By Katie Kieffer
Image credit: http://tinyurl.com/ycgjty4
Black and blue is the new red in banking. If you’re a bank, all you want these days is a Snuggie™. Daddy Congress and Mommy Treasury are becoming downright abusive with the spanking paddle. If there were a Bank Protection Services agency it would be full of cases.
Spanking’s merits are debatable for children who are too young to be reasoned with, but woe to the person who spanks an unruly teenager thinking that they will teach them a lesson. The “lesson” will yield strong resentment toward the spanker – not docile obedience.
Banks – like teenagers – are adult-like entities. They are analytical institutions comprised of adults, not babies. So, the government is doing the entire banking industry and the U.S. economy a disservice by treating banks as if they were bratty, screaming children.
Government mother-henning and micromanaging needs to go out the window in favor of a system that will allow banks to get on the fast-track to profit, responsibility and independent growth. As with raising a teenager, it’s effective to show them love by withholding privileges until they reform their behavior. Once they are on a track toward reformation, it is necessary to give them the independence to make their own decisions and mistakes or they will be eternally dependent on their parents.
Screaming and spanking doesn't work for teens – or banks.
Let’s take a look at some of the abusive treatment that banks are receiving, and I’ll offer alternative reforms for consideration:
Spank 1:
Many banks were “rescued” by the government about a year ago when they were on the brink of bankruptcy. Today, “Pressure groups have decided that if banks are an arm of the state, they should be subject to the same scrutiny as the government. … Over the past few weeks, it has become clear that the banks will have to negotiate with more and more lobbyists, unions and campaign groups as government-owned companies are forced to become more responsive to issues in the public interest,” commented Bloomberg News columnist, Matthew Lynn, in his Nov. 29, 2009 Pioneer Press column titled, “Banks need to forget politics to be run well.”
More loving solution:
“Banks must be able to make decisions based on commercial criteria. Otherwise, they will just end up lending money to people who can’t pay it back,” says Lynn. Obviously a parent isn’t going to do their teenager a favor by telling them what to major in and where to go to college. These are decisions they need to make themselves, based on their own interests and experiences, such as internships. Similarly, banks need to have the independence to make loans based on their own institutional interests and experiences so they can make a PROFIT – not cater to interests groups that are clamoring for money, but can’t pay the bills.
We will not get out of this recession until the government steps back and allows banks to go back to private owners who will manage their profitability under strict terms, but not pressure them politically.
Spank 2:
More loving solution:
The Treasury is looking for a silver bullet to solve the financial crisis and diffuse prior government incompetency. But, there isn’t one. Just like a parent or a teacher would fail to reform a deviant teen by putting them in front of their peers for public embarrassment, the Treasury will fail to get money moving again by embarrassing banks. A good parent or teacher would get to the root of the problem and find out if the teen needed therapy, medication, support or socialization. Likewise, the government should get to the root of the lending crisis before it pulls out the embarrassment card.
Banks would lend if they could – it’s their job. There are reasons they aren’t lending, and embarrassment alone isn’t going to shake them out. It’s hypocritical for the Fed to point banks in the direction of making more bad loans – a primary reason we got into this financial crisis to begin with.
There’s many reasons banks have lending standards and reserve the right to reign in credit. With property values down 20 to 50 percent, it isn’t surprising that banks are leery to modify a distressed mortgage or reduce principal debts. The government should focus on big-picture solutions to help the economy grow, such as lowering taxes and cutting spending so that entrepreneurs and small businesses – the fuel of our economy – can hire again. This would stimulate the economy and have a positive ripple effect – giving borrowers and lenders the ability and confidence to work together again.
Our government – with mascot Bo – is as cute as a cupcake, but as impractical as Amelia Bedelia.
