Obama, small banks to discuss lending

Small and community banks will likely tell President Barack ObamaBarack Hussein ObamaKrystal Ball tears into 'Never Trump' Republicans Sanders campaign announces it contacted over 1 million Iowa voters Iowa Steak Fry to draw record crowds for Democrats MORE on Tuesday that they welcome additional government programs to boost lending and that bank regulators may be stifling new loans with overly strict examinations.

Obama will meet with the heads of a dozen small and community banks at the White House to look at ways to boost lending that has either stagnated or declined.

“The president will reiterate to attendees that we all have a stake in getting the economy back on track from the government to the small and large financial institutions to the private sector,” said White House spokeswoman Jen Psaki. “As a part of that conversation, he plans to discuss the need to increase lending to small businesses, the housing foreclosure crisis and the importance of passing financial reform to local communities.”

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Obama has criticized the nation's largest banking institutions for not increasing lending, one of the chief aims of the $700 billion government bailout program. The nation's biggest banks have shown plenty of signs of recovery, with their stock values soaring and executives receiving bonuses worth millions of dollars.

Obama called the big bank CEOs “fat cat bankers” before a recent meeting at the White House. The meeting on Tuesday will likely take a much different tone.

“Our guys are not worried about record bonuses this year,” said Richard Hunt, president of the Consumer Bankers Association (CBA), a trade association with many mid-size banks.

The 12 banks at Tuesday's meeting range in asset size from $28 million to $8.5 billion. Four of the 12 received money from the $700 billion bailout program, known officially as the Troubled Asset Relief Program (TARP).

Steve Verdier, senior vice president at the Independent Community Bankers of America (ICBA), said the banks are looking to increase lending.

“They would certainly welcome any way to help the bankers help small business via [Small Business Administration] type programs,” Verdier said. The SBA received $125 million in emergency funds in the defense spending bill passed this weekend that will help continue a loan program that ran out of money. The program was part of the $787 billion fiscal stimulus package.

ICBA pushed for the extension of the program that aims to increase lending through higher loan guarantees and lower fees.

Small banks have also expressed concern that bank examiners in the field are contributing to the low loan volumes. “There are a lot of loans out there that might be good, but might be criticized by examiners,” Verdier said.

House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and Rep. Walt Minnick (D-Idaho) in late October urged federal banking regulators to take a “measured approach” in examinations. They warned of “overzealous regulatory actions” against community banks.

“The president doesn't control what bank examiners do, but the bankers are well prepared to talk about that,” Verdier said.

Banks have also expressed concern that the criticism over lending does not take into account the fall in demand for new loans. The American Bankers Association (ABA) said banks and customers are “understandably more cautious” during the weak economy.

“I think the president has been hearing we're not making loans. That's partly true,” said Hunt. “The demand isn't there. We're interested in making loans, but we're being extra cautious to make sure about credit.”