WASHINGTON -- President Bush stepped up pressure on banks Friday to make loans to fuel the recovery.

At a wide-ranging White House press conference, the President called on banks to muster the confindence to boost commercial lending.

'Make Good Loans' Bush Says

"Banks have money to loan, and they're not particularly willing to loan it," he said. "good banks should make good loans, for example."

"Some of that can be blamed on regulatory excess," he added, referring to banks' reported reluctance to lend. "Some of it, I think, is a lack of confidence."

The remarks were the President's first public comments on bank lending since he raised his concerns with economic advisers, including Treasury Secretary Nicholas Brady and Federal Reserve Chairman Alan Greenspan at a White House meeting 10 days ago. Another meeting of the same officials is scheduled Tuesday.

Jobless Data a Spur

President Bush spoke shortly after the release of september's employment figures. The unemployment rate slipped to 6.7%, from 6.8% in August, reflecting a net gain of 24,000 jobs.

Mr. Bush cited the improvement as evidence that the "economy is moving in the right direction." That assessment, he added, was bolstered by statistical reports last week that showed purchasing managers are bullish on manufacturing and that automobile and home sales are rising.

But the increase in jobs did not indicate robust growth, and speculation was widespread that the Federal Reserve would soon cut the federal funds rate to stimulate lending.

Brady on Banks' Role

In separate remarks Friday, Mr. Brady said banks have not been able to cushion the slumping economy, partly because of their weakened condition.

"Banks are not performing their function as 'shock absorbers,' lending to businesses and individuals to help pull them through tough times," the Treasury secretary told chief executives at a Business Week symposium, according to a text of his speech.

Not a Parochial Problem

"instead of making loans, banks are pulling back and improving their balance sheets, running to quality," Mr. Brady said. "And that's not just a problem for the banks - that's a problem for business and consumers."

The credit crunch is only one symptom of problems that banks face, the Treasury chief said, and it has many causes.

"Clearly, the recession is a major cause, along with over-building in the commercial real estate industry, and reported overkill on the part of bank examiners," Mr. Brady said.

A Plug for Bank Reform

Banks will be stronger and more competitive, he said, if Congress passes the administration's banking reform proposals. Without these reforms, market-place innovations may render the banking system obsolete.

"If we don't face today's reality, tomorrow's reality will be a second-class financial system," Mr. Brady said.

This article includes reports from Reuters.

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