A smaller woodshed for smaller banks; What Obama said he said to them

Last week President Obama called the nation's evil big-bonused, big bankers to the White House for a, uh, candid exchange. And we wrote about it here.

Today it was the turn of the less-evil, less-big banks to be pushed to lend more because without more loans -- especially to small business, the U.S. economy's main job-creation engine -- the unemployment rate (Obama's job approval and Democrat reelection prospects) will continue to suffer heading into 2010's midterm election.

We also discover at the very end of the full White House transcript below that Obama will not be leaving for his Hawaii beachfront vacation house while the Senate struggles with his beloved healthcare bill. A vote has been set for 8 a.m. Christmas Eve. But those times have a way of sliding, even without wintry Washington weather.

-- Andrew Malcolm

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President Obama's Remarks after meeting with some community bank executives
THE PRESIDENT: All right, everybody. Well, it's good to see all of you. I just concluded a meeting with 12 regional community banks to have the same conversation that I had with some of the larger banks last week and that I've been having with CEOs of companies across the country over the last year, and that is how do we continue to consolidate the gains we've made over the course of this year in terms of economic recovery, but most importantly, how we move forward over the next year so that businesses are getting the capital that they need and that we are starting to see people hired again, people able to finance their homes, finance college educations and so forth.

Community banks serve a vital function all across the country. They are folks who know their customers, don't just lend them money but also provide them advice if they're entrepreneurs and getting started. They are intimately woven into the fabric of the community. 

I think it's fair to say that most of these community banks were not engaged in some of the hugely risky activities that helped to precipitate the financial crisis.

 At the same time, they continue to try to do their best in their local and regional markets to make sure that businesses who are now being affected by the overall recession are able to pick themselves back up.

What I did was to go around the room and to hear from each of them. Not all these communities are the same -- we've got everything from Kalamazoo to Harlem to small communities in Arkansas that focus mostly on farm loans. 

We are looking to see if there are possibilities to cut some of the red tape.

We don't have direct influence over our independent regulators, but we think that the more that we can highlight that in some ways the pendulum may have swung too far in the direction of not lending after a decade in which it had gone way too far in the direction of getting money out the door no matter the risk -- that if we can get that balance right that there are businesses and communities out there that are ready to grow again, and we just need to help make that happen.

I also had a discussion with all these bankers about the prospects for financial....

...regulatory reform. As I said, many of the issues when it comes to large systemic banks and what precipitated the crisis on Wall Street don't apply to these smaller banks.  Most of them are very supportive of the idea of financial regulatory reform. 

I think, fairly, they just want to make sure that as we regulate better, that that doesn't automatically mean that we're just loading them up with more paperwork and more burdens. And I think we do have an obligation to make sure that the regulatory schemes that we come up with are more streamlined and more efficient and send clear signals to the banks involved.

I did emphasize to them that community banks do have a responsibility to their customers and that many of these consumer protections and efforts to make our -- to create a single consumer financial protection agency would apply to them.  And we think that's important, because every bank, large and small, is providing credit cards and providing debit cards and providing mortgage loans. 

And we think that the more we are making sure that banks aren't competing by how obscure their fine print is, but rather competing on the basis of the quality of their service and the terms of their loans, the better off consumers are going to be, and ultimately the better off banks are going to be as well.

So I very much appreciate them all coming in. I think the main message that I want everybody to take away, and certainly this is the message that I took away from the conversations here, is that there remains enormous opportunities as we come out of this recession for businesses to start growing again and to start hiring again. 

And everything that we're going to be doing here in the White House over the next several months is going to be geared towards catalyzing and spurring additional lending, particularly to small businesses, because we feel very optimistic that the work is behind us and that now is the time for us to seize opportunities.

With that, I want to wish everybody, if I don't see you guys before Christmas, a Happy Christmas -- a Merry Christmas and a Happy New Year. All right? Thank you guys.

Q    When do you think you'll leave?

THE PRESIDENT:  Well, I will not leave until my friends in the Senate have completed their work. My attitude is, is that if they're making these sacrifices to provide health care to all Americans, then the least I can do is to be around and to provide them any encouragement and last-minute help if necessary. All right?  Thank you guys.    ####

Comments

[loda]

Obama, you lie. Your healthcare bill will not provide healthcare coverage for all americans. Under your bill, millions will be left uncovered. If there are any smart demos in congress, they should give Obama some on the job training. All he do now is read what someone else writes for him.

[Mark North]

In Baraq Hussein Obama's world banks serve only one purpose. They are simply a repository of walking money and vote buying cash, to be liberally shaken down when in need of either.

[Chuck Blakeman]

The President said, "And everything that we're going to be doing here in the White House over the next several months is going to be geared towards catalyzing and spurring additional lending, particularly to small businesses."

Let's be clear on what he means by small business. The government defines small as businesses under 500 employees, which is 99.7% of all businesses in the US. This is a sample size so ridiculously large as to have no meaning. It's as silly as saying all people under 7' tall are short.

Here's how silly it sounds when you put Obama's comment in that perspective.

"And everything that we're going to be doing here in the White House over the next several months is going to be geared towards catalyzing and spurring additional lending, particularly to business owners under 7' tall."

That tells us nothing about how many owners under 5' tall, the truly small businesses, are getting loans. But when you use a sample size of this magnitude you can hide almost anything inside it.

Here's the real fact. Everything the politicians have done to date is geared toward helping larger businesses (50-500) to join the gigantic businesses (only 17,000 out of 28 million businesses have over 500 employees) in getting more loans. The majority of credit-worthy businesses under 20 employees and virtually all of those under 5 employees receive no relief at all from the above loudly trumpeted program. But because they lump 4' and 5' tall businesses with them, it makes a great sound bite to say "small business is getting help".

By the way, as the politicians are blowing their horns for this "help" to small businesses, the senate small business committee is entertaining legislation introduced by Olympia Snowe (self-proclaimed small business advocate) to kill the $35k ARC loan. This is the only stimulus program designed for businesses under 10 employees. The politicians want to pull the remaining paltry $110 million back into the Treasury immediately.

So take the above from the President as what it is - a thinly veiled communique' to help larger businesses continue to get larger while the politicians work hard to kill the lending opportunities for true small businesses.