my foreknowledge of what I strongly believe should be a criminal misappropriation of tax dollars, I was still shocked when I read that Citigroup had ordered a brand new $50 million dollar corporate jet with their $45 Billion TARP funds. At the same time, Citigroup executives were trying to quietly sell two of their existing corporate jets, worth $27 million each. Fortunately for us lowly taxpayers who have to fly coach on commercial airlines, President Obama learned of the intended purchase and instructed Citigroup executives to “fix it.”
That still leaves me with several questions. Will Citigroup actually use that $50 million that they had allocated to the corporate jet for consumer and/or business loans? Will they still sell the two jets that they have been trying to quietly unload? If so, what are the chances that the entire $104 million will actually go towards true economic recovery?