Obama To Bankers: Increase Lending

President Obama met Monday with the nation's biggest bankers, hoping to jawbone them into providing more small-business loans. Previous administration efforts to boost credit have not yet paid off, and cash-starved business owners are growing impatient.

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel. Big Wall Street banks are busy repaying most of the money they received in last year's bailout. But President Obama insists that doesn't even the score.

BLOCK: Today, Mr. Obama met with a dozen big bankers at the White House. He urged them to play a bigger role in the economy's recovery. He called for their support for new financial regulations and asked them to boost credit for small businesses.

SIEGEL: In a moment, we'll debate the question of what obligation, if any, the banks have beyond paying back the bailout money. First, NPR's Scott Horsley reports from the White House.

SCOTT HORSLEY: The White House meeting came one day after a "60 Minutes" broadcast in which Mr. Obama complained he hadn't run for office to help fat cat bankers. His tone today was somewhat softer. He said he doesn't want to vilify the banking industry but to make sure credit is flowing so businesses can grow.

President BARACK OBAMA: 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.

HORSLEY: Mr. Obama said he is getting too many letters from small business owners who can't get bank loan they need to hire additional workers. Anna Baim could have written one of those letters. She owns a textile company in Imperial, Missouri, and has tried repeatedly to get credit without success.

Ms. ANNA BAIM (Owner, Bernhardt Industries): I had three local banks and I do business with everyday banks that I carry healthy cash accounts with. Nobody would talk to me. I even sit with one of the board members on one of those banks. And they wouldn't loan me any money.

HORSLEY: Baim's company, Bernhardt Industries has been losing business to foreign competitors. Her textile factory wants armed with 120 workers, but now echoes with only 10. She's been pursuing opportunities to rehire some of the laid off seamstresses but said she can't do that without credit.

Ms. BAIM: I would hope to put people back behind the machines that I've got. I would have been able to acquire new equipment. It would have changed the way we operate here.

HORSLEY: Mr. Obama wants bankers to change their lending practices. He said he heard some encouraging words today about banks giving a second look to loan applications but words alone are not enough.

Pres. OBAMA: We expect them to explore every responsible way to help get our economy moving again.

HORSLEY: The Treasury Department has launched several efforts to encourage lending the small firms and Treasury Secretary Timothy Geithner said that's one of his main goals in extending the bank bailout program. With Harvard Law Professor Elizabeth Warren, who heads a congressional panel overseeing the bailout, is skeptical.

Professor ELIZABETH WARREN (Law, Harvard University): It's not news to anyone that small business landing some important small businesses are closing every day. But Treasury has now announced three plans and clearly has not gotten the job done.

HORSLEY: Geithner said that government has tried the bank role small business loans by providing bailout funds to smaller banks. But unlike big banks that were required to take the government's money, many smaller banks have chosen not to.

Secretary TIMOTHY GEITHNER (Department of Treasury): And their concern that if they come, they will be stigmatized and they will be submit the risk of conditions in the future that might make it harder for them to run their businesses.

HORSLEY: The government money does come with a lot of strings attached something the Treasury Department is looking it changing. Bankers offer a number of other explanations for why small business lending is down. Sometimes, it's the banks being cautious, sometimes it's their regulators and sometimes it's the small business people themselves, who are reluctant to take on more debt in the face of an uncertain economy. Senior Vice-President Paul Merski of the Independent Community Bankers of America says that's the problem the administration really needs to fix.

Surveying her largely empty factory Anna Baim agrees. The Missouri businesswoman needs credit to start hiring, she says. But what she really needs is more business.

Scott Horsley, NPR News, Washington.

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Obama Presses Banks To Boost Lending

Obama speaks with members of financial services industries i i

President Obama speaks during a meeting with the members of financial services industries to discuss economic recovery, small-business lending, improving lending practices for homeowners, and the administration's plans for financial reform, at the White House on Monday. Jewel Samad/AFP/Getty Images hide caption

itoggle caption Jewel Samad/AFP/Getty Images
Obama speaks with members of financial services industries

President Obama speaks during a meeting with the members of financial services industries to discuss economic recovery, small-business lending, improving lending practices for homeowners, and the administration's plans for financial reform, at the White House on Monday.

Jewel Samad/AFP/Getty Images

President Obama urged the nation's biggest banks Monday to increase lending and stop resisting new safeguards meant to prevent another meltdown like the one that pushed the industry to the brink last year.

"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," Obama said after the White House meeting with the heads of 12 banks — three by phone, due to bad weather.

In the president's brief but harsh statement, he also said the industry had "lobbied vigorously" on Capitol Hill to prevent reform.

Despite promises to the contrary, Obama said, "there's a big gap between what I'm hearing here in the White House and the activities of lobbyists on behalf of these institutions or associations of which they're a member up on Capitol Hill.

"I urged them to close that gap, and they assured me that they would make every effort to do so."

US Bancorp's chief executive, Richard Davis, said Monday that the financial industry had not done enough to articulate its support for regulatory reform.

"We do support regulatory reform," Davis said after meeting with the president. He said he agreed with Obama that there was a "disconnect" between what executives and bank lobbyists were saying about the issue.

Obama urged bankers to take a harder look at finding ways to help creditworthy small- and medium-sized businesses get the loans they need.

U.S. business lending has plummeted since the financial crisis struck, from a peak of $1.65 trillion in October 2008 to around $1.35 trillion earlier this month.

The president's remarks echoed comments he made on CBS' 60 Minutes, in which he laid into financial industry executives, many of whom received millions of dollars in bonuses even as their firms took bailout money.

"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Obama said during the interview, which aired Sunday.

The White House meeting came on the same day that Citigroup said it would repay $20 billion in rescue funds. Last week, Bank of America said it had repaid $45 billion.

The president referred to Citigroup's announcement Monday, declaring that the government was "determined to recover every last dime" of the bailout funds issued under the Troubled Asset Relief Program, or TARP.

Citigroup's repayment of TARP funds allows it to lift pay restrictions that came as an unwelcome condition of the rescue dollars. The bank was among the hardest hit by the credit crisis and rising loan defaults, and it received one of the largest bailouts of any bank. Citigroup got $45 billion in loans, while the government also backed $300 billion in risky investments.

The government also will divest itself of a huge stake it took in the banking giant as part of the bailout plan.

Most other major commercial and investment banks, including JPMorgan Chase, Morgan Stanley and Goldman Sachs, have already repaid the government.

With Citigroup's repayment, which includes interest, the Treasury Department is in line to end up about $13 billion in the black, depending on how much it makes selling the stock, a Treasury official told The Associated Press on condition of anonymity.

By approving the repayment, the government is saying that the bank is once again on a strong financial footing after having faltered on bad mortgages and other shaky debt.

Obama acknowledged Monday that "no one wants banks making the kinds of risky loans that got us into this situation." But he added that he was "getting too many letters" from small businesses that can't secure loans despite being creditworthy.

Bank of America CEO Kenneth Lewis pledged to Obama that his bank would lend $5 billion more to small- and medium-sized businesses in 2010 than it did in 2009. He said the move is part of a broader effort to support an economic recovery.

JPMorgan said last month that it would boost such lending by $4 billion.

From NPR staff and wire reports

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