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Obama exhorts top bankers to fulfill duty to taxpayers, economy

At the White House, the president tells executives to go beyond paying back taxpayer funds by 'finding ways to help creditworthy small and medium-sized businesses get the loans that they need.'

December 15, 2009|By Jim Puzzanghera

Reporting from Washington — Even as major banks scramble to repay billions of dollars in taxpayer aid, President Obama took the nation's top bankers aside Monday and implored them to do more to get people back to work and Main Street vibrant again.

On a day when Citigroup Inc. agreed to repay $20 billion in bailout money and Wells Fargo & Co. released details of its plan to return the $25 billion it received, Obama told the executives in a White House meeting that refunding money paid out at the height of the financial crisis wasn't enough.

In the president's view, taxpayers helped give the Wall Street executives he recently labeled "fat-cat bankers" another nine lives with government bailouts. Now he wants those executives not only to return the money but also to make an "extraordinary commitment" to "help rebuild our economy."

That commitment is to lend more money to small businesses, which long have been the nation's engine for job growth -- though some critics question the need for more loans.

After the closed-door meeting with executives from Wells Fargo, Citigroup, Bank of America Corp. and nine other large banks, Obama said in public comments that credit was still too tight where it counted the most.

"Given the difficulty businesspeople are having as lending has declined and given the exceptional assistance banks received to get them through a difficult time, we expect them to explore every responsible way to help get our economy moving again," he said.

Executives said they got the point.

Bank of America pledged to make $5 billion more in loans available to small and medium-sized businesses next year. JPMorgan Chase & Co. reiterated an announcement it made last month to increase lending next year by as much as $4 billion. And other bankers also promised to lend more -- within limits.

"Every bank in that room talked about adding many, many small-business originators and setting very aggressive goals for small-business lending next year," Richard Davis, chief executive of US Bancorp, said after the meeting.

"Lending is what we do, and so we want to make more loans," he said. "We have to find a way to qualify more people and not put ourselves at risk three or four years from now because of actions we took at a moment in time."

The Federal Deposit Insurance Corp. recently reported that business loans by banks fell $89.1 billion, or 6.5%, from July 1 to Sept. 30, compared with the previous quarter.

But pressuring executives at big banks will not solve the problem, analysts said.

Most loans to small businesses come from community banks, which also feel increased pressure from regulators to curtail risks. And many creditworthy small businesses aren't seeking loans because the deep recession has scared away too many customers, they said.

"A huge part is the demand side, even though Washington says it's a supply-side problem," said William Dunkelberg, chief economist at the National Federation of Independent Business. The group's survey of small businesses last month found that getting loans continues to be difficult but about the same as it was in the recovery from the recession during the early 1980s.

Overall, 29% of businesses said their borrowing needs over the previous three months had been satisfied, and 10% said they had problems getting the financing they needed. The report said that "many potentially good borrowers are simply sitting on the sidelines, waiting for a good reason to make capital outlays and order inventory and take out the usual loans used to support those activities."

Obama said that though bankers complain that they can't find enough creditworthy risks, he continues to hear from small businesses that say they are creditworthy but can't get loans.

"My main message in today's meeting was very simple: that America's banks received extraordinary assistance from American taxpayers to rebuild their industry, and now that they're back on their feet, we expect an extraordinary commitment from them to help rebuild our economy," Obama said. "That starts with finding ways to help creditworthy small and medium-size businesses get the loans that they need to open their doors, grow their operations and create new jobs."

The bankers, three of whom attended by conference call, told him they were hiring more employees to work on loans, increasing their target lending and taking a second look at borrowers that had been rejected. Obama said it "all sounded positive," but "we expect some results."

"And so I urged these institutions . . . to go back and take a third and fourth look about how they are operating when it comes to small-business and medium-sized-business lending," Obama said.

But the president is losing leverage as more of the banks repay their bailout loans.

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