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Companies raise money at a blistering pace

Going over the earnings reports

Kai Ryssdal: While the federal budget may be on the skids, over in corporate America, things are still fattening right up. Big American companies are sitting on billions of dollars in profits. We've known that for a while now. Lately, though, they've been adding even more to their accumulated wealth.

In the first three months of this year, companies that went public raised $12 billion between 'em, and established companies are setting records for bond issues -- that is, the sale of new debt. Lovely for them, and perhaps eventually their shareholders.

For everybody else, though? Our New York bureau chief Heidi Moore went in search of the answer.


Heidi Moore: It's a paradox we've all wondered about: if companies have so much money -- and they do -- why do we still have 13.5 million unemployed people in America?

The answer from corporate America is that they'll get around to it. But first, they're raising money in a new gold rush. They want to build new factories and buy other businesses, says Kelli Whitlock. She's a partner with law firm Duane Morris.

Kelli Whitlock: You've heard over the last couple of months that 'cash is king,' and that's true, but when everybody has cash, then it becomes less interesting just to have it. Then you have to use it for something to actually move your company forward.

In March, U.S. companies raised more money through stock offerings than any month since March 2000. And it's not just tech companies these days. Bond offerings are also occurring at a record pace thanks to low interest rates.

Robert Claassen is a partner with law firm Paul Hastings. He calls this a corporate recovery.

Robert Claassen: I tell you, these companies see enormous opportunities. They would love to hire people. Ultimately I think all of this will certainly benefit employees.

But Claassen says companies will only hire selectively for now. Partially, that's because executives are still stuck with a poverty mindset from the recession; they're worried the new money might disappear.

Neil Dhar is a partner with PricewaterhouseCoopers. He says the stock markets wait for no one.

Neil Dhar: Right now we have a pretty robust market. Not sure how long that window will stay open.

The only question is whether how long Americans will have to wait for these companies to start hiring.

In New York, I'm Heidi Moore for Marketplace.

About the author

Heidi N. Moore is The Guardian's U.S. finance and economics editor. She was formerly the New York bureau chief and Wall Street correspondent for Marketplace.
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So Americans are sitting on a pile of cash while they still export jobs, research and technology.And of course with raging inflation, despite what the Federal Reserve and so-called economists and Marketplace reports, the average Americans is being pushed to total financial distress.Why doesn't Marketplace interview Americans who are not part of the spin factory or live in the eliteist bubble? Most familes are poorer with a greatly reduced standard of living and few prospects for well paying jobs with adequate benefits.That's the real story!Seniors are struggling with no Social Security COLA adjustment despite record-high health care costs, gasoline and food prices,increased local taxes and housing costs. It time for Marketplace to get real!

Here's a cynical view of why corporations are hanging onto cash or just buying assets: crooked accounting to make executive bonuses. You can generate "profits" by having the cash in the bank and using purchased assets to simultaneously decrease your tax liabilities, and, presto-chango, you are paying no taxes and report a profit to your shareholders! Why do anything productive with your money when just having it will help make your executive bonus?

In response to why businesses are not rushing out to hire, but are holding on to cash, Moore states: "The answer from corporate America is that they'll get around to it..." This is a trite response based on the biases of the reporter, and not based on any research or fact and quite frankly diminishes the credibility of 'Marketplace'. If the reporter researched publications which deal with the economy and the current crisis, or interviewed a business owner she might find that "corporate america" is waiting to see what the burden of tax compliance is going to be since the administration has enacted the health care bill and other legislation which "corporate america" will be compelled to pay for. If a business, or an individual household spends more (or is required to spend more because of a crippling tax burden) than it makes, the result is disastrous and its future in doubt.

When will the media get the word out that no company makes hiring decisions based on tax breaks. Employees are expensed out just like machines are in a business and need to be seen as necessary NOT as a tax break. The government cannot make a company hire someone as seen by companies sitting on cash and still not hiring but rather are looking into efficient buildings and machines to purchase.

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