Governor Randall S. Kroszner testimony

Federal Reserve Governor Randall S. Kroszner recently testified on the effects of the credit crisis on small businesses at the House of Representatives Committee on Small Business. Not surprisingly, Kroszner said that small businesses are finding that loans are available on less favorable terms and subject to tightened standards. Kroszner seemed hopeful that the variety of programs recently implemented, though uncertain, should help small businesses.

Krozner's more extensive comments are available on the Federal Reserve website. Both written and verbal comments reflect an honesty about the uncertainty of our economic times and how this might impact small business. Although a "Black Friday" sale at a Wal-Mart in New York lured 2000 persons who trampled one man, small retailers were less busy on what should have been a busy day. Small businesses are struggling with a slow economy and credit crunch (see National Small Business Administration Mid-Year Economic Report 2008).

The common theme that I see with the Treasury and Federal Reserve programs so far is that the programs are designed to re-building our economy without tackling the choices that landed us here. The programs are also targeted at the broader markets as a whole, hoping that they will have positive effects on consumers, homeowners and small business. As Kroszner mentioned, this has not happened yet. While many of us are harsh on the auto execs for their handling of the proposed Big 3 bailout, perhaps they really do have a point to make. Individual companies and industries beyond banking have also been hit hard by the financial crisis as a whole. We might be willing to allow the Big 3 to enter bankruptcy, but they won't be alone in ending up there.

— JSM