Again we can see why government shouldn’t ever interfere in the markets, as revealed by the confusion and cluelessness of the Obama administration in navigating the banking waters.
Obama is now pushing for banks to start lending much more in order to encourage economic recovery (you know, the one we’re already in).
In an attempt to influence bankers to begin lending more, Obama has called for a face-to-face meeting in order to convince banking executives to not only lend more, but to fall in lockstep behind his financial reform strategy.
What doesn’t Obama understand about cutting back on bonuses will result in the consequences of either losing good people or the inability to hire new people. Bank of America (NYSE:BAC) has already shown that no one is going to take a top position at a bank with restrictions on their pay and rewards.
But as those in the banking industry rightly say, you have the White House speaking out of one side of its mouth while regulators are speaking out of the other side of their mouths.
Regulators are telling the banks to strengthen their capital ratios and to be on the lookout for default trends going forward. In those cases the regulators are advising the banks to cut back on lending.
But we already know that the big hit the banks are going to take on commercial lending hasn’t even arrived yet, and is going to kick in during the second half of 2010. So Obama attempting to pressure them to lend in order to try to get the economy back on track is ignorant at best, and terrible as far as business operations go.
What this is all about is the tremendous failure of the hundreds of billions in bailouts to do anything other than keep the huge banks in business, maintaining the cartel’s status quo. This is increasingly being recognized, and so Obama is trying to jump-start the economy through encouraging banks to do something regulators are advising them not to do. It’s crazy and schizophrenic.
Obama is treating this in a political manner: back up my initiatives, while in the real business world you can’t just spend and lend in order to make the guy and his administration look good, or at least not look completely incompetent, like they are increasingly being seen as.
Banks are in a defensive posture, and in general should remain so until there is real recovery stimulated by market forces and not the artificial propping coming from the government spending endless amount of dollars which can’t even keep things economically in a holding pattern, as the continual loss of jobs reveal. People are also continuing to hold onto their dollars during the busiest shopping season of the year.
Lending in and of itself isn’t the answer if people aren’t going to buy the goods and services offered by companies. Business expansion comes when the economy is growing, not when it’s contracting. Lending won’t do anything to change that, just like close to $700 billion hasn’t.
