For a little while now, I’ve been going after Obama and his bunch for attacking big banks when the problem is with regional banks. He’s given them TARP, gotten most of it back, called them names, and begged for their help. All the while, smaller banks have been totally ignored while the Feds have been killing them.
That ain’t pretty. And, it’s getting worse. That’s a hockey stick based on real numbers. In the meantime, Ben Bernanke was made Time’s peep of the year. In that article he talks about coming from a small town. If that’s the case, then he should remember which banks he did business with. In small towns, it’s not Citi or Bank of America. It’s the local regional banks. You wanna kick start the economy, get off their backs and motivate them to make loans.
No one seemed to be listening. Obama continued to hound big banks, big banks started giving out bonuses to spite him, and TARP wound up mostly unused. And the regional bank failures continued.
Finally, I wake up this morning to see that Tom Brown wrote this:
Remember, during the presidential campaign, how we all kept going on and on about how smart Barack Obama is? Remember?
Turns out we were wrong! I can’t speak to topics like foreign affairs or macroeconomics, but I do know about banking. And I will say flat out that Obama’s approach to dealing with bankers and the banking industry has been brainless. It is shocking to see what the guy appears to not know.
On Monday, the President summoned the heads of the country’s big banks to try to jawbone them into lending more. “America’s big banks received extraordinary assistance from American taxpayers,” he said after the meeting. “Now that they’re back on their feet, we expect an extraordinary commitment from them to help rebuild the economy.”
Really? If the President wants the banks to start lending more, he might spend less time yammering at CEOs and more time talking to his own regulators. They don’t seem to have gotten the memo. Instead, regulators are apparently doing all they can to ensure that banks keep their lending to a minimum. For example, they now seem to be insisting banks maintain minimum capital standards meaningfully above the published, official bogeys. Before the credit crunch hit, for instance, OCC policy said a bank would be considered “adequately capitalized” if it carried a Tier 1 capital ratio of 4%, and “well-capitalized” if it carried a Tier 1 ratio of 6%. It was simple. Right there in print.
And now—who knows? Regulators won’t come out and admit they’ve moved the goalposts but, as multiple conversations I’ve lately had with bank CEOs show, they have. Now, apparently, it takes a 10% Tier 1 ratio to be considered well-capitalized, and regulators don’t mind if banks are even a tad over that…..
Yup.
Drop the Tier One back to where it was, free up six or seven percent capital, use that to make traditional loans, you’ve got a lot of money kicked into the economy by doing basically nothing. The reason they’re not doing that now is FDIC has bankrupted itself and needs both a cash infusion and relief from failing banks. However, by artificially forcing nominal banks into bankruptcy, they’re not helping anyone. Use TARP instead. Simple. It “saved” the big boys and that did nothing to stimulate the economy. Put it in FDIC and it will immediately. What it won’t do however, is make for big headlines with Obama front and center.
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