Obama Tells Bankers to Show ‘Restraint’ as He Seeks Their Help
By Kim Chipman and Kristin Jensen
March 28 (Bloomberg) -- President Barack Obama told chief executive officers from some of the largest U.S. banks to “show some restraint,” even as he courted their support for his plans to stabilize the financial markets.
At a White House meeting yesterday, some of the CEOs expressed concern to Obama about government efforts to right the economy, even as they pledged to help him achieve that goal. Worries included repayment aspects of the federal bank-rescue program and details of initiatives aimed at preventing future banking meltdowns, according to attendees.
The president met at the White House with more than a dozen CEOS from banks 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. as he sought backing for his plans and to move beyond furor over bank bailouts and bonuses. Obama said he challenged the executives to prove they understand the public’s anger and exercise “restraint.”
“Show that you get that this is a crisis and everybody has to make sacrifices,” Obama, in an interview with CBS News later in the day, said he told them. “They agreed and they recognized it. Now the proof of the pudding’s in the eating.”
Credit Flow
People at the meeting said the president and the executives agreed on the need to work together to get credit flowing through the markets again and dig the economy out of a recession. One of Obama’s main messages was that financial institutions will find themselves working under stricter rules unless they take steps themselves, several attendees said.
“Clearly, the president said: ‘Look you can help me by helping yourselves and moderating this behavior and bringing scale to this and making sense out of it so the administration doesn’t have to step in,’” said Camden Fine, president of the Washington-based Independent Community Bankers of America.
Yesterday’s meeting was called to mend a relationship that deteriorated amid anger on Capitol Hill and among taxpayers over bonuses paid to some employees at American International Group Inc., once the world’s largest insurer, which has been propped up with $182.5 billion in government funds.
The CEOs and administration officials called the 75-minute meeting a candid dialogue. It was a “very frank, open conversation,” Robert Kelly of New York-based Bank of New York Mellon Corp., told reporters afterward. “Our interests are very much aligned with the administration.”
While AIG wasn’t discussed by name, according to Fine, Obama emphasized the importance of “recognizing what the American public is going through in this economic crisis,” White House press secretary Robert Gibbs said.
‘Yes, We Understand’
“Several of the bankers indicated, ‘yes, we understand the public’s anger,’” Edward Yingling, president of the American Bankers Association, said in an interview after the meeting.
Yingling also said the bankers came to the discussion with their own issues.
These include concern about the vilification of Wall Street, negative comments about the economy and shifting rules, according to Yingling and other attendees.
There’s a need for “consistency from the government so we don’t feel we are getting jerked all around,” he said. “We need people to be talking more confidently and not talking everything down all the time.”
John Koskinen, CEO of McLean, Virginia-based Freddie Mac, said the group discussed the need for “consistent messages” so that financial companies “understand what the rules of the road are.”
Obama “made it very clear they aren’t anxious to require things of people. They are really anxious to hear from the industry and to work together cooperatively,” Koskinen said.
Proposed Overhaul
The president is proposing an overhaul that would affect banks, hedge funds, private-equity firms and derivatives markets. Executives said they understand the need for new rules.
“Anyone who’s subject to the regulatory scheme that we’ve had up to this point can’t be happy with the state of regulation,” Blankfein of Goldman Sachs said in an interview with Bloomberg Television yesterday. “It is an alphabet soup of agencies.”
Still, bringing back Depression-era regulations, such as the Glass-Steagall Act that separated deposit-taking institutions from investment banks, would be difficult, Blankfein said. “It’s hard to turn back the clock,” he said.
TARP Repayment
The executives brought up repaying the government for capital doled out under the $700 billion Troubled Asset Relief Program. The bailouts have been increasingly unpopular with voters, and the administration has tightened rules on executive compensation for institutions that got the funds.
“Tarp was a big concern around the table,” Fine said. “What is the exit strategy for all of this going forward? What are some of the long-range goals?”
Many of the executives said repaying the money would aid public perceptions of financial institutions, Yingling said
“They thought it would send a very positive signal to the public to see institutions paying it back, to understand that the money was not only being paid back, but was being paid back with a good return to the public,” Yingling said.
One person in the room said some of the participants expressed concern that a rapid repayment of TARP funds might be perceived as an attempt to get out from under compensation restrictions.
Obama told the executives that banks shouldn’t return the money until they have adequate capital, so as not to hinder their ability to lend money, according to Yingling.
Treasury Secretary Timothy Geithner, Council of Economic Advisers head Christina Romer, economic adviser Lawrence Summers, Chief of Staff Rahm Emanuel and senior adviser Valerie Jarrett participated in the meeting with Obama.
Other Executives
Other executives present included Kenneth Lewis of Charlotte, North Carolina-based Bank of America Corp., Kenneth Chenault of New York-based American Express Co., Ronald Logue of Boston-based State Street Corp., Frederick Waddell of Chicago- based Northern Trust Corp., Richard Davis of Minneapolis-based US Bancorp, John Stumpf of San Francisco-based Wells Fargo & Co. and James Rohr of Pittsburgh-based PNC Financial Services Group.
While not relaxed, the group was engaged and attentive, according to a person in the room. There was an acknowledgment on the part of the bank leaders that they could have done things better, said the person, without giving specifics.
The administration’s plan to prop up the financial system 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.
“The president made it clear that he’d like this country to get back on track,” Dimon told Bloomberg Television after the meeting. “He wants us all to help.”
To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net; Kristin Jensen in Washington at kjensen@bloomberg.net
Last Updated: March 28, 2009 00:02 EDT |
