As a result, Perlmutter said in a press release, small community banks will have more liquid capital available to make business loans.

U.S. Rep. Scott Tipton

“Small businesses are the economic engine of our economy,” said Perlmutter. “Their innovation and ingenuity will help our country continue to diversify, grow and prosper. Small business owners and small banks are not looking for a bailout or a free deal. They are asking for a fair deal, to be able to compete and work out their difficulties over time. This plan is the responsible way to help small businesses weather the storm, set the foundation to rebuild our communities, and create the jobs we need to work our way back to prosperity.”

“This legislation is desperately needed to help small businesses get financing. Small businesses are the engine that drives economic growth and job creation but without access to capital that just won’t happen,” Coffman said in a prepared statement.

The TARP Congressional Oversight Panel estimated banks hold approximately $1.4 trillion in commercial real estate debt coming due over the next three years. The current rules require banks to write down all of this debt all at once, which reduces the bank’s available capital and impairs its ability to lend to small businesses.

“We’ll do what we always do,” said Meckler. “Our members will put immense pressure on every senator to vote against earmarks. This is a fundamental issue — it’s both substantive and symbolic. Will they vote against the politics of the past or are they still stuck in it? This is a vote that will never go away, like TARP. Tea Partiers have long memories. Politicians have always taken advantage of the fact that voters have short memories, but we’ll know, we’ll remember, and in 2012 when they have aggressive, well-funded primary challengers, they’ll know why.”

But how will the Tea Party groups know who to challenge when the vote is to be held in secret? The answer, according to Meckler, is that those who remain silent on the issue will be presumed guilty.

On the Democratic side, Rep. Nancy Pelosi (D-Calif.) has announced her desire to be Minority Leader and Rep. Jim Clyburn (D-S.C.) says he wants to remain whip. According to TPM’s Josh Marshall, the practical effect is that there’s no room for Rep. Steny Hoyer (D-Md.):

The next person down the totem poll is John Larson as Caucus Chairman. According to Roll Call, Pelosi is encouraging (sub.req.) him to run for Caucus Chair again. So Pelosi moves down, Clyburn and Larson remain in place. So there’s no room for Hoyer. He’s standing when the music stops. And he’s got no chair.

The key tell here is that Pelosi seems to be encouraging the people down the totem poll to stay in place. So she’s blocking Hoyer’s ability to perhaps get Clyburn to agree to step down the ladder with him.

I think I remember this scene from The Godfather.

Pelosi hasn’t officially weighed in on the budding Hoyer v. Clyburn battle for Whip, but Marshall is right to note that by not encouraging the rest of her leadership team to move a step down the rung, she’s effectively squeezing Hoyer out.

On the other side of the aisle, Republicans are delicately — or, at times, not so delicately — trying to foil Rep. Michele Bachmann’s (R-Minn.) bid to challenge Rep. Jeb Hensarling (R-Texas) for a Republican House leadership position:

“Bachmann will have a tough time convincing anyone that Hensarling isn’t conservative enough,” a House Republican aide told The Daily Caller. “She’ll have an even tougher time convincing the conference that she wouldn’t take our whole team down in flames with her antics.”

Another House Republican staffer aligned with the most conservative elements of the party called Hensarling “literally unbeatable.”

Working in Republicans’ favor is the fact that Hensarling is widely considered to represent that same kind of “constitutional conservatism” (he opposed TARP, etc.) that Bachmann says she could bring to the table. Working against them is the fact that few people outside of his district have ever heard of Hensarling and his nomination could thus be seen as a slight to the budding Tea Party caucus which is just starting to feel its oats.

It’s kind of easy to take pleasure in all this and think the banks are being hoisted on their own petard, but it’s all bad for the economy for the mortgage market to be in such turmoil, to not know whether the right to foreclose will be enforceable. It’s a great deal of uncertainty and makes it much harder for private investors to get back into the mortgage market. It will probably make home buyers more uncertain because there’ll be a lot of mortgage holders who are not going to be paying their mortgages or be foreclosed upon.

I don’t think any member of Congress has been more critical of the Obama administration to do more about foreclosures. I introduced the cram-down legislation, I’ve written pieces saying TARP funds should be used to buy mortgages and modify them. I’ve been very vocal that the housing sector is an enormous part of our ongoing financial pain. But this does not accomplish the solution to the mortgage problem. It’s hard even to see how it ends. But I’ve got to think it creates more uncertainty about the health of the banks. [Treasury] Secretary [Timothy] Geithner testified before the Financial Services Committee a few weeks ago and I asked him whether this legislation had been taken into account in the stress tests, and he said he wasn’t sure. At the least, we now have resolution authority that we can take out for a spin.

But there are increasing worries that the scale of the scandal and the fallout on the financial markets might impact the stability of the financial system, necessitating some form of government intervention.

With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to pre-stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone and putting us on a path to balance the budget and pay down the debt. We will also establish strict budget caps to limit federal spending from this point forward. We will launch a sustained effort to stem the relentless growth in government that has occurred over the past decade. By cutting Congress’ budget, imposing a net hiring freeze on non-security federal employees, and reviewing every current government program to eliminate wasteful and duplicative programs, we can curb Washington’s irresponsible spending habits and reduce the size of government, while still fulfilling our necessary obligations.

We will also prevent Washington from forcing responsible taxpayers to subsidize irresponsible behavior by ending bailouts permanently, canceling the Troubled Asset Relief Program (TARP), and reforming Fannie Mae and Freddie Mac.

That is not actually a plan, of course. It is a plan to make a plan.

First, Democrats put into their own Dodd-Frank law an amendment precisely “prohibit[ing] taxpayers from ever having to bail out the financial sector.” There are no bailouts.

Second, ending TARP is not a serious policy idea, either. The program sunsets on October 3 — about 10 days from now. And it ended up costing less than a tenth of its initial budget.

Third, there are no cuts in this proposal. There are caps on federal hiring, for instance, but nothing that would represent more than tens of billions of dollars in savings — though the United States is trillions of dollars in debt. Republicans say there are duplicative programs that should be eliminated, but do not name one.

Later, the Republicans do elaborate on these ideas, somewhat:

• Act Immediately to Reduce Spending: There is no reason to wait to reduce wasteful and unnecessary spending. Congress should move immediately to cancel unspent “stimulus” funds, and block any attempts to extend the timeline for spending “stimulus” funds. Throwing more money at a stimulus plan that is not working only wastes taxpayer money and puts us further in debt.
• Cut Government Spending to Pre-Stimulus, Pre-Bailout Levels: With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to pre-stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone and putting us on a path to begin paying down the debt, balancing the budget, and ending the spending spree in Washington that threatens our children’s future.
• Establish a Hard Cap on New Discretionary Spending: We must put common-sense limits on the growth of government and stop the endless increases. Only in Washington is there an expectation that whatever your budget was last year, it will be more this year and even more the next. We will set strict budget caps to limit federal spending on an annual basis. Budget caps were used in the 1990s, when a Republican Congress was able to bring the budget into balance and eventual surplus. By cutting discretionary spending from current levels and imposing a hard cap on future growth, we will save taxpayers hundreds of billions of dollars.
• Cut Congress’ Budget: This year, Congress increased its own budget by 5.8 percent at a time when families and small businesses across the country are cutting back. We will make Congress do more with less by significantly reducing its budget.
• Hold Weekly Votes on Spending Cuts: Earlier this year, House Republicans launched the YouCut initiative to combat the permissive culture of runaway spending in Congress. Over the course of nine weeks, YouCut produced proposals to save taxpayers more than $120 billion. We will continue to hold weekly votes on spending cuts.
• End TARP Once And For All: Americans are rightly outraged at the bailouts of businesses and entities that force responsible taxpayers to subsidize irresponsible behavior. We will cancel the Troubled Asset Relief Program (TARP), a move that would save taxpayers roughly $16 billion.
• End Government Control of Fannie Mae and Freddie Mac: Since taking over Fannie Mae and Freddie Mac, the mortgage companies that triggered the financial meltdown by giving too many high risk loans to people who couldn’t afford them, taxpayers were billed more than $145 billion to save the two companies. We will reform Fannie Mae and Freddie Mac by ending their government takeover, shrinking their portfolios, and establishing minimum capital standards. This will save taxpayers as much as $30 billion.
• Impose a Net Federal Hiring Freeze of Non-Security Employees: Small businesses and entrepreneurs are the engine of our economy and should not be crowded out by unchecked government growth. We will impose a net hiring freeze on non-security federal employees and ensure that the public sector no longer grows at the expense of the private sector.
• Root Out Government Waste and Duplication: Once created, federal programs almost never go away, even if the problem they were created to address is no longer relevant. More than 20 states have addressed this problem by requiring that programs end – or “sunset” – by a date certain. We will adopt this requirement at the federal level to force Congress to determine if a program is worthy of continued taxpayer support. necessary to protect our entitlement programs for today’s seniors and future generations.
• Reform the Budget Process to Focus on Long-Term Challenges: We will make the decisions that are requiring a full accounting of Social Security, Medicare, and Medicaid, setting benchmarks for these programs and reviewing them regularly, and preventing the expansion of unfunded liabilities.

But, again, there are no actual suggestions for cuts here. It is all well and good to say you’ll cut the federal budget. It is quite another to start taking away seniors’ Social Security, or families’ school-lunch funding, or farmers’ subsidies, or workers’ unemployment insurance, or bridge-builders’ contracts.

The Fed, Treasury and the Senate Budget Committee appear to have a favorite private sector economist, one who has managed to become a favorite even though he works for a unit of the same rating agency whose analysis is intrinsically tied to both the market, banking and housing crisis.

Mark Zandi of Moody’s Economy.com is routinely trotted out as an independent expert. He was the sole economist at the August 17 Treasury Conference on the Future of Housing Finance, the Fed’s REO and Vacant Properties conference and has now testified at the September 22^nd Senate Budget Committee hearing on “Assessing the Federal Policy Response to the Economic Crisis.”

Never mind that, based on Zandi’s record, either his analysis is just wrong or his independence is compromised. Everyone seems to like to hear the guy who is saying what people want to hear, even the press appears to prefer “feel good” analysis to considering the accuracy of his record.

I like Mark Zandi quite a bit. He is collegial, considerate, considered and smart. But his optimism is helping Washington avoid addressing the reality of our economic problems and the structural issues that must be addressed before our economy can sustain renewed growth.

So why is Zandi the Beltway’s Mr. Congeniality? That question is easy to answer, I think.

Zandi advised Sen. John McCain (R-Ariz.) in his presidential run and is widely respected in the business community. He isn’t seen as a liberal, or a partisan. But, for months now, he has argued for more stimulus, hailed TARP and generally sided with Democrats on major economic questions. Ergo, Democrats get to cite a Republican when arguing for their policies, knowing said Republican adviser will publicly back them up. If Doug Holtz-Eakin did, Democrats would happily cite him too.

None of this is to question Zandi’s work or to say anything about his politics, of course. It is just to note he is so frequently cited because it is so uniquely expedient for Democrats to cite him.

The signature Obama program to ameliorate this crisis was the Home Affordable Modification Program, or HAMP, which helps homeowners modify their mortgages for lower monthly payments.

But the program has proven frankly disastrous — in many cases hurting the families it was meant to help. The administration expected it to help 3 to 4 million homeowners. It has aided a fraction of that, completing just 434,700 permanent modifications, according to the last scorecard. The process frequently takes months and requires applicants to file extraordinary amounts of paperwork. About half of applicants are rejected during the trial modification period. Worst, for many HAMP participants, their monthly mortgage payment barely goes down. Those homeowners often keep paying a mortgage they can’t afford for a while  before defaulting anyway, meaning the bank is the real winner.

Now, rather than doubling down and helping homeowners, the administration is shuttering, or at least shrinking, the program. As David Dayen noticed, a recent Treasury report on the Troubled Asset Relief Program tucks in the detail that the government is granting HAMP just half of the funds it originally allocated.

As for President Obama’s mortgage modification program, the CBO estimates that the Treasury Department will use no more than $20 billion of TARP funds, less than half of the $50 billion originally allocated. That’s because the CBO expects many fewer people will participate in the program than the government originally expected, a view held by many housing industry observers.

When Obama announced the program in February 2009, he said up to 4 million people could save their homes through the loan modification program, which lowers eligible borrowers’ monthly payments to no more than 31% of their pre-tax income. But more recently, officials have backtracked and said up to 4 million people could qualify for trial modifications, during which loan servicers assess their borrowers’ eligibility and ability to pay.

Through February, around 170,000 distressed homeowners have received long-term modifications under the program. Another $1.5 billion in TARP funds will be used to provide grants to state housing agencies in California, Arizona, Nevada, Florida and Michigan. These agencies are tasked with coming up with programs to assist the unemployed, the underwater who owe more than their homes are worth, and the second-lien holders.

All I can say is that I hope they funnel the additional $30 billion into other, better initiatives to help homeowners.

It has long been said that any political coalition large enough to aspire to majority status is an organization of factions, conflict and contradictions. That description defines the Republican Party as it looks toward the November elections and beyond.

This was a week in which the party’s strengths and weaknesses competed for attention. Turnout in Tuesday’s primaries showed Republicans energized and enthusiastic, far more so than the Democrats. If anything, Democrats are more pessimistic about their prospects in November than they were two months ago.

But the elections last week in Florida and Alaska also pointed to ideological differences and personal enmities that have played out in Republican primary battles all year and that threaten to leave scars and fissures within the party that will have to be dealt with later. Republicans have seen more turmoil in their ranks this year than Democrats have, a sign of both robustness within the coalition and unresolved debates about the party’s direction.

Balz correctly notes a number of divisions within the Republican party, but to label them “ideological” seems a bit of a stretch. Businessman Rick Scott and Attorney General Bill McCollum spent most of the GOP governor’s race in Florida attacking each other’s experience and character, not policy prescriptions. And Joe Miller may have edged out Sen. Lisa Murkowski in Alaska’s GOP Senate primary mainly by successfully characterizing Murkowski as a member of a political dynasty when the nation is looking for change.

The party is split between insiders and outsiders, even if those outsiders in turn represent a strange pantheon of grassroots Tea Party candidates and self-funded multi-millionaires. When it comes to policy, GOP candidates’ opposition to Democratic initiatives are a matter of degree, not kind. Tea Party candidates adopt the Republican mantle but often seek to go further in dismantling unwanted portions of government spending — like various regulatory agencies, departments, and entitlement programs. Often they simply cannot forgive Republican incumbents for betraying their principles through a vote for the Bush-era Troubled Asset Relief Program (TARP) that bailed out Wall Street banks.

Balz also seems to imply that this fractiousness speaks well of Republicans’ electoral chances in November. While Republicans will doubtless gain many seats in both chambers, I’d argue that they’d be sitting a lot prettier if they had managed to avoid nominating Sharron Angle, Rand Paul, Ken Buck, Rick Scott, and now, perhaps, Joe Miller. By way of example, Democratic pollsters confide that Senate Majority Leader Harry Reid (R-Nev.) looked like toast running against nearly any Republican for reelection except… Sharron Angle. Now that the race has become in large part about her antics, many think Reid’s got more than a fighting chance of holding on.

Nearly half of Americans say the Troubled Asset Relief Program — the bank bailout — passed under President Obama. A further 19 percent say they do not know whether Obama or his predecessor signed the bill. Of course, TARP passed through a Democratic Congress and President George W. Bush signed it into law.

Nevertheless, he points to very real and very significant signs of a turnaround:

• Exports are booming because American companies are very competitive and lead the world in many high-tech industries.
• Private job growth has returned — not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.
• Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.
• American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn’t sustainable.
• The auto industry is coming back, and the Big Three — Chrysler, Ford and General Motors — are now leaner, generating profits despite lower annual sales.
• Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.
• The government’s investment in banks has already earned more than $20 billion in profits for taxpayers, and the TARP program will be out of business earlier than expected — and costing nearly a quarter of a trillion dollars less than projected last year.

What will really turn things around? Jobs. At some point, private employers, now hoarding cash with their profits, will return to picking up employees. That means Americans will be able to spend more, and the cycle will become virtuous again.