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In regard to “The Big Freeze” (March), first of all, the TARP funds cost 5 percent dividend — that’s not cheap. Therefore, there is incentive for banks to put all their capital to use after ensuring they have the capital to survive. Survival and preservation of principal are still most important to taxpayers. Second, the lending in the recent past was based on a quasi-government-backed, no-risk environment. It was artificial and we should not assume it will come back. Nor do we want it to come back. Third, banks can’t create good credits. Unfortunately, as banks get better at assessing risk, customers are living in a world of greater unpredictability, and will have a more difficult time proving their creditworthiness. The onus is on both the bank and the customer to hedge their risks. We definitely don’t want to go back to the cause of this crisis.
Chief Financial Officer
The current economic crisis has its roots in two very simple principals: greed and arrogance. Not everyone can afford a new car every two or three years, or a $750,000 house or two, or a $100,000 designer kitchen — and that’s just the beginning of the list of excessive spending that created the crisis. The equity one builds up in one’s home is not an “untapped, unlimited resource” to be used for excessive spending habits. This equity should be the “rainy day” savings. In most cases, the homeowners who are underwater have no one to blame but themselves. They signed the loan applications and agreements, spent the money, and, at the end of the day, no one forced them to sign something they couldn’t repay.
The lenders that gave out these insane mortgages are also to blame. Their corporate greed overshadowed good business sense. The leaders of the financial community should be forced to return their ill-gotten gains before another penny of federal aid is given to them.
The stimulus package rewards the bad behavior of both parties that caused this crisis. The total bailout is $787 billion. There are 300 million people in the United States. Here’s the simple math: just give each taxpayer $250,000, at a cost to the government of $750 billion. People can pay off their mortgages, buy cars, or save for a rainy day. That would be the simple, logical, and equitable solution.
Chief Financial Officer
Vantage Custom Classics Inc.
Avenel, New Jersey
Get the Health Care You Pay For
Consider the possibility that the HMO/PPO concept has outlived its usefulness (“Prognosis: Negative,” February). Your customers don’t buy a black-box product from you; why do you buy a black box for health care? Ask your supplier to switch to fee-for-service, and audit its bills to make sure you aren’t being charged for things you didn’t get.
Like it or not, employers are in a prime position to lead the way to a smarter and more efficient era of health care in the United States. Some of the innovative ideas outlined in this article need to be more aggressively explored and introduced by CFOs as the health-care consumerism movement broadens its influence.
While there may be reluctance by some corporations to be prescriptive about health behavior, it is important to note that the majority of health-care costs are lifestyle-related. As the majority investor in the employee’s health insurance, corporations do have a right and a responsibility to do more to help encourage changes in health behavior. By addressing just two areas — tobacco use and obesity — substantial efficiencies can be achieved. This may require elements of both carrot and stick, but needs to be supplemented with health education using effective communications approaches. Health-behavior change is difficult, but the consequences of the status quo are worse.
At this moment in our history and economic crisis, American business has the opportunity to do more to take control of the health-care situation before the new Administration crafts its plan. Most CFOs would agree that a bit of proactive intervention now would outweigh more-intrusive government intervention later.
Chief Executive Officer
Healthcentric Partners Inc.
Don’t Underestimate HR
I agree that human capital is too important to be left to the human-resources department, but CFOs and CEOs should not underestimate HR’s potential impact either (“Soft Is Hard,” From the Editor, February).
Laying people off is a good example. From a human-capital perspective, this is something companies need to avoid wherever possible. I don’t say this (purely) from a humanistic perspective, but simply because it’s going to cost. A lot. Much more than you probably think.
Talk to your HR department, and discuss how you can maintain your organization’s human capital to the maximum extent, even while you may be making cuts.
Warfield, United Kingdom
Leasing Michigan to China (“What’s Next — The Louisiana Spin-Off?” Topline, January)? What a great solution to a major issue for a corporation that needs cash flow. Each state is sovereign and is its own corporation. We have a history of leasing ideas and raw products. And, we have the INS, which is responsible for these programs through its incubator investments programs (citizenship).
Summer Leadership Institute
I find it unfortunate that intelligent people continue to apply the flawed trickle-down economic theory (“With a (Very) Little Help from the Feds,” Topline, December 2008). History does indeed repeat itself, and those beneficiaries receiving the funding, such as AIG, will by and large cling to the funds. The small and middle-market economic players may or may not see the funds trickle down. And, if it does trickle down, it will do so ever so lately.
E. Blake Mendez