More lunacy from the top.  At approximately 11:10 this morning, Obama is scheduled to meet with representatives of the financial industry.  Last night he had this to say about them:

“I did not run for office to be helping out a bunch of fat cat bankers on Wall Street.”…..

“They’re still puzzled why it is that people are mad at the banks. Well, let’s see. You guys are drawing down 10, 20 million dollar bonuses after America went through the worst economic year… in decades and you guys caused the problem.

“These same banks who benefited from taxpayer assistance who are fighting tooth and nail with their lobbyists… up on Capitol Hill, fighting against financial regulatory control,” Obama added.

Now, I for one never blamed the “financial services industry” for the meltdown.  I put the blame squarely where it belonged.  Even people like Paul Krugman are now trying to re-write history to put it in their political agenda.  My take on history is a little different than Obama’s and Krugman’s.  The meltdown did not start with Lehman Brothers or Citibank or ( insert scapegoat here ).  It started very overtly and obviously with the Fannie Mae and Freddie Mac collapse.  Now, the thing about Fannie Mae and Freddie Mac is, and I’ll grant it that it’s just splitting hairs, they are not members of the fiancial services industry.  They are a tool created by Democrats for Jimmy Carter that compelled members of the financial services industry to make bad loans.  Thirty years later, the very obvious end game came to roost.  The concept of forcing banks to make bad loans led to a problem with banks being stuck with too many bad loans.  Who woulda thunk it?

Definitely not Paul Krugman or Barack Obama.  They got together a couple of weeks ago to discuss how to create more jobs.  Their plan was to:

• Insult the banking industry publicly on 60 Minutes.
• Blame them for a problem they know they didn’t create.
• Publicly demand a solution that doesn’t address the root problem.
• Meet privately with them to encourage them to make more bad loans that got them in the shape they’re in now.

What a plan huh?

Now, as has been pointed out, most of the big players are paying back TARP as quickly as possible to get Obama out of their hair.  So, the strings aren’t quite what they were a year ago.  Additionally, Nancy Pelosi pushed through legislation that enabled Congress to break up large banks, scrutinize their business more closely to identify fraud, and a few other restrictions in the 1,300 page piece of legislation.

Two things you can bet it did not do is repeal the 1977 Community Reinvestment Act or use TARP money to bolster the finances of FDIC.  If Obama wants to kick-start lending, he needs to quit going for the headlines and pandering to liberal politics and do what makes some sense.  The FDIC is effectively bankrupt.  In order to prop up their assets, they are sucking small regional banks dry.  Now, small regional banks have to have a certain equity ratio to remain solvent.  You take away their equity, they can’t loan money.  It really is that simple.  That’s exactly what the FDIC is doing right now.  Infusing enough capital to get FDIC off regional banks’ backs will do more to kick-start lending and the economy than dicking around with a hand full of fat cat bankers.  On main street, bankers don’t get $10 million bonuses.  And, they certainly are never too big to fail.  Then, as the banking industry returns to normal due to the increased volume, FDIC returns the TARP money.

But, if they’re not going to do anything about the Community Reinvestment Act, then all bets are off that any fix will last very long.

Otherwise, Obama will be dealing with fat cat lawyers next as he tries to explain to his voters why the banks he’s been attacking start failing all over the country.  Stretching it?  Try this:

Obama’s had more bank failures this year than Bush had the entire eight years.  That’s a good reason why some aren’t lending any more.  Citibank, Bank of America, etc, make for good headlines, but they don’t do business in most of rural America.  It’s the small regional banks that do the lending to the small local businesses.  They are the ones hurting right now.  They are the ones that need help primarily by getting FDIC off their backs.  Strangling them with more regulations while ignoring the cause is a recipe for disaster that we are already experiencing but could only get worse.

Tags: 60 minutes, bankers, barack obama, community reinvestment act, fat cat, fdic, federal deposit insurance company, paul krugman, regional bank, tarp, Troubled Asset Relief Program