If bankers become overly conservative in response to past lending mistakes - or if examiners force such behavior - it will hurt bankers' own long-term interests and the economy in general.

Following an extended boom in housing, the demand for homes began to weaken in mid-2005. By the middle of 2006, sales of both new and existing homes had fallen about 15 percent below their peak levels. Homebuilders responded to the fall in demand by sharply curtailing construction.

Banks need to continue to lend to creditworthy borrowers to earn a profit and remain strong.

Ben Bernanke Quotes