Finance: Get Credit Moving Again

The challenge for the new Administration: Revive the credit markets and keep a light touch with regulation

By Theo Francis

Wall Street wants action, but fears Obama will do too much David Noton/Getty Images

What Business Wants

No surprise here: The business community wishes to see a swift end to the global financial crisis that has shaken companies large and small in recent months. The banks get most of the press, but many other corporations have also been pinched, from local commercial developers unable to get credit to motorcycle icon Harley-Davidson (HOG), which was burned by subprime loans to bikers.

More than anything, corporate executives yearn for some semblance of calm. "The critical issue is to restore confidence in the economy and stabilize our global financial markets," says Ronald Williams, chief executive officer of health insurer Aetna (AET).

To do that, say business leaders, the Obama Administration must push banks hard to resume lending and find a way to stop the bleeding in the housing market. "Tighter regulation is unavoidable," says Daniel Vasella, CEO of Novartis (NVS), the giant Swiss drugmaker.

But executives also stress that Washington must resist the urge to clamp down too hard on the financial sector, which could hurt markets in the long run. In other words, Washington should do just enough to stop the crisis—and nothing more. "It would be a mistake to regulate so strongly as to stifle innovation," warns Ernst & Young CEO James Turley. He hopes Barack Obama will "do everything in his power to see that [intervention] is temporary."

Striking the perfect balance is much easier said than done, of course. "It's very tough," says Brian Gardner, a Washington policy analyst at Keefe, Bruyette & Woods. "In this environment, it's very easy for the pendulum to swing too far."

First and foremost, executives want the new Administration to get credit flowing again. Some big banks that received chunks of the $125 billion doled out by the Treasury Dept. on Oct. 14 have appeared to hoard the capital rather than lend it out, and the agency's rules have put few restrictions on how the money is to be used. That could change soon. House Financial Services Committee Chairman Barney Frank (D-Mass.) has already scheduled a hearing to examine the government bailout so far.

In terms of the housing crisis itself, executives outside the financial industry are less concerned about the details of a fix as long as there is one. "The crisis started with the housing sector and it will end there," says Rich Dougherty, CEO of Expert Choice, an Arlington (Va.) software company. "When we resolve the mortgage mess the economy should start moving in the right direction again." Many executives also hope the new Administration will create more transparency in the famously murky derivatives markets, while others are calling for some sort of super-regulator—possibly the Federal Reserve—to watch over all of the big financial institutions.