Economic summit: No quick climb out of recession

The worst of the economic downturn may be over, but the climb out of the recession hasnÂ’t started just yet.

Finance and business leaders from across the United States met in Grapevine on May 4 and 5 at a Financial Executives International event at the Gaylord Texan to discuss what many called the end of the worst parts of the economic crisis. The speakers also discussed what can be done now to help immediate recovery efforts, and what can be done for long-term business successes in different industries.

Among the eventÂ’s featured speakers were Duncan L. Niederauer, CEO of the New York Stock Exchange Euronext; Chris Ballinger, CFO of Toyota Financial Services; Richard Lindner, senior executive vice president and CFO of AT&T Inc.; Patrick Mulva, vice president and controller of Exxon Mobil Corp.; and Laura Wright, senior vice president and CFO of Southwest Airlines Co.

Niederauer’s keynote address, titled “Building investor confidence and the new financial landscape,” covered issues including government intervention from the Obama and Bush administrations, regulation, and how consumers affect investor confidence.

“Government intervention was necessary,” Niederauer said. “And we’re going to have to be patient. Americans aren’t good at that. But, we need to keep encouraging the Obama administration to overcommunicate the way he did during the campaign.”

Communication from the Obama administration is key to keeping the public, investors and key players in the finance and banking industries calm and informed about the governmentÂ’s plans, he said.

But, in order to restore confidence in investors, consumer confidence will have to be restored first so people will be comfortable spending money on investments, he said.

“Right now people are worried about the roof over their head, about their family and whether they can support them; those are the three things they’re worried about,” Niederauer said.

Niederauer said his one criticism of Obama’s stimulus plan was that it isn’t geared enough toward small businesses, which he said have been the “economic engines” that have brought the United States out of all of its economic troubles. Small businesses are more likely to create jobs in a down economy than a large corporation, he said, and added in order to create jobs, small businesses need extra help right now.

Niederauer also went over his opinions on regulation efforts that may come out of the financial crisis, including any new regulations that may be geared toward companies dealing in credit default swaps and other exotic securities and financial instruments.

“If all we do is over-regulate, that’s going to be an unfortunate outcome,” he said.

Niederauer said new regulation efforts need to be enforced by experts who are specialized in complicated instruments, such as credit default swaps. He used AIG as an example, adding that just because AIG is involved in insurance, its work shouldnÂ’t only be overseen by an insurance regulator.

In Ballinger’s May 5 keynote address, titled “The End of the World as We Know It, and What Finance Can Do About It,” he covered issues including how bad decisions are made and how those decisions affect businesses in the long-term and consumer confidence issues related to the auto industry.

Linder, Mulva and Wright spoke in a group discussion, moderated by Zanny Minton-Beddoes, the U.S. economics editor for “The Economist,” titled “View from the C-Suite, Navigating New Realities.”

Among the topics covered in the discussion were how each speakerÂ’s industry was differently affected by the recession and seizure in the financial markets and whether or not each company had cut back on capital investment programs.

Wright said the airline industry was hit from several different angles in 2008, including consumer spending and the skyrocketing cost of fuel.

“Airlines really lag both in and out of economic downturns,” Wright said, adding that because travelers often have pre-planned trips scheduled far in advance, Southwest didn’t see a drop in ticket sales until after the major economic hits in 2008.

Coming out of the downturn, which Wright said she thinks is bottoming-out, Southwest still lags because consumer spending worries stop businesses and travelers from buying airline tickets, she said.

“We also expect business travel to stay down for the rest of the year,” Wright said.

To help with fuel costs, Southwest worked out a new fuel hedging deal in late 2008 after fuel prices dropped sharply from highs at nearly $150 a barrel for crude oil earlier in the year, she said.

 The high crude oil prices had an entirely different effect on Exxon Mobil, Mulva said, adding that while oil prices peaked, officials worked to make sure decisions werenÂ’t made that would make Exxon dependent on higher oil prices.

AT&T was hardest hit in the second half of 2008, Linder said.

The company has been most affected by the recessionÂ’s impact on its customers, he said, adding that the company has lost business for some of its products because several customers are going out of business or are tightening up on expenses.