Tuesday, December 30, 2008

Right Hand, Meet Left Hand

This Bloomberg column by John Berry reveals what I have discovered in the last few days talking to businessmen and bankers - while you read in the headlines that politicians are demanding that banks lend out the money they have received from the federal government, bank regulators are riding herd on banks to rein in lending to the point where many banks have "no new customer" policies. That is right, regulatory forces are driving banks to cease doing business. This is bad, very bad. The US government has bent every sail to get liquidity flowing back into the market and unfreeze credit. Ben Bernanke and Henry Paulson have risked their reputations and a great deal of our government's credibility to do this, and an army of bureaucrats, an immovable groupthinking herd, could be undermining the whole endeavor. If someone doesn't get ahold of the guys and gals who actually go into the field and talk to banks, and instruct them to ease off, credit will remain tight and the federales will have to be even more easy to compensate for what isn't happening on the ground, which has major risks for us in the longer term. This regulatory beast must be brought on board with the program.


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