Senators, Bankers Clash Over Bailout

Banks Say Taxpayer Money Not Being Used For Salaries, Bonuses, But Some Lawmakers Unconvinced

(CBS/AP)  Some of the largest U.S. banks sharing in the $700 billion government bailout of the financial industry tried to assure lawmakers Thursday they are using the money to make more loans and help financially strapped homeowners avoid foreclosure.

Barry L. Zubrow, chief risk officer with JP Morgan Chase, told the Senate Banking Committee that a portion of the $25 billion capital infusion it received from the Treasury Department was being deployed to "expand the flow of credit" and to assist with rewriting residential mortgages for up to 400,000 families.

Zubrow and executives with Goldman Sachs Inc., Bank of America and Wells Fargo & Co. told the committee that that none of the $85 billion they have received collectively from the government is being used to pay salaries or bonuses.

"The committee has asked whether (bailout) funds would be spent on executive compensation," said Jon Campbell, regional banking president for Wells Fargo & Co. in his testimony. "The answer is no. Wells Fargo doesn't need the government investment to pay for bonuses or compensation."

But lawmakers said there was little evidence that the bailout money had been used to expand lending as intended, and pressed bank leaders for commitments.

"Let me say as clearly as I can," said committee chairman Sen. Christopher Dodd, a Democrat. "Hoarding capital and acquiring healthy banks are not - I repeat are not - reasons why Congress authorized $700 billion in emergency funding."

With foreclosures still on the rise, Dodd said the bailout has done little to "stop the bleeding," reports CBS News investigative correspondent Sharyl Attkisson.

"It is still confounding to me why the Secretary of the Treasury and others refuse to understand this is the heart of the problem," he said.

Sen. Charles Schumer, a Democrat, said he and other lawmakers are looking at requiring banks to make more loans as a condition for taking part in the $350 billion second half of the bailout. "Any new capital injections must come with tougher requirements," he said.

Treasury has already loaned out or committed $290 billion of the first half. Democrats are working on a bill they hope to pass next week that would devote another $25 billion to the beleaguered auto industry, with the specific intent of helping General Motors Corp. avoid bankruptcy.

Lawmakers hoped that that the infusion of capital to banks would enable them to increase lending. But so far that hasn't happened, lawmakers say.

Sen. Tim Johnson, a Democrat, said he was alarmed by reports of continued generous compensation packages and benefits for executives of companies getting bailout funds.

"The intent of the bailout was to stabilize troubled financial institutions and help those businesses and individuals and Main Street affected by the credit freeze," said Johnson. "Those making the decisions on how to spend the $700 billion, and those receiving the funds, must remember this intended use."

Goldman Sachs and Morgan Stanley have each reportedly set aside more than $6 billion for end-of-year bonuses, reports Atkisson. The bankers promise it's a different pool of money from the taxpayer funds, but some senators remained skeptical.

"It flies in the face of reality that you can somehow draw these bright lines between public monies and private monies and retained earnings when it comes to some of these issues," said Dodd.

Congress can block release of the second $350 billion. It can also rewrite the law to put new conditions on its use.

On The Early Show, Sen. Dodd was asked if he thought bankers who attended Thursday's committee hearing got the message.

"Well, I'd like to tell you they did, but I doubt it," he said.

He blasted bankers for not showing that the billions of dollars in federal assistance that they have received are being put to proper use and accomplishing their intended public benefits.

"If the last two years is any experience at all, I just don't think they seem to understand," Dodd (left) told Early Show anchor Harry Smith. "And it isn't just $700 billion. If you tally up all of the guarantees and other assistance that's been provided over the last number of months one way or the other, it gets close to $5 trillion in support. In fact, as one witness pointed out yesterday, but for that kind of support and assistance, many of those banks wouldn't have been at the table yesterday - they would have been gone by now.

"And the question everyone asks: Where is the commensurate responsibility to mitigate foreclosures, to get money out the door to lenders, to understand you don't give bonuses or necessarily dividends to shareholders? The major job here is to get credit moving. Only one bank yesterday said they even had a committee established to see if they couldn't seek out credit-worthy bowers to get money out to, to start credit flowing.

"There is more than a level of exasperation," Dodd said. "Without any question, I'm tired of the jaw-boning. I started pleading two years ago, then sort of begging them to do things, then jaw-boning on it. but obviously we're running out of patience on that."

In the light of yesterday's depressing foreclosure numbers - more than a quarter of a million houses in foreclosure, and 84,000 homes reported now vacant where their owners have just walked away, Dodd focused on the families who are hurt.

"Put it in these terms: 9,128 foreclosures per day now. That's every single day, close to 10,000 families are adversely affected by this and that is the root cause of our financial difficulties. If you can put a tourniquet on that you really do begin to get to the bottom of this and reverse this cycle."

Dodd said two courses of action need to be taken: rewriting a provision of the $700 billion bailout package which would help families avert home foreclosures, as backed by Federal Deposit Insurance Corporation chairwoman Sheila Bair. "The treasury is still reluctant to move on it as they should," Dodd said.

"The second is, if you have a boat, a vacation home and a principal residence, under bankruptcy law your boat and your vacation home are protected, you get to keep those, but your principal residence goes. Assume you're an American like most people are who only have a principal residence: under that of course the bankruptcy court can take it. Why don't we just change that provision of law? That would get borrowers and lenders to negotiate. Those two things I think would do a tremendous amount."


Hedge Funds Under The Microscope

Separately, the House Oversight Committee met today to examine the role that hedge funds may have played in recent market turbulence.

The broader debate on the use of the bailout fund may not be resolved until President-elect Barack Obama takes office on Jan. 20 and pursues policies for administering the rescue program that are likely to be more closely aligned with his Democratic allies in Congress.

The economic meltdown that Obama will inherit was publicly declared a recession on Thursday by a major global economic cooperative, the Organization for Economic Cooperation and Development, of which the United States is one of 20 members.

The Paris-based OECD said in a statement that the economies of the U.S., Japan, and Europe were in recession, and the developed world's collective economy was on track to shrink 0.3 percent during 2009.

Attkisson reports that the massive taxpayer bailout of the banking system - sold to the American public as transparent - is veiled in secrecy.

Treasury Secretary Henry Paulson announced Wednesday that the administration had decided to scrap what had originally been the centerpiece of the program - a proposal to buy troubled assets to get them off the books of banks as a way of promoting increased lending.

Instead, the government is using tax dollars to buy massive shares in some of the nation's biggest and most successful banks - with virtually no strings attached, reports Attkisson. And that's all allowed under Congress' plan.

Attkisson and the CBS News investigative team decided to ask the banks directly what they are doing with Americans' tax money. Their responses were, on the whole, less than enlightening.

[tbuckl]

The NAZI Fascist Bush Crime Regime and
The Republican NAZI Fascist Party
Can-Not Get it Through Their Heads

They Have Been - EXPOSED - For WHO they Really Are and
WHAT they Really Are ! ! !

EMISSARIES of That -

That is : THE DESTROYER - of - WORLDS

JOB DESTROYERS __ WAGE PACKAGE DESTROYERS
WORKING MIDDLE CLASS AMERICA DESTROYERS
FAMILY UNIT DESTROYERS __ HOME OWNERSHIP DESTROYERS
ECONOMY DESTROYERS __ CREDIT DESTROYERS
DEMOCRACY DESTROYERS __ CIVIL RIGHTS DESTROYERS
WORLD PEACE DESTROYERS __ BANK DESTROYERS
INVESTMENT DESTROYERS
UNITED STATES SOVEREIGNTY DESTROYERS
UNITED STATES INDEPENDENCE DESTROYERS
WORLD ECONOMY DESTROYERS
WORLD RELIGION DESTROYERS

ECONOMIC STRIFE That is Being used as a Weapon to :
ELIMINATE a DEMOCRACY and REPLACE IT With :
The Totalitarian Dictatorship of : A NAZI FASCIST RULE
Against : The Populace of the United States and
The rest of The World

Any Corporation or POLITICAL INFLUENCE __ That has Supported and Assisted in :
The Achievement of : PURPOSELY and INTENTIONALLY
DESTROYING : The DEMOCRATIC INFRASTRUCTURE and
The ECONOMIC INFRASTRUCTURE of The United States is an :
Act of TREASON

Definition of TREASON :
1 : The betrayal of a trust : treachery
2 : The offense of attempting by Overt acts to overthrow the
government of the state to which the offender owes allegiance

[tbuckl]

Perhaps the Government would think different if all the home owners who are loosing their homes were to blockage their houses and take a stand, Use any and all force nessary to hold law enforcement off. One or two homeowners would not make a difference, but if 1 mil home owners put up a resistance then the police force would not have the man power to remove us all. If we band together, the Government will have to deal with us. Stand alone and they will take us one by one just like Nazi did. If it is the banks policy to rip us off, make us homeless while enjoying the bailout money for vacations, then take our homes and sale them for less than what we owe, it should be the policy of the citizens to repeal any and all government official attempt to effect this national swindle upon us. Again Thomas Jefferson saw that these tyrants would continue to rise up and we would need to forced them back down in order to maintain our liberty. He said, "I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

[tbuckl]

" The Preamble to his original draft of the Declaration of Independence, he wrote, "We hold these truths to be sacred & undeniable; that all men are created equal & independent, that from that equal creation they derive rights inherent & inalienable, among which are the preservation of life, & liberty, & the pursuit of happiness; that to secure these ends, governments are instituted among men, deriving their just powers from the consent of the governed; that whenever any form of government shall become destructive of these ends, it is the right of the people to alter or to abolish it, & to institute new government, laying its foundation on such principles & organizing its powers in such form, as to them shall seem most likely to effect their safety & happiness."

[tbuckl]

Hasn''t this government and the banking system proven to be destructive? Do the people now have a right to alter or abolish it and institute a new government? Thomas thought that "Rebellion to tyrants is Obedience to God." He further said, "The tree of liberty must be refreshed from time to time with the blood of patriots & tyrants." Perhaps we have reached that point where it is time to refresh the tree of liberty and deal with these tyrants now destroying American. Now that I have said my thoughts about this swindle, showed myself as a Son Of Liberty should I stand out front of my home and wait for the black van to pull up and take me to Guantanamo Bay?

[tbuckl]

2008 Preamble to Declaration of Independence
We the rich hold these truths to be undeniable; that all rich people are created above all others & that from our superiority is created by our God, that we derive our rights inherent & inalienable, above anyone else, we decide what the preservation of life, & liberty, & the pursuit of happiness is; that to secure our position to these ends, our token government is instituted by the rich, deriving their just powers because they have the armies and from the consent of the rich; that whenever any person shall become destructive of our rules, it is the right of the rich to destroy, alter or to abolish any rule, law that interfere with the rule of the rich, & to institute new definitions at will and without notice , laying ours foundation on the backs of the not rich. We shall organize our powers in such a form, as to keep all non-rich at bay and shall protect our safety & happiness by force should the poor rise up due to the heavy yoke around their necks.

[ruwebb-2009]

These are tough economic times. If any company can give 6 billion dollar to their overpaid management staff, they do not need and should not ask for assistance from the American taxpayers. THE CEOs JUST DO NOT GET IT. Struggling financial strapped companies do not pay out bonuses especially the ones who made stupid business choices.

[perk235]

HK4U: Let them fold, get rid of the unions and rebuild is the only thing that would work. What is next on the bailout plan? The airlines?
---------
Bush already bailed out the airlines post 9/11. Remember where the surplus went?

[perk235]

"The second is, if you have a boat, a vacation home and a principal residence, under bankruptcy law your boat and your vacation home are protected, you get to keep those, but your principal residence goes. Assume you''re an American like most people are who only have a principal residence: under that of course the bankruptcy court can take it.
---------------
How in the world can this be?

People should buy a trailer home as their primary residence and then a second home that they live in, so the second home is protected under bankrupcy law.

[upsetat63]

To: Thatguy56

You stated, "George Bush sold the entire country down the river. He and his adminstration have damaged the country to such and extent that it will take years to repair."

Maybe you can use some of the $700billion to attend writing classes. It should have read "such an extent NOT such and extent", think about it! Also, your spelling of administration is wrong.

I understand you are upset, as most of us are however, these type of errors impact the quality of your message.

[upsetat63]

To: Thatguy56

You stated, "George Bush sold the entire country down the river. He and his adminstration have damaged the country to such and extent that it will take years to repair."

Maybe you can use some of the $700billion to attend writing classes. It should have read "such an extent NOT such and extent", think about it! Also, your spelling of administration is wrong.

I understand you are upset, as most of us are however, these type of errors impact the quality of your message.

[perk235]

Financial industries were DEREGULATED in the 1999 Gramm/Leahy/Bliley Act. This act repealed the protections of the 1934 Glass/Steagall Act. Go back to the Glass/Steagall Act.

Repeal the Commodities Modernization Act of 2000 that DEREGULATED credit default swaps (derivatives).

[gop_will_win]

Once again the liberals prove to us that government does not work.

[earache4]

There''s just one question that keeps gnawing at me:

If it is taking so long to figure out WHAT to do with the $700 billion dollars, how did they come up with that figure so fast?

[abbe91]

There''''s your "New Order". Enjoy your trip to a welfare state of socialism, America. You sold the very birth right your fore fathers gave you.
Posted by ThatGuy56 at 06:47 AM : Nov 14, 2008

So, you call Bush a socialist ? He is only half a socialist: nationalizing debts, but privatizing profits.

[stupidrules3]

The fact that these banks accepted bailout money in exchange for stocks means that the US taxpayers are now stockholders. These corporations are obligated to justify all expenditures to their stockholders. If these coporations do not do this, they need to be required to pay back the bailout money immediately and make it own their own.

[berniesenn]

I followed the proceedings on the 750 billion bailout and I don''t remember anybody in government asking the bankers how they intend to use the money! So, now government is surprised the money isn''t being spent as they expected? I suggest government stop handing out the money based on good intentions and start spelling out what it''s to be used for and ask the borrowers how they are going to use the money to accomplish the purpose.

[stupidrules3]

When will our government learn that you cannot spend your way out of a hole?

[yongamerica]

America, remember, the money being handed out to the banks is YOUR Money, not the governments. It is your Social Security funds, your and your children''s future. Congress should rewrite the bailout bill to give us, all of us more transparency to how and why it is being used by the banks. Right now the banks don''t have to publicly disclose a thing about the bailout cash and what they do with it.

[yongamerica]

By having these government provided funds available the Banks can use their "own" funds to for big CEO and management payola. This is money they couldn''t have spent if the bailout funds were not in their pocket.

It would have been much wiser to have waited until the new year before giving these banks bailout funds. This way there would be no end of the year bonuses to the executives.

Why aren''t any of these bankers fired for their poor risks and bad decisions?

[perk235]

The only way to recover that stolen money is shut-down the Federal Reserve System and receive it into Conservatorship to conduct bankruptcy proceedings.


That will cancel over a Quadrillion in DERIVATIVES.
--------------
Or take back the job of printing money. I find it interesting that JFK started the treasury printing silver-backed money before he died.

Congress should be hard at work on repealing the Commodities Modernization Act. That would REGULATE derivatives.

Congress should be repealing the Gramm/Leahy/Bliley act and put back in place the 1934 Glass/Steagall Act.