Credit Is Frozen In This Country
Floor Speech
Ms. KAPTUR. Mr. Speaker, the job market is bleak. A major reason is that bank credit is frozen in this country still. Business can't get loans to hire and function. The Federal Deposit Insurance Corporation reports that lending has declined for the last five consecutive quarters.
This chart amply demonstrates that. It was in the Washington Post yesterday.
Credit in the real banking sector has dried up. I'm not talking about the political TARP bailout fund banking sector being managed by Treasury. I'm talking about the impact of that on the rest of the banking system where credit is simply not being lent across this country. Businesses are clamoring to get loans, only to be rejected from coast to coast. The normal banking sector is not functioning. TARP destroyed over $600 billion of real bank capital as the Treasury moved itself into the driver's seat of picking winners and losers. Wall Street banks literally, and the way they've been handled, have blunted real economic recovery as businesses cannot get loans to conduct their affairs, to hire new employees, to pay current employees or buy equipment because they simply don't have access to credit.
Sadly, what's happened over this period of time is our local banks and the non Big 5 banks in the country have tried to compete in this economy. The Big 5--the ones that got the TARP funds from the taxpayers--have gone from holding 30 percent of the deposits in this country to 40 percent. They're getting bigger, which means it's even harder for the other thousands of banks across this country to compete.
Our financial system started seizing up after TARP was passed when normal banks refused to lend to each other in overnight transactions, and this has just gotten worse ever since. They lost confidence in the banking system itself.
So, where does small business go to get operating loans? The Washington Post gave us a little insight on that yesterday, and I wish to place that article in the Record. Some of what it says is:
``The administration's options continue to be constrained by the belief of many officials that meddling in the details of banking is counterproductive.''
Well, what do they think the TARP is? It's ultimate meddling. It's total meddling. And, in fact, it prevents normal lending from being restored as banks across this country see that some banks get a special deal if they go to the Treasury and others get thrown aside or merged. A lot of those big banks have used the money to buy other banks, making our banking system much less competitive, much more concentrated.
While the White House has raised the temperature of its rhetoric in recent weeks about what's going wrong, their policy measures simply have not followed. Indeed, they extended the TARP for another year.
Now there are some activists across this country calling on the President to do much more. One of them, Reverend Jesse Jackson, left a meeting in Atlanta on Monday with ministers and others who are facing foreclosure even on their churches and homes. The Reverend Jackson, as the article reports, called on President Obama to use future Federal fair lending laws to force the banks to help struggling communities. He said, and I quote, ``Banks got Federal money at zero interest, but homeowners and churches are paying pre-TARP prices for their losses. The banking system must be made accountable. The Attorney General should have been in that meeting as well.'' I agree with Reverend Jackson.
``The banking industry,'' the article says, ``has reduced lending''--as this chart demonstrates--``for five consecutive quarters, even as it has regained profitability thanks to vast public aid from the people of the United States. The amount of money on loan from banks fell by about $600 billion, or 7.2 percent, from September 2008 to September 2009, according to the Federal Deposit Insurance Corporation.''
This is not a recipe for economic recovery, not in the real economy. This is the second time the President has convened bank executives to urge their increased lending. The first was in March. But you know what the article says, it did little to slow the slide.
There are two actions that immediately could make a difference. One deals with the President meeting with the Securities and Exchange Commission and the Financial Accounting Standards Board and looking at mark-to-market accounting, which has destroyed over $600 billion of capital in our financial system. Credit is frozen. The very banks we have bailed out have decreased their lending over these five quarters that I've talked about, and Treasury, who is in charge of the TARP, literally is picking winners and losers.
We need reform of mark-to-market accounting, and we need somebody in the administration to look at the Making Home Affordable program to make sure that we allow people to remain in their homes so we don't have increasing foreclosures, particularly over these winter months. The problem is that they can't see the forest because the big trees, the big five, are blocking their view of what is happening across this country.
[From the Washington Post, Dec. 15, 2009]
In White House Meeting, Obama Calls on Banks To Increase Lending
(By Binyamin Appelbaum and Michael A. Fletcher)
President Obama exhorted the nation's biggest banks on Monday to make ``extraordinary'' efforts to increase lending, even as some of those firms are racing to distance themselves from government control.
The nation's most powerful bankers sat in the Roosevelt Room at the White House and nodded as the president spoke, but some executives and industry officials said afterward that increasing lending is largely beyond their ability.
Meanwhile, Citigroup and Wells Fargo announced plans Monday to spend billions of dollars--not on lending, but to repay federal aid. Citigroup chief executive Vikram Pandit missed the White House meeting to rally investor support.
Bank executives say they itch to make profitable loans, as many as possible, but are struggling to find qualified borrowers. They also say that the administration is asking for increased lending even as it pursues financial reforms that will limit the ability of banks to make loans.
Some note that a recession caused by an orgy of lending must be solved in part through greater restraint.
Obama has come under increasing pressure to demonstrate his concern for the plight of Americans caught in a rising tide of joblessness, even as the larger economy appears headed to recovery. The White House portrayed Monday's meeting as a chance for the president to channel the anger of Americans who think federal programs intended to revive the broader economy have succeeded only in restoring Wall Street's profitability.
``America's banks received extraordinary assistance from American taxpayers to rebuild their industry,'' the president said after the meeting. ``And now that they're back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.''
Obama added that he expects not just effort but ``results.''
Some administration officials privately conceded that borrowing always declines during recessions, and that they are struggling to find effective ways of spurring new lending. Furthermore, the administration's options continued to be constrained by the belief of many officials that meddling in the details of banking is counterproductive.
The administration also is surrendering a measure of leverage over the industry as banks repay federal aid provided under the Troubled Assets Relief Program--although officials are eager to shed the political baggage of aiding big Wall Street firms. With the announcements Monday by Citigroup and Wells Fargo that they would repay federal aid, all of the nine major banks that got money late last year will be on track to pay it back.
As a result, while the White House has raised the temperature of its rhetoric in recent weeks, policy measures have not followed.
Some activists are calling on the president to do more. Just after leaving an Atlanta meeting Monday with ministers and others, some of whom are facing foreclosure on their churches and homes, the Rev. Jesse Jackson called on Obama to use federal fair-lending laws to force the banks to help struggling communities.
``Banks got federal money at zero interest, but homeowners and churches are paying pre-TARP prices for their loans,'' Jackson said. ``The banking system must be made accountable. The attorney general should have been in that meeting.''
The Congressional Black Caucus and other Democrats, who are concerned that administration efforts to slow foreclosures have come nowhere near meeting their stated goals, have also been pressing for additional steps to help distressed homeowners.
The banking industry has reduced lending for five consecutive quarters, even as it has regained profitability thanks to vast public aid. The amount of money on loan from banks fell by about $600 billion, or 7.2 percent, from September 2008 to September 2009, according to the Federal Deposit Insurance Corp.
The White House initially portrayed the meeting with bankers as an opportunity to discuss strategies for increasing lending. But the president set a sterner tone over the weekend, telling the CBS show ``60 Minutes'': ``I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street.''
One day later, the president was more temperate, saying that he did not intend to ``vilify'' any company or industry and that he appreciated existing efforts to increase lending, such as reviewing rejected applications to see whether loans can be approved. The president suggested Monday that banks should review applications three and four times if necessary.
Bankers also emerged from the meeting in a conciliatory mood, saying they share the administration's goals.
``Every bank in that room talked about adding many, many small-business originators and setting very aggressive goals for small-business lending next year,'' said Richard Davis, chief executive of US Bancorp.
Bank of America plans to increase small-business lending by $5 billion next year. J.P. Morgan Chase has committed to an increase of $4 billion.
``This is simply what a bank should do,'' J.P. Morgan chief executive Jamie Dimon said in a statement released before the meeting.
This is the second time the president has convened bank executives to urge increased lending. The first meeting, in March, did little to slow the slide. The president said Monday that he continues to get ``too many letters from small businesses who explain that they are creditworthy and banks that they've had a long-term relationship with are still having problems giving them loans.'' But the White House on Monday defended the value of the rhetoric.
``I think that the bully pulpit can be a powerful thing,'' said press secretary Robert Gibbs.
Obama said he also discussed the need for financial reform, urging the bank executives not to lobby against proposals such as the creation of an agency to protect borrowers from lending abuses. And the president said he once again urged moderation in executive compensation.
``I made it clear that it is both in the country's interest and ultimately in the financial industry's interest to have updated rules of the road to prevent abuse and excess,'' Obama said afterward. ``I have no intention of letting their lobbyists thwart reforms.''
Bank executives, however, say that they strongly favor reform--they just differ with the administration about some of the particulars.
The guest list for the meeting included the top executives of 12 of the nation's largest banks, but there were three late scratches. Goldman Sachs's Lloyd C. Blankfein, John Mack of Morgan Stanley and Citigroup's Richard Parsons participated in the meeting by telephone because the flight all three had planned to take from New York to Washington was delayed by fog.
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