Obama does not understand banking

Fox News:

President Obama is calling on the financial industry to help dig the economy out of the pit the White House says it helped create, as the president and bank executives headed into a potentially tense meeting Monday morning.

The president set the tone for the meeting in an interview broadcast the night before in which he called Wall Street bankers "fat cats" whom he has little obligation to help. In response, the bankers plan to tell the president to stop oversimplifying their concerns.

But the president is expected to argue that because Wall Street has already received significant aid from the federal government via the $700 billion bailout package passed last year, it in turn has an obligation to help jump-start the rest of the economy -- by boosting lending to small businesses and getting on board with a sweeping financial regulatory reform package.

"What the president's going to say to the bankers is, you guys were part of the problem, you helped create an economic crisis here that cost 7 million Americans their jobs and now you have to be part of the solution," White House senior adviser David Axelrod said on ABC's "Good Morning America."

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Axelrod and Obama are really out of touch when it comes to banking and what caused the crisis to begin with. What triggered it was exactly what Obama is pushing right now, i.e. government pressure to make loans that were not commercially viable.

Most of this pressure came from Democrats who wanted lenders to loan money to people who could not afford it. In order to deal with the increased risk these loans caused, the bankers developed sophisticated instruments to proved not up to the task.

The fact is that bankers have no interest in making a loan they know will not be repaid and they also have no interest in not making a loan to someone where they think they will be repaid. Different bankers may analyze these risks different and some have a higher risk tolerance, but that is usually offset with higher interest rates.