For the past week or so, President Obama has been trying to jawbone banks into lending more in order to jump start the economy. He continued the push yesterday, meeting with a group of small community bankers to urge them to open up the spigots. Interestingly, he acknowledged that federal regulation is itself a barrier to increased lending. According to a report in the Wall Street Journal, he said the White House is working on ways to decrease that red tape, but warned that: “We don’t have direct influence over our independent regulators.”
That’s a surprisingly diffident response from a president who campaigned under the theme “yes, we can.” A president who is trying to remake the American health care system, refound the U.S. auto industry, and regulate the earth’s climate can’t clear up some red tape on loans?
Of course, the issue isn’t that simple. No one wants the White House pressuring bank examiners to go easy on banks for political reasons. There are reasons for the rules, and reasons why regulators have a good deal of independence in the area.
But that doesn’t mean the president is powerless. After making increased financial regulation a priority, can he really maintain with a straight face the level of regulation is outside his job description? Is the president’s authority a ratchet that allows him to consider expanding rules, but not trimming them?
It’s not clear at all that bank lending rules are indeed a problem. And the last thing we need is for politicians to encourage banks to again make irresponsible loans. But to shrug off the question, claiming a lack of influence, is simply a dodge. If there is a problem, the president has a responsibility to address it.