WASHINGTON (

TheStreet

) - President Obama met with top banking executives on Monday to goad them into supporting initiatives that may be helpful to consumers and businesses, but don't make a whole lot of sense for the financial sector.

Leaders from 12 banks, including

Bank of America

(BAC) - Get Report

,

Citigroup

(C) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

,

U.S. Bancorp

(USB) - Get Report

,

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley

(MS) - Get Report

, met with President Obama at the White House to tackle several topics. Among them were lending, consumer protection and executive compensation.

President Obama meets with banking executives Monday.

Unfortunately, the president and the banking industry appear to have nearly polar opposite rhetoric, if not polar opposite views. Ahead of the meeting, Obama told

CBS's 60 Minutes

that he "did not run for office to be helping out a bunch of fat cat bankers on Wall Street." Ouch.

Compared with the financial industry's mostly respectful and sensitive tone -- except for Goldman CEO Lloyd

Blankfein and

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Wells Fargo's

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one-time CEO

Richard Kovacevich -- the assertion seemed neither mature nor productive.

The financial industry has been besieged -- sometimes deservedly -- by accusations of greed, recklessness, smarminess and irresponsibility. In simple terms, banks have been bailed out by taxpayers to the tune of several hundred billion dollars, yet taxpayers are still suffering. Banks fueled the crisis with risky lending practices, and now they don't seem to want to lend at all. People are out of jobs and homes, yet

bankers are plotting ways to get multi-million dollar bonuses again.

However, the lending conundrum is more complex than sadistic loan officers who enjoy watching consumers and small-business owners suffer. It may be the best representation of the quintessential rock and a hard place that banks are now caught between.

There is an undeniable

dearth of credit, and the administration would like banks to start lending more. Banks, too, would like hardy loan growth; that's how they make money. As U.S. Bancorp CEO Richard Davis put it after the meeting: "Lending is what we do."

However, economic conditions do not yet support a lending resurgence.

The average U.S. household is vastly over-everaged, with debt representing 120% of disposable income. The job market is weak in terms of both opportunities and wage growth. And while

small businesses are craving new capital, many have been shuttered over the past year, and few of the remaining shops have the financial metrics that would justify a bank loan in a risk-averse environment.

Furthermore, the lack of fresh credit isn't entirely banks' fault; the recession has caused demand to wane as well. According to the

Federal Reserve

, a sizable fraction of loan officers across the country -- 30% to 35% -- continue to report weaker demand for commercial and industrial loans. Home loan demand improved only because of the government-supported refinancing effort.

Just as handing out loans in a wanton manner wouldn't be wise for bankers today, neither would supporting the administration's consumer-protection plans. Just one part of those proposals -- limiting overdraft fees -- will cost

Bank of America hundreds of millions of dollars between now and the end of 2010.

Of course, consumers have complained for years about outsized bank fees. Advocates have pointed out the absurdity of a customer facing $30 worth of fees for a $3 purchase without agreeing or even knowing the fees would arise. Something had to be done to curb predatory practices and make loan agreements less confusing. But JPMorgan Chase CEO Jamie Dimon has repeatedly pointed out that adding another layer of bureaucracy through a new Consumer Protection Agency, in addition to the Fed and the

Federal Deposit Insurance Corp.

, may serve none of those goals. It will, however, raise the cost of doing business for banks, thereby raising costs for all consumers -- not just irresponsible ones who can't keep track of their finances.

When it comes to compensation, the head-butting is less complex: The president is asking bankers to support measures that would hurt their ability to hire competitively and cut their own salaries as well. Good luck with that one.

Yet some progress has been made. Most of the large banks have significantly improved refinancing efforts after the administration released data showing they had been dragging their feet. Many consumer banks have voluntarily changed overdraft fee practices, and

Bank of America came up with a simplified, one-page explainer of credit-card terms for consumers. Goldman Sachs, the exemplar of big Wall Street pay, has restructured its compensation practices, as have most others, after being shamed into doing so.

Banks appear to realize that change is afoot, whether they like it or not. But they also want recognition that some of the issues are more complicated than a bunch of "fat cat bankers on Wall Street," as President Obama phrased it, keeping money from the needy masses, charging them ridiculous fees, and demanding huge pay. The banking culture and its business practices -- as dubious as some may seem -- were years in the making and will take time and thoughtful analysis to change.

Steve Bartlett, the head of an industry lobbying group, said after the meeting that the industry is "working tirelessly" to restore public trust, but must also make business decisions that will not lead to another crisis.

"We need a financial system that provides market stability and integrity, yet encourages innovation and competition to serve consumers and meet the needs of a vibrant and growing economy," said Bartlett, president and CEO of the Financial Services Roundtable. "That is the shared goal that the administration and industry are working towards."

-- Written by Lauren Tara LaCapra in New York

.