The administration is introducing the American Jobs Act to Congress in attempt to alleviate the prolonged high levels of unemployment. The act includes payroll tax cuts, tax credits, extended jobless benefits, fixes for school infrastructure and road repairs.

There is also mention of tax benefits to stimulate small-business hiring, but the administration offers nothing to ease regulation, create a feeling of certainty about future tax rates, or endorse a positive public image of small businesses and community banks.

It has failed to realize and understand the psychology of job creation. It should focus on why individuals, small businesses and community banks have lost confidence in their economic future and are unwilling to invest capital in new or growing business ventures. It relies on Washington-inspired spending instead of developing plans to rebuild that lost confidence.

Two out of every three new jobs in the United States are created by small or new businesses. Most of the nearly 6,500 community banks have supported these opportunities. They understand when their neighbors are making good decisions and know to trust the right people. Historically it has worked well, the community bank has been a close partner with small business for much of our past job growth.

Now the local banker's good judgment and experience has been replaced with intense government standards, regulations and control. Bankers operate under the fear that their decisions might fail to meet regulatory scrutiny.

Bankers are more uncertain of how to respond or what to expect next from the increasingly punative government policies. In turn they have become more reluctant to trust and support local ventures.

Meanwhile entrepreneurs and small businesses no longer know what to anticipate for business regulations, tax rates and structure, or their future local economy. They find it difficult to ascertain how these unstable areas may affect their business or the development of their ideas. The result: they are reluctant to make the new investments necessary to create jobs.

The administration should realize that new or growing business ventures, as well as their community bank partners, must be willing to depend on a stable financial, tax and regulatory future before they will commit capital.

The administration would be better suited in developing policies to address this behavior and change the psychology of fear.

And to add to the level of reluctance, Washington and the press routinely stereotype businesses and banks as gangsters solely motivated by greed. Most recently several government entities have initiated a barrage of suits intended to further demean and punish banks for the recent financial debacle. Some claims may have substance, but most of us would agree that bankers and businesses don't routinely get up every morning contemplating how to screw the government or public.

For the next few years Washington should offer tax and regulatory certainty to small business and assurances that they are not the enemy.

Washington needs to take the banking regulators’ feet off the throats of the better performing community banks. Give them the space to use their best judgment about the potential success or failure of new and growing businesses. Community banks may occasionally fail to make good decisions, but their continuing support of small business is needed now. No single bank or group of these small banks can be a threat to the financial system. Don't make community banks pay for the recent mistakes of the largest banks and financial companies.

It is also important to clarify the requirements for bank capital under Dodd Frank and Basel III so banks are not operating under expectations they will be required to maintain higher capital levels. Banks need this information if they are going to open their balance sheets to more loans.

Create an environment that respects the contributions of small business and community banks, and their importance to growth and the creation of jobs. Develop policies that will change the psychology of uncertainty. See community banks and small business as partners to the solution.

Robert H. Smith, the former chairman and chief executive of Security Pacific Corp., is a founder and director of Commerce National Bank in Newport Beach, Calif.