You should read the transcript From Ken Lewis testimony before the Financial Services Committee of the US House of Representatives. It is a reasoned discussion of Bank of America’s performance and highlights several key points that we rarely read about:

1. The US taxpayers will receive $2.8 billion in dividends this year resulting from the TARP program.
2. US banks have other important constituencies besides the government, namely customers and shareholders. It is critical to balance these varying and often conflicting commitments.
3. There is significant lending going on but the capacity to lend is restrained by: (1) demand for loans; (2) credit quality; (3) ability to fund loans; and (4) regulatory and rating agency demands.

There’s some question about the nature of “significant lending” but most of it is anecdotal. It’s certainly clear that lending standards are important and that it is the only way banks can serve their shareholders and other constituents without greater losses.
Striking the right balance is more difficult than ever, but we shouldn’t forget that forcing banks to make loans is not a wise solution either.