Americans are reluctant to spend and invest their money because they are worried about the slow pace of economic recovery—especially high unemployment—Richard Parsons, Citigroup Chairman and former Time Warner CEO, told CNBC on Wednesday.
Out of Work
"Consumers in particular don’t have confidence that we are on a sustainable path for a robust rebound," Richard Parsons, Chairman of Citigroup told CNBC's "The Strategy Session" on Wednesday.
The biggest reason for "this lack of confidence is no job creation. People don’t see where the job growth is going to come from, so they are hanging on to their cash," Parsons said.
People will gain a sense of confidence and spend when they get "goods news on the sovereign debt front and a coherent articulation about how we are going to rebuild the economy coming from Washington," Parsons said.
As far as Congress passing financial reform regulation, Parsons is all for "a stronger banking sector, which probably means more capital and strong liquidity positions on the banks, which is why Citi was behind regulatory reform."
But getting the balance right is enormously important "because you are really making capital allocation and credit allocation decisions. You are essentially targeting where the credit is made available," Parsons said.
As a CEO, you have to ask, "What are my cash needs and how confident am I going to be that I have enough cash on hand to bridge because businesses don't run necessarily on a straight cycle."
He added, "Financial institutions float on the big ocean of the economy. If the economy tanks, we're all in trouble."
"Citi has turned a corner," Parsons said, "in the first two quarters of this year Citi made $7 billion plus.
And with corporations "sitting on a lot of cash, you have to worry about things like activism, because shareholders are going to say, hey, that's our cash," he said.
Using this cash to make acquisitions means "you probably are in pretty positive outlook upon your cash position and on the state of the economy and the direction of the economy," Parsons concluded.
