Rep. Barney Frank of Massachusetts told CBS' The Early Show Thursday that the Treasury Department under President Barack Obama has agreed to place stronger restrictions, including legal penalties and compensation restrictions, on financial institutions accepting federal TARP (Troubled Asset Relief Program) funds.
"If they get the money, they are legally bound to follow certain rules," Frank said. "How so? In the same way that if you do things you shouldn't do - you're subject to legal penalties."
Frank sought to distance the Obama administration from the Bush administration, which administered the first $350 billion of the bailout. Mr. Obama's White House was given the go-ahead by lawmakers to release the second $350 billion.
"I think the error is to assume that because the Bush administration resisted compensation restrictions, resisted a requirement that refused to do anything about foreclosures or make sure that these people got more money, that the Obama administration will do the same. In fact, the Obama administration is behaving very differently."
Frank said a "significant chunk" of the money will go toward reducing foreclosures and banks taking federal funds will be required to show the government how they plan to increase lending.
On Wednesday, Frank chaired hearings that brought for the first time since the bailout last October. The executives acknowledged they had lost the public's trust and agreed to greater accountability standards on the remaining bailout.
"Both our firm and our industry have far to go to regain the trust of taxpayers, investors and public officials," John J. Mack, head of Morgan Stanley, told the House Financial Institutions Committee.
Added JP Morgan Chase & Co.'s Jamie Dimon: "We stand ready to do our part going forward."
In general, the eight top bankers appearing before the panel were contrite and conceded they have work to do to win over a bitter public and an exasperated Congress. They had little choice but to acknowledge as much, given intense anger and anxiety as the troubled financial system continues to spiral downward in an ever-worsening recession.
Repeatedly, lawmakers were scornful and treated the financial heavyweights almost like naughty schoolchildren, ordering them to raise their hands to indicate their responses to blanket questions about their own use of perks and any policy changes made since accepting the bailout money.
At one point, under questioning from Rep. Dennis Moore, D-Kan., the CEOs went down the line disclosing how much bailout money their institutions received last year and how much they personally made. Their salaries ranged from $600,000 to $1.5 million annually, without bonuses.
Bankers are hardly sympathetic figures to Congress.
The initial spending of the bailout money was secretive, lacking strict requirements that the banks account publicly for how they were using it. Banks weren't helped by reports that Wall Street firms doled out more than $18 billion in bonuses to their employees last year or that Goldman Sachs and Wells Fargo had planned conferences in Las Vegas. Goldman Sachs moved its three-day event to San Francisco; Wells Fargo canceled its employee recognition retreat.
Most of these bankers didn't beg for their money. They were selected because they were relative healthy banks that could spur more banking activity and eliminate the stigma of taking taxpayer money for other financial institutions.
One by one, the CEOs brought a message of accommodation and gratitude. They applauded the program for making more loans available and promised to pay their share of the money back to the Treasury over time. Several asserted that none of the government's money went to bonuses or dividends.
"We are frugal," said Wells Fargo's John Stumpf.
Citigroup CEO Vikram Pandit testified that he has told his board of directors to set his salary at $1 with no bonus until the company makes money again.
He also struck an apologetic tone for letting the bank consider buying a private jet plane after receiving some $45 billion in bailout money. The bank ultimately scrapped the plan under pressure from Mr. Obama.
"We did not adjust quickly enough to this new world," Pandit said. "I get the new reality and I will make sure Citi gets it as well."
Most, if not all, were contrite.
"We understand taxpayers are angry" and they are right in demanding that institutions receiving their money take a "conservative, sober and frugal" approach to using it, said Kenneth D. Lewis of Bank of America.
Added Lloyd C. Blankfein of the Goldman Sachs Group, Inc.: "We have to regain the public's trust and do everything we can to help mend our financial system to restore stability and vitality."
Robert P. Kelly of The Bank of New York Mellon promised "a very good return on the investment for taxpayers" and acknowledged "we still have a long way to go" to jump start the U.S. credit market.