Venture capitalist Patrick Yam speaks to 140 people at Lighthouse Bank luncheon

By JONDI GUMZ - Santa Cruz Sentinel
Posted: 11/10/2011 05:23:48 PM PST
Updated: 11/10/2011 07:56:59 PM PST

SANTA CRUZ - About $2.7 trillion is sitting on corporate balance sheets, about what the Federal Reserve Bank injected into the economy to spur recovery. Yet consumer confidence is weak and corporations have put off hiring. What's the answer?

"Don't look for heroes - look in the mirror and ask questions," said Patrick Yam, chief executive officer of a private investment firm in Menlo Park. Yam was speaking to 140 people at Lighthouse Bank's 4th annual business and economic conference luncheon at the Cocoanut Grove.

Yam has spent more than 25 years in finance, working at the Federal Reserve, Lehman Brothers and Citicorp Investment Group, and currently lectures on entrepreneurship at Santa Clara University.

"This is an opportune time for community banks to be more attentive to customer needs," he said.

He quoted President Kennedy: The word "crisis" written in Chinese comprises two characters: One represents danger, the other opportunity.

Without the Fed policy of expanding the money supply, known as "quantitative easing," the cost of financing would be higher, Yam said.

Japan, using quantitative easing, has seen two lost decades of economic stagnation.

This year brought unpredictable epic "black swan" events such as revolutionary demonstrations in the Middle East, putting pressure on the price of oil and gas, Japan's earthquake and tsunami, disrupting supply chains for American industries, and a debt crisis in Europe which accounts for 20 percent of American exports.

At home, the Congressional Super Committee faces a Thanksgiving deadline to find $1.5 trillion in budget savings, actions that could crimp consumer spending.

"We've got this polarity on Capitol Hill that's limiting effectiveness," Yam said, wondering why Treasury Secretary Tim Geithner isn't on the scene.

Bruce McPherson, a Lighthouse Bank board member, former Secretary of State and a candidate for county supervisor, asked whether it's important for any other sector besides government to get its act together.

"We need to get the private sector re-engaged," said Yam, suggesting a three- to five-year capital gains holiday for corporations bringing back offshore money (60 percent of the $2.7 trillion) to hire people.

"I am a CEO," he said. "I understand the lack of confidence. It's like a catch-22. Someone has to move first."

Commercial real estate agent Reuben Helick found Yam's analysis astute.

"Repatriating that $2.7 trillion, we need to get the political will to do that," he said.

Marshall Delk, who works at Lighthouse Bank, said he's frustrated about local business owners banking with national banks.

"Keeping things local will get this (economy) started," said Dr. Michael Dunn, who helped found Lighthouse Bank four years ago. "It's true in industries such as health care."

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