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What’s keeping bank credit from flowing? Regulators covering their keisters. CNBC reports:

“You’re being examined right now, not on what the agencies are saying in Washington,” said one executive of a small northeastern bank who, like others in this article, asked not to be identified. “You are being examined in light of an examiner not wanting to have their name associated with another bank failure.”

From 2008 through 2011, 414 banks have failed in the U.S, according to the FDIC and as of the third quarter of last year 844 remain on its “troubled bank” list. Bank executives told CNBC it is no surprise examiners on the ground are being more conservative in assessing a bank’s loan portfolio, given the memories of the 2008′s financial crisis are still fresh in their heads. Still, three years on, they said, you would expect examiners to lighten up.

“Regulators are not being as reasonable as they used to be,” said one CEO of a small midwest bank. He recalls how they were back in the 1980s after the savings and loan crisis. Then regulators would work with his bank to figure out ways a farmer could make good on a bad loan. Today, he says, regulators are not practicing forbearance.

Instead, bank executives told CNBC, examiners are rigidly focused on global cash flow, or knowing what exactly the loan will be used for, and where a client is getting the money to repay the loan. These are factors in good credit analysis, but they don’t always outweigh other equally important considerations such as track record, or personal knowledge of a borrower. [Emph. added]

This should come as no secret. You’d think it would be the easiest thing in the world for the White House to call up the Comptroller of the Currency and tell him to have his examiners get with the program. . . .