Bank chiefs hold peace talks with Obama

Bank chiefs hold peace talks with Obama
By Andrew Ward and Tom Braithwaite in Washington and Francesco Guerrera in New York
Copyright The Financial Times Limited 2009
Published: March 27 2009 17:58 | Last updated: March 27 2009 17:58
http://www.ft.com/cms/s/0/e7f61650-1af7-11de-8aa3-0000779fd2ac.html


Top bank chief executives held peace talks with President Barack Obama at the White House on Friday as the administration sought to soothe tensions over lavish Wall Street bonus payments.

The meeting came at the end of a week in which in which Mr Obama pushed back against efforts by Congress to slap hefty tax penalties on bonuses and warned people not to “demonise” investors and entrepreneurs.

Ken Lewis of Bank of America, Jamie Dimon of JP Morgan, and Vikram Pandit of Citigroup were among 15 bank heads invited to the talks in the White House state dining room.

Robert Gibbs, White House press secretary, said the president would deliver a tough message on the need for shared sacrifice between Wall Street and Main Street.

But another administration official made clear it would not be a one-way lecture.

“The purpose of the meeting is to listen and to have a conversation about how we’re going to repair the damage to our financial system,” said the official. “Our recovery depends on reviving our financial system and capital markets.”

Mr Obama initially echoed and even encouraged public anger towards Wall Street after revelations earlier this month that AIG, the bailed-out insurer, had used taxpayer money to pay $165m of bonuses to top employees.

But he dialled back his rhetoric this week amid mounting concern that anti-Wall Street sentiment could undermine the administration’s efforts to shore up the financial sector.

In particular, Tim Geithner, Treasury secretary, needs support from investors for his plan, announced on Monday, for a public-private partnership to buy up the toxic assets weighing down bank balance sheets.

The administration has also been rattled by signs that healthier banks could withdraw early from the Troubled Asset Relief Programme because of heavy-handed government intervention, a move that would make it harder for the administration to kick-start lending.

Tensions between Wall Street and Washington reached a peak last week when the House of Representatives rushed through legislation to impose a 90 per cent tax on bonuses at many financial institutions receiving taxpayer support.

However, momentum behind the proposals has slowed this week after Mr Obama signalled his opposition and the initial wave of anger over the AIG bonuses fades.

Harry Reid, the Democratic leader in the Senate, insisted on Friday that “the issue has not gone away” but conceded that the Senate version of the bill was on hold until later in April at the earliest. “When we come back after Easter recess I’m committed to taking the lay of land to find out where we all go on this,” he said.

The Senate is working on a watered-down version of the House bill that would impose a 70 per cent tax on a wider range of bonuses, with half paid by the employee and half by the employer.

Bankers went into Friday’s meeting with a mixture of apprehension and hope.

Financial executives said that White House officials wanted to reassure them that President Obama would use the gathering to cool tensions rather than pressing them on specific issues.

However, few bankers believed the administration would not take the opportunity to remind the country’s largest financial institutions that the billions of dollars in taxpayers’ funds they have received came with strings attached.

“Hot button topics such as executive compensation, the resumption of lending and banks’ participation in the latest plan to rid the system of toxic assets are bound to come up,” said a Wall Street insider. “The question is how hard the White House wants to press the banks on these”.

For their part, bankers said they would be in a listening mode and keep their lobbying and complaints about the political furore surrounding the industry to a minimum.

Others attending the meeting included Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley, Ken Chenault of American Express, and Rick Waddell of Northern Trust.