Bank CEOs Get Grilled on the Hill
Wednesday, February 11, 2009SUSIE GHARIB: We will pay the money back. That's what the CEOs of eight of the nation's biggest banks told lawmakers in Washington today. They plan to reimburse taxpayers with interest for billions of dollars in government loans. Citigroup and Bank of America even agreed to temporarily suspend foreclosures. The promises came at a grueling hearing of the House Financial Services Committee, where Citigroup, Bank of America, JPMorgan and others came under harsh questioning for how they spent government bailout funds and their lack of willingness to lend money to consumers. Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: The leaders of the nation's biggest financial institutions were subjected today to a kind of financial psychotherapy. House Financial Services Committee Chairman Barney Frank said banks had to put aside their denial and accept the anger over government bailouts.
REP. BARNEY FRANK, CHMN., HOUSE FINANCIAL SERVICES COMMITTEE: I urge you strongly to cooperate with us, not grudgingly, not doing the minimum, but understanding that there is a substantial public anger and alleviating that public anger, not with mumbo jumbo, but with reality, is essential if we're going to have the support in the country to take the right steps.
GERSH: The bankers, all of whom forswore their private jets to take public transportation to the hearing, got the message. When one member of Congress mockingly called the CEOs captains of the universe, Bank of America's Ken Lewis demoted himself.
KEN LEWIS, CEO, BANK OF AMERICA: First of all, I feel more like corporal of the universe, not captain of the universe.
GERSH: Above all else, members of Congress wanted to know whether taxpayer dollars were going to pay huge bonuses. The New York attorney general today charged Merrill Lynch executives secretly paid $3.6 billion in bonuses earlier than usual, just before Bank of America took over the company. Lewis said Bank of America did ask Merrill executives to reduce payouts.
LEWIS: Major changes will be made, but we could not make them until we owned the company.
GERSH: Chairman Frank had a more basic question.
FRANK: Why do you need to be bribed to have your interests aligned with the people who are paying your salary?
GERSH: Morgan Stanley's John Mack said the bonus system grew out of a time when Wall Street firms were partnerships and the owners split the profits at the end of the year.
JOHN MACK, CEO, MORGAN STANLEY: And without question, given the kind of risk that we take today, the global nature of our business and the size of our business, all that has to be looked at again. If you gave me no bonus in the best year, I would still be here.
GERSH: One member of Congress called the hearing a shareholders' meeting. Not much of a stretch when many on Wall Street are wondering whether taxpayers will end up owning outright many of the banks that were represented today. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
