Obama doesn’t seem to have the ability to comprehend, not only how indecisive he is, but also the intellect to grasp the issues in relationship to the banking industry so he can understand and communicate a message that makes sense. As it stands, Obama doesn’t seem to even know he is sending more than one message which contradict one another in more ways than one. Understandably, the banking industry seems to be becoming much more wary of him as a result.
It’s one thing to have an intelligent conversation with someone which you may disagree with them, but it’s quite another to have a conversation with the president of the United States where he shows he doesn’t even grasp the issues they’re talking about.
I’m referring to the recently hyped get together with Obama and leaders in the banking industry where Obama incredibly views the need for banks to make more commercial loans to banks in order to fulfil some type of mystical duty they owe to the economy and taxpayers. Really! That’s his basic premise behind making what would be horrible business decisions concerning commercial loans.
First of all, there is absolutely no connection between getting bailouts from the taxpayers and making loans. It doesn’t compute. It has no place in deciding to make commercial loans, or any loans for that matter.
The implication by Obama is the banks are somehow holding back on making loans; an amazingly ignorant statement if I’ve ever heard one. The other ignorant element here is Obama is talking to the wrong people. Big banks aren’t the major source of loans for small business, regional and community banks are. That’s the first strike against him. He’s not even aware of who the right people are in the banking industry to talk to. That means he’s playing little games of demagoguery to impress the American people with his visible pursuit of being chief banker of the nation, or something like that.
What Obama also doesn’t understand is this has nothing to do with supply, it’s the demand which has fallen. People aren’t spending much on goods and services, and so to take out a loan isn’t on the top of the agenda for small business. They can’t grow if consumers are staying away from the stores or not hiring them for services. It’s as simple as that. Obama is dangerous in this because he can’t seem to identify the real problem at all. That’s why he’s talking to the wrong people with the wrong diagnosis.
The problem is the economy stupid. What don’t you get about that Obama? Millions of people are out of jobs or underemployed. Many others aren’t sure if they’re one step away from that same situation, and so are holding off on making purchases in order to pay down existing debt and building up some financial protection by saving money. Again, that means it’s a demand issue not a supply issue. Obama and many politicians can’t seem to understand that businesses can’t just throw money at something without consequences. Governments can’t either, but they can get away with it longer, although there is always a price to pay for printing money, which we’ll all be participating in soon, as the figures for inflation just came out and were over double what was expected.
Obama continues to hit on this theme of finding a way to get loans to creditworthy businesses. Like the banks don’t know this and they’re secretly holding back so they can’t make any money. This is how dumb this is and sounds. The banks aren’t borrowing because businesses aren’t asking. If businesses are asking, I would be very careful on what types of businesses they were and if it’s for expansion purposes. To offer loans for businesses to help them survive, like the TARP funds were alleged to do for banks won’t work. You have to have revenue coming in to pay off loans, and that comes from consumers spending on your products and services. Period. There’s nothing else to consider. Again, Obama through his words is clueless on this. Like the community organizer he was, he’s going to find out you can’t shake down business the way you shake down local government officials to get what you want.
All Obama can seem to say is credit is too tight. Let’s put that in other words: Obama wants banks to lend to those they wouldn’t normally lend to. Credit isn’t too tight, that’s what Obama doesn’t get. I’ll say it again: people aren’t spending so demand is what is low, not supply. Banks aren’t holding back, consumers are; the reason there isn’t a true recovery at this time, contrary to the assertions there are.
Even with manufacturing sales increasing, that isn’t sustainable demand, as it’s all based on the artificial, almost zero-interest rates that are generating those sales. The problem with that is as inflation becomes a large factor, as it’s starting to be, those artificially low interest rates can’t continue to be offered, as about the only tool the Federal Reserve has to fight inflation is to raise interest rates. Now you see the problem they face. Raise interest rates and the manufacturing sector of the U.S. plunges in sales, keep them low and you remove the ability to at least try to fight inflation. Choose your poison. Either way they’re screwed.
The mixed message and schizophrenia permeating the Obama administration concerning the banking industry is on the risk side for banks. They’re continually lectured to raise capital reserves to offer them better protection for hard times, and to abstain from risky behavior.
But the Obama Administration and Obama continue to hound banks to find ways to make loans to businesses, even though they are the riskiest loans to make, and it assumes they haven’t done that to begin with. What’s really being done by Obama is he’s pressuring banks to loan money to businesses that are not creditworthy, but if they lower their standards they’re sure to “find ways” to offer them money.
This is what the banking industry has had to cope with, and it’s impossible because the two can’t be done at the same time. You can’t build up capital reserves and make only solid loans, while at the same time finding ways to offer commercial loans to businesses that are at very best – questionable, and at worst, a huge risk.
Obama obviously has no understanding of business and how it works, as his comments reveal. He’s dangerous to the economy and the banking industry as a whole because of that, and no one in the industry should take him seriously when using the TARP funds card to shame them into doing some type of duty. What a sickening thought as far as the danger associated with it if these banks actually start listening to Obama and make things much worse than they are now.
Remember, we have a huge default of business loans coming in 2010, with the second half looking especially difficult. What in the world would banks be doing lending money to suspect businesses at a time when they’re going to take some big hits very soon. None of this makes any sense when you examine it in the light of how things in the real world work.
Government regulators on one side are telling banks not to make these risky types of loans, and Obama on the other side is telling them to do it. This is the ridiculous situation faced by the banking industry at a time when they indeed need to be prudent and learn from their mistakes and go slowly forward.
Don’t be fooled. This is really about the 2010 elections where the Democrats are expected to take a beating, and rightfully so from their dismal handling of things. That’s the real reason why it sounds so nutty and psychologically weird to hear Obama talk in ways that make him really look intellectually weak and economically dangerous.
