In a pre-Christmas meeting with community bankers, President Obama urged them start lending again to small businesses — and in the process open up the job market. Nice idea, but the bankers noted that some of the lending roadblocks are government-made or because of market problems.

The president met with a dozen banking representatives and told them that “the pendulum might have swung too far” in the direction of tightened lending since the financial meltdown. He said they have to loosen up to get the economy going again.

The bankers reportedly nodded but told the president that factors outside their control are preventing banks from lending. For instance:

• Reacting to the meltdown and accompanying fuzzy lending practices, federal regulators and auditors have tightened the screws on banks, making lenders skittish about loosening up, for fear of being penalized. And regulatory agencies have a fair degree of independence, so it’s not as if the White House can just order them to lighten up.
• Problems with collateral abound because of the drop in the real estate market. Many small businesses use real estate — sometimes an owner’s personal residence — to secure loans. With less security comes less lending.

So, while the president couldn’t guarantee that auditors would relax their standards or that there was a solution to the collateral problem, he promised to review the regs to make sure lending wasn’t being held up by pointless red tape.