Yesterday, I blogged that President Obama erred in urging the nation’s largest banks to “lend more.” Essentially, when you strip down the president’s command, he is suggesting that banks lower their credit score and underwriting standards, which is not exactly good advice when the Great Recession was caused by doing just that.

I reflected on what I wrote and I realized that my sentiments on the matter go deeper than what I outlined yesterday. At the root, Obama is blowing — has blown? — a unique opportunity to install real improvements to the nation’s banking system. The banking sector literally has owed him the shirt on their backs — and for what does he ask in return? Looser underwriting standards? In my view, the president is wasting his political capital, and it is a sad turn of events.

If you want a peek at the agenda the president should be pressing, just Google “Elizabeth Warren,” the head of the Congressional Oversight Panel. Here’s what she said recently (courtesy of Baseline Scenario):

Obama should be pounding on the same table. To be fair, he did needle the bank CEOs yesterday about the disconnect between their statements about financial reform and the banking industry lobby’s public stances on the various proposed rules. But this point gets obscured by the lend-more-for-the-American-people posturing.

It can be argued — and it has been implied in the mainstream media here and here — that the president has already squandered his political capital and leverage. I am not sure I would go that far — we’re still talking about the federal government here. What I would suggest, however, is that the president is not skillfully using the political currency still in his wallet. Lend more? A short-term result that truly needs a long-term approach.