Back off bank regulation

As a former banker for nine years and having been on the front lines during the boom and bust of the real estate market, and then the overall economy, I believe the actions of the banks in the last year are in direct response to the new regulations and oversight being implemented.

Economics 101 has always been that with lower rates, we increase the availability of credit.

In the last year, most of us saw Fed rates drop but credit cards jump from 10 percent to 30 percent, existing equity lines closed and new ones impossible to open.

Spending slowed, and jobs were lost.

Mortgage rates may be low, but the lending guidelines from Fannie Mae have tightened, and down- payment requirements jumped, making it more difficult to buy a home than it has been in my entire career in the business - since 1992.

The general reaction has been: "We gave the banks all this money, so why aren't they lending?"

I believe this is a power play and one that may in the long term actually be in the best interest of the public.

The new regulations and oversights, along with the increasing push to regulate the internal decisions of the bank - compensation plans - have done the exact opposite of inspiring banks to lend.

By tightening the availability of credit, banks are playing the only effective card they have in changing the course of governmental control.

Keep in mind that it was the Congress under President Clinton that pushed the banks to lend when they normally wouldn't have, creating the boom but then increasing the rate of foreclosure in this recession.

The feds have been aggressively been going after banks on equity and liquidity, and until that eases we will not see any significant increase in lending.

The result is banks are pushing to "resolve" loans that don't need to be resolved, based not on prudent lending but on fear of federal intervention.

I believe the real way to open the vault back up is to back off increasing regulation, change accounting rules and especially back off trying to tell the banks how to structure their compensation plans.

It may be popular to target big salaries, but it's also unconstitutional and not just impacting top executives. It hits the front line and everyone in between, which, by the way, also sets a precedent for further government control of wages.

Could that mean your paycheck, too?

SARA NORMANDEAU

Tampa