Out of Proportion

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As you watch what is going on in this country today, you cannot but conclude that the capitalist system that made this the great country it once was is in trouble – except for the big guys. Now you might think that the major challenge is emanating from Washington, but you would be wrong. The major challenge is emanating from those who that lead the capitalist system on Wall Street and the Major Megacorporations.

The problem is the way they conduct themselves and the fact that they do not focus on the major part of America’s capitalistic system, the middle class and small businesses across this great country. They say that California creates new ideas that are ultimately adopted across the country; therefore, the California business community can lead the country back on the right path.

The United States is a unique country, unlike anything that has existed before. So no one can foretell what is going to happen if the majority of Americans decide they are getting the short end of the stick from Wall Street and the megacorporations. Most are already fed up with their elected officials as evidenced by the low approval ratings by all or almost all polling companies. Also, there are the news reports that the health insurance reform bill has drawn six lobbyists for every member of Congress, and almost none of them has your interest as their primary focus. All of this is leading us to a country none of us really wants to see.

Clearly we have saved the megabanks/investment companies/insurance companies. But as a local CPA, I’m seeing the blood of the small business community run in the streets. I am watching these companies contract when they should be receiving financing to allow them to expand; I’m watching massive numbers of people being put out of business. The loss of each job leads to the loss of many more jobs as a result of the money they do not have to spend. The way out of this mess is to create productive jobs, not just retail sales jobs.

The business barons of America made this country great, as long as they were reasonably regulated. We need them now more than ever, but we need them reasonably regulated. Today there are too many who oppose regulation of any kind. We already know that the result of reduced regulations, and the refusal to believe that one of their own might be breaking the law leads to the Bernie Madoffs.

I recently lost a client, a small hedge fund that the SEC had beaten up pretty good even though there was nothing for them to find. The head of the hedge fund decided the additional cost burden he had to carry made it impractical to continue and he liquidated the fund – another small business fed into the tree chopper. So they beat on the little guy and let the big guys get away with who knows what.

Somehow, and maybe it is too late for this country, we have to restore three words into our business world: Integrity, Ethics and Honesty.

I remember a letter of mine being incorporated in the column of an editor of one of our major newspapers’ financial section when I responded to a professor of a major university MBA program who had been quoted as saying she taught her student to inflate income and hide liabilities. I asked what was the difference between doing that and teaching students to rob a 7-Eleven or a gas station, other than the fact that you usually don’t get caught and you get a large salary and a golden parachute. If you are caught and tried, you don’t get much time.

I have often wondered how Lehman Brothers could have received a certified financial statement in February or March and within nine months ceased to exist. I haven’t seen one question raised regarding this phenomenon.

I know that many readers will be unhappy with what I have written, but let’s say I’m a father scolding a young son who has gotten off the path. Let’s rebuild this country with integrity, ethics and honesty, not only in the business world but in our education system and at the family level, and then we can form a defensive and then offensive battle plan against those in Washington who would destroy the system that brought us to great heights. We have a long climb back up the hill. It may not happen in my lifetime, but it can be done.

Harold L. Katz is a partner in an accounting firm in Los Angeles and he is a citizen activist.

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