Patriotic Gore

By Andrew Cline on 10.30.09 @ 6:08AM

What would better motivate a solvent bank to lend money to a credit-worthy small business: (a) profit, or (b) a speech from the President of the United States? If your answer was (b), you might qualify for work in the White House.

To see what is wrong with the President's economic thinking, such as it is, we have to look no further than the President's Saturday speech on small businesses. Profit, the President suggested, is an insufficient motive for banks to lend money to credit-worthy small businesses. Therefore, the President must press them to make loans for patriotism.

"But while credit may be more available for large businesses, too many small business owners are still struggling to get the credit they need," Obama said in his weekly radio address. "These are the very taxpayers who stood by America's banks in a crisis -- and now it's time for our banks to stand by credit-worthy small businesses, and make the loans they need to open their doors, grow their operations, and create new jobs. It's time for those banks to fulfill their responsibility to help ensure a wider recovery, a more secure system, and a more broadly shared prosperity. And we're going to take every appropriate step to encourage them to meet those responsibilities."

I'm not one to casually throw around the "socialist" label. But let's look carefully at that statement. Banks, the President insists, have a "responsibility to help ensure a wider recovery" and "a more broadly shared prosperity."

That would be news to bank shareholders. You know who they are. They're the ones who invested their own money or other people's money (your retirement savings) in hope of getting more back. What of the banks' responsibility to them? Obama doesn't mention it.

Instead, the President asks banks to put those considerations aside and lend money to small businesses on the premise that the loan will not return money to shareholders, but will "spread the wealth around."