The pole in the conservative bloggers’ firehouse has been extremely busy this year. A sweeping attempt by President Obama and the liberal Democrats controlling Congress to use a serious economic crisis as a casus belli to wage incendiary, scorched earth warfare against free markets, individual rights, and common sense has kept conservatives in a near-constant four-alarm state. Lest you think the Reid-Pelosi-Obama plan to make a glass menagerie of our world-class healthcare system will be the final inferno threatening economic recovery and demanding Republicans to man the hoses, think again. Rep. Barney Frank (D-MA) has gleam of pyromania in his eye and his target is America’s drought-parched banking and credit system.

H.R. 4173 was introduced by Frank on Tuesday, curiously titled the Financial Stability Improvement Act. Closer inspection reveals it to be little more than another way of legislating economic euthanasia and bringing additional hardship to small businesses and families.

Republicans on the Hill like Rep. Patrick McHenry (R-NC) describe the legislation as a move to establish a $150 billion “permanent bailout fund” like the TARP program that was promised as a temporary and necessary step to restore stability to credit markets. As McHenry noted when speaking to bloggers on a Thursday afternoon conference call, because the fund would be created through assessments that Tim Geithner’s Treasury would take from banks, the entire proposal is a perversion that would create an “incentive [for banks] to not lend to businesses.”

It boils down to the basic economics of opportunity costs and reserve requirements. When a bank lends $10,000 to a small business — perhaps in the form of a line of credit that allows them to hire and train a new employee during the slow time to prepare for a resurgent economy – it must have a percentage of that amount in valued assets in reserve, typically 10 percent. In simplified terms, a bank that has $10 million in assets is able to lend $100 million to creditworthy customers. Some might fail to repay, but as long as the bank is underwriting its loans prudently the entire house will not fall.

McHenry points out is that if the Treasury Department will now be pulling $150 million out of bank’s vaults to provide a bailout the consequence of that will be that $1.5 trillion in hypothetical credit is no longer available for lending to the public. Presto, ta-da, and abracadabra. Barney Frank has magically made our credit crunch reappear.

At a time when U.S. banks are showing renewed buoyancy and are able to cautiously tread water Barney Frank’s bill may come packaged as a life preserver but will fit like a pair of lead boots. Frank would also tie the bank’s hands behind their back by creating a Consumer Financial Protection Agency that would need to pre-approve financing programs. The CFPA would handicap lending institutions by neutralizing the most vital feature of the free market, the ability of sellers to react quickly to the needs of the market. Perhaps Davids Blaine or Copperfield could bob safely to the surface if faced with similar impediments, but Congress should think twice about gambling American jobs and prosperity on the success or failure of an epic death-defying escape trick.

It’s time to throw on your jumpsuit, put on the helmet, get on the back of that hook and ladder, and save the American economy from explosive experimentation by Barney Frank and the Democrats. You know the drill. Call your Congressional representative today.

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