Photo by J. Scott Applewhite
WASHINGTON -- President Barack Obama implored top bankers Monday to help keep the fragile recovery from faltering by boosting lending to small businesses and getting behind an overhaul of financial regulation. ''We rise and fall together,'' Obama declared.
In response to the president's burst of populist jawboning, some banks pledged to increase loans and exercise more self-control over outsized compensation. But the full impact of Obama's intervention was hard to gauge: The government is losing leverage as major banks repay bailout loans.
Obama's lecture to the bankers was also part of a broader election-season Democratic effort to tie sluggish bank lending to continued high joblessness -- and to try to tie the banking industry to Republican efforts against Obama's financial overhaul legislation.
It's a tough balancing act, given past contributions of big banks to Democratic as well as Republican candidates.
Obama called his message a simple one: ''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.''
He urged bankers to ''explore every responsible way'' to boost lending and to ''take a third and fourth look'' at every loan application.
The bankers said they got the message.
But they also insisted they are getting conflicting messages from Washington when the do try to make more loans. While the White house presses for more lending, regulators are cracking down on banks to lend more prudently and forcing them to keep larger cushions of capital to protect against future losses. That means there's less money available to lend.
The meeting came amid growing friction between the president and the banking industry, a day after Obama denounced ''fat cat bankers on Wall Street'' who enjoy big bonuses but ''just don't get it.''
''He didn't call us any names'' during Monday's session lasting just over an hour, said U.S. Bancorp CEO Richard Davis.
Davis called the meeting ''very productive'' and acknowledged banks haven't done as good a job as they could in resuming lending. He said he and fellow bankers understood the public outcry over compensation and said they agreed to ''make sure we are doing the job of banking, which is lending.''
''And we should get paid for that when we do it,'' added Davis, who is incoming chairman of the Financial Services Roundtable.
Bank of America CEO Kenneth Lewis pledged that his bank would lend $5 billion more to small- and mid-sized businesses in 2010 than it did in 2009. JPMorgan Chase & Co., said last month that it would boost such lending by $4 billion.
Participants said Obama focused on four areas: Make more loans to small and medium-size businesses, increase modifications of underwater mortgages, bring executive compensation under control and give more support to legislation overhauling financial regulation.