House To Bankers: Time To Make Sacrifices

Bank CEOs Appear Before Skeptical Congress, Acknowledge Need To Regain Country's Trust

(CBS/ AP)  Facing a disgusted public and Congress, bank CEOs agreed with demands for greater accountability Wednesday in the first testimony on how they're spending money from the taxpayer-funded $700 billion 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.

Taxpayers are furious with big banks that benefited from the federal bailout designed to get credit moving again, but which also spent lavishly on executive bonuses, company retreats and office redecorating. Lawmakers also are feeling the heat for signing off on the bailout package plan last year.

Rep. Barney Frank, chairman of the House Financial Services Committee told the executives that if they objected to answering questions about their use of federal bailout funds, they can always return the money.

"If you want to give the money back, we will take it," Rep. Barney Frank, chairman of the House Financial Services Committee, told a panel of eight top CEOs.

Most lawmakers delivered a similar message to the executives - they must win over a disgusted public and work with Congress without hesitation to right the deeply troubled financial system.

"I urge you going forward to be ungrudgingly cooperative," said Rep. Barney Frank, chairman of the panel, said as the hearing opened. "There has to be a sense of the American people that you understand their anger ... and that you're willing to make some sacrifices to get this working."

All the executives said they got no bonus for 2008. But keenly aware of the PR fallout, bailed out banks Morgan Stanley and Citigroup Smith Barney announced last week internally there would be "awards," reports CBS News correspondent Sharyl Attkisson.

"Please do not call it a bonus. It is not a bonus. It is an award," said James Gorman, co-president of Morgan Stanley.

Frank also asked banks to impose a moratorium on mortgage foreclosures until Treasury Secretary Timothy Geithner comes up with a systemwide mortgage modification.

Republicans and Democrats alike have been smarting over the implementation of the financial package, which started under President Bush and now is in the hands of the Obama administration. The lingering suspicions present one of President Barack Obama's biggest obstacles as he attempts the dual challenge of prodding the financial sector to ease credit while aiming to create jobs with an economic stimulus package.

An amendment to the economic stimulus bill passed in the Senate Tuesday would require financial institutions that received federal bailout money and paid large executive bonuses to compensate taxpayers.

The panel's top Republican, Spencer Bachus of Alabama, said the bankers and Congress will have to do their part to sway people by "winning back their trust and their confidence."

Sitting in a row at a long table, the CEOs were met with deep skepticism from lawmakers who aggressively quizzed them on how they have used more than $160 billion in taxpayers' money.

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 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.

Hearings on the bailout were taking place across the Capitol, with the CEOs appearing in the House while Neil Barofsky, the watchdog of the government's Wall Street rescue package, testified before the Senate Judiciary Committee.

FBI Deputy Director John Pistole told that Senate panel that there are 530 active corporate fraud investigations, and 38 of them involve corporate fraud and financial institution matters directly related to the economic crisis.

Meanwhile, New York Attorney General Andrew Cuomo accused Merrill Lynch & Co. executives of corporate irresponsibility by secretly and prematurely awarding $3.6 billion in bonuses as taxpayers were bailing out the industry.

Cuomo made the claims in a letter to Frank, D-Mass., saying that instead of disclosing its bonus plan in a transparent manner designed to assure the payments were warranted, Merrill Lynch moved the date of bonuses to richly reward "failed executives." Cuomo says Bank of America, which acquired Merrill last fall, was apparently complicit in the move to award bonuses before Merrill's dismal fourth quarter earnings were announced.

Pressed about the report at the House hearing, Lewis said Bank of America urged Merrill to reduce the bonuses "substantially" as it prepared to take over the failing company but couldn't force it to make changes until the takeover was completed.

"We had no authority to tell them what to do, just urge them what to do," Lewis said. That said, he added: "Major changes will be made."

[perk235]

Bankers should not make sacrifices, they should file for Chapter 11 bankruptcy re-organization. Only when we do 2 things:

1. Cancel the 1.4 quadrillion in credit-default-swaps and worthless derivatives.
2. Shut down the Federal Reserve and go back to the Constitution and only allow Congress to ''utter'' currency.

It''s the only way to relieve the pain!
Posted by whitemale09 at 11:03 AM : Feb 12, 2009

I agree completely. The only president in this century to have the Treasury print silver-backed dollars was JFK.

The US Treasury needs to print US money, instead of our country paying the Federal Reserve to print it. The Federal Reserve is a private financial conglomeration, and we have a clearer picture today of what that means!

[drsuz]

American's To Congress, Senate, President: Time To Make Sacrifices

We think it is about time you start taking a paycut. We think it is time you start paying your OWN bills. We think it is time you pay your OWN expenses. We no longer can afford to support YOU due to having NO MONEY-- NO JOBS. We also think it is time you start downsizing your staff for we no longer can afford them either. We will also be requesting a independent audit of all your Political expenditures and Personal finances..

Sincerely;
The American Taxpayers

[drsuz]

**Taxpayers are furious with big banks that benefited from the federal bailout designed to get credit moving again, but which also spent lavishly on executive bonuses, company retreats and office redecorating. Lawmakers also are feeling the heat for signing off on the bailout package plan last year. ....**

Sure we are furious!! The money was given so the banks could "lend" it out. Not so the CEO's and high Execs could line their pockets by using it as their 'awards' they usually got from their companies at the end of the year. I think Congress better DEMAND all the money be returned and given to legitmate financial institutions who actually are willing to lend the money out. Has anyone with perfect credit tried to get a home loan or car loan? Banks are refusing to lend out even you you have perfect credit.

How many of you know that there are products sitting in warehouses and on docks that are not being delivered because these Banks are not lending the money to companies to pay for them? These high powered banks got the money to lend to the companies to pay for their products so they can be delivered to the consumers and have REFUSED to do so..Now you know why you cannot get what you want at a store or why factories are closing down. Its because they cannot get the money from the banks to pay for their goods or supplies to be delivered to the stores or the manufacturing companies...

You ask how do I know this?? As a truck driver I see the freight is there, sitting out on the docks, stocked piled up at the ports and the companies cannot get the money from the banks to pay for it so it can be delivered to the factories so products can be made. Goods are there that cannot be delivered to the stores because the banks will not lend the money so it can be delivered then sold.

[swin5]

Oh, so the banks are being asked to make sacrifices. Does that mean that the 0.5% interest that I earn on my savings account will be reduced as part of this sacrifice?

[willnotyield]

What President Barack Obama has proposed is not a "stimulus plan" at all -- I don''''t think it stimulates anything but the Democratic Party. This "porkulus" bill is designed to repair the Democratic Party''''s power losses from the 1990s forward, and to cement the party''''s majority power for decades to come. He is trying to do what Johnson tried to do with his war on poverty. It failed miserably. The only thing it did was perpetuate poverty and creat 45 million voters that didn''''t want to lose the entittlements they recieved.

[whitemale09]

...bankers should not make sacrifices, they should file for Chapter 11 bankruptcy re-organization.

Only when we do 2 things:

1. Cancel the 1.4 quadrillion in credit-default-swaps and worthless derivatives.

2. Shut down the Federal Reserve and go back to the Constitution and only allow Congress to ''utter'' currency.

It''s the only way to relieve the pain!

[birdyard1]

I bet both sides met at the strip club later and had a good laugh

[birdyard1]

look who is judgeing who. there is no hope here

[kiddoat44]

One thing to say...He who dies with the most toys (those rich bankers) is still non the less dead, you can''t take it with you when you go...If the government is going to pass out billions of dollars why not give it back to those of us that paid it in in the first place...

[chefrc]

Nothing will change,, the rich get richer and the taxpayers get poorer.

[scienceman1-2009]

I think when CEO''s get paid these ridiculous sum''s of money they don''t think they way that is needed to grind hard for the company to make a profit. In other words they get LAZY!

[scienceman1-2009]

I wonder why so many NEWS ANCHORS keep says that these companies CEO''s ect.. need to be well compensated to keep TALENT (YET SO FAR I SEE NO TALENT IN THESE GUYS WHEN ALL THEY ARE DOING IS LOSING MONEY )????

[jetranger7]

Simply Put - their ALL pigs at the Trough !! They should immediately have everything taken away from them, and be immediately shipped straight to Afganistan to fight in that war and make real men out of them, instead of the Panzi''s that they are !!!!!!!

[cjs_cnet_xyz]

We want these bankers to cut back on corporate lunches too. Why don''t they start bringing peanut butter and jelly sandwiches for lunch?

[samthetvcat]

PS Wasn''t Bank of America pressured by Paulson to buy up another bank, and then both BofA and Paulson were surprised by how bad it really was after the sale went through?

I guess these banks have ways of hiding the stuff they don''t want to be found (?) Like even the CEO of BofA and the ex-CEO of Goldman Sachs couldn''t tell the other bank that was being bought up was so much worse than they thought (?)

I think banks might not be lending because they''re lying as well as greedy . . . because housing was one of the few areas of growth during those years the interest rates were artificially low - I would guess all the banks got heavily involved in those complex instruments, and didn''t only one bet against the market?

Who knows . . .

[samthetvcat]

pt 1

---"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."---

To understand this banking crisis I guess you have to understand derivatives, and like none of us do - they''ve always seemed to me like just an excuse to gamble, no more sensical than say betting on where a roulette ball will land in Vegas.

That the TARP money didn''t lead to a better flow of credit, is it an issue of greedy bankers and misappropriation, or is it possibly an issue of liars unwilling to disclose just how in the hole they are because they have that optimism of an Enron executive or a Bernie Madoff that they''ll pull through this bear market because they''ve done so in the past.

[samthetvcat]

pt 2

Because they''ve been conditioned to maximize profits - if they''re given the message that they''re too big to fail then there''s no downside to them giving themselves ''awards'' because they''ll still be guaranteed more. Maybe they think if they lie about their viability they''ll get more than if they say they''re in big big trouble because then they''ll get the Lehman Brothers treatment (?)

I''m worried because Geithner just went and gave them what they were asking for, repealing or implementing or whatever that mark to market rule that''s like the equivalent to what he did fudging his returns to the IRS - financial manipulation that distorts the truth.

Is he going to be prone to trusting them too much and get suckered? Is he ideologically too ''Wall St.'' to consider nationalization as a possibility just like the guy in the FT believes?

Scary to not really understand what''s going on! :(

[chfnut]

Bank officers get exorbitant pay to exploit elderly &;
It%u2019s an industry, courts feeding income to bank officials with a few select others thrown in.
An unjust legal system has converted law which is damaging the general public. Unethical lawyers and other "fiduciaries" appointed by the courts to protect, nothing but predators. In our case, it''s WFBank. State agencies allow the abuse. Try and file criminal charges against a court officer, executor or trustee and see where it gets you.(http://www.stopguardianabuse.org/ www.probateinjustice.info)

[McHineguy]

Madame Pelosi wasn''t happy with the small private jet that comes with the Speaker''s job...no, Madame Pelosi was aggravated that this little jet had to stop to refuel, so she ordered a Bigger, Fatter 200 seat jet that could get her Back to California without stopping!

Nancy''s Big Fat Jet costs us, the hard working American Tax payers, thousands of gallons of fuel every week. Since she only works 3 days a week, this gas guzzling jet gets fueled and she flies home to California, cost to the taxpayers of about $60,000, one Way!

''Unfortunately we have to pay to bring her back on Monday Night.'' Cost to us is another $60,000.

Folks, that is $480,000 per month and that is an annual cost to the taxpayers Of $5,760,000. Meanwhile, she complains about the CEO''s. But that doesnt cramp her style, the one she enjoys on my back and yours.

I think of the many families in this country doing without and this woman, who heads up the most do-nothing Congress in the history of this country, keeps fueling that jet while doing nothing.

Madame Pelosi wants you and me to conserve our carbon footprint. She wants us to buy smaller cars and Obama wants us to get a bicycle pump and air up our tires.

These people are nuts.

Keep in mind the figures above do NOT include cost of plane or crew, Just fuel!

[ctla567]

Award or bonus, whats the difference? They got paid for their failures. Those crooks may be paid a salary of $1 each last year. But I am sure they will be paid plenty under a lot of other names as long as they are not called salaries or bonuses.