The Economy - Financial Hangover

Ringing in the New Year while facing the nation’s worst economic slump in 70 years doesn’t exactly make us feel like popping open a bottle of champagne. It appears the same goes for the Cleveland business leaders we talked to about the most pressing concerns facing us all in the next 12 months.

“After you’ve said the economy five times, there isn’t much else,” says Dr. Delos “Toby” Cosgrove, president and CEO of the Cleveland Clinic, the city’s largest employer.

But how do you defibrillate the economy out of a lifelessness that’s taking a toll on small businesses and large corporations alike, as well as those trying to get startups off the ground and people who buy and sell companies for a living?

It’s a query Sandra Pianalto, president and CEO of the Federal Reserve Bank of Cleveland, fields a lot these days. “As a national policy maker, the question I get asked most is: When will financial markets return to normal?”

So we asked Cosgrove, Pianalto and three other Cleveland business leaders for their thoughts on what needs to be done nationally and locally to weather this daunting economic storm. Consider this your two aspirins and glass of water.

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Dr. Delos “Toby” Cosgrove
President and CEO, Cleveland Clinic
Cosgrove says our region needs to focus on the current disparity between supply and demand for jobs. “There’s a big demand for nurses, no demand for construction workers,” he says. “People have not yet realized that health care is a growth industry.” He also says Ohio’s unemployment rate could jump to 13 percent in 2009, putting considerable stress on hospitals and social services agencies in the form of charity care. He says the Clinic’s charity care is now up from 1.5 percent to 7 percent.

President & CEO, Federal Reserve Bank of Cleveland
“Getting credit markets to function smoothly again is essential to the recovery of our economy,” Pianalto says. “My other issues pale in comparison.” To help this happen, she says, the Federal Reserve has been aggressively cutting interest rates, expanding use of traditional lending facilities while creating new ones and working with other central banks to ensure the availability of dollars in foreign financial markets.


Raymond Leach
CEO, JumpStart

Because of his role with a nonprofit that helps entrepreneurs develop promising businesses, Leach puts a premium on entrepreneurs having access to capital. He says the government must do “whatever it takes to make that happen.” He also suggests upstart businesses find creative ways to partner and collaborate. For example, instead of hiring one marketing person, companies could split the cost and share the person’s time.

Stewart Kohl
Co-CEO, Riverside Co.
Kohl says it could be a tough year for private equity firms (his specializes in buying companies worth up to $150 million), especially if the expectation of high-profile failures holds true. Capital needed to make deals is in short supply — and expensive. “Broken capital markets must start working again,” Kohl says. He expects deal flow could slow considerably because of the differences in how buyers and sellers value companies in today’s economy. However, for those ready, willing and able to act, Kohl points to once-in-a-lifetime opportunities that are emerging from the economic distress.

Umberto Fedeli
President and CEO, The Fedeli Group
Fedeli, the head of a privately held insurance brokerage, says business owners and consumers must return to the basics —don’t overextend on credit, and do business the way you’d want to be treated. He also advises paying attention to what’s happening in China, Brazil and India, while remembering that there are good things going on in our region. “We have health care that’s the best in the world and wonderful companies like Parker-Hannifin and Eaton,” he says. “There’s no bigger fan of this city than me.”