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When will we learn?

By Brian | October 28, 2008 | Share on Facebook

This is disturbing:

WASHINGTON – An impatient White House is serving notice on banks receiving billions of dollars in federal help to quit hoarding the money and start making more loans.

White House press secretary Dana Perino told reporters Tuesday that the Bush administration is trying to “get banks to do what they are supposed to do,” which is lend money. Though there are limits on how much Washington can pressure financial firms, she noted that banks are regulated by the federal government.

Perino said that the administration is watching lending activity very closely and working with the banks to step it up. She said that Anthony Ryan, Treasury’s acting undersecretary for domestic finance, was delivering a speech in New York on Tuesday that made this point.

Yeah, because why would we want banks to be careful about who they lend money to?!?

This kind of talk concerns me for two reasons. First, it can easily be seen as the White House suggesting that banks relax their rules about how they distribute loans, in order to get more money out the door and kick start the economy. Last time banks did this, it was lauded as “providing easier access to low cost housing,” and then subsequently vilified (five years later) as “Wall Street greed and deregulation.” Second, the side comment Dana Perino makes – “banks are regulated by the federal government” sounds a bit too much like “we have an equity stake in you now, you’ve got to do what we want.” For all the talk of socialism lately, this is the kind of thing we need to guard against.

If the banks are not lending because they are gun-shy to do so, even though there are qualified borrowers out there looking for money, then the White House is right to apply pressure. That pressure should be based on good business practices and benefits to the banks/economy, not some veiled threat about federal power over the banking industry. If, however, banks are not lending because they’ve toughened up their rules about who they’ll lend money to, then the White House should be encouraging solvent potential borrowers to step up and borrow money (and subsequently invest it in the economy), rather than back-handedly suggesting that we put ourselves right back in the same situation that caused the Current Financial Crisis(TM).

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