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Exclusive Interview
| | Jim Possehl
Republic Financial Corp.
Leasing industry veteran talks about the current state of the industry, the global opportunities and his outlook on the future. |
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Kenneth Bentsen
President of Equipment Leasing and Finance Association (ELFA)
Kenneth E. Bentsen Jr. is President of Equipment Leasing and Finance Association (ELFA). Mr. Bentsen’s background is in fiscal, financial, and economic policy with more than 25 years of professional experience combining public policy, finance, organizational management and strategic counsel. Prior to joining ELFA, Mr. Bentsen was a Managing Director of Public Strategies, Inc. where he specialized in providing strategic guidance to large corporations and trade associations in the financial services sector.
From 1995 to 2003, Mr. Bentsen represented the 25th District in Texas in the U.S. House of Representatives. As a senior member of both the House Budget and Financial Services Committees, Bentsen helped craft the legislation to modernize the nation's banking and securities laws known as the Gramm-Leach-Bliley Act and the Sarbanes-Oxley Act which enhanced federal oversight of U.S. capital markets. Mr. Bentsen is an active member of a number of educational, civic and charitable boards.
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WLN Interview with Kenneth Bentsen, January 30, 2009.
What are the key factors that will drive the equipment finance market in 2009?
There have to be two things for the market to be successful in the next year. One is aggregate demand in the general economy both domestically and internationally. Right now, at least in the fourth quarter, aggregate demand has slipped. And until there is sufficient demand, for companies and individuals to make investments to acquire goods, there will be a huge impact on the equipment finance sector. The second is stability in the financial markets. Right now there’s no stability. Without stability there’s not sufficient liquidity or capital in credit. And this market, as with any financial services market, can’t operate in that environment very effectively.
Looking at President Obama’s plans, what do you think the impact of his plans and the economic stimulus package will have on the market this year and in the future?
I think the package has the potential to affect the economy. You can look at it from two sides. First, you can look from the appropriations side, the funding side. The quicker money gets from the treasury to state and local governments that execute road building, bridge building, infrastructure development, the quicker this will stimulate demand for capital goods. So while there might be some surplus in some of the capital good categories or the off-road categories, nonetheless, if you’re really pumping billions and trillions of dollars into this market, it will stimulate some demand. Now looking at it from the other side, the tax side, the provisions related to bonus depreciation and expensing will encourage some companies to invest, to take advantage of it. The ability to carry losses back as a credit will have some effect. And I think the renewable provisions could have a big effect, depending on what they look like in the end. There’s been a lot of development in the wind and solar area with the fall off in energy prices, and oil and gas prices that’s maybe driven it back a little bit. Again, there’s lots of stimulus built into those tax provisions. I think they have the potential, depending on what the final bills that come out of congress look like, to do that. But I think even perhaps bigger, besides the pure raw stimulus, is whether or not it instills confidence that investors, and companies that are investors, are willing to bet on the future. And right now that confidence is a little slack. So I think it has a lot of opportunity, but I think at the same time, besides trying to drive demand into the economy, which they’re trying to do with this legislation, again, you’ve got to resolve the financial market crisis. I mean, this is a recession that started with the financial market recession and it translated into a mainstream, global recession. But until you deal with the original, initial problem in the financial market, that’s still going to hang over.
How will anticipated, regulatory legislative changes impact the industry?
Well, in the short run, it’s unclear. And, at this point, I’m not sure that people think about it too much because the other issues are so supreme. However, I think that looking down the road, we have to watch for the possibility that you could have a regulatory system that could impede some of the more efficient ways to apply capital that we’re used to. We don’t know what it’s going to be yet, our sector is not a direct target, if you will, but could be affected by it. At the same time, I don’t think we can say that we’re against regulation or any regulatory change, because clearly something needs to be done. And things got out of whack and frankly, our sector was kind of side-swiped by all of this. So, time will tell, we’re watching it very closely. We expect that we’ll see a movement towards enhancing the power of one or more of the financial regulators, perhaps the Federal Reserve. This will give them a broader authority, not just over broker-dealers and banks, but over systemically important institutions that may not be a regulated entity but could have an impact, for example an insurance company or a large financial non-bank bank company. This could impact the entire system. So we just don’t know yet, we’re going to have to watch that pretty closely.
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