Private-Equity Mogul Tilton Says Obama's Job Proposal Won't Do Jack

Between the State of the Union address and this week’s budget, President Obama has recently proposed a series of initiatives aimed at tackling America’s stubbornly high unemployment rate, including:

  • — Giving $30 billion of TARP funds to community banks in order to spur loans to small- and medium-sized businesses.
  • — $100 billion in tax credits for small business owners, including breaks for hiring new workers or raised wages.

Unfortunately, “the things he’s talking about do not get to the core of the issue,” according to Lynn Tilton, CEO of Patriarch Partners, a private equity fund.

Tilton, whose firm lends to or has a controlling interest in over 70 businesses with over $7 billion of assets, says Obama’s plan to give TARP money to community banks “will fail” precisely because it gives the money to banks.

Tilton predicts small banks will follow the lead of the big banks and sit on the TARP funds rather than lend them, because they don’t have the time, energy or expertise to make “rescue loans” to distressed companies, which is what’s necessary. For nearly 18 months, Tilton has been promoting a plan to spur loans to such companies via a public-private partnership, as detailed here.

“The feeling is you can give [money] to small community banks, which didn’t do what the large banks and investment banks did,” she says. “The problem is it won’t work to accomplish the goal, which is job creation in America.”

Tax credits, meanwhile, won’t work because they don’t address the core issue of a lack of capital and revenue growth for many American businesses.

With 10% (official) unemployment and over $12 trillion of lost household wealth, “consumers aren’t spending because they don’t have a job or are worried about not having a job,” she says.

In order to really stimulate job growth in this country, Tilton says “difficult decisions” must be made such as erecting the same kind of tariffs other countries have on imported goods, such as textiles, and forcing the Department of defence of “Buy American.”

Tilton, whose firm owns both textile and aerospace companies, admits these proposals would help Patriarch Partners. But she’s dedicated to reviving the U.S. manufacturing sector, and says these and related efforts are necessary to level the playing field for U.S. goods, suggesting “free trade” is an oxymoron.

Finally, Tilton says she has “no clue” how President Obama plans to meet his goal of doubling U.S. exports in five years, wondering: “How weak do we let the dollar get so we can be the cheapest labour in the world?”

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