{"id":416606,"date":"2010-03-11T06:45:52","date_gmt":"2010-03-11T11:45:52","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2010\/03\/11\/qa-atlanata-feds-altig-on-small-businesss-potential-to-derail-recovery\/"},"modified":"2010-03-11T06:45:52","modified_gmt":"2010-03-11T11:45:52","slug":"qa-atlanta-fed%e2%80%99s-altig-on-small-business%e2%80%99s-potential-to-derail-recovery","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/416606","title":{"rendered":"Q&A: Atlanta Fed\u2019s Altig on Small Business\u2019s Potential to Derail Recovery"},"content":{"rendered":"

In recent weeks, policy makers from President Barack Obama <\/strong>to Federal Reserve<\/strong> Chairman Ben Bernanke<\/strong> have been taking extraordinary measures to remove what they see as a serious impediment to the recovery: A dearth of credit for the small businesses that many economists say must play a leading role in creating new jobs.<\/em><\/p>\n

David Altig<\/strong>, head of research at the Atlanta Fed, has been in the front lines on the issue, polling small businesses in his region and parsing economic data to figure out what\u0092s really happening. He spoke with Real Time Economics about the extent to which small businesses are in trouble, what banks have to do with it and why we should care.<\/em><\/p>\n

In 2009, the U.S. experienced the largest contraction in bank lending since 1942. That might not be a problem for big companies, which can borrow on bond markets, but most small businesses have nowhere to go but the local bank. What might that mean for the recovery?<\/strong><\/p>\n

Altig:<\/strong> What this means for the recovery is nothing good. Depending on how you define small businesses, they account for something between one third and two thirds of net job creation. So if there\u0092s some impediment to the growth of such companies, we obviously have the bleaker side of our employment forecasts being the likely outcome.<\/p>\n

How big of a role did small businesses play in the latest recession?<\/strong><\/p>\n

Altig:<\/strong> An outsized fraction of the job losses during this recession came from small businesses, particularly very small businesses with less than 50 employees. In the 2001 recession, about 9% of the net job losses came from that small business category. This time around it was 45%.
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\nWhy did this recession hit small business so hard?<\/strong><\/p>\n

Altig:<\/strong> We\u0092re looking for explanations. One obvious candidate is that this was the group that would have more difficulty with a credit event, which clearly this recession was.<\/p>\n

We tried to get to the bottom of that by surveying small businesses about access to credit and how big of a problem it was in our district. We didn\u0092t really pick up access to credit as being a big problem for these businesses.<\/p>\n

Of course we\u0092re talking about those businesses that have survived. And what we don\u0092t know is how many small businesses are not being formed because of lack of access to credit. A lot of startups depend not on direct business loans, but on loans their owners take out against their homes. With the decline in real-estate values, those loans have become a lot harder to get.<\/p>\n

Some surveys have shown that small businesses are more concerned about poor sales than about access to credit. Does this mean that lack of credit isn\u0092t such a big problem, or that they haven\u0092t yet run into it because they\u0092re still reluctant to expand?<\/strong><\/p>\n

Altig:<\/strong> We don\u0092t really know if this will become more of a significant problem once things begin to pick up and businesses decide they want to expand. We did look at whether people were anticipating problems, but unless you\u0092re in construction, we\u0092re still not picking up that sentiment.<\/p>\n

We still get lots of anecdotal feedback that people are having credit problems and it is restraining them. It\u0092s our intuition and really it\u0092s embedded in our view of the trajectory of the economy that balance sheet repair and credit tightness is going to be a factor restraining the recovery.<\/p>\n

We\u0092re particularly worried that looming issues in commercial real estate will heavily impact the sorts of banks that would serve small businesses. That remains on our radar screen as a concern.
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\nHow much can regulators and the government do to get credit to small businesses?<\/strong><\/p>\n

Altig:<\/strong> I think it\u0092s hard to tell what will be effective and what won\u0092t be effective, in part because we\u0092re struggling here, trying to diagnose exactly what the problem is. We\u0092re trying to promote an environment that is conducive to growth and let things sort themselves out.<\/p>\n

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In recent weeks, policy makers from President Barack Obama to Federal Reserve Chairman Ben Bernanke have been taking extraordinary measures to remove what they see as a serious impediment to the recovery: A dearth of credit for the small businesses that many economists say must play a leading role in creating new jobs. David Altig, […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-416606","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/416606","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=416606"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/416606\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=416606"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=416606"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=416606"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}