March 25, 2009 / 8:38 PM / 10 years ago

Obama to tell bankers "we're all in the same boat"

WASHINGTON (Reuters) - President Barack Obama will tell bankers on Friday “we’re all in the same boat” while pressing them to support his strategy to unlock credit markets ahead of next week’s G20 meeting of world leaders.

President Barack Obama listens to NATO Secretary-General Jaap de Hoop Scheffer in the Oval Office of the White House in Washington, March 25, 2009. REUTERS/Larry Downing

Obama, who has proposed wide-ranging financial regulatory reforms as part of his plan to lift the country out of recession, has walked a fine line with bankers — chastising them for taking big bonuses while encouraging them to increase lending to help turn the economy around.

He will discuss his administration’s multi-faceted agenda at a meeting with a handful of chief executives from top financial institutions including JPMorgan Chase & Co, Goldman Sachs and Citigroup on Friday.

Spokesman Robert Gibbs said the president would seek the executives’ input on how the economy is developing.

“The president looks forward to getting an update on what they’re seeing happening in the economy,” Gibbs said on Wednesday of the banking chief executives who are slated to meet with the president later this week.

He said Obama’s message at the meeting would be to say that what is good for Wall Street is good for Main Street.

“We’re all in the same boat,” Gibbs said. “We have to understand that ... what is good for one has to be also good for the other.”

The U.S. Treasury has invested more than $180 billion in government capital from the $700 billion financial bailout fund approved last year into the 11 banks attending the meeting.

Other invited financial institutions, according to a financial sector source, include: Fannie Mae, Freddie Mac, Bank of New York/Mellon, Northern Trust, PNC Financial, State Street , Bank of America, Morgan Stanley, USBancorp, Wells Fargo, American Bankers Association and the Financial Services Roundtable.

The meeting will come just days after the U.S. Treasury Department provided details on a government plan to cleanse banks’ balance sheets of up to $1 trillion of distressed loans and securities.

It also comes as Obama prepares for next week’s meeting of leaders from the Group of 20 emerging and industrialized economies, which will try to coordinate their strategies to address the global economic crisis.


Douglas Elliott, a Brookings Institution fellow and former JPMorgan investment banker, said he believes Obama will want to encourage banks to keep government bailout money and boost lending, while bankers will express concerns about being vilified and punished with new restrictions in the wake of public fury over recent American International Group bonuses for employees of the unit that nearly caused the company’s collapse.

“The bankers have a feeling that they are the poster boys for evil right now,” Elliott said.

“They believe this is harmful and they’re trying to do their part and solve their problems, so they will express their fears that Congress will do punitive things to them.”

He said Obama will provide some reassuring words that he does not want to harm the banks and does not intend to rewrite contracts.

“I think he’s going to want to tell them that he believes in markets and the rule of law,” Elliott said.

On Monday, Treasury Secretary Timothy Geithner detailed a plan to purge bank balance sheets of toxic assets that are choking off lending and deepening the recession.

The government plans to form partnerships with private investors to bid on the assets, putting taxpayer capital alongside private capital and providing cheap financing through the Federal Reserve and the Federal Deposit Insurance Corp.

Obama is likely to encourage the banks to sell assets into the program.

Many financial executives fear that Congress will impose even tougher executive pay and bonus conditions as a result of public anger over AIG bonuses.

The Obama administration also has imposed tougher reporting rules that require banks to document increased lending as a result of the government funding.

Editing by Cynthia Osterman

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