Obama calls on banks to increase loans

The Associated Press reports:

In his weekly radio and Internet address Saturday, Obama said too many small business owners remain unable to get credit despite administration steps to jump-start lending, which was virtually frozen when the financial crisis took hold last year.

“It’s time for those banks to fulfill their responsibility to help ensure a wider recovery, a more secure system and more broadly shared prosperity,” said Obama.

What Obama fails to recognize is why banks have curbed lending to small businesses. They certainly aren’t hoarding money; they profit off these loans. The current economic climate is ugly, to say the least. Lending to what would have been a well-qualified business several years ago has become riskier. Hence, lending has slowed.

The option Obama seems to support is for banks to lower lending standards. But why would they do this? Obama says his administration will “take every appropriate step to encourage them to meet those responsibilities.” When the word “encourage” comes from government, it is merely a euphemism for “force” or “pressure.”

Moreover, I am not certain what he means by “responsibilities” either. Provided they are acting under the law, they have no other responsibilities.

All things considered, Obama’s call on banks to lower lending standards is old talk to a new issue. After all, it wasn’t too long ago that the government pressured banks and lenders to lower requirements for mortgage loans so more people could purchase houses. Remember how that turned out?

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