Poor Bargains and Empty Threats – Bread and Circuses for the Masses
December 18, 2009 Leave a comment
Obama Presses Biggest Banks to Lend More
WASHINGTON — President Obama pressured the heads of the nation’s biggest banks on Monday to take “extraordinary” steps to revive lending for small businesses and homeowners, prompting assurances from some financial institutions that they would do more even as they continued to shed their supplicant status in Washington.
Meeting with top executives from 12 financial institutions, Mr. Obama sent a clear message that the industry had a responsibility to help nurse the economy back to health and do more to create jobs in return for the huge federal bailout last year that kept Wall Street and the banking system afloat.
But Mr. Obama also confronted the limits of his power to jawbone the industry as banking companies continued to repay government money received in the bailout. Citigroup and Wells Fargo, two of the biggest, announced on Monday that they were doing precisely that.
If the banks came hat in hand to Washington a year ago to assure their survival, they returned on Monday in a much stronger position to deal with the government. As they scurry to repay the government and escape its influence over their operations, they have been fighting elements of legislation to regulate their industry more tightly.
At the same time, the banks are seeking to restore executive pay to high levels and asserting that the government’s demand that they hold bigger financial buffers against possible losses makes it hard for them to issue more loans.
During the hourlong meeting in the Roosevelt Room of the White House, Mr. Obama prodded the executives to stop fighting the regulation legislation intended to deal with the problems that led to the financial crisis, White House officials said.
“I made very clear that I have no intention of letting their lobbyists thwart reforms necessary to protect the American people,” Mr. Obama said in remarks after the meeting. “If they wish to fight common sense consumer protections, that’s a fight I’m more than willing to have.”
The heads of three of the biggest companies — Goldman Sachs, Morgan Stanley and Citigroup — did not even make it to the White House meeting in person. They had waited until Monday morning to travel on commercial flights to Washington and then were held up by fog.
By contrast, James E. Rohr, PNC Financial’s chief executive, drove his own car on Sunday evening to Washington from Pittsburgh, stopping at a Wendy’s for a sandwich en route. Other chief executives made sure they would arrive on time: Jamie Dimon of JPMorgan Chase flew into Washington on one of the bank’s private jets, while Kenneth D. Chenault of American Express took Amtrak.
Executives at the meeting said that Mr. Obama had told the missing three that he understood that their flight had been canceled. But he directed strong words at the industry afterward.
“America’s banks received extraordinary assistance from American taxpayers to rebuild their industry,” Mr. Obama said. “Now that they’re back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.”
He added, “Ultimately in this country we rise and fall together; banks and small businesses, consumers and large corporations.”
In the glare of the presidential spotlight, Bank of America used the occasion to say it would increase lending to small and mid-size businesses by $5 billion next year over what it lent to them in 2009. JPMorgan Chase announced a similar increase in early November and recently experienced an increase in new applications for loans.
Wells Fargo said in a statement on Monday that it expected to increase lending in 2010 as much as 25 percent, to more than $16 billion, for firms with $20 million or less in annual revenue.
The banking executives promised Mr. Obama that they would take second looks at loans they had denied over the last year. Richard K. Davis, the chief executive of US Bancorp, told reporters after the meeting that the executives were aware of the public perception that they were profiting with hefty bonuses at taxpayer expense, and that they realized they were “under a microscope” and needed to align themselves more closely with the needs of consumers.
But he cautioned that banks had a responsibility to carefully evaluate the qualifications of each client, lest there be a repeat of the bad lending practices that contributed to the financial crisis to begin with.
“We simply want to assure that we make qualified loans,” he said.
White House officials acknowledged that beyond the legislation on Capitol Hill, the administration’s leverage to prod the bankers, particularly on lending, was limited. But Robert Gibbs, the White House spokesman, said that Mr. Obama would keep up the public pressure. “I think that the bully pulpit can be a powerful thing,” he said.
In calling the bankers to the White House, Mr. Obama was seeking to capitalize on public anger over the continuation of big bonuses for Wall Street executives, coupled with the slow pace of renewed lending by institutions bailed out by taxpayers.
During Monday’s meeting, Mr. Obama did not repeat the language he used in an interview on “60 Minutes” on CBS Sunday night, in which he termed the bank executives “fat cats.” During the meeting, “he didn’t call us any names,” Mr. Davis said, adding that “we agree viscerally that more lending needs to be done.”
But with the unemployment rate at 10 percent, the White House needs to move the conversation from visceral to specific, administration officials said. Mr. Obama pressed the bankers to come up with possible solutions, according to administration officials and industry officials. In contrast to the lecturing tones of a similar meeting last March, several people in attendance Monday described this session as more constructive.
“There were no pitchforks, no fat cat bankers,” said Mr. Rohr of PNC.
Several of the chief executives, armed with statistics about initiatives to hire new bankers, replied that they were very focused on lending. Some, like Mr. Davis of US Bancorp, raised ideas like giving a second look to previously denied loans. Others proposed cutting the red tape on Small Business Administration loans.
Mr. Obama will meet next week with representatives of smaller banks, where he is expected to sound similar tones.
A meaningless conference in the Roosevelt Room of the Whitehouse among the US President and the leaders of the banking and investment banking (which are now called, categorically, "bankers"). Telling these people that they should help to stimulate the economy, jobs creation and entrepreneurial enterprise is like telling a drug cartel leader to "please stop selling cocaine, or even more people will become addicted." Serious and productive negotiations require serious incentives for change. Our elected leaders (either by popular vote, electoral college or litigation, as in the celebrated case of Bush v. Gore) are all carrot and no stick.