US Chamber of Commerce Official Warns Midmarket Institute of Imminent Damage to Midsize Companies

Oct. 21, 2010 - PRLog -- As the financial regulatory reform bill was making its way to President Obama's desk, Midmarket Institute Founder and President Ram V. Iyer traveled to Washington DC to meet with Thomas Quaadman, Vice President of the Center for Capital Markets Competitiveness at the US Chamber of Commerce to discuss the law's impact on midsize companies. The outlook is austere, according to Mr. Quaadman, one of the Chamber’s key lobbyists on financial reform.

“The bill was supposed to take care of the deficiencies of financial regulation, which we think is important,” Quaadman said in an exclusive interview with Mr. Iyer of the Midmarket Institute. “But the way that Congress has gone about this is that it regulates businesses far outside the financial sector. So, you can be a midmarket service provider, or an industrial company, and you're faced with more regulation because of this bill.” Midmarket companies are broadly defined as companies with between ten million and one billion dollars in annual revenues.

One area that will severely impact the day to day operations of midmarket manufacturers, Quaadman pointed out, is the use of derivatives. “We fought very hard and will continue to fight hard for sensible exemptions for corporate end-users of derivatives,” he said, “because they use derivatives for what they're intended to be – as a risk management tool that allows them to bring products to the market with the least amount of price volatility for consumers.”

Another important side effect of the law, according to Quaadman, is that it is going to raise the costs to companies looking to raise capital, or it's going to shut off certain forms of capital. “Overall the law is going to have dramatic impacts on economic growth and on business growth,” he said.

If the government engages in policies that begin to make it less welcome for capital to reside here, Quaadman says capital will go elsewhere. Countries that have done this before, such as Sweden did with its tax on securities transactions, have found that the capital left, and most of their transactions began to go elsewhere. He says, “they repealed the tax, but the net impact was not all the capital came back.”

“The lesson,” Quaadman says, “is if capital leaves because it's less welcome, it's not necessarily going to come back. If you're a large company and capital begins to leave the United States, you can go across borders to raise capital. It's going to be expensive for you to do so, but you have the ability to do that.
But midmarket companies don't have that ability. So it’s going to be harder for them to gain access to the credit and capital they need. And the corollary is they will not be able to create jobs.”

The one thing that’s worse for the midmarket, and for the whole economy, than what we already know about the bill, Quaadman says, is what we don’t know. “One thing it does is it creates continued uncertainty,” he says.  “This bill itself is only the first leg in terms of a marathon of financial regulatory reform.” By the Chamber’s estimates, the bill would require 355 new rule makings, 47 reports to Congress, and 74 studies.

“There's going to be a tremendous implementation phase that happens here that's going to take years. Companies large small and mid size are really going to have a tough time in determining how they're going to deploy capital.” One of the few things clear about financial reform is that it is an undertaking that will take 8-10 years to sort out all the ramifications that will be felt throughout the economy during that time.

The full wide-ranging and informative discussion between the U.S. Chamber's Tom Quaadman and Ram V. Iyer, President of the Midmarket Institute, can be seen on the Institute's web site at www.midmarket.org.

About The Midmarket Institute
The Midmarket Institute is the first organization and portal devoted exclusively to providing practical information and fostering a strong community for the midmarket. The objective of the Institute is to foster greater understanding, collaboration and commerce among and between midmarket companies and those that support them. Through its online presence at www.midmarket.org, in-person events, publishing, sponsored research and advocacy, the Institute is committed to helping midmarket companies succeed.

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About The Midmarket Institute
We’re advocates for the midmarket - firms too small to be big and too big to be small. These "grownup startups" account for 3% of all biz, but 36% of all jobs & 44% of all new jobs. The midmarket is the true job growth engine capable of pulling us out of the economic morass.
The Midmarket Institute is the first organization and portal devoted exclusively to providing practical information and fostering a strong community for the midmarket. The objective of the Institute is to foster greater understanding, collaboration and commerce among and between midmarket companies and those that support them. Through its online presence at www.midmarket.org, in-person events, publishing, sponsored research and advocacy, the Institute is committed to helping midmarket companies succeed.