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In one small sampling of finance executives today, CFO.com finds some angst over the president's vagueness on key points.
Kate Plourd and Sarah Johnson, CFO.com | US
February 25, 2009
The uplifting tone of President Obama's speech to Congress Tuesday night impressed the half-dozen finance executives that CFO.com interviewed on the subject today. But they were also concerned by the president's vagueness about the steps being planned by the government to help restore the economic stability that businesses and consumers crave.
"It was a lot of 'rah-rah' and no specifics," lamented Sandy Marrero, CFO of Your Auction Inc. an auto auction in Tampa, Fla. " I felt like I was listening to his nomination speech all over again."
Instead, the CFOs, from a range of companies, sought more detail about how government officials will spur banks to lend again to businesses of all sizes — at least at the levels that prevailed before the credit markets contracted last year. "Helping the banks out of the current situation would not only benefit the people at banks, but it would benefit the Everyman on Main Street," says Don Elsey, CFO of Emergent BioSolutions, a biopharmaceutical company based in Maryland. "Getting credit to flow again is key."
Credit was certainly covered by President Obama, who called the flow of credit "the lifeblood of our economy." Indeed, he acknowledged that the financial crisis can't abate until businesses and consumers win better access to financing. "The concern is that if we do not restart lending in this country, our recovery will be choked off before it begins," he said.
However, neither the president nor any other prominent government official has clarified — to the satisfaction of the average CFO, it seems — how or when banks will hit the restart button.
Further, some CFOs seem sympathetic to critics of the plans put forth by the new president, as well as those discussed by former President Bush — critics who continue to worry about the lack of restrictions being placed on the financial institutions receiving government assistance. The restrictions being considered, of course, could lead the bailout recipients to funnel some of their new capital to businesses or consumers. And CFOs now are wondering, too, whether any U.S. banks will be nationalized; what course will be set for or by the U.S. automotive industry; and what can be done to get consumers to start spending again.
"In its tone, the president's speech last night took an important step forward in reassuring the American people about the resilience of our nation and economy," said Craig Omtvedt, CFO of consumer-brands company Fortune Brands. "Still, we have a long way to go in stabilizing the housing market and restoring consumer confidence, which are critical priorities for our country. Housing led us into this recession and housing will have to lead us out."
Rather, President Obama's talk seemed to some among our small sampling of finance chiefs too much a defense of the administration's recently-passed $787 stimulus package — a package many critics see as flawed. It also rang to these CFOs as something of a too-weak rallying cry for bankers to lend, and for investors to feel more confident. The president said that his plans would lead to 3.5 million new or preserved jobs, tax cuts for 95 percent of Americans, and major investments in the healthy-care, energy, construction, and education sectors. But the thin support for those claims left some CFOs unimpressed.
What confused some finance executives was how the president could combine the promises with a similarly-ill-defined pledge to cut the budget deficit in half.
And for CFOs used to the annual headaches of budgeting and balancing debits and credits on a corporate level — there seemed a tendency toward skepticism about how President Obama will pull off such a feat against such enormous odds.
"Huge sums are being committed to — or already spent — with no specific plan on how it's to be spent, or what the receivers of funds are supposed to be doing to help restart the economy," said David Dreyer, CFO of AMN Healthcare, a health-care staffing company.
Of course, much more detail is likely to emerge when he presents his budget plans presented later this week, most of the CFOs noted.
But some whose businesses are most directly affected by the stimulus expressed doubt about how long it could take to turn things around. Ron Box, CFO of Joe Money Machinery Co., for example, said he didn't expect to see any effect on his construction-industry business in 2009, even though that would seem to be in the sweet spot of any drive toward job-creating infrastructure projects. "I believe the stimulus package does very little for most businesses," Box said, adding that President Obama's plan likely will not lead to immediate job creation.
Fortune Brands' Omtvedt said that he would take a wait-and-see approach before incorporating any possible benefits his company might see from the stimulus plan.
And others of the CFOs contacted, including Ken West, CFO of Marvel Entertainment, worried that the economic problems of other countries could stifle U.S. businesses' ability to see a quick turnaround. For that reason, he was concerned that an economy turnaround should be expected until at least the first quarter of 2010.
Still, even the most skeptical finance chiefs couldn't miss the inspiration of such warming words coming at a time of frozen credit and ceaselessly bitter news from Wall Street and Main Street alike. "I thought it was very uplifting," noted Elsey, of Emergent BioSolutions.
Elsey acknowledged that he might be a bit more optimistic than his CFO counterparts, including some in biopharm who have seen their access to private equity funds and other financing avenues dry up. His company, which claims to have the only FDA-approved anthrax vaccine, has a multiyear contract with the U.S. government. It also has plans to hire this year, putting it in a relatively rare class. Still, he said he did plan to pull back on capital spending this year.
Even though President Obama's stimulus plans likely will have no direct effect on Elsey's company, he said, though, "the economy is healthier when everybody rises with the rising tides."
David McCann contributed to this article