Washington Report

Obama Urges Small Banks to Lend to Small Businesses

President Barack Obama met with a dozen community bankers on Tuesday and essentially delivered the same message he gave “fat cat” bankers a week ago: Make more small business loans.

“There are businesses that are looking for loans out there, that are profitable and ready to make money, and the key is to match them up with banks that are in a position to lend,” Obama said. In

remarks to reporters after the meeting, the president said that most community banks weren’t engaged in the risky activities that led to the financial crisis, but “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 of the door no matter the risk.”

Deborah C. Wright, president of Carver Federal Savings Bank (No. 1 on the BE 100s bank list), says that her bank’s Carver’s federal regulator now requires the bank to hold more capital to pledge against total loans made and it has been discouraging lending in some areas, such as commercial real estate. She also said that the bankers at the meeting all expressed concern about the “unintended consequences” of regulatory reform on their institutions.

“Small banks are deeply concerned that a ‘one size fits all system’ will inevitably hurt smaller players,” said Wright, adding that “The cost of complying with regulations, was brought up today by every banker.” Administration officials who attended the meeting, including Treasury Secretary Tim Geithner and SBA administrator Karen Mills, have been charged with following up on these and other concerns raised by the bankers.

Speaking to reporters, Obama said, “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.”