As I described last week, loan demand is down, which is good for the economy in the long run. The FDIC and Federal Reserve are encouraging banks to lend prudently and hold large capital reserves. Today's remarks show that the Executive Branch is not comfortable with that course of action, however, as the President called for banks to step up lending to small business. Is a titanic struggle in the offing?
Hardly. Bank of America and Wells Fargo pledged $5 billion and $4 billion respectively in increased lending to small business customers. These amounts, which will seem large to the public's ear when played as sound bites, are small relative to the discretion the banks have, as viewed by their regulators. In other words, it is all a show: The President gets to sound like he is beating up big banks again, and the banks get to show that they are complying with the President's request. Since the FDIC is happy, you should be happy too.
It is just another day in the scapegoating business for those holding blame bags chock-a-block with hot air and invective.
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