You can’t swing a cat in Washington DC these days without hitting a politician holding a media rich press conference damning some financial institution. I fully expect the next piece of legislation proposed on the floor of Congress will mandate that all bank presidents must grow a long black mustache and spend at least half their day twisting it at the ends while chanting “You must pay the rent”.

Throughout history there have been numerous occasions where the “money lenders” have been fallaciously vilified in order to deflect negative public sentiment away from governmental shortcomings and onto an easy target group. For those not familiar with history let me assure you that this tactic has never ended well for anyone concerned.

The insanity of this constant fatuous objurgating of any and all things financial is not only doing great harm to the American banking system, but it is doing great harm to the American psyche as well. If people are convinced that banks and greedy bankers are the source of all their pain how likely are they to spend or invest? How likely are we to pull ourselves out of this housing slump if the house buying public is afraid of the mortgage providing banks? How likely are we to pull ourselves out if this economic collapse if people are afraid to spend for fear that banks will come in the dead of night and repo all their stuff. This incessant haranguing is not being done to support small businesses or even large businesses. Businesses understand that they operate on profits not charity. It is being done to influence the public mind set and create a negative, victimized group conscious. Democrats are following their play book to the letter by making victims of the public at the expense of the banks who themselves are actually victims of governmental fiduciary mismanagement through Fannie Mae and Freddie Mac.

The poster boy for the Democrats small business victims is Joe Zucchero, or better known in Chicago as Mr. Beef. Zucchero has been serving the Chicago staple Italian beef sandwich for 30 years from his now yuppie filled River North location. Friends and patrons to Mr. Beef have been rallying in support of the beef stand and using it as an example of nasty banks not loaning money to worthy small businessmen. A neighbor of Mr. Beef even created a supportive video of the owner and his business which has been drawing huge attention on the internet and cable news stations.

One of Mr. Beef’s faithful supporters is the querulous US Congressman Luis Gutierrez who invited Zucchero to Capitol Hill to testify how his malevolent bank was forcing him into bankruptcy. The bank being pilloried by Gutierrez is Midwest Bank who received $85 million in TARP funds last November. According to Gutierrez this bank is a prime example of how banks who received TARP funds are still refusing to extend credit to their victimized clients. “Even if you have a business that makes money, they will not extend you credit” said the Congressman. He also talked at length about Mr. Beef being a “humble establishment” with lines of hungry diners going out the door.

But the story goes much deeper than a poor beef stand guy getting screwed over by a big bad bank. Zucchero already has three loans totaling more than $650,000, and while Mr. Beef claimed in his congressional testimony that he has never defaulted on a payment, documentation shows that he and his business partner defaulted on both their October and November loan payments. It was this default that caused the bank to begin foreclosure proceedings and refusal to renegotiate the debt. It also turns out that Mr. Beef and his business partner are in default of an additional $300.000 loan they used to open a new beef stand location last March. While this new loan is not with Midwest Bank, anyone with the slightest understanding of credit risk can see why it would be viewed as a negative for extending them more credit.

Is Congressman Gutierrez really proposing that because Midwest Bank received TARP funds from the government they are now obliged to extend credit to a guy that owns a beef stand and is already in default for just shy of a million dollars in loans? This Democrat poster boy of victimization does nothing but prove that Democrats simply refuse to accept or acknowledge that it was poorly conceived loans to poor credit risks in the housing market that got us in this credit crisis in the first place.

As somewhat of an Italian beef aficionado myself I can understand Congressman Gutierrez desire to help Mr. Beef. A good beef sandwich is a thing of beauty. But even with my limited math skills, I can figure out that you would have to sell a whole bunch of them to pay back a million bucks in bank loans and I can certainly understand how a bank could come to that same conclusion.

And how is Mr. Beef celebrating his public admission of being a loan repayment deadbeat? Well he’s giving away free beef sandwiches of course.

Honest to God, you can’t make stuff like this up.

The barkers at the carnival always make it sound so easy. That’s how he suckers you in to try it in the first place. Then after each turn he assures you that you are getting better and before long you’ve spent $20 to win a $3 stuffed animal. It’s a scam. We know it’s a scam. We like being part of the scam. But most importantly, we think we can beat the scam.

That pretty much sums up today’s long awaited speech by Treasury Secretary Tim 1040 Geithner. The problem is that this scam isn’t going to cost us $20. It’s more along the lines of $500 billion, with an anticipated end value of $2 trillion dollars.

As President Barack Hussein Obama toured the countryside in the opening salvo of his 2013 reelection campaign Tim 1040 laid out the “new” Financial Stability Plan. This much anticipated plan left most of Wall Street feeling like they had just gotten off the Tilt-A-Whirl. In a less than enthusiastic response the markets immediately headed in a precipitous downward direction to end the day down big with the Dow, Nasdaq and S&P 500 each shedding about 4.5% of their value. If this speech was a Broadway play it would have closed on opening night.

While President Obama stated last night that his number one priority is to create jobs, the real number one priority for this administration should be to free up the credit markets. Once you do that the private sector can get back to creating real jobs versus the government’s reheated New Deal WPO.

The new plan calls for an estimated $1 trillion dollars to prop up the Fed’s Term Asset-backed Securities Loan Facility or TALF. The plan then envisions another $1 trillion in private equity to buy up the toxic debt bonds that are handcuffing bank’s balance sheets.

These toxic assets are sitting like a bad burrito in the colon of most major lending institutions making them afraid to even move much less lend. Due to the mark to market requirements of valuing these assets, and seeing as there is no current market for them to be marked against, most banks have written them down to zero making them much more of a liability than an asset. And therein lays the rub. How does the Fed begin to logically and realistically value these assets?

The Obama administration is looking for this new plan to become an instrument to facilitate the sale of these contaminated assets to the private sector. The obvious problem is that there already is an instrument to do that, it’s called the market. And because it is impossible to discern the good assets from the bad assets the market considers them to be worthless. Now because these are mortgage backed securities there is obviously some value attached to them, but trying to figure out what that could be is like trying to figure out why Tom Daschle would give up a career that paid him $5 million a year in apparently tax free income to be Secretary of Health and Human Services.

Somebody is going to have to pick a number to value these things. It won’t matter if they spin the big wheel or draw it out of a fish bowl, because no matter how they pick that number it will be a complete scam.

It’s not so much that picking the number will affect the possible sale of the assets to the private market that is the problem. The problem comes in that once the government summarily picks the value it immediately changes the assets mark to market basis value allowing banks to artificially inflate their plus column of the ledger.

It’s time to put the smoke and mirrors back in the Fun House and focus on the task at hand. It was the federal government that created this problem with the welfare infection of the mortgage markets and it must be the federal government that buys back their mistakes.

All the roads and bridges projects in the world won’t matter if the only people using the road to get to work are the road building crew. Forget the near $1 trillion dollar spending package the ever campaigning BHO is pushing and focus that money plus whatever other stimulus money toward the mandatory repurchase of these toxic assets. They can be valued at a number that benefits both the bank and the government, recapitalizing the banks which will allow these currently toxic assets to actually begin to accrue value. Only then should the government look to private equity to begin buying them as actual investments.

The time for the scam is over.

Now gimme my damn Cupie Doll.

In his recent interview on NBC, President Obama seemed to come to terms with the fact that for the first time in his life he will be judged by results rather than rhetoric. In discussing the gloomy economic forecast as it relates to his maintaining residence at 1600 Pennsylvania Avenue the president stated that “I will be held accountable. I’ve got four years and ……A year from now, I think people are going to see that we’re starting to make some progress, but there is still going to be some pain out there……If I don’t have this done in three years, then there’s going to be a one term proposition.”

This hardly sounds like the same self-confident campaigner who only a few months ago seemed to have all the answers, now stating “there are no silver bullets to this”.

Of course he is correct in his admission that there will still be some very trying days, weeks and months ahead as the economy continues to ebb and flow in a spastic seizure. But the disturbing insight into his grasp of economic reality came when the president went on to say that the reason banks are in the condition they are in is because they are still suffering from a “hangover” brought about by a “binge” of risk as if this binge was of their own design.

What the president failed to mention was that this “binge” of risk was sanctioned and instituted by the Democrats during the Clinton administration. In 1999 Fannie May was directed to begin a pilot program to increase mortgages held by higher risk minorities and low income consumers.
”Fannie Mae has expanded home ownership for millions of families in the 1990′s by reducing down payment requirements,” said Franklin D. Raines, then Fannie Mae’s chairman and CEO. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

Even the news print media arm of the Democratic Party The New York Times reported on September 30, 1999 that “In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.”

Let us put aside the fact that it was Democrats led by Barney Frank that effectively tabled legislation that would have required oversight into the now infamous book cooking done by Mr. Raines at Fannie May, calling it a “solution in search of a problem”. But it was the congressionally directed infecting of the credit markets that has led banks into crisis and in some cases to the point of no return.

I have yet to see any economic authority that is looking at this recession lasting three years. In their recent report asserting the likely ineffectiveness of the currently proposed trillion dollar economic stimulus package, the nonpartisan Congressional Budget Office stated that their forecast was to see improvement prior to the 18 months, calling into question the fact that most of this package would be spent after that. Yet this president, after only 10 days in office, chooses to make his benchmark three years and blame banks for the credit crisis that we are now going to have to “dig ourselves out of”. I doubt he could have set the bar any lower.

Blaming banks for “mismanagement and huge risk taking” as he did during his interview was catchy banter for the campaign trail, but it is a very inaccurate and misguided perception to be avowing as president. Unless this administration is willing to recognize how we got here they will have very little hope of finding their way back to a sound economy, even in three years. Repeating the same mistakes will not lead to recovery. It will only increase the number of non-issues that Democrats will attempt to blame.

“Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein.

I couldn’t have said it better myself.