WASHINGTON – Even as major banks scramble to repay billions of dollars in taxpayer aid, President Barack Obama took the nation’s top bankers aside Monday and implored them to do more to get people back to work and Main Street vibrant again.
On a day when Citigroup Inc. reached terms for repaying $20 billion in bailout money and Wells Fargo & Co. released details of its plan to repay $25 billion, Obama told the executives in a White House meeting that refunding money doled out at the height of the financial crisis wasn’t enough.
In the president’s view, taxpayers helped give the Wall Street executives he recently labeled as “fat-cat bankers” another nine lives with government bailouts. Now he wants those executives not only to return the money but to make an “extraordinary” commitment to “help rebuild our economy.”
That commitment is to lend more money to small businesses, which long have been the nation’s engine for job growth – even though some critics question the need for more loans.
After the meeting with executives from Wells Fargo, Citigroup, Bank of America Corp. and 10 other large banks, Obama said in public comments that credit was still too tight where it counts the most.
“Given the difficulty businesspeople are having as lending has declined and given the exceptional assistance banks received to get them through a difficult time, we expect them to explore every responsible way to help get our economy moving again,” Obama said.
Executives said they got the point. Bank of America pledged $5 billion more to small and medium-size businesses next year. JPMorgan Chase reiterated an announcement it made last month to increase lending next year by as much as $4 billion. And other bankers also promised to do more – within limits.
“Every bank in that room talked about adding many, many small business originators and setting very aggressive goals for small business lending next year,” Richard Davis, chief executive of US Bancorp, said after the meeting. “We have to find a way to qualify more people and not put ourselves at risk three or four years from now because of actions we took at a moment in time.”
The Federal Deposit Insurance Corp. recently reported that business loans by banks dropped $89.1 billion, or 6.5 percent, from July 1 to Sept. 30, compared with the previous quarter.
But pressuring executives at big banks will not solve the problem, analysts said.
Most loans to small businesses come from community banks, which also feel increased pressure from regulators to curtail risks. And many creditworthy small businesses aren’t seeking loans because the recession has scared away too many customers, they said.
“A huge part is the demand side, even though Washington says it’s a supply-side problem,” said William Dunkelberg, chief economist at the National Federation of Independent Business.
The group’s monthly survey of small businesses last month found that getting loans continues to be difficult but about the same as it was in the recovery from the recession during the early 1980s. Overall, 29 percent of businesses said their borrowing needs over the previous three months had been satisfied, while 10 percent said they had problems getting the financing they needed.
Obama said that while bankers claim they can’t find enough creditworthy risks, he continues to hear from small-business owners who say they are creditworthy but can’t get loans.
The bankers told him they were hiring more employees to work on loans, increasing their target lending and taking a second look at borrowers who have been rejected.
The meeting came hours after Citigroup announced it had reached a deal with the U.S. Treasury Department to repay $20 billion in bailout money. The move will leave the government with equity in the bank but will release the financial institution from strict executive compensation rules aimed at the seven recipients of “exceptional assistance” from the Troubled Asset Relief Program. Treasury said it planned to sell its 34 percent equity stake in Citigroup within a year.
Late Monday, Wells Fargo said it had reached agreement with Treasury to repay $25 billion in TARP money. The San Francisco bank, which has paid $1.4 billion in dividends on the bailout money, plans to sell $10.4 billion in new stock to help pay off its debt.
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