Obama vs. the Banks | Gerald P. O'Driscoll Jr. | Cato Institute: Commentary

Obama vs. the Banks | Gerald P. O'Driscoll Jr. | Cato Institute: Commentary: "Wall Street fat cats are always a convenient political target, but bankers are responding to the incentives generated by the economic policies of the Treasury and the Federal Reserve. First and foremost is the Fed's policy of near-zero interest rates.

What this means is that banks can raise short-term money at very low interest rates and buy safe, 10-year Treasury bonds at around 3.5%. The Bernanke Fed has promised to maintain its policy for 'an extended period.' That translates into an extended opportunity for banks to engage in this interest-rate arbitrage.

Why would a banker take on traditional loans, which even in good times come with some risk of loss?"