Balance-Sheet Shape Up

Two weeks ago, this blog focused on the change in attitude among the bankers who attended the Indiana Bankers Association Annual Convention. For the first time in five years, bankers are talking again about growing or offering new services to customers, and about increasing profits for shareholders, not just surviving. It is welcomed news for the United States and, frankly, for the world.

Bankers have been spending the past few years getting their balance sheets back into shape. Consequently they are now positioned to lead a surge of growth in this country.

There is, however, a giant elephant sitting in this room of financial optimism. That giant elephant is sovereign debt. The looming debt load that politicians worldwide have laden upon their citizens must be brought under control. In other words, governments must do what banks already have done — they must get their balance sheets into order.

The massive debt of the Euro Zone, led by Greece, has dominated recent headlines, but the biggest long-term problem lies with us, the United States. Our debt equals 25 percent of the world gross domestic product. Even if we begin today to address our sovereign debt crisis systematically, our grandchildren would be grandparents before the problem is resolved!

What is frightening is that the total federal tax collected can no longer cover interest on that debt, plus payment of mandated programs such as Social Security, Medicare, Medicaid and unemployment benefits. This discrepancy means that we have to borrow 100 percent and more of the money to continue to fund government services, including defense.

Because the United States is the world’s largest debtor, if we go down, the rest of the world surely goes down with us.

The sooner we start, the less painful the remedy will be. I am certain that bankers, who already have been through balance-sheet shape-up, will be at the front of the line, willing to take our share of the distasteful medicine, while providing the needed capital and leadership to get the job done. But we all must participate, and our government will have to take the lead in initiating this lengthy recovery.

It doesn’t matter whether it’s Democrats or Republicans leading the charge. What we need are true Americans, brave enough to do what is right.

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