Obama To Small Banks: Lend A Hand To Small Businesses
JACKI LYDEN, host:
I'm Jacki Lyden and this is TELL ME MORE from NPR News. Michel Martin is away.
Coming up, our Sipping Series stirs up some hot new recipes for holiday Sangria. That's in a few minutes. But first, President Obama met with leaders of community and regional banks yesterday. They discussed, among other things, the foreclosure crisis that has crippled the housing market and plans to increase lending to small businesses.
Community banks often face stricter regulations that may prevent them from lending as the economy struggles to get back on its feet. We thought we'd talk more about this with William Bynum. He's the president of Hope Community Credit Union in Madison, Mississippi. He attended the president's meeting yesterday. We're also joined by Alvin Hall, our regular contributor to matters related to finance. Welcome to both of you.
Mr. WILLIAM BYNUM (President, Hope Community Credit Union): Thank you. Glad to be here.
ALVIN HALL: Good morning.
LYDEN: Thank you. And, Mr. Bynum, you went to the meeting yesterday with the president. What did he have to say? Did you hear what you wanted to from the meeting?
Mr. BYNUM: It was a good meeting. I think I was very encouraged to see the president place more emphasis on looking for ways to support small institutions that are at the forefront of lending and community development in this country. He met last week with larger banks. Those banks, in my experience, have historically not been very present in the community that I serve. And I think it was a recognition that in order to get economy moving, it's going to take more lending from institutions that are actually on the ground.
LYDEN: Well, he's certainly placing small banks like yours and, of course, they are not that small, but smaller into the equation to try to solve the problem. Did you hear any practical solutions?
Mr. BYNUM: There really wasn't a lot of new ideas put forward by the administration. I think the president wanted to hear what we were experiencing on the ground. What are some of the challenges that we're seeing. What are the kind of demands we are experiencing in our institutions. And that really varied from institution to institution and from location to location.
But I think that what we did here that was encouraging was the acknowledgement that the regulatory environment needs to be more balanced and that institutions have to have reasonable rules of the road in order to be able to respond to the needs of the small businesses in our community.
LYDEN: Okay. Well, I'd like to hear more about the regional differences in a little bit. But first, Mr. Hall in New York, President Obama has met with both big and then later this week, yesterday, community banks. What does this mean for consumers? What do you think the White House is trying to say by following up this big meeting last week with harsh rhetoric? The president actually termed bankers fat cats, as (unintelligible).
LYDEN: And now this broader meeting scattered amongst communities around the country.
HALL: I think the president recognizes that a lot of the major banks really did leave their responsibility behind to small businesses. When things got really rough, they cut credit lines for small businesses. Sometimes just willy-nilly, you know, ask them to cut their credit cards up and say we are not going to honor your credit cards anymore.
So, this left a lot of the small businesses nowhere to turn, but the community banks, who tend to be more user friendly, tend to listen more and tend to have their fingers on the pulse of the community, what those businesses need to survive. And I think the president was reaching out to those institutions to say to America, we are there with you at the grassroots level. We're not just looking at the big players and their problems. We're also looking at the community banks who are the ones who may help you survive.
LYDEN: Is this the first - is this trying to put community banks front and center in a way we haven't seen before?
HALL: I think he is trying to put them a little more front and center. But clearly there is a conflict here. The major money centered banks have always been the leaders, especially over the boom years, they were the ones who set the trend. So, now that they have accepted the TARP money and are paying it back so quickly, they expect to move back to the top tier.
But the president is saying, listen, during the difficult times, you walked away from your responsibility as a small businessman and therefore you need -we need look at these community banks who at least were less risky and tried to hold up to their part of the financial bargain in America.
LYDEN: And considering some of those communities, Mr. Bynum, amongst those represented yesterday, there were people from Schaumburg, Illinois, which is a suburb of Chicago, Solvay, New York, the German American Bancorp in Jasper, Indiana, your community in Madison, Mississippi, why have smaller banks had difficultly getting some of the big money and why are they reluctant to accept TARP money? I guess, the president is talking about billions of dollars.
Mr. BYNUM: Again, I think that really varies. In some cases, financial institutions have plenty of capital and are able to go out and get deposits fill in and they're looking for demand. I think the challenge for them is the regulatory environment. Regulators or examiners are appropriately concerned about safety and soundness, but I think in response to the financial market meltdown, they have gone a little far. The (unintelligible) has swung to where there is a lot more concern about the earnings and the capital, positions the banks have, which in the financial institutions, without really taking into consideration the changes that have occurred in the economy.
On the other hand, some institutions like mine are seeing demands at greater levels than we ever have seen because large banks are not lending and those businesses need excess capital to continue to operate. And their only options are community banks, credit unions and also community development and financial institutions were very present in the room yesterday. I think the president recognizes that those institutions have a long history of reaching those communities that are historically underserved...
Mr. BYNUM: ...such as minority communities, low income areas, rural areas that even in the best of times, you know, traditional banks don't serve very effectively.
LYDEN: If you're just joining us, you're listening to TELL ME MORE from NPR News. I'm speaking to Alvin Hall and William Bynum about President Obama's community bankers meeting, which took place yesterday. Mr. Hall, is it true that these community banks have had difficulty getting this money to help underserved communities and how can things change?
HALL: Yes. Once the financial crisis came into place, the regulators responded by tightening the capital requirements of the banks, therefore making it more difficult for them to make loans. You can understand how this happened if you look at what happened with the big moneys in our banks, but it also drilled down. And for these banks, where they don't have the stuff, they don't have risk management tools in place, this added a level of bureaucracy that made it difficult for them to make these loans. Also the requirements for more perfect credit made it difficult for them to make loans to people who were at less than stellar credit. So, there was a knock-on effect here.
And I think the president really in this session was more listening to the bankers rather than trying to provide them with solutions because in these local communities, there is no one-size-fits-all solution. What may work in Kalamazoo, Michigan, may not work in North Platte, Nebraska, or, you know, Susquehanna, Pennsylvania. It just won't work. So, I think they need to look at each of these situations much more individually, which is, I think, hard for the regulators to do.
LYDEN: Well, the president referred to the independence of the regulators, but you would think that a meeting like this could have a lot of moral suasion perhaps?
HALL: Yes, I think, absolutely. And they will think now maybe when I go to look at this bank or look at this bank's books, I will look at it differently because in this area, there may be a need for higher concentration of commercial real estate loans. In this one, there may be a need for more loans serving businesses like diners or restaurants. So, I think they need to look at this more individually and I think moral suasion may have a little degree of influence here, Jacki.
LYDEN: Mr. Bynum, before we leave you, would you give me a snapshot of what you think is most needed out of a meeting like this one in the delta area where you are in Mississippi?
Mr. BYNUM: You mentioned the different responses to TARP. I think in many institutions, TARP (unintelligible) has a stigma, but for trade unions, we previously did not have access to TARP funds. I think there's a move to make those funds available. We're not concerned about (unintelligible) top levels. We're opened to accountability and scrutiny. We just need the resources to be able to lend. We're seeing more demand than we ever had and I think that access to more TARP funds would be helpful. Increasing the absolute investigative program is something we advocated, I think, the administration is very supportive of.
LYDEN: What would that do exactly?
Mr. BYNUM: It would increase the level of lending available through these main programs. If there are any guaranteed programs, which allows us to make more start-up loans and be more flexible on collateral in 504 lending, which is a great tool for real estate financing, which is a significant challenge in this current...
Mr. BYNUM: ...environment.
LYDEN: All right. Alvin, are you hopeful that 2010 will show some sort of turnaround?
HALL: I actually am. And I wasn't so a month ago. But I think with the increase in the stock market as well as the more positive accents and attitudes of a lot of the people who are in the management positions in financial institutions, I think there will be an upturn, I hope, in employment, and an upturn in business profits over the next years. And will enable people - next year, at least - and it will enable people to see the future a little bit more bright.
LYDEN: Just very quickly, Alvin, what else do you think the president should do to encourage people?
HALL: I think this jobs bill is just the centerpiece of it. No matter what you do, these businesses are not going to hire new people unless they feel that the - their revenues will pick up, that their businesses will pick up in the New Year. So, I think the jobs bill is really at the core of achieving the economic turnaround that he wants. Otherwise, I fear that without the job increases, people won't start to spend, businesses won't feel secure, and it will just be smoke and mirrors.
LYDEN: Alvin Hall is TELL ME MORE's regular on matters relating to finance, and he joined us from our bureau in New York. William Bynum is the president of Hope Community Credit Union, and he joined us by phone from Madison, Mississippi. Gentlemen, I want to thank you both for being with us today, and wish you happy holidays.
HALL: Happy holidays to you.
Mr. BYNUM: Same to you.
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LYDEN: Just ahead, an American Muslim explains why even after 9/11, he thinks that the U.S. is a great place to practice his faith.
Mr. MICHAEL MUHAMMAD KNIGHT (Author, �Journey to the End of Islam�): Anywhere that Islam is so connected to political power, it's going to be political power that defines the religion. And in America with Islam so removed from political power, we have a chance to build it for ourselves.
LYDEN: Writer Michael Muhammad Knight on his book, �Journey to the End of Islam.� That's coming up on TELL ME MORE from NPR News. I'm Jacki Lyden.
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