By Binyamin Appelbaum and Michael A. Fletcher
Washington Post Staff Writers
Saturday, March 28, 2009
Lend more. Spend less.
That was President Obama's message yesterday during a meeting at the White House with the chief executives of the nation's largest banks. The president told the bankers he understood their critical role in renewed economic growth, and was committed to returning the industry to long-term health.
At the same time, Obama said the executives needed to understand and acknowledge the public's anger over the financial crisis and the massive paydays that have continued long after the industry went on the public dole.
"Excess is out of fashion," Obama said, according to participants in the gathering.
The president held himself up as an example, saying that he had not yet renovated the Oval Office and was still using George W. Bush's furniture, even noting the stains on the carpet. He urged the banks to show comparable "constraint and responsibility," adding that the nation had undergone a cultural shift.
The bankers, a roll call of industry titans including the heads of Bank of America, Citigroup and J.P. Morgan Chase, arrived with their own message: The government's steady support is a critical prerequisite for increased lending. The administration, they said, needs to provide more steadiness and support.
Several of the executives, each of whom had a chance to address the president, also offered specific accounts of their efforts to increase lending.
The meeting comes as the administration tries to craft a working relationship with an industry that is key to the nation's economic stability, while at the same time channeling a wave of public anger.
Just more than a week has passed since the outcry over bonuses to employees of American International Group led the president to call the payments an "outrage," and the House to pass a bill that would essentially seize through taxation the bulk of any bonus paid by a financial firm taking federal aid.
Obama has since tempered his rhetoric, and the Senate has slowed the legislation. Both moves are a response to warnings that hitting the banks would only hurt the economy.
Yesterday, Obama made this point explicitly, casting himself as a bulwark between an angry Congress and the banks who was seeking to push the industry toward necessary changes while shielding it from the consequences of populist rage.
"The president emphasized that Wall Street needs Main Street and that Main Street needs Wall Street," said White House press secretary Robert Gibbs.
"I think the president made a clean break with the rhetoric of last week," said Michael Paese of the Securities Industry and Financial Markets Association. Paese was one of several trade group representatives at the meeting.
The bankers also expressed optimism as they left the White House. "We look forward to working with the administration," said James Rohr, the chief executive of PNC, in a statement that summarized the public remarks of the others.
This account is based on the recollections and notes of several people who attended the meeting and who spoke on condition of anonymity because the session was private.
President Obama began by speaking about his concern for the continuing fragility of the financial system and his desire to find long-term solutions so that renewed lending could spark economic growth. He also said that systemic risks had been overlooked during the boom, and that there was a need for corrective action, a reference to the administration's blueprint for regulatory reform.
Treasury Secretary Timothy F. Geithner presented Congress earlier this week with an outline of the administration's financial regulatory plans. The issue is expected to be a major topic when the president meets next week in London with leaders of the world's largest industrial nations.
During the meeting yesterday, the president also returned several times to the need for the banks to behave modestly.
Obama at one point cast the issue through the eyes of "a single mom trying to make a mortgage payment," watching banks that get aid spending money on bonuses, and feeling what he described as justifiable anger. He added that such anger could derail the administration's efforts to help banks through programs designed to clear away troubled assets and provide new capital at public expense.
The president, however, spent most of the meeting listening. There were 13 executives seated with Obama, and he called on each in turn, beginning with Jamie Dimon, the chief executive of J.P. Morgan Chase.
Dimon told the president that banks had made mistakes: excessive lending, inadequate underwriting and paying some employees too much. He said, however, that the word "bank" had become an unfair shorthand for the wide variety of financial institutions that engaged in problematic behavior, including mortgage brokers, insurance companies and money-market mutual funds. He also expressed broad support for the administration's regulatory reform agenda.
Dimon was the first of several chief executives to tell the president that his bank has increased its lending.
The chief executive of Wells Fargo, John Stumpf, spoke of increased mortgage lending in recent months, which he described as a boon to the economy.
Richard Davis, the chief executive of U.S. Bancorp, told the president that his company was placing a particular emphasis on maintaining loans and lines of credit to longtime customers, particularly small businesses, even in cases in which the bank's risk models called for curtailing or ending those relationships.
Obama responded by encouraging all of the banks to maintain their relationships with existing customers, particularly small businesses. He told the banks that he was reading a lot of letters from smaller employers whose access to credit had been cut.
All of the banks at yesterday's meeting have received infusions of taxpayer money, and several of the executives told the president they were eager to repay those investments. The president said he would welcome repayments, but only if doing so would not curtail the banks' ability to make loans.