John S. Wolfe

First, he did apologize.

“(The banking industry) made a lot of mistakes,” U.S. Bancorp CEO Richard Davis told the Feb. 25 Phoenix Economics Club luncheon crowd at the Arizona Biltmore. “The industry failed you.”

Banks gave out loans they shouldn’t have and lost sight of their customers, he said. Those December bonuses were a bad idea. And now they’re facing the music.

That big-bank tax the feds are proposing? The industry should accept it.

Consumer protection reform? Yes, but let’s use the agencies in place, not create a new one.

Start making loans? It’s a bit more complicated than that.

Davis, 51, said banks want to lead the country out of recession but can’t do it imprudently. Plenty of small businesses are asking for loans, but many aren’t qualified. Furthermore, many banks have their own capital issues to deal with.

He sees a way for the government to help.

“Let’s say six $100,000 loans were given out to small businesses,” he said. “If the bank set aside 3% and the government provided a 3% match, that would provide a $36,000 reserve as backup to the bank, should the loan fail. Six companies move the economy forward. That would help.”

He noted that most studies show that for every $1 in loans, the economy is boosted by $7 through resulting commerce. That is why banks, though unpopular because of the problems of 2007-2009, are actually the catalyst for an economic recovery.

He urged citizens to become as involved as they are in the health-care debate.

“(Banking reform) really affects your life,” he said. “You should be as engaged as you are with health care.”

2010 will be a slog, Davis said, and there is a risk of a double-dip recession. “I think we’re on a plateau that will go up next year.”

He acknowledged, however, that businesses aren’t hiring and investment is not taking place because of the uncertainty – in Washington, with taxes and health care and the myriad of other issues. That uncertainty leads to paralysis. “We need clarity,” he said.

This is the worse economy he has ever seen but it also provides lessons to the next generation, he said.

“In February 2012 how will we look back on this period? We will be looking back on our behaviors and our actions during the recession. What leadership are we providing?”