Wall St. CEOs scolded by lawmakers
WASHINGTON (Reuters) - Wall Street bank executives squirmed under a public scolding in the U.S. Congress on Wednesday over how they used $176 billion in bailout money without noticeably improving the battered economy.
"America doesn't trust you anymore," Massachusetts Democratic Rep. Michael Capuano told eight bank CEOs during a congressional hearing on the troubled bank bailout plan.
Lawmakers' remarks reflected public outrage over the economic crisis but the tone was more civil than the grilling last week by many of the same lawmakers of securities regulators over Bernard Madoff's alleged $50 billion fraud.
They demanded to know what the banks have done with the bailout money, given an ongoing credit crisis that has added to the country's deteriorating economy.
The CEOs, representing the titans of the once seemingly invincible capitalist society, argued that they had responsibly used billions in taxpayer dollars to increase lending, not to pay executives, lobbyists or shareholder dividends.
They all said they had received 2008 salaries ranging from $600,000 to $1.5 million and had not received bonuses. All but one reported that their companies own or leased airplanes, prompting California Democratic Rep. Brad Sherman to advise them to give up the expensive aircraft.
"You could sell them," he said.
Prodded by New York Democratic Rep. Gregory Meeks on whether Americans deserved an apology for lax loan standards that fueled the now-collapsed debt bubble, only Morgan Stanley CEO John Mack spoke up.
"I think the entire industry bears responsibility, and I'm sorry for it," Mack said.
More so than other lawmakers, Capuano expressed frustration.
"You come to us today on your bicycles after buying Girl Scout cookies and helping out Mother Theresa and telling us, 'We're sorry, we didn't mean it, we won't do it again, trust us.' Well, I have some people in my constituency that actually robbed some of your banks and they say the same thing," he said.
The CEO's struck a contrite tone, politely answering pointed questions with corporate aplomb.
"I feel more like corporal of the universe, not captain of the universe at this moment," Ken Lewis, CEO of Bank of America, as he came under intense questioning from California Democratic Rep. Maxine Waters.
Outside the House office building where the hearing took place, about a dozen protesters taunted Lewis. "Hey, Ken Lewis feel our pain," they chanted.
Wednesday's hearing came a day after Treasury Secretary Timothy Geithner failed to inspire market confidence over the government's financial bailout plans and sent stocks tumbling.
Democratic Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, opened the proceedings by telling the CEOs they needed to understand Americans' anger and frustration and cooperate with lawmakers willingly, "not grudgingly, not doing the minimum."
New York Democratic Rep. Gary Ackerman said that in "the real world,' people cannot get loans to buy cars or homes or send children to college.
"It seems to me and some of us that this money hasn't reached the street, that you haven't loaned it out," he said.
Democratic Rep. Paul Kanjorski of Pennsylvania was equally baffled, telling the executives that if their banks did not use the money, "Please find a way to return that money before you leave town."
South Carolina Republican Rep. Gresham Barrett said his constituents "simply have not seen the evidence that the money you were given is working or making their lives better."
The CEOs reported they had forsworn bonuses for now.
"I've told my board of directors that my salary should be $1 per year with no bonus until we return to profitability," said Vikram Pandit of Citigroup Inc.
But Frank demanded why they needed bonuses at all when a good salary would do. New York state officials say financial companies doled out $18.4 billion in bonuses last year.
"At your level, why do you need bonuses?" Frank asked. "This notion that you need some special incentive to do the right thing troubles people."
"It's complicated," Mack replied, citing the risks involved, the global nature of the banking business and the size of the companies. "If you gave me no bonus for the best year, I'd still be here."
The executives also said they are embracing some of the reforms proposed for the badly crippled U.S. financial system.
Jamie Dimon, head of JPMorgan Chase & Co, said he is endorsing a proposal to create a systemic risk regulator to help oversee U.S. markets.
"This would allow us to begin to address some of the underlying weaknesses in our system and fill the gaps in regulation that contributed to the current situation," he said. "We stand ready to work with you on the range of issues confronting the financial services sector and our economy."
The United States' economy, already in recession for a year, is facing its worst crisis in generations as banks struggle to absorb losses and resume lending.
"It is abundantly clear that we are here amidst broad public anger at our industry," said Lloyd Blankfein, CEO of Goldman Sachs Group Inc.
Others testifying included Robert Kelly of Bank of New York Mellon Corp, Ronald Logue of State Street Corp and John Stumpf of Wells Fargo & Co.
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