Banks Sway Bills to Aid Consumers

By Lindsay Chin

WASHINGTON — They may be held in low esteem around the nation, but the country’s largest banks still wield considerable influence in Washington.
The banks have made it difficult for Congressional Democrats and the White House to give stretched homeowners a stronger hand in negotiating lower monthly payments on mortgages and to prevent credit card companies from imposing higher fees and interest rates.
Having won some early skirmishes by teaming with Republican allies, the banks now appear to have the upper hand and may wind up killing — or at least substantially diluting — both pro-consumer measures.
To turn the tide, Democrats are calling in their big gun — President Obama — to pressure the executives at the largest credit card lenders. In coming weeks, officials say, the administration intends to make a major push on consumer finance issues, possibly including tough new lending standards for homeowners seeking mortgages.
Mr. Obama is set to meet at the White House on Thursday with executives from American Express, Bank of America, Capital One Financial, Citigroup, Discover Financial Services, JPMorgan Chase and others to discuss what officials say are abusive credit card fees and practices.
During the presidential campaign, Mr. Obama made an issue of what he considered excessive credit card fees, but he has been largely silent on the matter since his arrival in Washington. As a candidate, he also favored legislation to make it easier for troubled homeowners to use bankruptcy court to ease the terms of their mortgages, a proposal he again endorsed last month.

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U.S. Program Lends a Hand to Banks, Quietly

By Lindsay Chin

Eager to escape the long arm of government, Goldman Sachs is preparing to return $10 billion in taxpayer funds as fast as the ink can dry on the check. But the bank, and a number of others, is quietly holding on to other forms of public support that come with virtually no strings attached.

Banks have been benefiting from an indirect subsidy adopted by the federal government at the height of the financial crisis last fall that allows them to issue their debt cheaply with the backing of the Federal Deposit Insurance Corporation.
That debt — more than $300 billion for the banking industry so far — helped otherwise cash-strained banks to keep their businesses running even when it was virtually impossible for other companies to raise funds. The program will continue to bolster scores of banks through at least the middle of 2012.
The value of the assistance, economists say, is incalculable, because it helped keep participating banks alive despite the panic sown in financial markets after Lehman Brothers collapsed.
“I don’t know how you measure that subsidy,” said Mark Zandi, the chief economist at Moody’s Economy.com. “That’s why they say it’s invaluable. It’s an infinite subsidy. It’s their franchise value.”

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