Big Business Is Not to Blame.(International Edition; BUSINESS)

Byline: Barrett Sheridan

The conventional wisdom is that 'we all' borrowed too much before the crisis, but that's just not so.

Wall Street serves as an ideal scapegoat for the deepening global recession, but the emerging consensus is that there's plenty of blame to go around. Certainly the banks that turbocharged their balance sheets, borrowing $32 for every $1 they owned, played their part. But families, too, doubled down on bad bets by turning houses into ATMs, and by 2007 averaged $121,000 in outstanding mortgage debt. Governments, particularly Western ones, immiserated future generations by selling trillions of dollars' worth of bonds. No one, it seemed, was immune to the allure of cheap credit.

The big exception to the spending spree? Corporations. Aside from the profligate financial sector, big business behaved quite responsibly over the

past five years. They paid down debts, steered away from short-term financing and, most important, hoarded cash to prepare for rainy days. Now, with cloudy skies stretching to the horizon, cash-rich companies are being lauded by investors--an ironic turn of events, given that as recently as early 2007 many of the same investors considered cash to be an albatross. But will an overflowing bank account be enough protection against the worst financial meltdown since the Great Depression?

The cash wealth of the world's large corporations is truly impressive, and stands at record levels. By 2006, the average firm held 23 percent of its assets in cash, up from 10 percent in 1980, according to one academic study. For some firms, the numbers are breathtakingly large. Pharmaceutical giant Johnson & Johnson sits atop a $15 billion treasure chest. Microsoft has enough to buy Yahoo at full price--and in cash--and still have $4 billion left over. And at $38 billion, ExxonMobil's cash on hand is roughly equal to the GDP of Syria. "Companies are going into this recession much stronger than they went into the last recession," says Carsten Stendevad, head of financial strategy at Citigroup.

Balance-sheet strength has made the credit crunch easier to bear for many companies. So far, stock-market investors have shown a willingness to reward big savers; cash-rich companies have outperformed their peers by 4.3 percent since the credit markets seized up in mid-2007, according to a report by Stendevad and others in Citigroup's investment-banking division. "If you exclude banks and auto companies, we haven't seen many Fortune 500 companies in distress yet," says Stendevad, "despite the world potentially entering the worst economic situation in the last 70 years." He adds, "That's in part because of this preparedness." With the global economic outlook bleak, investors are willing to pay a premium for foresight.