When the guy signing your paychecks invites you for a little face-to-face, you do what any employee would do. You drop what you are doing and hop to it.
Such is the case with the CEOs of America’s largest banks.
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They’ve been summoned to America’s corner office to meet with the head honcho. In response, they’ve left the plush confines of their own offices from Manhattan and Boston to Chicago and San Francisco, and they are headed to White House to meet with President Obama.
The noon meeting in Washington is scheduled to include chief executive officer Vikram Pandit of Citigroup, Jamie Dimon from JP Morgan and Lloyd Blankfein of Goldman Sachs. They are among the 15 banking executives expected to attend.
Food Is Not the Main Event
Even though it’s being billed as a cordial luncheon, it doubtful that finger sandwiches and cupcakes will be on the menu.
During the past few weeks, the President has been faced with answering for the continued shenanigans of several financial institutions that have been the beneficiaries of billions in taxpayer bailouts. Although the President clearly seeks their continued cooperation in the federal government’s efforts to overcome the worst financial crisis since the 1930s, it’s plain that he plans to knock some heads in an attempt to get these banks to tow the line.
In addition to the President, a select cadre of his top financial and political will be attending the meeting. The list includes former Treasury chief Lawrence Summers, current Treasury Secretary Tim Geithner and close advisor Valerie Jarrett.
The President’s plate is full and getting piled higher. With the U.S. economic recovery tethered to the health of the financial industry, Obama has proposed a public-private partnership to soak up the banks’ toxic assets and help unlock credit as well as new regulations on banks, hedge funds, private-equity firms and derivatives markets. He’s got to have all the major players on board or his efforts are likely to fail.
Persuading the Skeptics
Starting with his primetime press news conference earlier this week, the President is trying to up the ante in assuring the American people that he has both hands on the wheel of the economy. Yesterday, the President fired the first shot in his battle to use the crisis to impose new reforms on the financial services industry. He sent Treasury Secretary Geithner up to Capitol Hill with a laundry list of new regulations targeting the darkest corners of the banking system, including derivatives trading, hedge funds and money markets.
Testifying before the House Financial Services Committee, Geithner invoked the financial disasters of the past year – from Bernie Madoff and American International Group Inc. to risky mortgage lending, in calling for “fundamentally new rules of the game.” While he was short on specifics, Geithner told the assembled committee that “what we need is better, smarter, tougher regulation.”
Obama knows that he will not be able to succeed in these efforts without the cooperation of the big banks. Their political influence runs too deep. Unless he enlists their support and collaboration, his proposed reforms will be an extremely tough sell to Congress. The President also is over a barrel, and he’s using a little home court advantage to hold the high ground. TARP is a lousy program. No matter what he does, Obama will be saddled with its failures. His greatest assets in this fight are the force of his personality and the fact that he’s got the check book.
With consumer confidence at three-decade lows and unemployment still climbing, the President must look like a lion tamer and act like a cheerleader. By bringing the big boys of the banking world to the Presidential woodshed, he is trying to reassure the American people and Congress that he is the new boss.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
