Still Sending Mixed Messages to Banks

Once in a while even Barney Frank can be right, as he is warning regulators against getting too tough on banks out of fear that lending will completely dry up.

Mr. Frank's letter complains examiners are enforcing "unofficial" capital requirements that are higher than the normal standard. Secondly, it says examiners are focusing bank reviews mainly on asset quality and not other measures of a bank's health. Third, it says "banks are being forced" to write down the value of assets to their market value, which can lead to "artificially low prices."

Congress wants banks to lend, while regulators don't want banks to hoard capital. Meanwhile in the Senate, Countrywide Dodd wants a new regulatory bureaucracy to oversee banks instead of the Fed and the FDIC (which begs the question, what do we then do with the FDIC and Fed?)