WASHINGTON — Hauling a dozen chief executives of large financial firms to the White House for a lecture on the importance of credit gets big headlines, but how much leverage does President Obama actually have with lenders?

All but two of the 12 bankers present at the meeting have repaid their Troubled Asset Relief Program funds, freeing them from added potential government restrictions, and threats to force institutions to offer more loan modifications are going no where in Congress.

The administration does have a few tools it could wield against banks — including forcing them to comply with higher capital requirements — but using them would likely exacerbate the credit crunch, precisely the situation Obama is hoping to avoid.

"It's political theater and Obama has to look like he is doing something," said Bert Ely, an independent consultant in Alexandria, Va. "It's just demagoguing against the banks."

After the meeting, Obama said it was time for banks to repay the government for its help in stabilizing the financial sector.

"The way I see it, having recovered with the help of the American government and the American taxpayers, our banks now have a greater obligation to the goal of a wider recovery, a more stable system, and more broadly shared prosperity," the president said.

But even Obama appeared to recognize the limits of his power. Instead of forcing the institutions to agree to specific steps, the only condition he appeared to have won from the CEOs was a pledge to review their small-business lending decisions.

"I urged these institutions here today to go back and take a third and fourth look about how they are operating when it comes to small-business and medium-sized business lending," Obama said.

Political attempts to force action from banks have also failed.

Lawmakers have been threatening for nearly two years to pass a bill that would allow judges to rework mortgages in the bankruptcy process if banks did not modify more loans.

The pace of modifications has fallen well short of expectations, and yet last week House Democrats failed to add the measure to the regulatory reform bill. Efforts to jump-start the bankruptcy bill in the Senate have gone nowhere.

Bankers have also gained ground in the debate over the regulatory reform bill itself. Large banks nearly succeeded last week in convincing the House to strip a provision that would create a new consumer protection agency, and appear well positioned to fight that plan in the Senate.

On Monday Obama expressed frustration with their efforts, saying that while the CEOs have pledged to support reform, it's clear that their lobbyists are resisting it.

"The problem is there's a big gap between what I'm hearing here in the White House and the activities of lobbyists on behalf of these institutions or associations of which they're a member up on Capitol Hill," Obama said. "I urged them to close that gap, and they assured me that they would make every effort to do so."

Administration officials contend banks are not lending enough, especially to small businesses. Bankers counter that loan demand is down and there are fewer creditworthy borrowers. (Outstanding loans dropped 2.8% in the third quarter, to $7.4 trillion, the largest percentage decline since 1984, when the Federal Deposit Insurance Corp. began reporting such data.)

After the White House meeting, Richard Davis, chairman, president and CEO of U.S. Bancorp, said bankers and the administration had agreed to put more resources behind small business lending — but he, too, cited a lack of demand and solid lending opportunities as key problems.

"The volume of demand and the needs for consumers are not always aligned for the risk that's out there," Davis said in an interview on CNBC. "At the end of a recession, the qualifications of most borrowers are lower than they were at the beginning, and the banks right now — more than ever you don't want us to make loans that are not strong or well suited for the consumer or the small business."

Even though Bob Kelly, Bank of New York Mellon Corp.'s CEO, pledged a "redoubling" of efforts to reach out to borrowers, he said it may be tough. "The reality is that demand is down materially," he said. "The other fact of life is not everyone is credit worthy."

Bank of America Corp. tried to capitalize on the meeting by publicly pledging to increase lending. Fresh from repaying its Tarp funding last week, B of A said Monday that it plans to increase its lending to small and midsize businesses by at least $5 billion over 2009 volumes.

Some observers said banks are getting mixed messages from the government. While policymakers want banks to lend more, they also don't want them to engage in risky lending.

"That's an incredibly difficult balancing act," said Kevin Jacques, a Boynton Murch chairman in finance at Baldwin-Wallace College and a former Treasury official. "You need banks to lend, and at the same time you have regulators saying there may be more problems down the road commercial real estate, etc., so you need more capital. There is an inherent conflict with the administration telling banks to lend more as well as regulators telling banks you need more capital for unexpected losses. There is really no way to bridge this."

To be sure, some sources still see Obama's bully pulpit as formidable.

"I do think Wall Street is smart enough to try to cooperate given how unpopular they are," said Doug Elliott, a fellow at the Brookings Institution.

"The government and the administration have a little less control as the Tarp money gets paid back, but the president and the Congress still have a great deal of leverage as they push financial reform."

But others like Lily Claffee, a partner at Jones Day and former Treasury lawyer, doubt scolding by the President would stimulate lending.

"Banks are going to do what's in the interest of their bottom line," she said. "They are not going to do things just because they are told informally by the executive branch."

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