How to defuse a Populist President

President Obama has got the populist bug, unfortunately he contracted the Liberal Populism and not the populism “buzz saw” that put Senator Elect Scott Brown into the Senate and halted his agenda. The Administration and  all their “smart” political masterminds just keep misreading the mood of the electorate and in true progressive liberal fashion can not come to grips that the people do not support their reforms. They seem to think that the average person just “does not get it” because they have been subverted by the forces arrayed against their agenda and these nefarious interests have some sort of icy grip of fear on the average person’s heart and mind leveraging a fear of change. It is just is not true, everyone agrees that Healthcare Reform is needed, they just do not agree that the Democrat’s plan is the right one, which is viewed as simply incredulous that someone could come to that conclusion,and that is the one true failing of left wing political minds and why Democrats never control all three branches of Government for long.

The President believes that tapping into this populist anger is the best course of action and has launched yet another political firefight with the Financial Industry over something that he feels can galvanize his support. The miscalculation on his part is that the anger is not being directed at Wall Street Bankers it is at the Government for policies that run counter to the American culture and values, the outrage is at the Government intrusions into the system and top down economic planning policies taking the form of ineffective use of taxpayer funds and raising barriers to growth in the form of regulatory uncertainties rather than promotion of economic activity of all types.

This brings me to the Bank Fees being proposed “to get our money back” from the largest banks. It plays great in a speech but when you really look at where the lost TARP money went you will find this Administration is responsible for all the losses incurred to date. If the TARP had been used for its sole purpose as laid out under the Bush Administration and Treasury Secretary Paulson the largest money outstanding would be with AIG or 70 Billion or 10% of the total funds. The large Banks being targeted with this Bank Fee to “get our Money Back” of 90 Billion have paid the TARP back about 100 Billion with a 17% Return according to the TARP Inspector General, or approximately 17 Billion in interest and warrants for using the funds for 1 year, not a bad return. They have more than compensated the taxpayer for their use of the funds, the institutions still with TARP loans outstanding are not gone, they are not off the hook for their shares and many will pay it off in the future and for now are paying interest to the Treasury so technically that money is not lost. Nor is they money in the TALF program that purchased long term asset backed loans acting as a secondary market to keep liquidity in the system lost as these loans are performing.

The money that has been lost has been only by programs introduced by this Administration via the Treasury Department, they are the Making Homes Affordable Loan Modification Program and the money used to save the ailing auto industry, both programs targeted at Americans on Main Street who were demanding for their share of the bailout. So in my mind the people who should be paying for those losses are the ones who received the assistance, a special fee assessed to anyone who received assistance under this program. Since that will never fly politically, taxpayers need to be aware that the losses were the fault of the current Administration’s programs and the benefit went to them or their neighbors and not the banks.

Just to be clear the Obama Administration spent this money on programs outside the initial scope of TARP with no hope of repayment and because the legislation demands the repayment of TARP they are targeting a few financial institutions who have paid back their share and then some to make up for their policy mistakes. If you want to be angry at someone be angry at this Administration who only by omission is spinning the truth being fed to you as to why it is doing this. The Administration is on the hook for not Paying Back the TARP and would have to dip into general revenue if this fee is not collected further impacting the yearly deficit (note here that TARP was in the Previous Administrations total deficit spending and is that number is much smaller now than it was).

So this brings me to the reason for the post, finally, and that is how should the banks fight this fight. Simple really, they should volunteer to place the 9 Billion Each year over the next 10 years into a special SMB loan pool they can all draw from to allow for micro loans to New Small Business startups across the country with no government mandate for loans to pet industries like Green Energy. They would allow only 5 times leverage on the funds and these would be fire-walled from the Banks which could create a Joint Venture limited Partnership to administer it. This would simply diffuse the President’s attack and render the assaults meaningless as well as open up a new channel for SMB credit and potentially Job Growth and high potential for returns to perpetuate and expand the program.

The public relations and goodwill would be justification enough for boards to approve this but the additional defusing of a Populist President firing on the wrong camp would be priceless for the country and the economy. Additionally this program could fund the next Microsoft or General Electric.