Bank CEOs Tell Obama They Are Working Toward Recovery
By Julianna Goldman and Kristin Jensen
March 27 (Bloomberg) -- Chief executive officers from some of the nation’s largest banks told President Barack Obama that they will work with him to achieve an economic recovery and agreed that financial-market regulations need to be overhauled.
“We’re all in this together,” John Stumpf, the CEO of Wells Fargo & Co., told reporters outside the White House after meeting with Obama today. “We’re trying to do the right thing for America.”
Obama is seeking support for his plan to stabilize the U.S. financial system and move beyond the furor over bailouts and bonuses. He met with CEOs including Jamie Dimon of JPMorgan Chase & Co., John Mack of Morgan Stanley, Vikram Pandit of Citigroup Inc. and Lloyd Blankfein of Goldman Sachs Group Inc.
The meeting began with a discussion about the need to deal with toxic assets and increase bank lending, then moved onto Obama’s plan to resolve the housing crisis, and his proposals for revamping regulations and executive compensation, White House Press Secretary Robert Gibbs said.
“They agreed on the need to update the framework of regulation,” Gibbs told reporters. Obama also emphasized the importance of “recognizing what the American public is going through in this economic crisis,” he said.
Public-Private Partnership
With the U.S. economic recovery tethered to the health of the financial industry, Obama has proposed a public-private partnership to soak up the banks’ toxic assets and help unlock credit, as well as new regulations on banks, hedge funds, private-equity firms and derivatives markets.
“It’s terribly important that an environment of consensus replace the polarization of recent weeks,” said former U.S. Securities and Exchange Commission Chairman Arthur Levitt, now a senior adviser to the Carlyle Group based in Washington and a board member of Bloomberg LP, the parent of Bloomberg News. “It’s essential to the business community that they be very much part of this process,” Levitt said yesterday.
The gathering is the latest in a continuing engagement with the business community, White House advisers said. Obama has held meetings with Dimon and Kenneth Chenault, the CEO of New York-based American Express Co., as well as Redmond, Washington-based Microsoft Corp. Chairman Bill Gates, over the last couple of months, they said.
‘All Agree to Help’
“The president made it clear that he’d like this country to get back on track,” Dimon told Bloomberg Television after today’s meeting. “He wants us all to help.”
While executives told reporters they understood financial regulations needed revamping, they had different prescriptions for new rules. Proposals to bring back Depression-era regulations separating investment banking from commercial banking would be difficult to resurrect, Blankfein said.
“It’s hard to turn back the clock” on the rules, known as the Glass-Steagall Act, Blankfein said in an interview with Bloomberg Television after the meeting.
The Glass-Steagall Act that separated deposit-taking institutions from investment banks was overturned in 1999 with the passage of the Gramm-Leach-Bliley bill.
Bank of America Corp. CEO Kenneth Lewis said before the meeting that the U.S. should consider separating commercial lenders from investment banking activities. Larry di Rita, a spokesman for Bank of America, said in a telephone interview that Lewis’s comments were misinterpreted.
“We’re not contemplating separating our commercial banking activities and our investment banking activities,” di Rita said.
Meeting Attendees
“We have a pretty old and antiquated” system for regulations, Robert Kelly of New York-based Bank of New York Mellon Corp. told reporters. “It needs to be modernized.”
Treasury Secretary Timothy Geithner, economic adviser Lawrence Summers and senior adviser Valerie Jarrett joined the meeting. The group of executives also included Lewis, American Express’s Chenault, Ronald Logue of Boston-based State Street Corp., Frederick Waddell of Chicago-based Northern Trust Corp., James Rohr of Pittsburgh-based PNC Financial Services Group and Richard Davis of Minneapolis-based US Bancorp.
The administration’s plan is dependent in part on the financial companies being willing to sell distressed assets at prices attractive enough to create a new market and enable banks to start lending, which they have been reluctant to do.
The plan would remove banks’ distressed assets from the lenders’ balance sheets through a public-private investment program, with Treasury providing $75 billion to $100 billion to finance investors’ purchases of devalued loans and securities.
‘A Partnership’
“A recovery based on a public-private partnership will depend, to a large extent, on the business community believing that they are in a partnership rather than enthralled to politicians and a punishing public that wants to extract the last ounce of blood,” Levitt said.
A number of the CEOs met with Geithner last night at a dinner sponsored by the Financial Services Roundtable. Steve Bartlett, the group’s president and CEO, said the event for about 150 people featured a “good candid exchange.”
The CEOs arrived today at the White House alone and escorted by other company executives; some were quickly ushered in through the security gate by Bartlett, while others were forced to go through the usual routine for visitors. Dimon was asked to repeat his name twice and spell it once. He said he was there for a meeting with the president.
On Wall Street, the banks today were involved in a stock retreat, trimming a third-straight weekly gain, as JPMorgan’s Dimon and Bank of America’s Lewis said in interviews with the CNBC cable station that results deteriorated in March and lower oil and metal prices dragged down commodity producers.
Popular Anger
Popular anger erupted this month after the Treasury said it couldn’t stop $165 million in bonuses to American International Group Inc. employees, after the New York-based insurer received $182.5 billion in taxpayer bailout funds.
Several executives have criticized the administration’s anti-Wall Street rhetoric, its stress tests to monitor banks’ health and restrictions imposed by the Troubled Asset Relief Program affecting lending, foreclosures, pay and perks.
The U.S. Treasury in October injected more than $120 billion from the TARP program into nine of the biggest U.S. banks. More than 500 banks, insurers and credit-card companies applied for capital, and the government has distributed almost $300 billion. Lenders including Bank of America, U.S. Bancorp and New York-based Goldman Sachs have said they want to give back the TARP money.
Dimon of New York-based JPMorgan this month called on government officials to stop demonizing Wall Street, saying “it’s just hurting our country at this point.”
“The atmospherics have to improve,” said Bert Ely, chief executive officer of Ely & Co., a financial institution and monetary policy consultant in Alexandria, Virginia. The meeting signals that “the policy makers are listening and trying to deal with this in a positive constructive manner and moving past all the blaming and finger pointing and demonizing.”
To contact the reporters on this story: Julianna Goldman in Washington at jgoldman6@bloomberg.net; Kristin Jensen in Washington at kjensen@bloomberg.net
Last Updated: March 27, 2009 14:56 EDT |
