Two Westporters who are leaders in the finance industry, in an update of their Westport Public Library appearance a year ago, tonight called on Washington politicians to end partisan bickering and come up with innovative ways to promote economic recovery.
David Komansky, Marc Lasry, and Dan Goodgame listened to audience questions tonight at the Westport Public Library. (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
“We can work ourselves out of this if we get some leadership in Washington,” said David Komansky, retired chairman and CEO of Merrill Lynch. “Wall Street won’t do it.”
Added Marc Lasry, chairman, CEO and co-founder of Avenue Capital Group, a New York-based distressed fund, “Everyone is looking to blame someone. No one is coming up with solutions.”
He said, “We can solve these issues but no one is stepping forward. The question now is are we going to do what’s good for all of us.”
Lasry told the packed McManus Room audience that while President Obama is calling for creation of jobs and for banks to lend to small businesses, the Federal Reserve is “forcing them (banks) to hold on to $1.5 trillion in excess cash on their balance sheets.”
Fed directors “are worried about the banks having more issues,” Lasry said. “What will get this economy moving again is the banks lending.”
Both men returned repeatedly to what they said was a lack of leadership in Washington.
Marc Lasry: “Everyone is looking to blame someone.” (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
“In my view the Democrats are as intransigent as the Republicans,” Komansky said. “And the Republicans are as intransigent as a stop sign. And it is keeping us from moving forward.
“They’re looking at issues that will not bring a permanent solution, in my opinion, to the financial structure that has to be revamped on a global basis.”
Komansky and Lasry agreed inflation will return but were unsure to what extent.
Asked by moderator Dan Goodgame, a veteran Time Inc. journalist, to review the past year since the last community conversation at the library (See WestportNow Feb. 10, 2009), Komansky said his biggest surprise was the equity markets.
“Clearly the equity markets have far exceeded my expectations,” he said. “I think they were up 60 percent last year, something like that.” However, Komansky said this was deceiving.
“I think there’s a tremendous disconnect between the stock market and the real underlying economy,” he said. “The economy still has much to fight its way through, and as I look at this, we’re still in a bottoming out process. I don’t think we’re very far along in the recovery. “
Lasry also expressed surprise at “how quickly the markets came back.” He said he had expected it to take two or three years for things to stabilize.
“I think what we were shocked at was just how much liquidity came flying into the system,” he said.
But, like Komansky, he expressed skepticism as to how much the rebound in the equity markets was indicative of an improved economy.
David Komansky: “We can work ourselves out of this if we get some leadership in Washington.” (CLICK TO ENLARGE) Phyllis Groner for WestportNow.com
“The real question is how has it really affected your lives,” Lasry said. “Is it that much better? I think what’s better—you’re not worried about the world blowing up.
“But when you really look around, you don’t really get a sense that things are a lot better and part of that is there’s nothing driving the U.S. economy.”
Asked what advice they would give investors, Komansky noted that most of the audience were like him, retired, and past their peak earning years. He suggested fixed income instruments and 25 percent of the portfolio allocated to “high grade” equities.
Lasry said he is fully invested in mid-cap stocks—companies worth $5 billion or less—and is also taking senior debt.
“I’m actually investing in a very wimpy way right now,” he said.
Komansky said one of the cleverest moves to help business to come out of Washington recently was the “cash for clunkers” program.
“It probably was thought up by someone in a small back office,” he said, “not by some politicians.”
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Phyllis Groner contributed reporting for this story.
