Obama Encourages Small Banks to Lend to Small Biz

President Obama urged a group of leaders of community banks to increase their lending to small businesses.

“There are businesses that are looking for loans out there that are profitable, that are ready to make money,” said Obama after a meeting with several local bankers Tuesday. “And the key is to match them up with banks that are in a position to lend. There are some banks that have seen the increase in the savings rate and higher deposits give them a pretty good capital base, but they’re still constrained by some regulatory restraints.”

The meeting came a week after a similar meeting with the heads of the 12 largest U.S-based banks (see Obama Pushes for More SMB Lending). One of the local bankers who met with Obama was Paul Solvay, president and CEO of Solvay Bank in Solvay, N.Y. He and seven other members of the Independent Community Bankers of America voiced concerns that community banks continue to face overly aggressive examinations that can hinder small-business lending.

Obama acknowledged that the banks were operating under greater constraints in the wake of the credit crisis and indicated the administration would try to help ease some of the pressure. “We are looking to see if there are possibilities to cut some of the red tape,” he said, “We don't have direct influence over our independent regulators, but we think that the more that we can highlight that in some ways the pendulum may have swung too far in the direction of not lending after a decade in which it had gone way too far in the direction of getting money out the door no matter the risk — that if we can get that balance right, that there are businesses and communities out there that are ready to grow again, and we just need to help make that happen.”

While community banks with $1 billion in assets or less represent about 12 percent of all bank assets, the ICBA said the local banks support 31 percent of all small-business loans of less than $1 million.