Bank Presidents and US President

Surfeit begets insolence, when prosperity comes to a bad man.
- Theognis, c. 545b.c.

I
hope the President didn't take it personally. I'm sure no offense was
intended. Even though bank presidents have shown they can single
handedly almost sink the economy, they can't control the weather that
prevented their making it to the meeting. Of course some people might
wonder why they didn't leave a day earlier. A lot of people who have a
morning meeting scheduled with the President of the United States would
be very anxious to make sure they were in town the night before so as
not to miss the meeting. Such a meeting is heady stuff even for a bank
president. My guess is that the men all had good reasons for not
arriving in Washington D.C. the night before the meeting and it was
not, as some might think, a lack of respect for the President of the
United States. A number of factors explain their actions.

One
is that it was the middle of the holiday season and a Sunday night two
weeks before Christmas is a time when there are lots of holiday
parties. It is important for bank presidents to be in attendance to
show that even though 12 months ago they were being bailed out by,
among others, the people at the parties as well as lots of other people
their cheerful demeanors prove that they are not the least bit nervous
about the economy or the state of their banks. Another reason they may
have waited until Monday to travel to see the President (if they were
not partying) was to give them additional time to work for the benefit
of customers, employees and shareholders.

Lloyd Blankfein,
president of Goldman Sachs (who missed the meeting), was very likely
spending the evening doing rough calculations as to how to divide up
$16 billion in bonuses among his thousands of employees. That is a
complicated calculation. He may also have been working on the speech he
would give to his employees to explain why some of them would get
bonuses in stock instead of cash.

Citigroup's Vikram
Pandit missed the meeting because Citigroup had a $17 billion stock
offering on the same day as the meeting with the President took place.
Mr. Pandit spent the day convincing investors they should buy some of
the stock that was being offered. Thanks to those efforts Citigroup received
$425 million in fees from the offering. In Mr. Pandit's place
Citigroup's chairman, Richard Parsons was to attend, but having better
things to do on Sunday night than spend the night in the capitol he
waited until Monday morning to travel and because of weather had to
miss the meeting. He may have spent some time Sunday night working on
helping those struggling to pay their mortgages who were hoping to
qualify under the "Making Home Affordable Program." In November 2008
Citigroup said its intention was to reach out to 500,000 borrowers who
needed help to avoid foreclosure. It said its program might result in
$20 billion of mortgage refinancings. As of November 2009 it had fallen
a bit shy of its goal. Of all mortgagees who were eligible for
modification it had only entered into trial modifications
Public 111009 FINAL.PDF with 100,126 homeowners instead of 500,000
homeowners and had only made permanent modifications with 271 borrowers
out of the 231,000 who were estimated to be eligible.

John
Mack of Morgan Stanley was probably also spending Sunday night trying
to figure out how to help those threatened with foreclosure who were in
distress. Morgan Stanley's subsidiary, Saxon Mortgage Services, Inc.
had an estimated 80,000 eligible loans and had 35,565 trial
modifications going on but as of the end of November had only made 42
of the loan modifications permanent. The rest were still awaiting
approval. Of course he might have been toasting the fact that although
those numbers are not impressive, when its permanent loans
modifications are added to its trial modifications it turns out that
44% of its loans have been modified or are in the trial stage and that,
percentage wise, places Public 111009 FINAL.PDF it at the top of all the Servicers in the program.

The
"Making Home Affordable Program" has been in place for slightly over a
year. The Treasury Department estimates there are 3,299,780 people
eligible to participate in the program. As of the end of November only
31,382 have received permanent modifications. The three presidents who
missed the meeting are probably keenly ware of the failure of their
institutions to do more for those in trouble. They may even feel a bit
of guilt about it. Not enough, however, to have made sure they'd get to
the meeting with the President on time. And not enough to cause them to
forego their large bonuses.