“The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse.” – James Madison

Our President can’t be serious. Really, this must be some sort of sick joke. On Monday, President Obama met with financial leaders from around the country in an effort to promote economic growth. The plan involved re-regulating banks and encouraging lenders to refinance mortgages and open credit to more businesses [1]. Certainly, the plan does have some advantages. However, there are still many concerns which still exist.

The mortgage bubble really began in 1977 with the Community Reinvestment Act which allowed the government to veto bank mergers and other major banking decisions. In the 1990s, Attorney General Janet Reno harassed banks into making more “community investments” through the use of studies aimed at proving racism in the lending market. However, the studies managed to only judge loans based on the borrower’s race, failing to factor credit scores as a part of the equation. Ultimately, banks were pressed to either make risky loans or be labeled as racists.

Then-President Clinton later began the bank-bail-out culture, from which Fannie Mae and Freddie Mac, formerly just housing assistance companies, were now free to make risky loans insured by you and me. As the government pushed creditors to lend through the 1990s and into the next millennium, more and more persons with poor credit were given high-value loans on low-value properties. Sadly, we all know what happened next – the market bubbled and collapsed and the taxpayers were left with the financial burden.

Yesterday, I talked about President Obama’s recent interview aired on CBS’s “60 Minutes” on Sunday night. The President aggressively blamed the banks for the financial mess, saying “[n]othing has been more frustrating to me this year than having to salvage a financial system at great expense to taxpayers that was precipitated, that was caused in part by completely irresponsible actions on Wall Street” [2]. While Wall Street did make some stupid moves, our government is the last institution which should be pointing fingers. It’s like Bernie Madoff calling someone unethical.

Unfortunately, beyond all comprehension, the President is – again – telling creditors to lend beyond their comfort level. Riddle me this: if the market bubbles – again – and we bail out creditors – again – will Obama – again – blame the lenders? Creditors don’t just sit on money if they could be lending it; lending is how they make their money. There’s a natural balance between risk and reward, and when that balance is disturbed, well, you know the rest of the story.

Moreover, no government has the right to force creditors to lend. President Obama certainly couldn’t walk up to your front door and say, “Hey there, Bob across the street needs help. He’s having financial problems, and I noticed you have $2,000 in your savings account. I know that amounts to your entire savings and that you have it set aside as a reserve in case you lose your job or have an accident, but you really need to think about Bob’s needs, too.” That would be silly, right? Banks are merely organized groups of people, and when they fail, real people (investors and employees) fail, and thanks to the government’s reckless actions, so do the taxpayers of the United States.

The writing is on the wall. When will we bother to read it?

1. “Obama to Banks: ‘Rebuild Our Economy’,” money.cnn.com, November 14, 2009.
2. “Transcript: President Barack Obama,” cbsnews.com, November 13, 2009.