JIM LEHRER: President Obama called the leaders of American banking to the White House today and laid on a challenge and a warning. The bankers were guarded in their response.
NewsHour correspondent Kwame Holman begins our coverage.
KWAME HOLMAN: The face-to-face at the White House lasted well over an hour, longer than expected. Nine major bank executives attended, with three others conferenced in.
U.S. PRESIDENT BARACK OBAMA: I have just finished a candid and productive meeting with the CEOs of 12 of our nation’s largest financial institutions.
KWAME HOLMAN: The president pointed out, many of the banks faced bleak prospects just a year ago and might not have survived without government help.
BARACK OBAMA: When many of these institutions were on the verge of collapse, a predicament largely of their own making, oftentimes because they failed to manage risk properly, we took difficult and, frankly, unpopular steps to pull them back from the brink.
My main message in today’s meeting was very simple: that America’s banks received extraordinary assistance from American taxpayers to rebuild their industry and now that they’re back on their feet we expect an extraordinary commitment from them to help rebuild our economy.
KWAME HOLMAN: Specifically, Mr. Obama said he urged more lending to small businesses in an effort to stir job creation. He also pressed the bankers to support a sweeping overhaul of the financial regulatory system. It passed the House on Friday and moved to the Senate in the face of industry opposition.
BARACK OBAMA: I made very clear that I have no intention of letting their lobbyists thwart reforms necessary to protect the American people. If they wish to fight common-sense consumer protections, that’s a fight I’m more than willing to have.
KWAME HOLMAN: The tough talk was a carryover from the president’s interview on CBS’s “60 Minutes” last night.
BARACK OBAMA: I did not run for office to be helping out a bunch of, you know, fat cat bankers on Wall Street. The only ones that are going to be paying out these fat bonuses are the ones that have now paid back that TARP money.
KWAME HOLMAN: Some of the bankers played down the pointed criticism.
Richard Davis of U.S. Bancorp spoke in the White House driveway.
RICHARD DAVIS, CEO, U.S. Bancorp: We’re in this together. And we understand that the bankers are not surprised by the public response. We are paying attention to it. We get the same letters from small business owners who want more availability to credit.
So, I think the productive conversation allowed us to align our thinking and be more in line with each other as we talk to the American public about being party to this recovery. We haven’t done a very good job of saying that. And we’re going to now.
KWAME HOLMAN: Before the White House meeting, Citigroup became the latest big bank to announce it’s repaying its federal rescue money to the U.S. Treasury, $20 billion worth. And the government will sell its stake in the company, worth another $25 billion.
The move is aimed at freeing the bank from the scrutiny that came with the rescue program, including restrictions on executive pay. Wells Fargo now is the only national bank that has not yet paid back its bailout money.
JUDY WOODRUFF: We take a closer look now at what happened in today’s meeting with the president and bankers.
Valerie Jarrett is a senior advisor to the president. She participated, and she joins us now from the White House Briefing Room.
Valerie Jarrett, good to see you. Thank you for being with us.
VALERIE JARRETT: Hello. How are you, Judy? Good evening.
JUDY WOODRUFF: First of all, the president had some really tough words for these bankers over the last few days. How did this meeting go?
VALERIE JARRETT: Well, I think it was a very constructive and productive meeting.
Yes, he did have some tough words, but he also said to them, look, the way back to recovery is with your help. We need you right there at the table working with us hand and glove. And on the four key topics that he addressed at the meeting, I think that we saw that there was a lot of alignment in terms of lending.
The banks did agree they are going to try to beef up their small business lending, that they are going to take a look at loans that they have rejected and see if they can give them another chance if they are actually good loans. He asked them also to take a hard look at their executive compensation and make sure that they understand that the American people are very frustrated.
Having spent taxpayer dollars to get the banks back on track, they don’t want to see all those dollars going out to pay executive bonuses. He also said he is concerned about making opportunities available for people to refinance their homes. And the banks said, look, we want people to stay in their homes. And, so, the president asked them to push harder to more move speedily on home refinancing.
And then finally and very importantly, the president asked for their support for financial regulatory reforms, so that we can make sure that we don’t end up back in the same extreme situation that we were in, in the beginning of the year, and we were heartened to see that all of the banks unanimously pledged that they will support regulatory reform.
In fact, they said that 80 percent of what we put on the table, that they are in agreement with. And the president said, look, if there are some unintended consequences that you think would be deleterious to business as a result of provisions, tell us what they are, come and work with us constructively.
So, I think on all four fronts, the meeting was very constructive.
JUDY WOODRUFF: I think some people are wondering, are a little bit confused, Valerie Jarrett, because, on the one hand, the president said today I don’t want to vilify anybody, but then last night, in that “60 Minutes” interview, he said, I didn’t run for office to bail out a bunch of fat cat bankers.
Which picture is more accurate?
VALERIE JARRETT: They are both accurate.
Look, the president expressed frustration not just on his own frustration, Judy, but the American people are very frustrated. I think what they saw is that, look, we stepped up. Taxpayers did their job a year ago. We provided the important dollars that were also very unpopular dollars to help right the business community and get the banks back on track.
And now what the president is saying, having done that, let’s see what you can do to work with us cooperatively to give something back and improve our overall economy.
Now, there is a huge disconnect, let’s face it, between the compensation that we’re seeing on Wall Street and what the average person is struggling with, trying to make ends meet, seeing the unemployment rate at 10 percent. That’s a huge frustration that the president expressed. That doesn’t mean that he doesn’t want to work constructively with those bankers. And I think that is what happened today.
JUDY WOODRUFF: Well, the president is, among other things, asking them to lend more. But we hear many of the bankers saying, including our guests coming up later in the program, that it’s a recession, and many of these businesses shouldn’t be receiving loans, banks shouldn’t be lending right now.
VALERIE JARRETT: Well, I think it’s not as black and white as that, Judy.
There are responsible loans that can be made. We saw what happened when they just lent without any underwriting criteria and without any financial regulatory restrictions. That is what was going on last year. And now what we are seeing is that there are businesses, and the president receives letters from these small businesses each and every day, where they are saying, look, I have great credit. I have a wonderful business plan.
In fact, the lenders were lending to me previously, and now we can’t get the loans or they’re not being processed as quickly as we need them processed. And so what the president said is, look, we all have to try a little bit harder. You have got to go back and push your team that, if you reject a loan, go back and look at it and make sure that it really was rejected for good purposes.
We’re not suggesting to make bad loans. We’re not looking to go back in time. But we are saying that there are businesses out there that want to expand, they want to grow, they want to hire, and let’s all work collectively to see if we can make that happen.
JUDY WOODRUFF: And what about another argument we hear from the bankers? And that is: We’re getting a mixed message. On the one hand, the White House, the administration tells us to lend more money. On the other hand, the banking regulators are saying, whoa, don’t make any loans unless you are absolutely sure you are going to get that money back.
VALERIE JARRETT: Well, I don’t think that they are inconsistent. We are all saying let’s lend responsibly.
And what we are saying is that we believe that there are companies out there who could repay those loans. No one is advocating taking unnecessary risks, but I think that there is a middle ground here. And that’s what we were pushing today.
And it’s interesting. Judy, you talk about what progress is made. Right after the meeting, Bank of America announced a $5 billion increase to their small business lending. So, right away, we’re already seeing results.
JUDY WOODRUFF: And what are you — so, bottom line, what do you think is going to change as a result of this? I mean, you mentioned the Bank of America. What else do we look for?
VALERIE JARRETT: Well, I think that what the challenge is, is for each of the banks that was in the room, as well as many others that are out there as well — the president is inviting in smaller banks next week to have a conversation with them about what are the challenges that they are facing in terms of small business lending.
And so I think what we want to see is that everybody is going to just try a little bit harder. We tried very hard, we being the taxpayers, a year ago, when we pushed forward the bold plans that righted the business, the business community, by providing access to capital to the banks, very necessary funds that, as you know, were very unpopular at the time.
Everybody — it was a herculean effort, it was a bold effort, and it was very unpopular. So, what we are saying is, in exchange for that, give something back. And so I think the charge to each and every bank was, go back, work with your management team, discuss with your boards, what can you do to just go one step further than you have?
And I think what they committed at the meeting is that they are going to do just that. So, we will see. We will see whether the conversation that we had inside the Roosevelt Room translates into providing efforts along all four fronts that I described a minute ago.
JUDY WOODRUFF: Valerie Jarrett at the White House, thanks very much.
VALERIE JARRETT: You’re welcome Judy. Have a great evening.
JUDY WOODRUFF: And you.