Trying Times for Area Service Industries
But gas shortages and financial crisis could spell opportunity for some.
Britt Combs
Michele Birchfield was ready to wait tables at the Market Grill Thursday evening, but there were no customers. “I’ve never seen it like this,” she said. “The service industry is really hurting.”
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Published: September 25, 2008
"These are the times that try men's souls," said Thomas Paine during the American Revolutionary War. He could just as well have been talking about McDowell County in 2008. While credit has stopped flowing in the high places of the business world, the flow of gasoline, the "fuel that drives the American economy," has slowed to a trickle locally and across the region.
While it has become increasingly frustrating keeping enough fuel to do the most basic things – getting the kids to school, going to work or to the doctor, getting the groceries -- the impact on local businesses has been crushing.
Waitresses at the Market Grill on East Court Street said Thursday that they would be closing early for lack of customers.
"I've been here for eight years," said waitress Donna Pearson, "and I have never, ever seen it this bad."
"The ones that do come in – a lot of them have stopped tipping completely," said Michele Birchfield, also of Market Grill, "so we're not making any money. And it's costing (owner Susan Wise Harris) money just to have us here, and keeping the lights on and everything. We're not doing nearly enough business, and we have a lot of regular customers we haven't seen lately."
"Breakfast is way off," added Pearson, "and at lunch time folks go get in line at the gas station and wait for a tanker to show up."
"The service industry is really hurting," concluded Birchfield. "Everybody's saying the same thing. It's really bad out there. I don't know what we're going to do."
Local financial business analyst Jody Lane said he was skeptical about the economy's prospects.
"People have been laughing at me for months, but I think the situation looks pretty dire," he said, adding that he saw no point getting excited about the federal bailout plan until a final agreement is reached in Washington.
"They'd better get some kind of plan," he said, "because the whole financial industry is in turmoil."
However, he said, the situation is not without opportunities. At least for those who have kept a "pristine credit history" and have a little equity in their homes.
"It's really tough to refinance or buy a new home right now, but it's doable," said Lane. "The analysts are looking at every cent you make and every debt you have, whereas a few years ago you could just walk in with a paycheck and get a loan."
The best prospects for getting a loan or refinancing are with your local bank, Lane added. "The bank where you keep your checking and savings account, they know you and you have some sort of rapport, I'd definitely start with them.
"If you've got the credit, it's a buyer's market right now," he said. "Get a copy of your own credit report and take it with you. Tell them you don't want them to pull your credit until you've come to some preliminary terms.
"I can't tell you how many times when I was a loan officer someone would come in on Monday wanting to borrow money for a car, and they'd been out shopping all weekend, letting every car dealer in town pull their credit – that seriously lowers your beacon score. In this market that'll close the door for you."
If the lender balks at negotiating based on your own copy of your report, he said, take your business somewhere else. Of course they'll have to pull your report before you can make a deal, he clarified, but you should know you want to do business before you let them damage your beacon score.
Mike Walden, Reynolds Distinguished Professor at North Carolina State University, said that if the president's bailout plan were not passed it would impact every aspect of the economy.
"The fear is the financial markets would stop working (they almost did last week)," he said, "meaning businesses couldn't obtain the daily credit they need, and layoffs and unemployment would both rise significantly."
Walden saw the bailout as less of a threat to average folks, stating that a greatly accelerated rate of inflation could even be beneficial.
"It would help homeowners who have fixed mortgage payments," he said, "because the value of their repaid dollars would fall."
He cautioned, however, that, "homeowners with adjustable mortgage payments would see an increase in those payments."
Walden said that while there was plenty of blame to go around, the situation was serious enough that all judgment and recrimination should be suspended until the crisis is resolved. But, he said, the financial system would need a fundamental overhaul in the aftermath. Investors, homebuyers and corporate lenders alike would have to rethink how mush they can risk, and how much risk should be shared by government.
"(The issue of risk is) one that we need to revisit after financial stability returns," he said. "I think this is a once in a lifetime situation. However, we do want to examine
incentives in the market for risk taking not backed up by responsibility for failure. Specifically, the incentives inherent in Fannie Mae and Freddie Mac need to be re-examined."
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