NEW YORK (
) -- Now that the mortgage modification program is off to a running start, big banks have begun to funneling credit to
-- another sweet spot for lending in the economic recovery.
The Obama administration has been pushing banks to open up their loan spigots for small and medium-sized companies, which employ more than half the U.S. workforce and contribute as much to private, non-farm GDP. On Monday, the president met with top bank executives to prod them further, as the Small Business Administration seeks additional lending incentives with Congress.
Soon after Monday's meeting,
Bank of America
, issued press releases saying they would increase small-business lending by up to $10 billion and $5 billion, respectively.
CEO Richard Davis said big banks would reconsider small-business loans that had previously been rejected.
"Every bank in that room talked about adding many, many small business originators, and setting very aggressive goals for small-business lending next year," Davis told reporters after the meeting.
Among those present were Bank of America CEO Ken Lewis, JPMorgan's Jamie Dimon,
Jim Rohr and
CEO John Stumpf was also there. His bank recently showed its commitment by touting its position as the No. 1 small-business lender in the country, though its key focus on Monday was repaying its
Also at the meeting were
CEO Kenneth Chenault and Richard Fairbank, who leads
. Since small businesses often rely on credit cards to fill in the funding gaps, their commitment as top credit-card lenders is also important.
Chairman Richard Parsons,
CEO Lloyd Blankfein and
CEO John Mack participated via conference call because their flights to Washington were delayed.
Small businesses have been a driving factor in leading the U.S. out of previous recessions. Expanding prudent loans to small companies, especially as the $787 billion stimulus package is rolled out in 2010 for clean-energy projects, infrastructure and other initiatives. The Small Business Administration has run through its $375 million in
, but is asking Congress to extend the incentives into 2010. The administration is also appears pushing to extend tax breaks to small business owners.
If all goes as planned -- and that's a big "if" -- consumers will benefit from new jobs, businesses will benefit from expansion opportunities and banks will benefit by making prudent loans to fuel all that growth. Once the ball gets rolling next year, expect banks to be profiting from the loans Obama is now pressuring them to make.
Written by Lauren Tara LaCapra in New York