US President Barack Obama wants to hear from the chief executives of some of the country’s biggest banks as he caps a week in which he clarified his overall plan for stabilizing the financial system.
The president was set to take the temperature of the bank CEOs yesterday at the White House. The session will be the latest in a series of such meetings Obama has had with financial industry representatives and business executives since taking office amid the worst economic downturn since the Great Depression.
The meeting follows a period marked by Obama’s sharp language, and public outrage, over Wall Street excesses and US$165 million in employee bonuses by American International Group, the large but troubled insurance company that has taken more than US$170 billion in federal bailout funds.
It also comes days before Obama attends his first international summit, a meeting in London next week of the world’s 20 major and developing economies, all struggling with the global recession.
This week, the administration unveiled its program to help banks clear their balance sheets of so-called “toxic assets,” bad investments that are tying up capital and making it difficult for them to lend money. The administration also outlined its proposals to impose tighter regulations on the financial sector in an effort to avoid a repeat of the industry meltdown that contributed to the recession.
Obama in recent days has dialed down his rhetoric against AIG and Wall Street.
The administration needs the industry’s cooperation for its financial stability and financial regulation plans to work.
White House officials said Obama likes to hear directly from those who will be affected by his decisions.
“Our future is inextricably linked to these financial institutions and their future is linked to the economic health of the country,” said Valerie Jarrett, a senior adviser to Obama.
Press secretary Robert Gibbs said Obama looked forward to getting an update from the bankers on the activity they are seeing in real estate and commercial loans. They also are likely to discuss “stuff that’s been in the news” in the past few weeks, including executive compensation, bonuses and “the notion that ... we have to change the culture of the way Wall Street works,” he said.
Asked whether Obama would deliver as tough a message in private as he has in public, Gibbs replied, “Yes.”
“The president isn’t going to say one thing out here and a different thing in there,” he said. “We’re not going to get out of this financial crisis and we’re not going to stabilize our financial system without healthy banks. That’s part of what he hopes to talk to them about.”
Larry Summers, Obama’s chief economic adviser, said the meeting will focus on a broad approach to restoring the economy.
This week, the administration announced a plan to partner with private investors, the Federal Reserve and the Federal Deposit Insurance Corp to take over up to US$1 trillion in sour mortgage securities from banks.
The goal is to help jump-start lending.
The administration also has proposed tighter regulation of the financial system, including giving the government broad power to take over major financial institutions that are not banks, such as insurance companies, like AIG, and hedge funds teetering on the brink of collapse.
Last week, Obama assailed AIG for “recklessness and greed” in its business practices.
He softened his tone a bit during a nationally televised news conference on Tuesday night, saying the country “can’t afford to demonize” every profit-seeking investor or entrepreneur because that is what fuels prosperity and is what will get banks lending and the economy moving again.
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