Obama vs Wall Street
President Obama calls on nation's top bankers to increase lending, rein in executive pay and agree to tighter industry regulations.
The following is a partial transcript; for full story, listen to audio.
He called them "fat cats who still don't get it," but less than 24 hours later, President Obama met with those very same top bank executives. Awkward? It should have been, but the meeting included top brass from Goldman Sachs, Bank of America, Morgan Stanley and Citigroup, which announced today it will pay back $20 billion dollars in federal bailout money; which means President Obama has even less leverage to get them to increase small business lending, rein in executive pay, and get on board with tighter industry regulations.
The closed-door meeting was a repeat of one that took place back in March. So why does it seem like the President is reluctant to be a bit more heavy-handed with the banks?
"The reason is primarily that they believe these banks are deeply important to the broader economy, that their health is central to the health of the economy," said "Washington Post" reporter Binyamin Appelbaum. "And the overriding concern is still to get them back to health, even if that means that you need to endure a little political heat for not sort of taking a pound of flesh."
Some of that political heat comes from the growing contrast between how strongly other countries have dealt with the banking industry, and the relatively weaker response in the US.
"Both England and France have now announced plans to impose a heavy tax on end-of-year bonuses for bankers in those two countries," said Appelbaum. "We've seen in general that Europe has been out ahead of the US in cracking down on the excesses that the banks in those countries also participated in."
The President is primarily pushing big banks to lend. According to Appelbaum, lending has been in decline for five consecutive quarters. The total amount that banks have made available to borrowers has fallen by about seven percent, or six hundred billion dollars.
The decline in lending has really hurt small businesses and families hoping to purchase homes or refinance existing loans, says Appelbaum. But bankers say that they need to get healthy before they can make more loans available.
Ed Yingling, head of the American Bankers Association, says that banks are getting mixed messages: They're being pushed to make loans, but they're also having to consider new policies that would restrict loans.
Appelbaum agrees. "After years of regulatory laxity, after years of permissiveness, anything-goes-lending, regulators are also cracking down and requiring banks, in some cases to exercise perhaps more caution than is necessary, but in many cases simply to return to a path of moderation and due diligence in lending, and to operate these businesses the way that they should be operated in the long term. The net effect of that is that less money is going to be available."
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