Obama will let bank execs keep TARP funds to help stabilize financial system.

Bank executives indicated they are willing to hold onto U.S. government aid to help stabilize the financial system and pull the economy out of recession.

Thirteen chief executive officers of the nation’s biggest financial institutions met with President Barack Obama yesterday at the White House to discuss housing, proposed rules and executive pay, as well as the Treasury Department’s plans to revive the banking industry. While some lenders plan to soon return billions of dollars in assistance they accepted since October, potentially undermining the rescue effort, others backed away.

“No one has an interest in having capital returned prematurely at the expense of banks’ ability to participate in this stimulus,” Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc., said in an interview with Bloomberg Television. Officials at his firm have discussed returning the $10 billion it received from the Treasury’s Troubled Asset Relief Program.

Also present at the 90-minute meeting were Treasury Secretary Timothy Geithner, National Economic Council Director Lawrence Summers and Christina Romer, chairman of the Council of Economic Advisers. The Treasury in October injected more than $120 billion from TARP into nine of the biggest U.S. banks, and the government has distributed a total of about $200 billion to more than 500 companies.

Lenders including Bank of America Corp., Morgan Stanley and U.S. Bancorp have said they want to give back the TARP money. Since taking the government funds, the banks and their employees have come under increasing scrutiny about compensation policies and how they’re using the money.
Compensation

Regarding bonuses and pay, Obama emphasized to the executives the importance of “recognizing what the American public is going through in this economic crisis,” Gibbs said.

“The president made it clear that he’d like this country to get back on track,” Dimon told Bloomberg Television after the gathering. “He wants us all to help.”

While executives said that they understood financial regulations needed revamping, they had different prescriptions for new rules. Obama is proposing an overhaul that would affect banks, hedge funds, private-equity firms and derivatives markets.
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