Obama vs. the Banks: Why make risky loans when you can exploit the Fed-Treasury interest rate spread?

Gerald P. O’Driscoll writes at the Wall Street Journal: “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%.”