The Rubber Meets the Road

Here's where the rubber meets the road. The rubber is business lending and the road translates to "toxic assets" sitting in large, medium and small financial institutions, otherwise known in the Japanese vernacular as "zombie banks."

In CNN.com's Small Business Loans: $10 Billion Evaporates, we see what happens when we follow a logical chain of common sense. If you have read my previous blogs, or just skimmed them, I have alluded to investment analysts, economists and a bunch of people smarter than myself who pay attention to the economic landscape and see through the BS being reported.

Here's the logic chain:

Link One: A bank with trillions of dollars in loans that will never be fully repaid;
Link Two: A federal government that would rather retain a philosophy of higher debt and more consumer spending (70 percent of economic growth) over more fiscal restraint by putting banks into a receivership, unloading the toxic assets, merging together some of these "too-big-to-fail" banks and putting the Glass-Steagal Act back into place;
Link Three: Banks saying thanks for the free money--we'll hold it in our capital risk-ratio reserves so we do not fail or go into receivership;
Link Four: Banks saying that since they have so many "toxic assets" they need to hoard this money and not lend it to businesses;
Link Five: Businesses laying off employees to the current 10.2 percent unemployment rate with Wells Fargo Securities now reforecasting to 10.8 percent unemployment into the first quarter of 2011--well above the most-adverse scenario in the Treasury's bank stress tests that took place before the summer.

Hence, my title, the "Rubber Meets the Road," because small business leaders will speak with Treasury Secretary Timothy Geithner as to where any money is for credit. And, here's the answer--the strong businesses that do not need credit will have it available to them once they start expansion and the businesses that are weak--well--bank do not want to take the credit risk. Thanks for playing "tainted capitalism."

Meanwhile, the weak business that will undergo further layoffs--that also includes state and local governments as well--will increase the unemployment rate.

If we follow that logic chain to its full conclusion, it means that unemployed persons will not spend nearly as much money as they have in the past, more businesses will slowdown or fail, more homebuyers will face foreclosure since unemployment is the primary reason for foreclosure under normal economic circumstances and more RESIDENTIAL MORTGAGE toxic assets will keep banks from lending.

"The very issues that brought us to the brink of disaster and caused us to pass TARP are still there," said Elizabeth Warren, chair of the Congressional Oversight Panel created to oversee the U.S. banking bailout or the Troubled Assets Relief Program (TARP) last week.

And, on a side note, retail stores become more vacant, hotel loans deteriorate, office vacancies increase and all banks are now stuck with EVEN MORE TOXIC ASSETS in terms of COMMERCIAL REAL ESTATE. Not to mention CREDIT CARD CHARGE OFFS, STUDENT LOANS, BUSINESS LOANS and other consumer and corporate debt.

Does this make sense? Do you see why it is a mistake to not get rid of those crappy loans lying in these banks--all so the rich people who own our Congress...well...Federal Government in general...can remain rich. And our taxpayer money continues to capitalize banks that do not lend, our taxpayer money funds Fannie Mae, Freddie Mac and FHA-insured mortgages and our taxpayer money is going to dwindle down as more people lose their jobs and pay fewer taxes.

Meanwhile, the corporate leaders with overwhelming wealth use high-paid tax attorneys to find loopholes in tax laws so that they pay much less than necessary in taxes.

I'll tell you right now, I'm feeling a little frugal these days with the little amount of money I have left after the monthly mortgage payment, the monthly bills and the usual spending my wife and I do for food and any other necessities. There's really not alot left over for any discretionary spending unless I want to pay 30 percent interest rates on credit card debt for the next 10-20 years at least. And we don't even have kids! I don't really see how a family of four cannot go into serious debt--or at least go paycheck-to-paycheck in this society. To me, it's just common sense.

And, trust me, the people who can afford any and all luxuries in this society, can hire very smart accountants who will find every way to reduce any substantial tax burdens.

Now that I think about it, why did our founding fathers leave England for this new land? Oh...right...Taxation Without Representation...the wealthy, politically influential people owned everything and made all the rules...and the poor people had to go along with it. Now I get it.

There was once a man named George Washington, and his friend Thomas Jefferson who discussed finding a new country where with laws not manipulated by the wealthy for the wealthy. Where people had opportunities to start a business, a bank--perhaps, and succeed or fail based on their own merits.

The laws--the Declaration of Indepence and a Constitution--elected people to represent them in the government from local municipalities, districts and states, with their welfare in mind. Yes, they paid taxes so that everyone in the country took part in their pursuit of happiness.

I mean, sure, not everything was perfect--by far. But the men who founded this country philosophically believed in freedom from tyranny and equal treatment under the law--as much as they could back then. The Constitution provided a document for success and, rich or poor, America served as the land of opportunities.

It was all done because George and Tom felt a bunch of wealth aristocrats were ripping them off of their hard-earned money so they could go and get wealthier--taxation without representation.

Wait a minute, that was 18th century England...right? Not the 21st Century.

Nah...I was never that good with history.

Face it, George and Tom's role in history was to start a new government in a new land.

It's our role in history--as U.S. citizens--to start new home theater systems in new houses.