Long-term rates are falling, a brief bout of economic optimism now replaced by a renewed "Who knows?" Mortgage rates are 5 percent-ish (you might find a "4" prefix in your stocking) and the 10-year Treasury note is trying to head back under 3.5 percent.

The optimism crested with a surge in producer prices (core up 0.5 percent in November), and industrial production better than expected, up 0.8 percent. Some drew confidence from the Fed’s post-meeting assertion that "economic activity continued to pick up."

Long-term rates are falling, a brief bout of economic optimism now replaced by a renewed "Who knows?" Mortgage rates are 5 percent-ish (you might find a "4" prefix in your stocking) and the 10-year Treasury note is trying to head back under 3.5 percent.

The optimism crested with a surge in producer prices (core up 0.5 percent in November), and industrial production better than expected, up 0.8 percent. Some drew confidence from the Fed’s post-meeting assertion that "economic activity continued to pick up."

Then core Consumer Price Index data came in unchanged for November, a developing crisis in Europe pushed cash to the dollar (weak nations may depart the euro, hurt as they are by its excessive strength, driven by German super-productivity), homebuilding is still going nowhere, and weekly unemployment claims spiked to 480,000.

The comic-opera conclusion to one of the great failures in American economic policy played out all week long. We may escape with nothing worse than wry grins and head-shaking, and we may not.

Fifteen months ago, in the panicked aftermath of Lehman’s collapse, TARP (the Troubled Asset Relief Program) was at first a vague request for $750 billion from Congress to throw at the biggest bank run in history. Designed to buy up toxic IOUs, before passage it morphed into injecting capital into banks. Too many toxics, and a 10-to-1 capital multiplier would work for us.

It was the right thing to do. The prior 18 months’ hosing of "liquidity" and rate cuts had failed. A bank is a simple thing: Its assets (loans) minus its liabilities (deposits) equal its capital. A prudent level of capital is about 10 percent of assets. Lose 10 percent of your assets and you’re broke.

In the panic from July 2007 to September 2008, fire sales had cut the market value of everybody’s assets by 10 percent or a lot more.

However, TARP quickly resembled the 2003 conquest of Baghdad. Now we are part-owners of these banks … Does anybody have a plan for what we do now? Taxpayers would like that money back.

Voters, some of them taxpayers, want the bankers to be punished, at minimum by pay cuts, embarrassment and nitpicking. Another government problem: Does anybody here know how to run a bank? Or want to? …CONTINUED

Then, all through 2009, the bankers resisted. Huffing. How dare these politicians interfere in our businesses? Other banks by the thousand refused TARP, preferring mothballs to government castor oil. Secretary Geithner proposed new toxic extractions, but the bankers simply ignored him. He looked like he would fold, and he did.

Bankers followed the standard survival path: cancel existing loans or refuse rollover when possible, and avoid new loans. Shrink your loan assets and your capital looks better. Post-panic, existing assets recovered some value. Emboldened, the strongest banks began to buy their way out of TARP, which mean the weak had to follow.

President Obama called the bankers "fat cats" last Saturday. Then at Monday’s all-hands meeting with them, he was non-confrontal and polite as could be. Three bankers skipped, blaming airport fog, and attended by speaker phone (try that on your anniversary).

In the history of presidential collisions with business — Theodore Roosevelt as the "trust buster," Franklin Delano Roosevelt as "a traitor to his class," Harry Truman and steel, John F. Kennedy and prices, Ronald Reagan vs. air-traffic controllers — Obama’s rout by "fat cats" defines the mousy end of the scale.

The end of TARP marks two things. The banking system this week coughed up $161 billion in capital that it didn’t have, in order to escape — enough capital to support $1.5 trillion in new loans. The weakest of the giants (Citi, Bank of America, Wells Fargo) are weaker.

Second, and far more important: This crisis gave us the chance to restore control of banking, lost during the last 30 years.

This was the time to insist that boards of directors and chairmen execute their duties, and put an end to imperial-CEO-bankers. The nation guarantees your liabilities, and heads-you-win-tails-we-lose has concluded. You are a public utility. Know your duty and your place. Nobody wears suspenders and Guccis at the sewer plant.

Forget all of that. President Obama inherited TARP, and the nation senselessly hated it, with no leader yet explaining the crisis. The failure is hardly Obama’s alone, but failure it is.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

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