This week, House Republican Leader, John Boehner, called on President Obama to fire his economic team.  As recovery wanes, dissatisfaction runs deep, but this public appeal seems more the initiate of a campaign for majority House Speaker than the proffer of solution to the financial downturn that plagues our nation.  While I agree that Timothy Geithner and Lawrence Summers have not delivered on the administration’s promise of economic recovery, we need not a change of the guard and a revamp of rhetoric - we need a business plan to rebuild America.

Only changes in policy will ignite job creation and fuel a sustainable economic turnaround. The urgency of transformation is more about principle than people.  Infrastructure issues demand appropriate actions.  We must make a commitment to manufacturing and modify policies to support that pledge.  Many foreign countries subsidize raw materials by as much as 30% - this equates to dumping, not free trade.  Such truth belies America’s inability to compete in the global economy.  We close our eyes to what we choose not to see.  Immediate changes to policy could put Americans to work now, and place our country on the fast track to a sustained recovery.

The United States government should subsidize value-added jobs, and mandate their Department of Defense’s $140 billion procurement budget be spent on American manufactured goods.  To witness the wisdom of subsidized employment, we need look no farther than Germany.  Germans take pride in their industrial base; America once shared that sentiment.  Today, Germany’s unemployment rate is 7.6%, 3 million of a total workforce of 42 million.  America’s current 9.5% unemployment rate equals almost 15 million out-of-work citizens. The more accurate count of unemployed hovers at 30 million when including the discouraged workers, the part-timers who long for full-time positions and the permanently unemployed.  Germany has successfully maintained its manufacturing workforce by assisting employers through a program affectionately called “short work.”  In essence, during times of economic distress, workers are granted reduced hours by companies while the German government supports their wages up to 85% of full-time salary. In Germany, they pay their citizens to work - Americans are paid to stay home. Subsidized employment does not equate to additional government or taxpayer costs. Rather, it is the difference between an expensive band-aid and less costly value-added solution; the government contribution to workers’ paychecks is an alternative to unemployment benefits. Companies that would otherwise engage in mass layoffs or liquidate are provided with temporary support to keep workers employed. More companies survive downturns, benefits are shorter in duration and the debate on benefit abuse is eradicated. Each job saved is multiplied by at least 5 more employed as an economic effect on a town or city. Executed properly, this is a win-win.

Involuntary unemployment has devastating effects on American workers and families. Studies show job loss correlates to depression and despair to illness, creating a downward spiral of government costs beyond benefits.  Loss of American employment decreases household wealth, reducing consumption of locally manufactured goods and further stifling job creation.  Joblessness, homelessness and hopelessness have enveloped our nation.

As November’s mid-term elections approach, politicians will engage in negative debate and critique absent solutions, bringing us no closer to job creation and economic growth.  Rebuilding America must start with a plan, not politics. Subsidized employment and the sole source allocation of Department of Defense dollars to American goods must be followed by trade policies that eradicate foreign advantage.  The Department of Defense’s $140 billion procurement budget equates to revenues of General Electric, America’s second largest employer with more than 300,000 workers.  Buying American could create hundreds of thousands of new jobs.  Rather than political sparring and stonewalling, a more noble approach would be to stand shoulder to shoulder to create employment and rebuild America. A business plan to restructure our economy can be designed — the tools are within our reach.  It starts with a commitment to our nation that overshadows party loyalties and ideological preconceptions.

More than thirty million unemployed and under-employed Americans (and their family members) feel helpless, desperate and abandoned by Washington politicians who focus their partisan gamesmanship on issues other than the only one that matters most to them—their jobs.  In the past several months, the issue of unemployment has almost entirely centered on the extension of jobless benefits in Congress.  While I do believe that assistance for those in need is humanitarian and necessary, it is imperative that we accept these benefits for what they are – a temporary band-aid on a much larger systemic infrastructure problem - not the rapid job creator Speaker Pelosi claims them to be.       

This month, one year ago, I made my last of many visits to Treasury to present a plan designed to sustain and create jobs. I believed then, as I do now, that an economic recovery is not possible until we can curb the tide of unemployment.  Job losses cannot be stemmed until the liquidation of small and mid-sized enterprises (SMEs), which employ 80% of the American workforce, are halted.  Industry in this country must be embraced and accepted as the necessary foundation of our economy. The most direct and rapid solution to sustain and create employment is to incent private enterprise to originate and monetize rescue-financing loans for struggling SMEs and capital starved industrial companies.  We are now painfully aware that neither large banks nor community banks will provide such loans.

My rescue loan plan (RLP), as presented, accessed unutilized TARP funds set aside for the PPIP (Public Private Investment Program) Legacy Securities Program. Treasury originally intended $100 billion of TARP funds be used for PPIP programs but, only $30 billion was allocated and less was actually tapped for a plan that was ill conceived and underdeveloped. The RLP would have used $30 billion for equity and debt investments. The program’s blueprint was carefully designed to access structures previously announced and required no additional funding from Congress. The RLP would have saved jobs the old fashioned way, by lending money to companies that without funding would otherwise shut down and liquidate, leaving their employees without salaries and benefits .Without jobs, Americans lose the all important hope for a bright and prosperous future.

Unfortunately, the offer of my time and patented portfolio construction models, upon which my Patriarch platform has thrived, seemingly fell on deaf ears. At the time of my visit to Treasury in July of 2009, 1 in 3 unemployed persons were jobless for 27 weeks or more.  Less than one year later, in June of 2010, those individuals made up more than 45% of unemployed persons.  Immediate and early action to stop the bleeding and address the daunting but surmountable obstacles to job creation were overshadowed by the more politicized issues of healthcare and financial reform. 

Questionable Wall Street practices and synthetic financial instruments such as credit default swaps hunger for regulation.  However, at the risk of repetition in works of my recent past - the heart, soul and salvation of our nation have never, and will never, reside on Wall Street.  The disconnect between Wall Street and Main Street grows increasingly vast and any economic revival will lie in the recovery and resonance of cities and districts beyond southern Manhattan.  Immediate and aggressive action is needed from our elected officials to address the epidemic of unemployment.  It is a disease whose source must be analyzed and treated to provide long and lasting solutions.  The infrastructure of this nation has been badly injured.  Manufacturing jobs have been reduced by more than 9 million since the start of the decade.  Small and mid-sized businesses struggle to access the necessary working capital to survive.  Healing the plague upon the nation will begin with facing and addressing the truth.  We need an antidote to end the plague of joblessness and that solution rests with helping America’s struggling small and mid-sized businesses.  I hope Washington will hear our call.  America’s future depends on it.

In his inaugural address, President Obama poetically and prophetically addressed the import of manufacturing to this renowned country. In his words:

“It has not been the path for the faint-hearted, for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things — some celebrated, but more often men and women obscure in their labor –who have carried us up the long, rugged path towards prosperity and freedom.” - President Obama’s Inaugural Address

But shortly after taking office, the President disregarded the promise of his words: the need to develop incentives, programs and responsibility to promote the renaissance of U.S. Manufacturing. The new administration had the opportunity to set priorities, humble the nation and inspire a patriotic rebuild of America. However, in the panic of crisis, the government chose the path of least resistance. It reached again for the magic switch of fiscal and monetary policies, choosing to save the banks through cash, guarantees and programs. The Fed flooded the markets with the hope that it could slow the rapid plunge of GDP prior to a systemic collapse. But once disaster was averted, there was never a change in principle to address job creation through a focus on industry - to rebuild the economy bottom up with a sound foundation to withstand the next decline. Instead, the need for direct lending to small and mid-sized companies has been wholly ignored with more manufacturers liquidating daily. Such action, or rather inaction, should make us wonder whether we have lost our collective will to be the maker of things. We have taken a national stance of arrogance, founded in a belief that we should evolve beyond blue collar employment to service jobs that bring us closer to the godliness of Wall Street.

Over the last decade, on a seasonally unadjusted basis, we have lost 6.4 million manufacturing jobs, from a high of 17.4 million down to approximately 11 million. Since peak employment in 2000, when annual car production stood at 17 million, automotive and supplier service has fallen by 50%. With the start of this recent recession, 2 million manufacturing jobs have disappeared, almost one in every four total employment opportunities lost. Recovery in the manufacturing sector is expected to be very slow - most jobs lost will never again be available due to closures and transfers overseas. Liquidation brings the loss of technology, tribal knowledge and the impossible task of restarting production.

In her recent article, Why Wall Street’s Gain Has Been America’s Loss, Arianna Huffington explains that manufacturing jobs have, “traditionally delivered American families into the middle class and kept them there. There have been a number of recessions over the last few decades. And our economy bounced back in a way that made it harder for those in the middle class to stay there — and even harder for those aspiring to become middle class to get there. The loss of middle class jobs is rarely talked about in Washington. Neither is the way this useful section of our economy is being replaced by the useless section of our economy.”

This week, former Federal Reserve Chairman Paul Volcker said the “U.S. economy faces a long slog as the nation struggles to reduce the jobless rate from close to a 26 year high…,” and he recommended “the U.S. economy shift from a reliance on consumer and government spending to a greater emphasis on investments and exports as it recovers.”

Our ability to sell overseas, however, is deeply dependent on that which we make and manufacture. I remain indelibly confused by the administration’s push for greater exports while we systematically reduce emphasis on our need for industry.

At some point in our recent history, we lost our faith in the American Dream - or, at very least, significantly altered our definition. From the shop floor to the C Suite, “Made in America” has always spoken to the satisfaction of active participation in a hands-on, productive economy. With the loss of opportunity to earn a living with dignity and to take pride in heavy lifting, we could inadvertently raise a populace of permanently unemployed Americans more comfortable with programs of entitlements than with continued rejection and dejection.

This country has long been a meritocracy founded upon education and work ethic, a nation in which each one of us could overcome the circumstance of birth to live the American Dream. This is not a time in our nation’s history for panic, self-pity, entitlement or complacency; it is a time for discipline, hard work and cooperation. Call me naïve, but I believe that faced with the ugly truth, we will roll up our sleeves, raise ploughshares and stand together to rebuild America.

http://www.huffingtonpost.com/lynn-tilton/its-not-easy-being-blue_b_566605.html

It is a time when divides widen, factions combat and violence erupts.  We try not to speak to subjects that spread fear and panic; we hunger for fairy tales, happy endings and It’s a Wonderful Life.  Staying silent and standing still in the face of economic hardship, volcanic violence and a world at war will lead only to an unprepared populace deeply depressed by perceived government apathy to setbacks ignored. There is little doubt our government is acutely aware of dangerous threats and addressing issues behind closed doors. This private policy, however, defies our nation’s hunger for truth and united leadership to command us in the battle we dare confront.

In order to assuage the anger, we must carefully analyze the issues that have inspired its eruption.  Enlightenment begins with the search for truth.  Truth is a word that we all use easily, but one which few of us understand; without comprehension of its inherent meaning, one cannot make sacrifices essential to follow a path the concept defines.  Truth forces each one of us to look at ourselves without façade; to face demons, admit frailties and acquiesce to changes of character in order to become the persons we hold ourselves to be.  Living loyal to truth requires a never-ending process of self-reflection.  This may appear off subject, with words more aligned to spiritual guidance than a pathway to a country repaired, but such would be perception, not reality.

Healing the economy, assuaging anger and rebuilding America will begin both with truth and self-reflection.  We must all strive to be a better people and demonstrate those qualities that create light in a world gone dark.  Our country’s most valuable asset is human capital; the most potent force of nature is people standing shoulder to shoulder, moving in one direction, pure of intent and united in consciousness.  We must all be aligned in the cause of rebuilding America, with shared vision, courage and perseverance.  This march forward begins with acceptance of individual responsibility for our respective roles in the economic, social and spiritual malaise pervasive in our lives and communities.  We must transcend from a culture of expectation to a nation of appreciation.  We must feel inspired to give and to help — gifts and aid must be greeted with gracious acceptance.  Jobs must be created —employment must be embraced.  Collective change begins with individual transformation.

It is difficult to ignore daily reports of violence in Afghanistan, Pakistan, Iraq, Iran and Yemen.  December also witnessed attacks on Berlusconi and the Pope in a more gentile Italy.  Christmas 2009 in the U.S. will be defined by the terrorist attack that could have been.  And lest we forget the populist anger and vengeance inspired by payment of AIG bonuses, the stampede of the Detroit hungry on lines for Federal help or the need for riot police on California campuses during tuition hikes, we would be remiss to the recognition of seething anger and despondency in our nation divided.

The SEC complaint against Goldman Sachs, that accuses executives of operating the grandest of Wall Street casinos, has inflamed a country in turmoil and highlighted a significant schism between Wall Street wealth and Main Street struggle.  Angry senators seeking humility and apology were met with complacency and apathy.  Yet, truth be told, responsibility inures to government that both supported policies and rejected regulation; leading to trillion dollar losses and to Wall Street executives using Federal funds, guarantees and bailouts to make markets for traders rather than loans to corporate America.  Ironically, in the war of words, neither side apologized, shouldered blame nor sought absolution.  With such depth of pain and loss, how could we believe there is no responsible party? Imperfection belongs to each one of us.

Witness the anger that resonates in the “comments” beneath articles posted on this site or blog commentary on others, and we can identify the mass hopelessness in our nation. Anonymity allows for courage to be demeaning, hurtful and irrelevant without any positive power for change.  Disagreement and critique with solution are constructive forces; hateful comments that assuage the writer’s own pain and insecurity merely reveal a person in desperate need of self-reflection.

Truth is cold and hard, but it is also the first step on the path of hope and salvation.  We are a nation starved for truth; for solutions to plaguing problems, alignment of Wall Street and Main Street, and for honest leadership in the rebuilding of America.

This was posted on Business Insider, 4/30/2010

In October 2008, I wrote:

The cold, hard truth is we have sustained trillions of financial losses which will never be recovered, even with time, patience and perseverance. With the use of leverage and credit default swaps (”CDS”), synthetic financial instruments that mimic performance of underlying securities, the markets long ago lost equilibrium on matching assets with liabilities — its fulcrum and natural balance. Such widespread unregulated tools render gains and losses exponential. In this downturn, the false floor has opened and the abyss into which our assets fall is deep and unimaginable. CDS will take its rightful place in history as the greatest financial anathema of our time.

I argued that, for many years, our nation’s growth had been built upon leverage and financial instruments, leading us to mistakenly believe we could replace a manufacturing nation with a market economy. We, as a country, were seduced to accept that the laws of gravity had been defied for us. I feared we would repeat the fall of every great empire before us, a plunge precipitated by arrogance and complacency. I explained such strategies distorted the value of our financial markets and created a false security of increasing GDP but that sadly, our nation’s expansion was built upon a façade. This parody of advancement encouraged self-deception and dismissed the need for value creation through production of goods and delivery of services. Our diminishing base of manufacturers, America’s unsung heros, I predicted, would be the prime casualty of the credit crisis, leaving individuals unemployed and families in turmoil. It is essential, I argued, that we make a national commitment to sustain and create jobs, in order to rebuild America. To accomplish this, I insisted liquidity be made available not only to big banks, where capital was hoarded, but also to American companies and the American people working to kick-start our sputtering economy.

My words were either too early or my name and experience unrecognized; my message fell on deaf ears. However, with last week’s SEC’s complaint against Goldman Sachs, and the calls from the wild to stop the gambling, to restrain Wall Street and to defibrillate ethics, I trust I can bring new attention to the warnings I howled as the lone wolf long ago. New York Times columnist Paul Krugman penned a piece titled, “Looters in Loafers“, about Goldman engaging in activity tantamount to “white-collar looting”, and Andrew Ross Sorkin equated the investment firm’s practices to casino gambling in, “When Wall Street Deals Resemble Casino Wagers“. Rick Newman of US News & World Report exposed, “How Goldman Sachs Abandoned the ‘Real’ Economy“.

My goal was to set forth the path to recovery eighteen months ago, prior to exacerbated decline of industry and displacement of thirty million Americans, now unemployed. Before moving forward, I insisted we needed collective recognition that Wall Street greed and its lobby against regulation enabled, and almost guaranteed, an eventual disaster. “With truth,” I penned,” the unknown vanishes, panic and fear subside and the long journey home can begin.” I hope that the repeated unveiling of truth in the daily press initiates healing.

The devastation to our industrial nation has created a populace of the permanently unemployed; those who are hopeless, jobless and homeless. The vast unwind of industry, when combined with the dearth of working capital suffocating small business, has left too many Americans behind. According to a PEW Research study published April 2010, over 44 percent of unemployed Americans have been without work for more than six months — the highest rate since World War II. In contrast, during the severe recession of the 1980s, long-term unemployment peaked at 26 percent in 1983. In 2010, federal spending on unemployment benefits is projected to grow five times greater than in each year immediately preceding the recession, with unemployment benefits reaching $168 billion — $81 billion associated with regular benefits and $87 billion the cost of emergency aid to the long-term unemployed.

It is not that I want to say I told you so, but rather I hope my repeated words will highlight the increasingly dangerous disconnect between the real economy and the financial markets, the devastating damage inflicted upon this nation’s industrial base and the rapid inroads to recovery that must have priority above all financial legislation. The heart, soul and salvation of our nation has never, and will never, reside on Wall Street, a fact which will grow increasingly clear as the negligence, scheming and depravity behind financial losses continue to unfold. However, if we do not soon recognize the import of industry to the rebuilding of America, and take action, we will soon be a nation beyond repair.

Candidate Obama took our hands and started a slow stroll down Selective Memory Lane as he recounted his arrival in town by turnip truck, his miraculous election to President and his sudden shock at finding himself “a stranger in a foreign land” of politicians and people who expected government to “do stuff”, all while the economy was teetering on the precipice of abyss with the dangers of all things “really bad.”

While he could not easily understand or persuade these foreigners, he would rather rely on Rahm Emanuel, Harry Reid and Nancy Pelosi to do that for him, as his mission was directed only towards “doing good” and “helping people.” President Obama saved the banks only to discover later that banks house the bankers, who covet money with bold expectations of big bonus checks, every year without consequence of risk or reward.

The funny thing about Selective Memory Lane, however, is it often leads us in circles and sometimes to dead ends. Candidate Obama takes full credit for resolving the mess he came into, but the mess he allegedly fixed was the salvation of banks. In truth, the fix was in for the banks when President Bush and Treasury Secretary Paulson appropriated money from under the TARP and gave it freely to them, no strings attached. Ben Bernanke played his part, too, when he turned the Fed into the grandest junk yard in the financial world, buying up that which no one else wanted at prices ant New Yorker would call, insane!

For a while, the official word upheld the stimulus package, cleverly crafted by Reid and Pelosi, as the reason to claim credit. Only the stimulus did not create credit nor jobs, real or imagined, and unemployment soared to desperate heights. Things were getting very confusing Wednesday night, indeed.

Everyone wanted health care reform, but ironically no one welcomed President Obama’s proposal. The Common Man recognized rapidly the bill too large, while Candidate Obama maintained the measure unpopular because at 2,000 pages, the bill was too large. Adding insult to injury, he learned a new guy in a truck was coming to town and he professed a few ideas on health care, as well. So, it was such that the stage was set this week for Candidate Obama to engage in an all-out, one-sided debate (where was Joe Wilson when we needed him?) with The Common Man, calling out boldly to the greedy bankers to give back the money, to politicians to cease being politicians and to any citizen who had a better bill on health care, the request to bring it on. I have a bill for Candidate Obama, but I believe it to be distinct from the kind he expects. I have a bill that says there is no free lunch in this town, or in Washington.

Candidate Obama took one too many wrong turns down Selective Memory Lane when he announced his plan to use $30 billion of TARP funds to make loans available to small and mid-sized businesses with the purpose of job creation in America. His mandate is a great idea. I really like it. In fact, I liked it last July when I first proposed it to the White House and the Department of the Treasury. I liked it when I created a website to garner support, and again at the time I published my white paper on the idea. I liked it when President Obama announced a jobs summit and did not invite small business owners like me — make that — he did not invite me, to the meeting. So let me borrow a little bit from Candidate Obama — “let’s make this perfectly clear” — I did not authorize The Common Man to take my idea and claim it his own. More importantly, like the common cheat in school who looks over his shoulder for the answer, The Common Man missed a key point when he copied. The money will not create jobs if it is made available only to banks.

Remember the lesson of last year: banks have bankers in them. And, in this case, many of the small banks, to whom he will give this money, have big problems and will use it to fix broken balance sheets and bad loans already held. I knew this risk when I created my plan, now known as the Obama Plan. It is for this reason that the original plan states that TARP funds are used to provide capital support to lever investments in new rescue loans made by selected experienced investors in the public sector who choose to own them.

So it is time to pay the piper — or the writer, as the case may be — and Candidate Obama, here is your bill:

Staying silent and standing still in the face of economic hardship, volcanic violence and a world at war will lead only to an unprepared populace further angered by perceived government apathy to setbacks ignored. There is little doubt our government is acutely aware of dangerous threats and addressing issues behind closed doors. This policy, however, defies our nation’s hunger for truth and united leadership to command us in the battle we dare confront.

In order to assuage the anger, we must carefully analyze the issues that have inspired its eruption. Enlightenment begins with the search for truth. Truth is a word that we all use easily but of which few of us understand the inherent meaning or the sacrifices necessary to follow a path that the concept defines. Truth forces us all to look at ourselves without façade; to face demons, admit frailties and acquiesce to changes of character in order to become the persons we hold ourselves to be. Living loyal to truth requires a never-ending process of self-reflection. This may appear off subject, with words more aligned to spiritual guidance than a pathway to a country repaired, but such would be perception, not reality.

Healing the economy, assuaging anger and rebuilding America will begin both with truth and self-reflection. We must all strive to be better people and to demonstrate those qualities that create light in a world gone dark. Our country’s most valuable asset is human capital, and the most potent force of nature is people standing together, moving in one direction, pure of intent and collective in consciousness. We must all be aligned in the battle of rebuilding America. This begins with acceptance of individual responsibility for our part in the current communal economic, social and spiritual malaise. We must transcend from a culture of expectation to a nation of appreciation. We must feel inspired to give and to help — gifts and aid must be greeted with gracious acceptance. Jobs must be created –employment must be embraced. Collective change begins with individual transformation.

It is difficult to ignore daily reports of violence in Afghanistan, Pakistan, Iraq, Iran and Yemen. December also witnessed attacks on Berlusconi and the Pope in a more gentile Italy. Christmas in the U.S. will be defined by the terrorist attack that could have been. And lest we forget the populist anger and vengeance inspired by payment of AIG bonuses, the stampede of the Detroit hungry on lines for Federal help or the need for riot police on California campuses during tuition hikes, we would be remiss to the recognition of seething anger in our nation divided.

Truth is cold and hard but it is also the first step on the path of hope and salvation. We are a nation starved for truth; for solutions to plaguing problems, alignment of Wall Street and Main Street and for leadership in the battle of rebuilding America.

It can be felt in the air and seen in the faces of those on the street. It is the Holiday Season, a time of charitable thoughts, unexpected giving and wishes come true. From Stockholm to Washington, even critical minds and sharp tongues have taken to more generous bent. The Nobel Prize committee ignited the holiday gifting by presenting President Obama with an ornament of beautiful gold and some greens adorning. Senior management of Goldman Sachs, no strangers to both gold and green, suddenly remembered tis nobler to give than receive, and decided to self-grant stockings filled not with coal but tax-benefited deferred shares, trading today’s immediate cash gratification for future multiples of postponed gain. Such patient self-sacrifice is aimed to avert the angry wrath of Congress, regulators and a frustrated populace. Bank of America, recipient of Uncle Sam’s generosity last year and this, surprised many on Wall Street by saying thanks and belatedly no-thanks, returning its gratitude and gifts to the U.S. Treasury. While no one has yet to candidly admit inspiration for the premature return, the bank says only that the stringed gift is no longer needed. Some speculate that Bank of America struggled with the red tape wrapping. Others reason bank executives believed the gift a good fit, but a bit too revealing (a fit with which I am warmly familiar). Regardless of reason, the early holiday return offered Treasury Secretary Geithner a chance occasion to play Santa and re-gift a few surprise holiday presents to the needy. So what if Scrooges of the Republican Party and non-believers of the Oversight Committee see this gesture as less than noble (or allowed)? It is for the elves of Treasury, not the gnomes of Wall Street and Washington to decide the naughty and nice — those who get and who do not. Did not Secretary Paulson make this clear last year with his choice of Christmas cheer?

Who should be added to this year’s Christmas party list? The big banks have been well cared for along with several large insurers, Fannie and Freddie, the auto makers and recent converts that found banking religion. Some were christened more than once. But like any good crisis, no windfall should go wasted, and with rapid decisiveness the Secretary knew just what he would do. Dusting off a plan for lending to small businesses to spur job creation, he will sprinkle half of Bank of America’s gilded gift among hundreds of small banks with direction for loans to small businesses everywhere, while recipients of Christmas cheer might, in turn, make ends meet for a bit longer and perhaps pay a Christmas bonus or two. With that, a little thoughtfulness could go a long way. Of course, tis the season of miracles and wishes. One can almost hear the words of Tiny Tim echo in the beltway: “God bless us everyone!”

I struggle to understand why you ignore my letters and calls?  I appreciate the depth and breadth of issues you face, decisions to make and responsibility to bear. Yet I came myriad times with well thought solutions to lending problems that plague our nation, built upon tactical proven business experience.  I volunteered my time, my patented portfolio construction models, and designed solutions to solve the dearth of lending to small and mid-sized companies, (“SMEs”).  With patriotic hat in hand, asking for nothing, I offered demonstrated solutions upon which the Patriarch platform, a $ 7 billion business has thrived over 9 years.  Still my letters remain unanswered and my SME Rescue Loans Program (“RLP”) lies dormant in Treasury hands.

Joblessness is a plague upon America. Including part-time workers coveting full time employ and marginally unattached, those indelibly discouraged, almost 30 million Americans suffer under weight of unemployment.  If each unemployed heads families of 4, joblessness brings suffering to 120 million Americans. I am consistent in my verse, my chorus the same for 14 months - the absence of lending to SMEs would bring rapidly rising unemployment and stall the engine of job creation.  My plans, acknowledged, would have significantly reduced populace pain.

Last October, in response to a Treasury Plan to rescue large banks without mandate to lend, I purchased ads in the Washington Post and New York Times to express deep fears that TARP-infused banks would use Treasury-injected capital to heal internal wounds by selfish means, leaving SMEs without resources for recovery.  I foretold middle market manufacturers, unsung heroes and hope for this nation would be rendered prime casualties and appealed for a national commitment to sustain our core economic base. I proposed a Provisional Federal Bank to lend directly to deserving businesses. http://patriarchpartners.com/Lynn_Tilton_WashPost_NYT.pdf

On February 2, I sent an open letter, covered by national press, acknowledging the unprecedented obstacles to America’s economy. I addressed the implausible challenges in form of ideas for consideration that, together, represented a multi-spoke approach to foster economic recovery. I warned measures beyond TARP programs needed immediate implementation to avoid a punishing downturn and that SMEs, the backbone of America and its largest employer, remained starved for credit.  I insisted upon rapid and ineradicable acceptance that America’s future relies more heavily upon revival of industry and creation of jobs than resurrection of complex financial instruments.http://www.patriarchpartners.com/open_letter_Geithner.pdf

In late March, I published an editorial titled Tim, Why won’t “you” take a chance on lending? I suggested waiting for banks to heed your call to “take a chance on lending” made little sense and held low probability for triumph. I advised reduction of distance between problem and solution to enhance probability of success should be a lesson embraced.

I questioned your bank reliance and bank confidence, the cost and time to motivate institutions to lend. I feared millions of jobs lost while awaiting banks embark upon the lending crusade.  From whence came assurances cash infused or toxic assets removed would inspire immediate lending to businesses damaged by interim starvation? I believed it time to face the harsh fact that TARP failed to revive lending. I suggested the shortest path between need to unlock credit and emergency loans available was use of Government funds. http://patriarchpartners.com/dust2diamonds/2009/03/tim-why-won’t-you-take-a-chance-on-lending/

In July, I visited Treasury to present a plan designed upon the simple premise the foremost obstacle to economic recovery was unemployment. Job losses could not be stemmed until liquidation of SMEs halted, and this feat accomplished only by enabling access to capital.  In short, the most direct and rapid solution to stem job losses is to incent private enterprise to originate and monetize rescue-financing loans for struggling SMEs.

The RLP, as presented, accesses unutilized TARP funds set aside for the PPIP Legacy Securities Program. Treasury originally intended $100 billion of TARP funds be used for PPIP programs but, to date, only $30 billion has been allocated. The RLP would use $30 billion for equity and debt investments. The program’s configuration is built upon structures previously announced and requires no additional funding from Congress. The RLP would save jobs, in a manner effective and quantified, through combined private and public sector solution. Private equity would absorb entire first loss, in advance of government loans and equity, significantly reducing taxpayer risk. The RLP would be temporary and replaced with private sector and bank financing as credit markets recover. http://www.smerescueloans.com/

Mr. Geithner, perhaps you believe safety of advice lies with big names like Goldman Sachs, Blackstone and Blackrock.  I suggest you revisit the history of my warnings and quality of advice. And if, sadly, you look only to safe haven, I am a self-made billionaire who has saved 150 companies from liquidation and 250,000 jobs. I believe in America.  My hand remains extended to you. Please hear my call.

Sincerely,

Lynn Tilton

From the Huffington Post November 11, 2009

History May Repeat Itself, But Never Exactly

By Lynn Tilton

Although the jobless rate in America surprisingly soared to 10.2% with the broader measure of underemployment reaching 17.5%, heights not witnessed since the Great Depression, economists and government maintain economic recovery has commenced and enhanced employment will follow its historic lag.

In order to predict the future, one must always study the past and understand well the present circumstances evaluated. The foretelling of economic events and discharge of policy to assuage recessionary consequences relies heavily upon the study of history and the winding path to the present. And so as economists and government struggle to explain away our jobless economic recovery, they continue to grasp at historic data which demonstrate employment has always lagged as an indicator of economic revival.

The analysis of history in order to understand today or as predictor of what comes requires, above all, extrapolation.  If any one variable in the equation, or if circumstance or environment has been modified, then the resulting analysis will be altered and distinct.  I am troubled by the comparison of today’s economic data to recessions of mid-70s, early-80s and the Great Depression, absent the adjustment for changes in credit markets, interest rates, housing prices, health of banks, size of industrial base and government stimulus.  In order to contrast economic downturns, past and present, multiple variables must be compared simultaneously to discern changeability and predict behaviors.  It is shocking that we so rarely hear or read the grim reports of continued job losses explained within the context of economic elements necessary to understand well or predict accurately the timing of shift from job loss to job creation.

Main Street Americans have been battered by the perfect storm of falling employment, plummeting home prices and inability to access credit. And the storm has left so many homeless, jobless and hopeless.  But we are called upon to be patient and to forbear as history foreshadows that GDP growth leads to job creation and therefore help is near. In support of that request for patience, President Obama signed into law Friday temporary measures to alleviate the pain for Main Street unemployed in form of extensions of benefits and tax credits for home buyers.  It frightens me that we treat the symptoms of joblessness with provisional programs while the epidemic left unaddressed may rapidly create a populace of the permanently unemployed.

In recession, job losses, while painful, are anticipated.  Economic downturns cull weak companies, creating room for the strongest and most innovative to thrive.  The process of creative destruction is perceived as integral to free market economies.  However, this economic collapse is by no means similar to past recessions.  Too many job losses spring from changes in bank lending strategies and too many are casualties of small business liquidations.  The massacre of small business is best manifested in the broad variance in job loss numbers reported by the establishment survey, in contrast to the household survey that seeks to determine whether or not people are working by asking individuals their job status, rather than querying the larger companies that employ them.  During September and October, reported job losses were 263,000 and 785,000 and 190,000 and 585,000 for establishment and household surveys, respectively.  Over the course of 60 days, the differential exceeds 900,000 incremental job losses reflecting, in large part, destruction of very small businesses and the self-employed who are excluded from establishment census. The economy is not in a process of cyclical creative destruction, but rather in the deadly grasp of secular, irreparable economic devastation

As financially impaired banks retrenched from traditional secured lending to small and middle-market enterprises (SMEs) to preserve capital and repair balance sheets, a gaping hole in our financing economy was shaped. The sudden dearth of capital has forced companies that might otherwise rationalize and survive the current economic downturn to radically reduce workforce — layoffs that are permanent as, without capital, companies have no choice but to liquidate.

As we forecast employment, we cannot embrace history without adjustment for the unique economic character of this Great Recession that began in December 2007.  Not since the Great Depression have Americans endured this damaging confluence of events — dearth of credit and bank failures, mass liquidations of businesses, plunging real estate values and high unemployment.  The recessions of mid-70s and early-80s were not equally marred by so many threats. Most troubling to me, however, is that exit from this Great Recession will be the first in history where Americans could not turn to a broad industrial base or to small businesses for the requisite foundation for economic renaissance and job creation.  Manufacturing job losses accelerated in October with 61,000 compared to 45,000 in September. Since 2000, the U.S. has lost over 8 million manufacturing jobs, and since the start of the recession nearly 40% of all job losses have been casualties of a frail and dwindling industrial base. Adding insult to injury, in all previous post-war recoveries, it has been small businesses that fueled job recovery. In this recession, credit remains woefully unavailable to SMEs, impairing not only growth potential but interim survival.  I fear we have ignored the permanence that defines the recent contraction of American jobs and that if rebuilding America’s industrial base and providing capital to SMEs is not quickly addressed, more and more Americans will fill the rank and file of permanently unemployed.  Every great empire in recent times has been built upon a manufacturing economy. The fall of those great empires has been the failure to remember that one fundamental fact.

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