James Pethokoukis
Politics and policy from inside Washington
Obama vs. Wall Street
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A few thoughts on the banker summit at the White House:
1) Some banks were already trying to boost small business lending, such as Goldman Sachs and JPMorgan.
2) Lending was likely to rise anyway as economic growth picks up, so it will be tough to determine if this WH meeting had any independent impact.
3) For the all the talk about loan supply, far less about loan demand and how uncertainty over Obamanomics is chilling small biz expansion plans.
4) The Obama reform plan is not nearly as tough as the Obama rhetoric. It doesn’t embrace, for example, the preemptive dismantling of large, interconnected firms. It doesn’t reduce the Federal Reserve’s regulatory reach. It doesn’t restore the law separating commercial and investment banking. It doesn’t even give bankruptcy judges the power to alter mortgages.
5) Banks have clearly lost control of the narrative. Someone needs to highlight the role of government in creating the financial crisis.
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Point (5) is well-taken, although I wouldn’t hold my breath waiting for any mea culpas from the likes of Barney Frank or Chris Dodd or Fannie or Freddie or any of the senior bureaucrats who thought they had a winner (and votes) in extending mortgages to unqualified individuals. Moreover, banking regulators who altered reserve requirements to encourage banks to buy mortgage-backed’s rather than holding actual mortgages – by dropping the reserve requirements – have NEVER been fingered as culprits. So much simpler to blame Wall Street and whine about bonuses and compensation, as Mr. Obama DID NOT FAIL to do today. Unfortunately for the banks, the truth is very complicated and, while there is plenty of blame to go around, it wasn’t entirely the banks’ fault. I don’t envy the spot they’re in. The optics are awful.