Bad Bankers, Bad Bad Bankers.

President Barack Obama appears to be a little irritated. First, it appears that the major lending institutions that took TARP money are paying it back faster than expected. Those institutions, such as Goldman Sachs, JP Morgan and Morgan Stanley now find themselves newly liberated from the onerous and vindictive eye of the Federal government, specifically the glaring spotlight from the U.S. "Pay Czar" Kenneth Feinberg.

This means that these same institutions that were literally saved by the American tax-payer can now get on with the business of paying effusive bonuses to their beleagured and misunderstood executives. Last report: $22 billion. Yes, that's a "b", not an "m".

Considering that over seven million American workers are out of work right now, the populist view is that these "fat cat" bonuses seem to be out of synch with the struggles of the American common laborer and that this money would be better directed towards programs that will funnel money towards the unwashed masses.

As offended as I am by these bonuses (have these people no shame?) I am equally offended by the tone of President Obama's current rhetoric with regards to our financial sector.

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street", said the Presdident in a CBS "60 Minutes" interview. Senior White House Advisor David Axelrod further stated "What the president is going to say to the bankers is, you guys were part of the problem, you helped create an economic crisis here that cost 7 million Americans their jobs and now you have to be part of the solution."

There is a growing resistance movement among the bankers, especially with regards to the creation of a government office called the "Consumer Financial Protection Agency". "He can say what he wants, but we're not going back to the kind of lending that put us in this mess" said a person who is helping to prepare the bankers for the meeting but who spoke anonymously because of lack of authority to discuss the plans.

We are told that executives at the highest levels of the mega corporations justify their enormous compensation because they "risk the most". But we've seen that they feel no pain in bad times. They keep making enormous salaries and receive extravagant even as they send pink slips to thousands of employees who watch as their pension funds shrink or disappear entirely.

But the US financial ship of state has been victimized in two ways. First, it was helmed by executives that were willing to pursue imprudent strategies because there was (is?) no perception of personal risk of loss if things went wrong. If you are looking for a poster-child for this kind of executive, look no further than Dick Fuld, the "Gorilla of Wall Street". Second, it foundered into a storm was of our government's own making. Many of those squalls and icebergs that disabled our hypothetical ship were the result of Federal politicians literally FORCING them to relax the very lending standards and practices that would have avoided much of the pain we have seen in the last four years.

The government insisted that banks lend to people that could not be reasonably expected to pay back the loans that they were taking out. The reasoning behind this was two-fold: First, loaning money to a poor family to buy a house so they can move out of a project not only feels good but also looks good on your political resume, especially on the first Tuesday in November. But good financial policy conflicts with touchy-feely politics. Secondly, by making loans available to a larger pool of borrowers, the residential housing manufacturing industry remained white-hot when much of the rest of the economy had cooled or even reversed. Even back in 2003-2004, many U.S. Senators and Representatives were beginning to discern the threat on the horizon and tried to get somebody, anybody, to take a real interest in the risk and IRRESPONSIBLE lending practices at Fannie Mae and Freddie Mac. But with the housing sector the only bright spot in a gloomy economy, nobody really wanted to look at it too closely.

And just like the Titanic, by the time anybody realized the danger, it was too late. Give President Bush credit, he tried to get Congress to look at it early in his administration. Then give him a whack on the head because he failed.

Now President Obama is insisting that the lending institutions, especially those that took taxpayer assistance TARP monies, needs to help by boosting lending to small businesses. The problem is that President Obama and his advisors seem to think that if they make money easily available to small businesses that they will just rush in to take advantage of it and begin creating new jobs.

Uh, did ANYBODY in the administration take Economics 101?

Manufacturing and services are always a waterfall economic indicator. Increases in production, which will spur increased employment, won't happen until AFTER there are clear signs that consumers will open their wallets again. News flash to Congress and the Administration, we have 10.2% unemployment (estimated by some organizations to be closer to 17% when you include those who are seriously underemployed). Further, for the first time in 40 years, the American consumer is starting to cut debt and save their earnings instead. In 1982 the average American had 60% of their annual income in some form of debt, much of it revolving. In 2007, the most recent reporting year) Americans were carrying 130% of their annual income in debt. So it will take TIME for us to get out of the hole we're in.

It seems that President Obama and staff seems to think that the US economy is going to swiftly return to the heady levels of 2004. Don't count on it. All indications are that down economy has handed the American consumer harsh lesson about high levels of personal debt. And regardless of all of the hippies that voted for "hope and change" in 2008, the traditional American wants to live a freer life. Debt is a shackle we put on ourselves.

If I'm right, American consumers will not start spending more soon. If true, then all of President Obama's ideas are barking up the wrong tree. He's focusing on getting more jobs by making it easier for small business to borrow. But no sane small business man is going to borrow money when he has no evidence that he can sell the increased capacity. Instead, he needs to keep more of the money that he currently makes now, so that he can invest it into his company or better yet, avoid becoming an additional statistic in the unemployment report.