The heads of leading banks in the United States were summoned to the White House this week for a “frank and candid” discussion with President Barack Obama about the paucity of loans to small businesses, the financial industry’s tepid support for regulatory reform and the public outcry concerning huge bonus payouts on Wall Street.
At a 90-minute summit, which participants described as “very, very serious”, the president made clear his frustration that, despite the government’s $700-billion banking bailout package, small businesses across the US were still struggling to obtain loans and credit.
Obama urged the executives to stop lobbying against tightening supervision on Wall Street. He demanded an acceleration in relief for troubled mortgage borrowers and, although there was no indication of mandatory curbs on bonuses, he urged banks to move away from multimillion-dollar awards in cash.
The meeting was attended by the bosses of nine banks, including JPMorgan, Bank of America, Wells Fargo and American Express. The chairmen of Goldman Sachs, Citigroup and Morgan Stanley failed to turn up in person but participated via conference call after fog disrupted flights between New York and Washington.
“America’s banks received extraordinary assistance from American taxpayers to rebuild their industry,” Obama told the press after the meeting. “Now that they’re back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.”
The mood of the meeting was notably severe. It came a day after Obama had blasted “fat cat bankers on Wall Street” in an interview on CBS, complaining that they “still don’t get it” when it came to public outrage over multimillion-dollar remuneration packages.
One of those at the White House gathering, Richard Davis, chief executive of US Bancorp, said the president “didn’t call us any names”, but added: “It was not a moment where we all went round and celebrated the holidays. We talked about how we could do a better job.”
There has been irritation within the Obama administration at the lobbying by the banking industry against an overhaul of regulation, which includes the creation of a new body, the Consumer Financial Protection Agency, to safeguard the public against predatory practices.
The American Bankers’ Association, which represents the industry, has been critical of these plans and has staunchly defended banks’ lending record, asserting that the country’s largest 21 banks had made $2,1-trillion in loans since receiving government funding.
Obama came close to accusing the industry of duplicity, complaining that bank bosses told him that they supported regulatory reform. “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.” Democrats and trade unions are furious about Wall Street’s swift return to bonus payouts. Goldman Sachs, in particular, has felt the public outrage over its bonus pool of more than $20-billion, an average payout of more than $700 000 per employee.
Obama said he did not intend to “dictate to them or micromanage their compensation practices”, yet he praised moves to award shares rather than cash. —