Donate Today!

EMAIL SIGN UP!

 

Popular content

Where'd All That Money Go? Bank Execs Testify Today

by Lisa Zagaroli

WASHINGTON - The nation's largest banks, battling an image of jet-setting executives with multimillion-dollar salaries, will face tough scrutiny Wednesday from lawmakers who are struggling to understand the financial health of the institutions and the impact of a $700 billion taxpayer bailout.

House Financial Services Committee Chairman Rep. Barney Frank, D-Mass. gestures during a news conference on Capitol Hill in Washington, Tuesday, Feb. 3, 2009. Frank is chairman of the House Financial Services Committee, which will grill bank executives today.(AP Photo/Susan Walsh) Eight chief executive officers, including Bank of America's Ken Lewis and Wells Fargo & Co.'s John Stumpf, are scheduled to testify at a hearing of the House Financial Services Committee.

Lawmakers are hoping for a comprehensive accounting of what the banking giants did with the money they got from the Troubled Asset Relief Program and whether it appears to be stabilizing the rocky financial services industry.

Taking a cue from congressional scrutiny of beleaguered automotive executives who came to Washington hat in hand, the bankers also are expected to avoid any unwanted attention about corporate travel: Lewis has said he'll take a train, and Stumpf is flying commercial. It'll be harder to dodge questions about their high-dollar executive compensation packages that include multimillion-dollar bonuses.

"If they didn't get a bonus, would they knock off early on Wednesday?" said Rep. Barney Frank, D-Mass., the committee's chairman, who like President Obama is pushing for more modest compensation packages and shareholder input.

Rep. Brad Miller, a Democrat from North Carolina who serves on the panel, joked that the CEOs have already "gotten that memo" to buy their suits at a discount store and travel by bus to Washington.

"I'm as offended by the excesses as anybody, but I'm much more concerned about whether the problem with banks is liquidity or solvency," Miller said.

"I want to have much more assurance than I now feel that the problem is one of liquidity, that the assets are hard to value, and that the real problem isn't that a great many banks are actually insolvent now."

Miller said he hoped to get to the bottom of why both Citigroup and BofA needed a second infusion of TARP funds, what triggered the second installment and what assets were guaranteed by it.

"What would have happened - would their checks have started to bounce?" he said.

Rep. Patrick McHenry, a North Carolina Republican who also sits on the committee, said he wants to hear, "How are the CEOs resolving their impulse to keep the TARP funds on their balance sheets with the need of fulfilling their program's mission of increasing consumer lending?"

BofA and Wells spokespersons declined to comment about what they would reveal at the hearing.

Bank of America, which has received $45 billion in government aid, has said it made more than $115 billion in consumer and commercial loans in the fourth quarter. Wells Fargo, which bought Charlotte's Wachovia last year, emphasized that it had remained "open for business" during the credit crunch. It said it has increased loans and other assets by $119 billion, or 28 percent, since the crisis began in mid-2007.

The House hearing will be watched on both sides of the Capitol, where lawmakers are struggling to justify how federal bailouts and a huge economic stimulus bill will help typical citizens struggling to stay afloat at home.

"Our bankers have really blown it here in terms of public image," said Sen. Lindsey Graham, R-S.C.

"My advice to any CEO is to restore trust and confidence by demonstrating you have the capability of managing any money you receive from the public sector, from the taxpayer, and use it wisely, that you have a plan to pay it back, you understand the nature of problem and you have a plan to fix it, and you're going to be frugal and thrifty with the money."

Who's testifying

Lloyd Blankfein, Goldman Sachs

James Dimon, JPMorgan Chase

Robert Kelly, Bank of New York Mellon

Ken Lewis, Bank of America

Ronald Logue, State Street

John Mack, Morgan Stanley

Vikram Pandit, Citigroup

John Stumpf, Wells Fargo & Co.

 

Comments are closed

53 Comments so far

Show All

Comments

Note: Disqus 2012 is best viewed on an up to date browser. Click here for information. Instructions for how to sign up to comment can be viewed here. Our Comment Policy can be viewed here. Please follow the guidelines. Note to Readers: Spam Filter May Capture Legitimate Comments...