While the President is focused on presenting plans that Grover Nordquist will veto, he is ignoring what he could do within his own power to arrest the downward spiral of the US economy. His banking agencies are working around the clock to restrict the ability of deposit gatherers -- commercial banks and thrifts -- to make loans in the communities where their deposits are gathered. We will not reach the bottom until banks are allowed by federal regulators to make loans secured by assets now valued at a small percentage of 2007 values. Like firemen who show up five years after the fire with water hoses, federal banking regulators are too late to put out the fire but making darn sure no one can rebuild.
Federal tax policy and investment bankers have for a long time joined forces to encourage those who controlled local and regional banks to sell their banks to large conglomerates who would make the combined company more efficient -- that is, need fewer employees. The controlling persons would reap huge rewards through golden parachutes, restrictive covenants and years of stock options, much of the income from which was treated as capital gains, taxed at 15%. The employees driven out of jobs were not so lucky. The customers who used to have bankers to talk to not so lucky. The people who invested in the banks they thought were operated by people who talked to customers not so lucky.
Then, years of neglect of real customers with real loans led to the collapse of the banking system, as all of the efficiencies turned out to be quite inefficient.
While there has been much focus on the zillions the federal government has given, directly or indirectly to the world's largest banks, there is considerably less focus on the fact that the privilege of collecting federally insured deposits now largely rests in the hands of bankers the FDIC and OCC does not trust to make loans. There is not enough space here to describe how the FDIC and OCC have done this, capital rules, cease and desist orders and so on, that this is being done is undeniable. Thus, deposits are being sucked out of growth states like Florida and not used to rebuild a vibrant economy.
Like in so many other areas, the President is surrounded by the NE establishment that sees borrowers and loans as nothing more than blips on a computer screen. This is truly a growing tragedy.
Either let the banks make loans or shut them down so that those allowed to operate banks are those able to make loans.