Wall Street Tries to Make Nice with Obama
Whether any detente will last is not clear. Obama, whose coolness under pressure was legendary during the campaign, clearly was annoyed with the banks for failing to do enough to jump start the economy after U.S. taxpayers spent hundreds of billions of dollars rescuing them, and he urged them to lend more to small-and mid-sized businesses and to do more to help homeowners in danger of losing their homes.
He also reiterated his call to banks to control their spending on lavish executive pay and excoriated the industry's lobbyists for trying to block reform legislation.
Rob Nichols, head of the Financial Services Forum, tells DailyFinance that the industry agrees with Obama on most issues regarding financial reform and is confident that the differences that exist can be resolved. "They had a good conversation," he says. "It was candid. ... There was none of that rancor (from yesterday)."
Among the dozen banks represented at the White House meeting was Citigroup (C), which announced plans to repay the government aid that it received. And there were signs Monday that Wall Street was recommitting itself to lending, as Bank of America (BAC) pledged it would lend at least $5 billion more to small and mid-sized businesses in 2010 and the American Bankers Association released a report noting that the largest 21 bailed out banks had made $2.2 trillion in new loans since receiving TARP funds.
As the mid-term elections approach, Obama and his Democratic allies are sure to face mounting popular pressure to address sky-high unemployment, falling home prices and tight credit conditions. As the New York Times notes, Obama has faced criticism from Democrats and Republicans alike who feel he's cozied up Wall Street at the expense of working Americans.
But the answers to the economic crisis are not as simple as opening up a spigot and letting the money pour out. After all, as bankers are quick to point out, people and corporations that were creditworthy at the beginning of the recession may not be so anymore.
Still, nuanced arguments about credit aren't likely to hold water with members of Congress facing mounting pressure from constituents not to appear too chummy with much-loathed Wall Street titans. And they can now point to legislation that would bring a major overhaul of the industry, which recently passed the House and will likely be debated in the Senate after the holidays. Passage of the bill has taken longer than expected, particularly as the two sides tussle over how to create additional protections for consumers.
"It's an awful complex, esoteric issue," says Nichols, noting that the topic has only been taken up by Congress two other times since the Great Depression.. "This is kind of uncharted territory."