Dining Dialogue: ‘Unique uncertainty’ slows economy

Joe Edwards and John Taylor are two of the most optimistic and positive people you could meet, but their assessment of economic conditions are anything but optimistic and positive.

Edwards, president and CEO of Fort Smith-based Benefit Bank, and John Taylor, a member of the bank’s Board of Directors and senior vice president in Fort Smith for Sterne Agee, recently sat down for a lunch interview at Whole Hog Cafe in Fort Smith.

“We’re really poised to make loans, and eager to make loans,” Edwards explained. “But there is just not a lot of loan demand out there. … And as a region, I don’t think we’re unique in that sense.”

‘UNIQUE UNCERTAINTY’
Although the bank’s Northwest Arkansas office is seeing an uptick in loan demand, Edwards said numerous conversations with business owners from a wide range of businesses suggest concerns over future tax liabilities, healthcare costs and regulation cause the business owners to be hesitant about expanding.

“Risk takers do not mind the risk, but what we are seeing, what they are seeing is a broader unique uncertainty out there,” Edwards said, adding that there is also “uncertainty with the consumer.”

Edwards said he has not seen this type of uncertainty in his more than 30 years of banking. He also said many of the business owners he talks to are seeing improvements and want to expand, but are unwilling to make the move.

“The people are positive and they want to invest. The desire is there, but they see too much risk to go out there and do that (expand),” Edwards said.

Taylor agreed, saying the average “retail investors” among his client base have no confidence in government or they see government as an obstacle.

“I have never seen a time in my career where they are as risk averse as they are today,” said Taylor, who began working in the investment field in 1986.

REGULATION FRUSTRATION
Edwards and Taylor focused on two government programs they believe create the most uncertainty in national, state and local economies: the federal healthcare law, and banking industry changes through Dodd-Frank.

Named after legislative authors U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank, the “Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed into law on July 21, 2010. It was passed in response to the near financial collapse of the U.S. banking community in 2007-2008. Advocates of the law say it will prevent banks and other financial institutions from essentially creating a financial house of cards.

Edwards said Dodd-Frank creates “a new level of unknown” in a banking community that needs stability to make good loan decisions.

“A reaction was needed to that (previous problems in the financial sector), but this was an overreaction,” Edwards said of Dodd-Frank.

As to health care changes, Taylor said the law is a disincentive to business growth. The small business owner who sees his company grow will have to make a tough decision before hiring a 50th employee and “falling under a whole new set of Obamacare rules.” Non-profits with several hundred employees may have to cut many workers back to 28 hours a week to avoid higher medical costs. That action, Taylor explained, would in turn create more health care problems rather than provide the fixes the new law was supposed to create.

“The early stages of this anemic but sustainable recovery can continue, with the only threat to that being government regulation and interference,” Taylor said. “The summary for your story can be, ‘Risk averse, with no or low confidence’” among investors and the business community.

ON THE BRIGHT SIDE
But there are bright spots for the national economy, and Edwards and Taylor also see possible growth options for the Fort Smith regional economy.

The “massive quantities” of natural gas in the U.S. “is really a game changer,” said Taylor, who believes the right leadership could allow the U.S. to become energy independent.

Edwards and Taylor also agreed that energy independence and innovation could reverse the trend of outsourcing manufacturing, which could be a big help for the Fort Smith area.

Taylor said Fort Smith officials may want to focus on two areas to help improve economic trends in the region: 1) work to become a logistics/distribution center, and 2) support efforts to again become a region known for healthcare quality. Taylor said Fort Smith was once a place where people from many states would come to receive quality healthcare. With the deep pockets of Naples, Fla.-based Health Management Associates (which owns Sparks Health and manages Summit Medical in Van Buren), and St. Louis-based Mercy, Taylor is optimistic the investments will be made to improve the regional medical sector.

“I believe we can be a regional healthcare center like we were when I moved here in 1973,” Taylor said.

Benefit Bank is putting its money in the healthcare effort. Bank officials recently announced two gifts totaling $300,000 to the University of Arkansas at Fort Smith. A $250,000 professorship – titled the Benefit Bank Endowed Professor of Nursing – will provide a perpetual source of support outside the scope of the University’s regular budget, while a $50,000 gift will fund the Benefit Bank Adult High-Fidelity Simulator, called a “sim-man,” which will be the second such simulator for the UAFS College of Health Sciences.

Bank officials cited a nursing faculty shortage, a shortage of nurses in Arkansas and UAFS nursing laboratory needs in making the gift to UAFS.