Obama: Let's Cut 'Red Tape' for Community Banks

President Barack ObamaWithout offering specific proposals, President Barack Obama told executives with community banks at a White House meeting today that he hopes there is a possible loosening of regulatory “red tape” to help them increase lending to small businesses.
After the meeting, Obama emphasized that the executives of the smaller banks had little to do with the financial crisis and risky lending that triggered the current economic times. In a tougher tone last week, Obama told big bank CEOs, many of them recipients of bailout funds, that he expected “extraordinary results” in loosening lending policies to small businesses.
In today’s meeting, Obama had some praise for bankers.
“It’s fair to say that most of these community banks were not engaged in some of the hugely risky activities that helped to precipitate the financial crisis,” Obama said. “At the same time, they continue to try to do their best in their local and regional markets to make sure that businesses who are now being affected by the overall recession are able to pick themselves back up.”
However, smaller banks are also preserving capital as a hedge against future losses, much of that is out of regulatory requirements.
“We are looking to see if there are possibilities to cut some of the red tape,” Obama said.
Saying he doesn’t have direct influence over “our independent regulators,” Obama added that he fears the “pendulum may have swung too far in the direction of not lending.”
“If we can get that balance right,” the president said …”there are businesses and communities out there that are ready to grow again, and we just need to help make that happen.”
Obama said there are some banks that have seen “the increase in the savings rate and higher deposits” to give them a pretty good capital base, but they’re still constrained by some regulatory restraints.
The president did not specify what regulatory policy changes would free up lending from this community banks to small businesses.
The banking regulatory agencies are politically independent. However, financial system reform already approved in the House, and pending in the Senate, creates a higher “Consumer Financial Protection Agency” with the authority to amend some existing regulatory policies.

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