Obama asks community banks to free up business lending

By Binyamin Appelbaum and Michael D. Shear
Washington Post Staff Writer
Wednesday, December 23, 2009

President Obama sought to demonstrate his concern about a shortage of small-business loans Tuesday, meeting with a carefully selected group of community bankers to discuss ways of making more money available.

The president said banks and regulators risk overreacting to the financial crisis, imposing too many restrictions on lending just as businesses need money to expand operations and start hiring new employees.

"In some ways, the pendulum may have swung too far in the direction of not lending after a decade in which it had gone way too far in the direction of getting money out the door," Obama said after the meeting.

The White House invited several bankers from congressional districts where Democrats face tough races next fall, the parts of the country where it hopes the president's message of concern about jobs will have the greatest political impact.

The White House last week asked a trade group, the Independent Community Bankers of America, to suggest eight bankers from a list of areas including Kalamazoo, Mich.; Jasper, Ind.; and Little Rock, according to the group's chief executive, Cam Fine.

Others at the meeting included representatives of credit unions; banks that focus on financing community development; and the Consumer Bankers Association, another trade group.

"The president wanted to meet with a handful of the 8,000 community bankers from all over the country with a diverse set of challenges and experiences," White House spokeswoman Jen Psaki said. "He wanted to make sure the attendees represented a broad set of regions and concerns."

Greeted as friends

Tuesday's meeting lacked the confrontational trappings of the president's meeting last week with the heads of the nation's largest banks. The president had earlier referred to "fat-cat bankers" and suggested that they were not doing enough to repay their debt to the nation. These bankers, by contrast, were greeted as friends.

One executive who spoke on the condition of anonymity because the meeting was private said the large banks were called to the principal's office, while the smaller banks were asked to a parent-teacher conference. He quoted Obama as saying, "Look, you guys aren't the ones who caused this crisis, but you can help me get us out of this crisis."

The president told reporters after the meeting that he asked the group, "How do we move forward over the next year so that businesses are getting the capital they need and that we are starting to see people hired again and people able to finance their homes?"

Small banks are a critical source of loans for small businesses, but many are struggling with rising losses, particularly on commercial real estate loans. The Treasury Department is planning to offer banks about $30 billion in federal aid for a mix of programs to support lending to small businesses, according to people familiar with the matter.

Some community bank executives said the money could help increase lending. Dorothy Bridges, chief executive of City First Bank of D.C., said her bank had not applied for previous rounds of federal aid because she did not want to pay the high dividends required by the government. She said her bank, which focuses on community development, would welcome an infusion if it came at a lower cost.

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