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Obama leans on bankers to lend more
President Barack Obama sought to reassure his political base Monday by doubling down on his criticism of Wall Street.
Obama convened a White House meeting with a dozen CEOs from the nation’s largest financial institutions, saying they need to increase lending, get on board with financial regulatory reform and change their compensation practices.
The tough talk comes as Obama faces pressure from the left to rein in Wall Street bonuses and remove Treasury Secretary Tim Geithner, the former president of the New York Federal Reserve whom some liberals see as being too close to Wall Street.
Geithner is the administration official most associated with the unpopular $700 billion program to bail out the financial sector, as he advocated for the program under the George W. Bush administration.
One year later, Wall Street banks are on track to pay $26 billion in bonuses for 2009 performance, according to compensation consulting firm Johnson Associates Inc. That’s up from $18.4 billion in 2008.
Bank of America, Wells Fargo and Citigroup rushed to pay back government loans to remove themselves from restrictions on their bonuses.
Liberals are also wary of Obama’s support last week for a Senate strategy that drops the public health insurance option demanded by liberals for healthcare reform. On foreign policy, the left opposes Obama’s decision to send 30,000 additional troops to Afghanistan.
The disappointment on Afghanistan, the public option and Obama’s economic team could pose a real problem for the president, whose own approval rating is hovering below 50 percent. Strategists fear the liberal base of the Democratic primary may not be motivated to come out in force in November 2010, when Democratic majorities in the House and Senate are at stake.
A Research 2000/Daily Kos poll from late November indicated the Republican base is more “fired up [and] ready to go” than was the liberal base of 2008.
Eighty-one percent of Republicans surveyed said they were definitely or probably voting next year, compared to only 56 percent of Democrats.
For Obama, that likely means more harsh rhetoric for Wall Street, especially during bonus season.
“It sure seems they’ve made a calculation that there’s not much they can do through policy, but they can show they get it by … jawboning or using the power of the bully pulpit to criticize the banking industry,” said Democratic strategist Dan Gerstein.
He said he expects to hear quite a bit more populist rhetoric from the White House this bonus season. During an interview on CBS’s “60 Minutes” on Sunday, Obama said he didn’t run for office to help “fat-cat bankers on Wall Street.”
That banks are paying back loans from the $700 billion bailout is good news for the White House in that it provides money that can be put against the deficit or used for a new jobs program, as proposed by Obama.
But it also reduces the leverage the administration has on the banking industry.
“There’s no question that this is just an opportunity to take populist whacks at an unpopular group,” said Tony Fratto, a former Treasury and White House spokesman during the Bush administration.
“It makes you feel good, but it doesn’t really do anything to solve the problem,” Fratto said.
Bank executives meeting with Obama on Monday included JP Morgan Chase Chairman and CEO Jamie Dimon, Bank of America President and CEO Ken Lewis and Wells Fargo President and CEO John Stumpf. Three other executives — Goldman Sachs CEO and Chairman Lloyd Blankfein, Morgan Stanley Chairman and CEO John Mack and Citigroup Chairman Dick Parsons — were unable to attend because of bad weather and dialed in for the meeting.
Executives on Monday had the look of students emerging from the principal’s office, and agreed with Obama on every point.
Richard Davis, chairman of U.S. Bancorp, told reporters after the meeting that he and other executives support financial regulatory reform, but he acknowledged that “we haven’t done a good job of showing it.”
He described the meeting as productive, adding that Obama “didn’t call us any names.”
He also said the bankers “viscerally” agree they should do more lending, but that they need to be careful not to start offering the kinds of loans that got the country into the housing crisis.
Obama said he encouraged bankers to find creative ways to increase lending without making high-risk loans.
“We expect them to explore every responsible way to help get our economy moving again,” Obama said.
The president also criticized the bankers for fighting his administration on financial regulatory reform, saying he “made very clear that I have no intention of letting their lobbyists thwart reforms necessary to protect the American people.”
Much of the banking lobby fought proposals included in the regulatory reform bill approved by the House on Friday, including a measure to create a new Consumer Financial Protection Agency. The industry also worked to weaken other parts of the legislation.
Obama pressed bankers to call off their lobbyists on Capitol Hill.
“The problem is 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 or associations of which they’re a member up on Capitol Hill,” Obama said. “I urged them to close that gap, and they assured me that they would make every effort to do so.”
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