IBJNews

Indiana banker meets with Obama, Geithner

Back to TopCommentsE-mailPrintBookmark and Share

Opportunities don’t get much rarer than face time with President Obama and Treasury Secretary Timothy Geithner. Yesterday morning, German American Bancorp CEO Mark Schroeder got 90 minutes.

Schroeder was one of just 12 community bankers from across the country invited to meet Obama for a friendly discussion about how the one-two punch of the recession and bank regulation drags down local lending.

“I was thankful for the opportunity,” Schroeder said. “It was, I’m certain, a once-in-a-lifetime experience.”

Jasper-based German American is exactly the type of community bank that Obama wants to support. With $1.2 billion in assets and 29 branches, German American hasn’t asked for or received any bailout money from the federal Troubled Asset Relief Program.

It’s a tiny institution compared to bank giants like JPMorgan Chase, Wells Fargo and American Express. Obama famously called top mega-bankers “fat cats” in a television interview last week and told them in a White House meeting that they have a responsibility to make “an extraordinary commitment” to help rebuild the economy.

According to the FDIC, German American holds 1.02 percent of Indiana’s deposits, meaning 21 other banks have greater Hoosier market share. But it’s a stalwart of its community and a key source of capital for small businesses there.

“It’s fair to say that most of these community banks were not engaged in some of the hugely risky activities that helped to precipitate the financial crisis,” the Associated Press quoted Obama as saying after Tuesday’s meeting.

The Washington D.C.-based trade group Independent Community Bankers of America tapped Schroeder for the Obama meeting. Schroeder is ICBA’s Indiana state director. Earlier this month, Schroeder said, the White House called ICBA asking it to suggest local bankers for a presidential meeting, including one from Indiana. On Dec. 11, ICBA submitted Schroeder’s name and supporting data, which the White House and Treasury Department used for a background check.

Two feet of snow fell on the nation’s capital over the weekend, so Schroeder flew to Washington, D.C., early Monday morning. Upon entering the White House on Tuesday, Schroeder said he went through three separate checkpoints before being ushered into the Roosevelt Room, directly adjacent to the Oval Office.

Schroeder chatted briefly with Karen Mills, administrator of the U.S. Small Business Administration, until Geithner entered, followed five minutes later by Obama. The president circled the room and met each of the community bankers individually, asking them each to explain the challenges their banks and states face.

It was Schroeder's first visit to the White House. The Democrat said he’s never met Obama or been a contributor to political campaigns before, but was immediately impressed with the president’s ability to connect with his audience. Schroeder used his time to lay out a community banker’s current challenge in practical terms. He pointed out that in Indiana, problems are dramatically worse in the auto-manufacturing-intense north, while the southern region near Jasper has held up relatively well.

But all bankers work under the same regulatory restrictions. Noting that banks must reserve $1 of capital for every $10 in loans, Schroeder explained how recessionary credit losses squeeze a community bank’s ability to advance credit, even to well-known businesses. By way of example, Schroeder said, he pointed to a 76-year-old Jasper business that had never suffered a loss until 2008. German American struggled to advance the business working capital because it knew regulators would wave red flags and slap a “troubled” label on the loan.

According to the Federal Reserve, loans by the nation’s 8,000 banks fell 8 percent to $6.7 trillion in the past year, and some analysts expect them to keep falling at least through the next year.

Schroeder said he went on to describe how the Small Business Administration can help. With SBA backing, Schroeder said, a community bank can make $10 in loans with just 20 cents capital in reserve. Perhaps most important, the bank doesn’t have to classify those loans as substandard.

But the SBA’s money has been so in demand, Schroeder said, that it basically ran out of cash this year. Schroeder said he wanted to emphasize how that could drag down the economic recovery, especially next year.

Businesses for the last 18 months or more have survived by living off their receivables and excess inventories, Schroeder said. When the economy picks up, they’ll need to start building both back up again. But it will be difficult for businesses to get credit,  given their banged-up balance sheets, without the backing of credit-enhancement programs like the SBA, he said.

Community banks are also worried that Washington’s reform of mega-banks will spill over and hike their own compliance costs. Schroeder said Obama promised that any new rules aimed at curbing the excesses of enormous institutions that took outsized risks and sparked the economic downturn won’t add to community banks’ regulatory burden.

But Obama also stated flatly that community banks won’t get any special exemptions.

“I respect that,” Schroeder said. “He didn’t pull any punches.”

Obama did make one miscalculation yesterday, Schroeder said, laughing. The meeting was scheduled for an hour, but it stretched another 30 minutes beyond that.

“When you get 12 bankers in the room in this economic environment and ask them what issues are you facing and what can we do, we didn’t get done in an hour,” Schroeder said.

-- The Associated Press contributed to this report

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Really, taking someone managing the regulation of Alcohol and making himthe President of an IVY Tech regional campus. Does he have an education background?

  2. Jan, great rant. Now how about you review the report and offer rebuttal of the memo. This might be more conducive to civil discourse than a wild rant with no supporting facts. Perhaps some links to support your assertions would be helpful

  3. I've lived in Indianapolis my whole and been to the track 3 times. Once for a Brickyard, once last year on a practice day for Indy 500, and once when I was a high school student to pick up trash for community service. In the past 11 years, I would say while the IMS is a great venue, there are some upgrades that would show that it's changing with the times, just like the city is. First, take out the bleachers and put in individual seats. Kentucky Motor Speedway has individual seats and they look cool. Fix up the restrooms. Add wi-fi. Like others have suggested, look at bringing in concerts leading up to events. Don't just stick with the country music genre. Pop music would work well too I believe. This will attract more young celebrities to the Indy 500 like the kind that go to the Kentucky Derby. Work with Indy Go to increase the frequency of the bus route to the track during high end events. That way people have other options than worrying about where to park and paying for parking. Then after all of this, look at getting night lights. I think the aforementioned strategies are more necessary than night racing at this point in time.

  4. Talking about congestion ANYWHERE in Indianapolis is absolutely laughable. Sure you may have to wait in 5 minutes of traffic to travel down BR avenue during *peak* times. But that is absolutely nothing compared to actual big cities. Indy is way too suburban to have actual congestion problems. So please, never bring up "congestion" as an excuse to avoid development in Indianapolis. If anything, we could use a little more.

  5. Oh wait. Never mind.

ADVERTISEMENT