Page last updated at 23:49 GMT, Friday, 27 March 2009

Obama tells banks 'work together'

Barack Obama
President Obama wants both stimulus and regulatory reforms

President Barack Obama has met top US bankers to discuss his latest plans to stabilise the US financial system and boost the US economy.

Mr Obama called the bosses of the biggest US banks to the White House and told them: "We are in this together."

The president said that his message to the bankers was "show some restraint."

The boss of Goldman Sachs said after the meeting "the problems will be solved" and "we are at the end of beginning, the hard works starts now."

He said the money spent on stimulating the economy would be money well spent.

Mr Obama said that he had asked the bankers to "show some restraint. Show that you get that this is a crisis and everybody has to make sacrifices.

They agreed and they recognized it," he said. "Now, the proof of the pudding is in the eating."

The meeting was a bridge-building exercise by the Obama administration after coming under fire last week for allowing huge bonuses to be paid to AIG executives.

Far-reaching plans

We can see the beginning of a turn [in the economy], we can start to see a bottom
Richard Davis, chief executive, Bancorp

There are three measures needed to turn the economy around, said Lloyd Blankfein, chief executive of Goldman Sachs: "Stimulating the economy, arresting the fall in asset prices and fixing the financial system."

All three were now in place, he added.

"The capital markets are recovering and the stimulus [package] is just starting to get into people's pockets," said Jamie Dimon, chief executive of JP Morgan Chase.

Richard Davis, chief executive of Bancorp, was equally upbeat following the meeting. He said he could see the "beginning of a turn [in the economy], we can start to see a bottom."

He also said the 13 bankers present at the meeting understood the public's anger at bonuses paid to executives of banks that have received government aid.

However, he said that the money Bancorp took from the government "was a good investment, it was not a bail-out."

The government is getting a good rate of interest and it will get its money back, he said.

Despite the optimism of the leading bankers, John Mack, chief executive of Morgan Stanley, sounded a more cautionary note about the time needed for the government measures to take effect.

"Nothing is going to be instantaneous, it's going to take time," he said.

Toxic assets

The US government announced a plan earlier this week to work together with banks and private investors to help turn the economy around.

John Mack
Morgan Stanley boss John Mack said government measures would take time

The "Public-Private Investment Programme" is designed to buy up to $1 trillion (£686bn) worth of toxic assets to help repair banks' balance sheets.

Specifically, it will purchase the troubled mortgages and securities that have been at the root of the credit crunch.

And on Thursday US Treasury Secretary Timothy Geithner outlined on Thursday far-reaching plans to strengthen government authority over the US financial system.

Mr Geithner told a US House Committee that a simpler, more effective regulatory system was needed.

The measures are designed to prevent the kind of systemic risk-taking among banks that contributed to the current financial crisis.

The Obama administration has made it clear that it sees the banks as essential to an economic recovery.

The chairman of the Federal Reserve, Ben Bernanke, recently told Congress that while the recession may end in 2009, that would happen "only if" financial stability was restored.



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