Issue of the week: Obama meets the bankers
President Obama summoned the leaders of the nation’s biggest banks to scold them for their reluctance to lend and their resistance to tighter regulation.
The scene around the White House conference table spoke volumes about “the balance of power between Wall Street and Washington,” said Andrew Ross Sorkin in The New York Times. President Obama this week summoned the leaders of the nation’s biggest banks—whom he had called “fat cats” during a 60 Minutes interview just the day before—to scold them for their reluctance to lend and their resistance to tighter regulation. But the heads of three of the most important banks were “conspicuously absent.” True, Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley Chairman John Mack, and Citigroup Chairman Richard Parsons “seemed genuinely disappointed” that their early-morning flights from New York had been grounded by fog. They participated instead via conference call. But their nonattendance suggested that with the financial crisis now ebbing, banks no longer need—or fear—the White House. After all, “if the meeting were really that important,” the execs “would have found a way to get there.”
They didn’t miss much, said The Wall Street Journal in an editorial. Obama called the meeting because he sensed “a political opening” to bash bankers, but he managed only to highlight his administration’s incoherent response to the sputtering economic recovery. The administration “says it wants banks to lend more money,” but then it turns around and threatens “to punish bankers if they make too many bad loans.” Never mind that more lending would only invite a replay of the credit crisis, said Investor’s Business Daily. “Our current economic ills are largely due to just the kind of government meddling” that was on display at the meeting. The government has a long and sorry record of pressuring banks to make dubious loans, such as all those mortgages for low-income borrowers. Lest we forget, “this is how the subprime meltdown, the source of our current financial troubles, came about.”
Obama may have made “mean” noises about bankers on TV the night before, but his meeting with them was a “lovefest,” according to some in attendance, said Charles Gasparino in the New York Post. Perhaps the president pulled his punches because he knows his own administration is responsible for returning bank earnings to “megabonus levels.” Banks can make a tidy profit simply by borrowing from the Federal Reserve for next to nothing, then investing the proceeds in higher-yielding Treasury bonds. Thanks to that strategy, “Wall Street has bounced back from the dead,” even while the rest of the nation suffers. Although that’s infuriating, the blame lies not with the banks but with “their enablers in government,” including Obama.
To be fair, Obama doesn’t have a lot of options, said Massimo Calabresi in Time. With little real leverage over the financial sector, Obama must “alternately threaten and plead with banks to open their purse strings.” Obama can’t afford to crack down much harder. With unemployment in double digits and housing prices still in the dumps, the nation desperately needs the capital that the banks alone control. “The president has real problems only the banks can help him solve.”