WASHINGTON--This time, no fat cats. President Barack Obama took his plea for more small business lending to community bankers last week, but his prodding was far gentler than it was with high finance chief executive officers the week before.
The president offered to help ease regulation that bankers say has restricted lending. He praised the small bankers as pillars of their communities.
He listened sympathetically to their pleas for easier access to capital.
“It’s fair to say that most of these community banks were not engaged in some of the hugely risky activities that helped to precipitate the financial crisis,” the president said at the conclusion of the meeting with 12 regional bankers and top administration officials.
That’s a different tone than last week when he famously called top bankers “fat cats” in a television interview and then told them in a White House meeting that they had a responsibility to make “an extraordinary commitment” to help rebuild the economy.
No wonder small bankers have not aggressively fought central elements of his sweeping financial regulation proposal, they don’t make as good a populist target as Wall Street’s banking chiefs and they are essential to President Obama’s goal of spurring small business lending.
“The administration recognizes that, truly, community banks are in a different business than the megafirms and the megabanks,” said Mark Schroeder, chairman of German American Bancorp of Jasper, Ind., and a participant in the meeting.
The bankers told President Obama their experiences where good loans weren’t financed because regulators demanded banks hold more capital and downgrade existing loans. Privately and then later before reporters, the president acknowledged that the regulators are independent agencies but said his administration is looking at “possibilities to cut some of the red tape.”
“In some ways the pendulum may have swung too far in the direction of not lending,” the president said.
The meeting came as the administration is trying to forge a program that would give community banks access to about $30 billion in low interest money from the government’s $700 billion Troubled Asset Relief Program.
Small bankers have been loath to accept TARP money, however. They say they fear the reporting requirements that come with the money as well as any restrictions on compensation and lending that would be attached.
“Right now, you couldn’t make it cheap enough for them to touch it,” said Camden Fine, the president of the Independent Community Bankers of America.
That poses a dilemma for the White House.
Obama advisors see small business expansion as an answer to the high unemployment that has hurt the president politically and is likely to linger well into next year’s congressional election season.
In pushing banks, the administration is trying to reverse a troubling trend. According to the Federal Reserve, loans by the nation’s 8,000 banks fell 8 percent to $6.7 trillion in the past year, and some analysts expect them to keep falling at least through next year.
James MacPhee, president of Kalamazoo County State Bank in Schoolcraft, Mich., said using bailout money is “problematic” for banks, but that banks facing regulators’ demands to increase capital might not be in a position to turn it down.
