Banks to Bush: Slack Demand Spurs Crunch
WASHINGTON -- President Bush met with a group of senior bankers at the White House on Thursday for a roundtable talk about ways to spur lending.
"We encouraged the president to abolish the words |credit crunch' from the vocabulary of the administration," said John Medlin, chairman of Wachovia Corp., Winston-Salem, N.C. Limited demand and confidence among borrowers have caused the downturn in lending, not unwillingness by banks to lend, he said.
Mr. Bush primarily listened to the bankers and did not offer many specific reactions, according to bankers.
Looking for a Jump-Start
The two-hour meeting in the Roosevelt Room was the latest in a series of recent moves by Mr. Bush to show that he is actively looking for ways to stimulate the dragging economy. Mr. Bush also wants to make it clear that he is dedicated to removing regulatory barriers to bank lending, including overzealous examiners.
In an interview before the meeting, John B. McCoy, chairman of Banc One Corp. in Columbus, Ohio, said that loans are tougher to get now because banks have finally tightened underwriting standards.
"You just can't blindly keep lending money to people who can't pay it back," he said. "I'm going to tell [Mr. Bush] that if there are good borrowers, we're going to lend."
Mr. McCoy described the meeting as the President's way of "trying to hear what's happening out on the street, without all the filters."
To fuel the economy, the administration has been trying since March to jawbone bankers into lending more. Mr. Bush recently backed a package of initiatives that includes cutting the capital requirements for some real estate loans and broadening the types of capital that banks may count as equity.
Taking the Pulse
Council of Economic Advisers Chairman Michael Boskin said the President wanted to use his meeting with industry leaders to probe bankers' attitudes toward the credit crunch package.
"If there's any ambiguity about what was involved in that, there will be an opportunity to clarify things," Mr. Boskin said. "We never tried to indicate that it was the only step or that it was the solution to all the problems in the economy -- far from it."
The administration's campaign to persuade bank examiners to ease up is continuing. Treasury Secretary Nicholas Brady has written a letter to the heads of the banking agencies complaining that examiners are still taking too hard a line.
"Unfortunately, we continue to hear reports that the guidelines are directives that were given to examiners, particularly those relating to real estate credits, are ignored by examiners in the field," Mr. Brady said in an Oct. 4 letter.
"Notwithstanding the efforts you have made to see that these directives are applied in the field, it seems as though the message may not be getting through in an effective and uniform manner," Mr. Brady concluded.
The conclave was one of the measures included in the administration's series of loan-stimulating steps, announced Oct. 8. A Treasury statement at the time said it would take place by mid-November, but the date has not been set.
Besides Mr. Medlin and Mr. McCoy, other bankers attending included Hugh McColl, chief executive of NCNB Corp., based in Charlotte, N.C.; and Terrence Murray, chairman of Fleet/Norstar Financial Group, Providence, R.I.
A Fleet source said Mr. Murray planned to tell Mr. Bush that the Northeast is in a depression and that steps to ease credit are helpful, but they are not enough. The source said Fleet is mainly concerned with finding ways to work off nonperforming real estate loans and to unload properties seized from bankrupt borrowers.
Also at the meeting were: John F. McGillicuddy, chairman of Manufacturers Hanover Corp., New York; Dennis Weatherstone, chairman of J.P. Morgan & Co.; Charles Fisher 3d, chairman of National Bank of Detroit; Donald Shackelford, chairman of the U.S. League of Savings Institutions and of State Savings Bank in Columbus, Ohio; Claude B. Hutchinson Jr., chairman of CivicBank of Commerce, Oakland, Calif.; George W. Hamlin 4th, president and CEO of Canandaigua (N.Y.) National Bank; and Jerry E. Finger, chairman of Charter National Bank, Houston.