It seems O'Leary may have called it back a couple months ago.
“They’re struggling because the Fed has raised rates up to 5.5% in a matter of months,” he said in the August FOX interview. “You’re going to hear a lot of people crying about this in the next few months because they can’t borrow anything anymore and they can’t run their businesses.”
Regional bank woes
The Federal Reserve may have paused rate increases for now, but the damage may have been done. Meanwhile, O’Leary claims that small businesses — with between five and 500 employees — have been “cut off” at the regional bank level in the wake of three major bank failures in the spring. He said regional banks are no longer willing to loan money to small businesses because they’re under pressure from regulators to increase their liquidity.
The failures of Silicon Valley Bank and Signature Bank, in particular, sparked immense stress on America’s regional banking industry. The country currently has around 4,100 regional banks, which O’Leary believes will consolidate to around 2,000 in the next few years.
“During that period, people are very nervous about putting their money in the bank because if another one fails and you have your cash in there, right now you’re only guaranteed for $250,000,” he said, referring to the Federal Deposit Insurance Corporation (FDIC) guarantee to protect deposits of up to $250,000.
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O’Leary’s fix for small businesses
The entrepreneur and television personality expressed his support for the Depositor Protection Act of 2023 — introduced by Senator Bill Hagerty (R-TN) in May — which would introduce a two-year transaction guarantee for non-interest-bearing accounts up to $100 million to protect commercial deposits.
Another similar bill — the Payroll Account Guarantee Act of 2023, proposed by Senator J.D. Vance (R-OH) in July — would expand Hagerty’s proposal to grant unlimited deposit insurance to all non-interest-bearing transaction accounts at credit unions and at banks with less than $225 billion in assets, in order to guarantee all operating, business and payroll accounts.
Aside from supporting new legislation, O’Leary also said he would extend the Employee Retention Credit — a refundable tax credit for businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic.
“It’s the only active program I know of that supports small business,” said O’Leary. “Meanwhile, we’re going to write $2 trillion to the big guys. That, in itself, is inflation. It seems unfair to me to support a behemoth company that has a lot of its employees outside of North America, and not my companies — small businesses.
“I’m asking myself: What are we doing for them — the 60% of jobs in America? Let’s wake up, smell the roses, realize they’re under tremendous pressure and they ARE our economy.”
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