Banks, not Prez, in Driver's Seat
Now that Wells Fargo, the last of the "too big to fail banks," plans to pay back TARP and get out from under government controls, Wall Street is feeling cocky. Yesterday's meeting between president Obama and the major banks chiefs showed all too clearly who's in the driver's seat. Hint: it's not the prez.
Three of the top Wall Street CEOs - Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley and Richard Parsons of Citigroup - failed to even step into the President's office. The bankers didn't bother to make adequate travel plans in the face of inclement weather to show up for the meeting on time. Instead, flight delays Monday morning forced them to attend the meeting via telephone.
The scene was much different in 2008, as the New York Times pointed out. With less than 24 hours notice, they managed to show up to meet with then-Treasury Secretary Henry Paulson. Of course, they knew Paulson was doling out something they wanted: government bailout money. In fact, most arrived early and walked out with between $10 billion and $25 billion of taxpayer money.This time around, the banks knew they had little to gain from a meeting with President Obama. In an interview on CBS's 60 Minutes on Sunday, the president threw down the gauntlet on Wall Street compensation, saying he did not become President to bail out the "fat cat bankers on Wall Street." He added that bankers have not shown "a lot of shame" about their behavior or their outsized compensation, despite the public bailout and economic downturn.
The banks knew the president would exhort them to increase lending and give Main Street the same opportunity they were given to recover from the downturn. Yet banks continue to plan big bonuses, tighten lending, raise interest rates and increase other costs to the public. And they spent $344 million in lobbying fees in the first three quarters of this year to fight off attempts to strengthen regulation of the financial industry. Clearly, the banks need to hear a stronger message that Main Street -- and our elected officials -- won't take it anymore.
On Monday, they not only snubbed the president, they snubbed the American public.
Our only hope is that Congress will take this slight as a sign that it's time for them to step up to the plate and pass strong legislation to protect Main Street from Wall Street excesses.
Lita Epstein has written more than 25 books including Reading Financial Reports for Dummies and Trading for Dummies.