One of the keystones of President-elect Obama's innovation policy is the green agenda. As I see it, this can be divided into "green collar" and "green tech." Much of the green collar focus is on the massive opportunity for increased energy efficiency through retrofitting existing buildings as well as construction of more eco-friendly new buildings. The retrofit process opens up a large potential for jobs in the construction industry in relatively well paying jobs (see Green for All). Green tech is about creating and utilizing new energy technologies - for both energy efficiency and for new sources of energy.
What has this got to do with Wall Street? Everything. Both green collar and green tech need investment financing. Green tech obviously needs venture capital, research funding and later stage funding for production facilities. For green collar, the fastest way of retrofitting buildings is to finance the work out of the energy savings produced - rather than try to do it all using up front cash. The homeowner gets a loan and pays it back monthly at the same amount as (or slightly less than) the energy bills are reduced.
But, right now, both venture and consumer credit has dried up. I noted earlier that the venture capital industry is bracing for hard times. As today's Wall Street Journal -
Bond Woes Choke Off Some Credit to Consumers - reports, the inability of banks to securitize their consumer loans is hurting lending:
Banks and other finance companies are stuck holding more loans on their balance sheets, which crimps their ability to offer new loans. That, in turn, shrinks available credit for consumers, who need it to finance an education, buy a new car, or pay for household expenses using a credit card. Banks were already reining in lending to customers as they try to reduce exposure to loans that may ultimately go unpaid.
So the innovation agenda is closely tied to the financial agenda. Getting investment flowing again needs to be the first priority. But as we do that, let us also build into that unfreezing a set of tweaks that help push the green agenda along. For example, we should expand loan guarantees for retrofitting buildings. Most importantly, as the financial agenda moves ahead everyone needs to think about how the policies being put in place support the rest of the innovation agenda.
President-elect Obama gets it. He realizes that we face multifaceted problems that require multifaceted solutions. We all need to help him come up with those answers.
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