The Obama banking policies reflect two seemingly opposing strategies of government that are usually pursued in a free market. Obama sought to provide proper oversight with regulations, ignoring banks' right to openly compete in a free market. These policies have created special challenges for an Obama administration that had provided major banking firms with money, savings them from a mortgage fiasco created by Fannie Mae and Freddie Mac.

The initial banking policies of the Obama administration, led by U.S. Treasury Secretary Timothy Geithner, sought to stabilize the banking industry by continuing the rescue policies of the previous Bush administration. The Obama administration oversaw injection of the final $350 billion of the Troubled Assets Relief Program funds into the banking industry. Meanwhile, the Federal Reserve under Ben Bernanke continued the policy of maintaining a low Fed fund fate of 0.00 to 0.25 percent.

A previous policy of mild deregulation had permitted banks to expand in size and create investment branches. These branches soon began engaging in high-risk speculation. Steered by the Community Reinvestment Act, these banks' speculation resulted in rapidly inflating home prices. Risks had been transferred to credit default swaps on the secondary markets. This activity proved nothing more than banks gambling on toxic assets that neither they nor homeowners could back up.

When the housing market busted, many homeowners were left with overvalued mortgages on homes that had declined in value. Instead of renegotiating mortgages, banks began retaking distressed homes through foreclosure proceedings.

Republicans have so far refused Obama banking policies that would force banks to modify mortgages. Banks were chastised for not following the administration’s Home Affordable Refinance Program in good faith. And recently, the Obama administration sued 17 major banks for selling $200 billion of toxic mortgage-backed securities to the government housing agencies of Fannie Mae and Freddie Mac.

The administration has promoted financial reform through its support of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Allegedly promoting free markets, Republicans have sought to neutralize Dodd-Frank’s several provisions. They have so far had some success by watering down the restrictions that banks charge in hidden fees on debit card swipes. But Obama banking policies have persisted with the creation of the Financial Stability Oversight Council, the Bureau of Consumer Financial Protection and the Volker rule separating commercial banking from investment banking.