WASHINGTON — President Obama said Wednesday that some skepticism of how the government began its bailout of the banking system might be warranted, but he hoped to win back some public confidence by seeing to it that banks share more of the burden.
Obama said "a lot of banks going under and a lot of people losing their life savings" might have been the outcome if the government hadn’t stepped in to stabilize the financial system last fall. He said he was working to make sure the second phase of the Troubled Asset Relief Program would be better executed.
"Our goal going forward is to make sure the second half of that TARP money is spent with transparency, with oversight, that it is conditioned on banks sharing the burden, not expecting the taxpayers to pick up the entire tab while they're still giving their executives multimillion-dollar bonuses and still taking junkets to Las Vegas," Obama told a group of 16 reporters during a discussion in the Roosevelt Room in the West Wing of the White House.
More lending to businesses and consumers with money that's already been appropriated will "build back some of that confidence."
Obama was responding to a question that cynicism of the government's ability to help manage banks was so rampant that even Congress members who represent a banking town are opposed to it.
Rep. Sue Myrick, R-N.C., said recently that, "The government can't do anything right. I mean give me a break."
Another North Carolina Republican, Rep. Patrick McHenry, said "If we currently have a crisis with our financial institutions, the only thing that could make it worse is government making lending decisions for institutions."
Obama said he understood criticism about how the first round of TARP funds was distributed without proper oversight and "we have to earn trust back."
"Some of the criticism is this notion that government shouldn't be involved at all," he said. "If FDR hadn’t declared a bank holiday, probably the entire financial system would have collapsed back in the 30s. If (former Federal Reserve Chairman) Paul Volcker hadn't taken certain steps to control inflation, we'd still be looking at 15 percent interest rates. The fact of the matter is things like deposit insurance and securities regulation, all sorts of things we count on to make the market work, (are) the consequence of government involvement. Anybody who says that government should have no involvement in dealing with this crisis probably hasn't been studying their history very carefully."