Kiplinger Connection
Banking • Human Resources • Public Works

Banking: Woes are slowly trickling down to local banks.
Human Resources: New amendments and guidelines will broaden ADA.
Public Works: In coming years, infrastructure projects will drive recovery.

Banking
What’s your banker’s outlook these days?
Three months ago, many were still sanguine. The large money center banks were in deep trouble, drowning in pools of failing subprime mortgages, unable even to gauge how deep the water was. But ...
Most Main St. banks were riding the waves, largely untouched by housing woes and fairly hopeful that they’d come through the economic downturn with little or no permanent ill effects to speak of.

Today, there’s mounting queasiness.
The big banks are in more trouble than ever. They face continuing losses from failed mortgages. The stock prices of the 40 largest banks are down ... an average of 34% in the past 12 months. A third of large banks are down much more ... over 50%.
The pain is beginning to spread to others.
Most small and midsize banks are still OK.
But few are worry free. The housing slump has hurt banks far from Wall Street, including many in Fla., Calif., Nev., and Ariz. And the nosedive in autos and other manufacturing woes resulting in big losses in factory jobs is taking a toll on banks in the Midwest.

With lending down at big banks, there should be an opportunity for smalls to attract customers who were wooed away by bigs’ aggressive marketing in the past.
Businesses, though, aren’t in the mood to borrow. Loan volume is slowing as companies sit tight, waiting for signs that an economic recovery is beginning.
For those who are in the market to borrow, money is still available.
But lenders will be more demanding, carefully scrutinizing balance sheets, asking for more collateral and charging more than they did just a few months ago.

Beneath the banking worries are some encouraging economic signals.
Housing, whose improvement is crucial, is seeing sales begin to steady for both new and existing homes. That said, prices will keep falling well into 2009 because foreclosures will continue to add to the national inventory of unsold homes.
Exports are still the biggest bright spot. They’ve been offsetting housing ... to some extent at least ... and the latest indicators show no signs of any pullback.
There’s even a silver lining in ever-rising energy and transportation prices:
They’re leading manufacturers to bring overseas production and jobs home.

But the cost of oil remains the biggest question mark going forward. A decline ... from about $145 a barrel to about $110 ... is a must to boost spending by consumers on computers, electronics, dining, and dozens of other categories.
We still see a drop by year-end as the commodities bubble deflates.
That should start a slow but steady recovery in U.S. economic growth.

Human Resources
Coming soon: Expanded protections for the disabled in the workplace. In response to recent Supreme Court decisions that narrow the definition of who’s considered disabled under the Americans with Disabilities Act ...
Congress is fast-tracking changes in a bill that President Bush will sign in late July, 18 years after his father signed the original ADA into law. By broadening the definition of “disability,” the ADA Amendments Act will restore protections to people with serious but treatable illnesses ... epilepsy, heart ailments, etc. The high court effectively eliminated people with such illnesses from ADA protections in ruling that the law covers only people with conditions that can’t be corrected or eased and that severely restrict “a major life activity.”

Meanwhile, proposed rules on access for the disabled are making waves at firms open to the public. Acting on recommendations by the U.S. Access Board, an independent federal agency, the Justice Dept. plans to require wider doorways, lower light switches, and service counters and other modifications to improve access.
The changes would extend to all employee work areas, going beyond rules that currently require just entrances and exits to be accessible to people with disabilities.
Business groups are in a quandary. While they want to force revisions to the rules to make them less costly, they don’t want them delayed into next year. They fear that a Democratic administration would make the regs even more onerous.

Public Works
When the economic recovery gets going full steam in a year or two ...
Rebuilding U.S. infrastructure will help fuel it. Look for spending of about $3.5 trillion over a 20-year period to fix crumbling roads, bridges, dams, river locks, sewage treatment plants, schools, city waterworks, and much more.
The doubling of activity to $200 billion a year will create millions of jobs ... about 30,000 for every $1 billion spent to meet the nation’s long pent-up needs.
The spurt won’t just help road construction and asphalt companies. It means new opportunities also for metal suppliers, filtration system makers, machine shops, design and cost control software developers, and others.

Voters are increasingly pushing for action from local and federal officials as disasters ... from breached levees to collapsed bridges to buckling roads ... pile up. One-quarter of U.S. bridges are structurally weak, half the inland water locks are obsolete, and 3300 dams are unsafe. 42,000 die every year in traffic accidents, with damaged or hazardous roads a leading cause. Each year, traffic bottlenecks waste $70 billion in fuel and 4.2 billion hours, cutting productivity by $80 billion.

Public demand will force governments to come up with additional money.
Governments can’t do it alone, but count on Washington to do more ... providing about $70 billion a year, up from $48 billion in the last transportation bill.
The extra funds are likely to come partly from a tax on cargo containers for imported goods, though other sources of federal revenue will have to be found.
One certainty: More strings will be attached to the federal money. Lawmakers will insist on multipronged approaches ... mass transit incentives and pricing to discourage peak hour driving in addition to new roads, for example. Look for Congress to push for special truck lanes to ease interstate shipments plus construction of dedicated rail lines and roadways for cargo arriving at big ports.
Creation of an infrastructure bank should make federal dollars go further. It will be financed with a $60-billion bond issue and give priority to regional projects.
“Build America” bonds may provide another $60 billion in lending. States that win approval could finance infrastructure needs with lower interest.

Private equity funds will also be tapped for projects. Investment banks such as Goldman Sachs and The Carlyle Group have amassed $500 billion.
Although much of that will be used to finance projects in foreign countries, where the red tape is less onerous, significant amounts will be invested in the U.S. That will enable huge projects to get off the ground with little federal funding. Equity funds would pay for construction and be repaid out of toll collections.
Top candidates for equity funds: Replacement of N.Y.’s Tappan Zee Bridge, a new tunnel between NYC and N.J., and an expansion of Calif.’s Alameda Corridor to speed travel of freight offloaded at the ports of Los Angeles and Long Beach. Similar projects are planned at ports in N.Y., N.J., Va., S.C., and the Gulf of Mexico.
But privatization will be limited by a public that wants governments to stay in control. Opposition, for example, forced N.J. to cancel some of its plans, and Texas got cold feet about leasing part of state Highway 121 outside Dallas.