Tisch Says Lack of Confidence in Obama Hurts Growth

Loews Corp. CEO Jim Tisch
James "Jim" Tisch, president and chief executive officer of Loews Corp. Photographer: Ramin Talaie/Bloomberg

Jim Tisch, chief executive officer of Loews Corp., whose operations include offshore drilling, hotels and insurance, said economic growth will remain sluggish in part because executives lack confidence in the Obama administration’s policies.

Tisch, 57, said President Barack Obama’s health care reform, financial regulation and moratorium on offshore drilling are keeping businesses from spending money to expand.

“The thing that business people don’t like is uncertainty,” Tisch said in an interview at Bloomberg’s New York headquarters yesterday. “Part of the problem is that business has very little confidence in what’s been going on and very little visibility.”

Tisch said he expects the economy to grow at a rate of around 2 percent annually, while the average estimate of 69 economists surveyed by Bloomberg News is for 3 percent growth. While Tisch called himself a realistic optimist, that level of growth isn’t enough to reduce the unemployment rate, now at 9.5 percent, he said. Nor does he see the U.S.’s near-zero interest rates as a catalyst for expansion because corporations and individuals aren’t borrowing money, instead using any cash on hand to pay down debt.

Tisch, who contributed to Republican Arizona Senator John McCain’s 2008 presidential election campaign, said Obama’s actions after BP Plc’s Macondo well blew out in the Gulf of Mexico in April, creating the world’s largest accidental oil spill, sent the wrong signal. Obama named a commission that failed to consider the oil industry’s concerns, he said.

‘Fair Shake’

“That sends a strong message to American industry that if your industry gets in trouble, there’s a possibility you won’t get a fair shake,” Tisch said. Loews owns 50 percent of Diamond Offshore Drilling Inc., the U.S.’s largest deep-water driller. Two Gulf rigs owned by Houston-based Diamond have since left the Gulf to drill elsewhere.

Earlier this year, Tisch said the U.S. did a “good job of killing” the hotel business by criticizing corporate travel by companies including American International Group Inc. that had received government bailouts. Loews owns luxury hotels in North America.


In February, Obama said in an interview with Bloomberg Businessweek that he and his administration have pursued a “fundamentally business-friendly” agenda and are “fierce advocates” of the free market, rejecting corporate criticism of his policies.

The president has sought to bolster relations with corporate leaders, recruiting executives for presidential committees and inviting business leaders to lunch at the White House. Tisch’s cousin, Jonathan, who is co-chairman of Loews, attended one of those White House meetings in March 2009 to discuss the Senate’s measure to limit “luxury” spending for corporate travel by recipients of federal bailout funds.

JPMorgan Chase & Co. said this week in a research report that sluggish demand was a bigger factor in restraining the economy than government policies. Gabriel de Kock, an analyst for New York-based JPMorgan, reviewed economic data including the National Federation of Independent Business’s monthly survey of small business economic trends.

“There is a heated public debate about whether the political climate or weak demand is restraining business expansion,” de Kock said in the Aug. 20 report. “Our results are unambiguous. They overwhelmingly indicate that weak demand, rather than government policies, account for firms’ reluctance to expand.”

Large Caps

Loews manages about $45 billion in assets, primarily in the group’s insurance business. Given Tisch’s “cloudy” outlook on the economy, he favors stocks such as Exxon Mobil Corp. and Johnson & Johnson after the decline in Treasury and municipal- bond yields.

“There are equities that are rather intriguing, especially when compared to fixed income,” Tisch said. “When I look at what we’re earning on T bills and round it to the closest whole number, it’s zero.”

Yields on two-year Treasuries dropped to a record low of 0.45 percent this week amid a slowing growth in the economy and a dip in expectations for inflation. Tax-free yields on municipal bonds are at their lowest in four decades, according to Thomas Doe, chief executive officer of Municipal Market Advisors.

“We’re actually investing in stocks, in large cap, good dividend-paying stocks,” he said. “Who would have thought five or 10 years ago that a 3 percent yield on a stock would be a good yield? But actually today it’s a very good yield.”

Paring Holdings

CNA Financial Corp., the property-casualty insurer 90 percent owned by Loews, has been paring holdings of Treasuries and municipal debt while adding corporate bonds. The Chicago- based insurer had about $7.6 billion in municipal debt as of June 30, down from $8.6 billion 18 months earlier.

Holdings of Treasuries and agency debt fell to about $150 million from more than $2.8 billion, according to regulatory filings. Corporate debt investments surged to $19.7 billion from $13 billion.

“We’re in the insurance business, and like it or not we have to have a fixed-income portfolio,” Tisch said. “Right now we see corporate debt as the cheapest sector.”

For the time being, Loews, which was started by Tisch’s father and uncle in 1946, when they bought a New Jersey hotel, holds about $2.6 billion of the holding company’s $4 billion war chest in cash. He said he will use the cash to make acquisitions, buy back stock or pay dividends.

“We don’t let cash burn a hole in our pockets,” he said.

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