As an awful year for business heads for the history books, we’re going to sound a couple of warning notes about 2010.
What troubles us more than anything else are what economists like to call “externalities” — events clearly beyond control of those of us who operate in the Tri-Counties. Here’s a look at two of them:
 

Regulation feeds fear of lending

Atop our list of concerns is the state of community banks and banking regulation. With a singular voice, bank  presidents have been telling us that the regulatory climate is totally dysfunctional, making it impossible for lenders to lend in ways that will grow our economy.

They fear a growing possibility of what U.S. Rep. Barney Frank, Chair of the House Banking Committee, called a “downward spiral” in the economy, where lenders are afraid to lend and that forces more companies out of business, which only makes bankers more fearful about customers who are even healthier than the ones that just closed.

Such a dog-eat-dog mentality on the ground in Santa Barbara, Ventura and SLO counties stands in sharp contrast to the chatter coming out of Washington, D.C., where Treasury and Federal Reserve officials are quick to tout their support for the banking system.

The problem seems to be that the folks at the top are sending mixed signals to the regulators on the ground who continue to impose draconian and unfair rules on community banks. When banks fail, the assets are parceled out to favored survivors, often at an enormous cost to taxpayers, including many business owners who are being victimized by the lending crackdown. This is a vicious circle that simply must be broken if the economy is to recover.

Public education must come first
Second is the state of funding for our colleges and universities — especially in light of the latest news that the current state budget is $21 billion in the red.

University of California President Mark Yudof of has written an intelligent and clearly worded letter in which he argues passionately for the restoration of funding to the UC system. “I am concerned that we are now facing the prospect of lasting damage not only to the university, but to the next generation of Californians and to the economy of California itself,” he wrote.

We’d second that thought and add that funding to Cal Poly and our  California State University, Channel Islands, campus near Camarillo are extremely important driver’s for the regional economy.

The state has gotten so hung up on spending money on prisons that it is in grave danger of throwing away its single most important sources of innovation, business starts, job growth and revenue.  Alas, other states have taken the same ill-conceived course — Colorado now finds its prison system takes up as much taxpayer cash as its public universities.

California is a recognized global leader in higher education. That means breaking the cycle and putting higher education first.

Summing it all up
We need for the bureaucrats in Washington to stop paying lip-service to small business and actually create a consistent regulatory regime that allows banks to make loans again.

We need to restore funding to our public higher education institutions and provide a strong foundation for our economic future.

Are you a subscriber? If not, sign up today for a four-week FREE trial or subscribe and receive the 2009 Book of Lists free with your purchase.