President Barack Obama challenged leaders of the nation's biggest banks Monday to take "extraordinary" steps to increase lending to small businesses and home owners, saying they were obliged to help after being rescued by taxpayers.

The exchange came during an hourlong meeting with the executives at the White House. In response, financial leaders reiterated to Obama they are under pressure from regulators to build up reserves, leaving less money to lend. The slow economy also has businesses reluctant to expand -- and makes banks more grim about their prospects. Loan applications are down.

That said, U.S. Bancorp CEO Richard Davis called the talk a "full and frank discussion and said banks realized they were "under a microscope" and needed to align themselves more closely with the needs of consumers.

He said the financial institutions agreed to re-examine small business loans that had been denied, but he cautioned that banks had a responsibility to carefully evaluate the qualifications of each client.

In Utah, Zions Bank isn't planning to change its lending activities, which have remained unchanged since before the financial crisis began in 2007, spokesman Rob Brough said.

"We've always had money to lend and we've been advertising and marketing that we do have money to lend," Brough said. "If you were to take year-to-date, September 2009 and compare it to September 2007, loans are up about 21 percent."

He said consumers who might have had trouble borrowing from the state's biggest Utah-based bank probably saw their creditworthiness slip.

"A couple of years ago, people who may not have had any trouble qualifying for new credit now find themselves in a different financial position," Brough said.

Bank of America CEO Kenneth Lewis pledged to Obama that his bank would lend $5 billion more to small -- and midsized businesses in 2010 than it did in 2009, the bank said. It said the move is part of the bank's broader effort to support an economic recovery.

JPMorgan said last month that it would boost such lending by $4 billion.

Delay, Obama told the bankers, was not an option he was willing to consider as his administration has focused on digging out an economy that has left more than 15 million Americans out-of-work. An economy with double-digit unemployment next year threatens political fortunes for Obama's fellow Democrats in the 2010 midterm elections -- and presumably even Obama himself in a 2012 re-election bid.

Obama reminded the bankers that much of the financial crisis that took the U.S. banking system to the brink of collapse had been "of their own making." He also exhorted the executives to drop their opposition to an overhaul of the nation's financial industry.

"If they wish to fight common-sense consumer protections, that's a fight I'm more than willing to have," Obama told reporters afterward.

Obama's stern lecture came hours after Citigroup Inc. said it was repaying $20 billion in bailout money it received from the Treasury Department, in an effort to reduce government influence over the banking giant. The government will also sell its stake in the company.

The meeting came amid Obama's fierce criticism of Wall Street. In an interview that aired Sunday, Obama rebuked executive paychecks at firms that only last year required tax dollars to keep their doors open. "I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," Obama told CBS's "60 Minutes."

US Bancorp's Davis said there was no rancor after Obama's "fat cats" comment. "We haven't done as good a job as we can to align the interests of our constituents with those of the American public."

After House passage of a regulatory overhaul Friday, the work now shifts to the Senate, which has been preoccupied with health care legislation.

Obama said rhetoric and reality on financial overhaul don't align. "The problem is, there's a big gap between what I'm hearing here in the White House and the activities of lobbyists on behalf of these institutions or associations of which they're a member up on Capitol Hill."

Davis said Obama talked about the difference between bankers' broad support of the financial overhaul and the strident objections raised by their industry groups and lobbyists. "We're going to do a better job, beginning with the CEOs, to work with the lobbyists directly and be the voice with those administration leaders to come to a conclusion that we haven't before."