The Price of Playing Politics

The intertwined relationship between business and politics is really a simple one. Inaction = uncertainty. Just like shareholders in companies, citizens of countries demand leadership and accountability from their politicians. If they don’t get it, confidence is weakened and in some cases, shattered. While Europe continues on their never-ending crusade of so-called “solutions”, Americans watch as politicians on capitol hill continue to take their jabs as they try to “compromise” with the fiscal cliff getting ever so closer.

But while the game of politics are played, businesses sits on the sidelines to watch. “At some point, our creditors will call the question (of our fiscal health) on us. If the do, it will re-price the cost of our borrowing.” worries Charles Fabrikant, Chairman of SEACOR Holdings (CKH). If that would happen, the higher cost of capital could impact asset values. Asset must have pricing power to maintain value and their income stream is valued based on the cost of capital.

The parallels of over spending in Europe and United States are very similar says Kristin Holth, head of ship financing leader DNB Americas. “Countries like Greece, Spain and Italy have social systems and a structure in place that they actually cannot afford. This is an important reason for this crisis, when combined with overleveraged countries.” she said with disdain in her voice. “So, for me, and that’s what I struggle with as this is such a long-term issue to solve, the politicians really need to make changes and we have seen how challenging that has been for Spain and for Greece. The people don’t accept the required changes.”

As a result of the trickle-down effect of this lack of fiscal control Holth said the banks are challenged. I am being told by bank CEOs like Rusty Cloutier of MidSouth Bancorp (MSL) that his loan officers cannot make loans because businesses do not want to take on the leverage right now because of this uncertainty.

But even with this cloud hanging over the economy, Jim Tisch, CEO of Loews(L) who describes the U.S. economy as “sickly” still holds out hope, “The United States is growing at two percent, if we’re lucky.. In the short term we have ea number of obstacles to overcome, but I am optimistic about the long term and feel that the best days for the U.S. are ahead of it, not behind it.”

Bottom line, no matter what the industry, CEOs across the board are echoing the strong call for leadership voiced by Jacob Stolt-Nielsen of Stolt Nielsen said with fire in his voice, “What is wrong is that there are no leaders. No one seems to be able to take charge. In America today, the (political) candidates quibble instead of getting together, finding common ground, and getting something done. Right now, they’re not doing anything and things are getting worse…. Until a leader emergencies, until we have a Churchill or Konrad Adenauer, someone must take charge. If not, the impact of this lack of leadership will continue.”

Question is will our political leaders rise above their differences and do what’s right for America? The fate of the good faith and credit of Uncle Sam is in their hands.

Advertisements

3 Comments

Filed under Uncategorized

3 responses to “The Price of Playing Politics

  1. Reblogged this on Dynasties of the Sea and commented:
    Lori Ann LaRocco explains the relationship between politics and business using some key quotes from Dynasties of the Sea.

    Like

  2. Pingback: Leadership Thought #415 – Know When To Stand Your Ground « Ed Robinson's Blog

  3. Pingback: Know When To Stand Your Ground

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s