Accountant Frank Giordano, senior partner at Judelson, Giordano & Siegel, stays nimble and stays informed. News is analyzed, used. This is no time for sloth: “more a depression than a recession” and, “We”™ll do what we have to do to get back up and running.”
The Middletown-based accounting firm was started at the height of the Great Depression by Jake Judelson, who focused on what was once that city”™s economic driver: retail. “But as malls began to open, small independent retailers began to disappear,” said Giordano. “To keep ourselves viable, we, too, redirected our focus and changed our business model. That”™s something any business, whether in a bad economy or a good one, has to keep doing in order to survive and keep growing.”
One of the industries JGS branched out to was banking. “Orange County Trust is one of the very few independent banks left,” said Giordano. “Most have been bought and re-bought over and over. TD Bank”™s acquisition of Commerce Bank is helping them reach a broader market, but our local economies are the ones in need of assistance. The national banking system has to deal with its own issues.
“The current credit crunch will see this phenomenon of banks buying up banks continue,” he continued. “Who could have believed that companies like Bear Sterns or Lehman Brothers would disappear from the financial scene? But they did … and I”™m sure we”™ll see more changes before the dust settles.
“The current recession differs from the others we had in the 70s, 80s and 90s; they were shallow and short-lived. But because of what happened in the credit marketplace, the bad loans and trillions of dollars lost to too-loose credit, this borders more a depression than a recession.
“Some of the nonlending companies like Merrill Lynch and Goldman Sachs were packaging those loans and selling throughout the world. But no one knew what was in the bundle. Now we”™ve found out and are paying the price.”
Giordano said when savings and loans got into trouble years ago, many people took money out of the system. “Circumstances today are somewhat déjà vu,” he said. “People are holding onto whatever money they have because they don”™t know where the ”˜top”™ is: how far up will gasoline, groceries and heating go? Now, couple that fear to spend with the inability to obtain credit because the banks have tightened up so much, and we”™ve got a huge stall in our economy,” said the longtime CPA and financial planner.
“The first stimulus package was flawed because people squirreled the money away; they didn”™t know what was coming,” said Giordano. “Now, with the changes in the White House and Congress, the inherent problem is still there, because Obama and the new Congress are still going to have to satisfy their constituents. People are ascribing hope to this change, the catalyst that will help get people to start spending money. Even if that happens ”“ and hopefully, it will ”“ it is only half the correction we need to see.”
Giordano said lenders are going to have to start opening pockets to those who qualify so they can run their companies and get life back to normal. “Banks and nonbanking lenders are getting government money, which is only helping them to buy beleaguered banks,” Giordano said. “It is not helping to get money flowing into the economy.”
Giordano said local banks have an edge over the larger ones. “They weren”™t hurt in the credit crunch. Local banks are trying to get back into lending without losing. They are receiving TARP (Troubled Assets Relief Program) money, but now they need to start to lend it out. Credit needs to be released to people who qualify.”
While Giordano focuses mergers and acquisitions, particularly in the banking and financial industry, he said local banks have an edge over the larger ones. “They weren”™t hurt in the credit crunch. Local banks are trying to get back into lending without losing. They are receiving TARP (Troubled Assets Relief Program ) money but now they need to start to lend it out. Credit needs to be released to people who qualify. Those companies and small business owners who need to replenish their capitalization and get strong again need to have credit made available to them. Â
“And,” he said, “there needs to be oversight on this program.
Congress must make sure TARP money will filter down and be released to borrowers, rather than giving out millions of dollars carte blanch that will sit in banks as a cushion. And we need to get people spending again, and that”™s not going to happen unless banks start lending; it represents 50 (percent) to 70 percent of our GNP ”“ every service industry, from restaurants to retail, is adversely affected by the public”™s fear of the future.”
Giordano said Obama”™s economic stimulus plan includes repairing or replacing decaying infrastructure and will enable the U.S. to employ thousands of people and put the construction trades back to work, “funneling money into industries across the country.
“When the government says, ”˜We”™ll let you write off your capital loss,”™ that”™s an important aspect of economic stimulus. What is the return on capital spending? If you can get a 100 percent write-off in the first year, that would be a great stimulus for every company, no matter what the size. Many larger companies have stopped capital spending. While they need to protect themselves, that”™s another negative effect on the overall economy.”
But he said, “We”™re a country of resourceful, resilient people. We”™ll do what we have to do to get back up and running. How long it will take, however, depends on our lawmakers and how proactive they are.”
