Top Bankers Set for Washington Grilling

(CBS)  America's top bankers are bracing for another trip into the principal's office Wednesday, as a federally appointed panel is set to grill them about their firms' actions leading up to the nations' most severe financial crisis since the Great Depression.

The Financial Crisis Inquiry Commission, a congressionally sanctioned body reminiscent of the Pecora Commission that probed the causes of the Depression, will convene in Washington to begin its broad autopsy of the U.S. financial system, which came dangerously close to collapsing if not for a multi-billion dollar government bailout in the fall of 2008.

Among the panel's first witnesses are top executives at four major banks - Lloyd C. Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, John J. Mack of Morgan Stanley and Brian T. Moynihan of Bank of America.

These financial titans are not particularly popular in Washington.

Their banks have enjoyed largely profitable years - due in part to government efforts to pump them full of cash - and are set to dole out billions in bonuses to their top performers. That's a fact that still rankles many at a time when the U.S. unemployment hovers at 10 percent, despite the firms' attempts to mollify critics by offering most of the bonuses in deferred stock instead of cash.

And even though the U.S. has started to recoup large portions of the bailout money, federal scrutiny of the Wall Street giants shows no signs of letting up.

On Monday, reports surfaced that President Barack Obama would seek to impose as much as $120 billion in fees on financial firms to help recoup the government funds used to keep them afloat.

That same day, New York State Attorney General Andrew Cuomo began pressing banks to reveal information on their bonus payments.

In a lawsuit filed Tuesday, the Securities and Exchange Commission accused Bank of America of failing to disclose huge losses at Merrill Lynch to shareholders before they voted to approve its acquisition.

Also Tuesday, the Federal Deposit Insurance Corp. invited public comment on a proposal to tie banks' insurance premiums to their executive compensation policies.

JPMorgan's Jamie Dimon had a response to the criticism - stop picking on us.

"I am a little tired of the constant vilification of these people," Dimon told a health care conference Monday, according to ABC News. "This is not a casino."

Dimon was referring specifically to the reports of the White House's proposed new fee - a development New York Times columnist Andrew Ross Sorkin told ABC "completely blindsided" the executives.

"There was a lack of appreciation that the White House could even contemplate doing something like this," Sorkin, who also authored "Too Big to Fail" told "Good Morning America" Tuesday. "And now I think there are real questions about what does this fee mean? How does it get assessed?"

Sorkin also offered some suggested questions that the Financial Crisis Inquiry Commission might ask the four bankers - all pointed queries about their firms' risky, and perhaps ethically dubious, bets made leading up to and during the crisis.

The commission will continue their probe throughout the year and are scheduled to present a final report in December 2010.

[bluedenmant]

...for all you Republicans and right-wingnuts hell-bent on blaming the current administration for the financial collapse: all you have to do is read alpha10000 Jan 13,2010 7:30AM entry and all will suddenly make sense (maybe) to you!! Very succinctly put.

[hartmanlord]

Let me get this right. The bankers that have drove the economy off the cliff, cost trillions to our national debt, created the greatest depression since the 1930's, the loss of 7 million Americans their jobs and millions have lost their homes, now everything is OK because they "paid back with interest" the TARP money. WOW Why didn't we just asked bin Laden to pay for a wheelbarrow to help clean up the world trade centers. Everything would be forgiven.

[govtguy]

Congress can't and won't do anything about this, so why even waste our tax dollars on this pompous and self-serving "show of force". If Congress was really interested, they would have been all over the bonus like stink on a carcass. Come talk to the public when you really decide to take action and hang the carnivore banks (and their execs) out to dry.

[rykatspop]

Ooooooowwww, scary. The bankers are going to get an ear full from the guys they've given huge sums of money to for the next election. The bankers are trembling in their Italian loafers. The Congress is going to grandstand a big show for us on "getting tough with banks." All the while, credit card regs continue to protect useary practices by these devils. Homeowners can't get out from their dirty mortgage agreements. Cancer victims can't find protection in bankruptcy court as banks and insurance companies hound the sick and dying for every last nickel.

Yeah, the banks are very much afeeearrrred on the grilling they will face. Wake up stupid Americans. Wall Street is the problem. We actually need big govt in order to go after these snakes. I want more govt in order to investigate and prosecute these jerks. An uprising would work, too.

[us_1776]

The big banks are 100% responsible for funding massive real estate developments so they would have huge amounts of "inventory" from which to write massive amounts of mortgages. And write them they did, with perverse "volume" incentives to their mortgage brokers that virtually guaranteed anyone breathing would qualify for one of their mortgages. And then when their mortgages started to go bad they bundled them into investment bundles and put them into the stock market which eventually collapsed the financial system and ultimately the economy.

We need to bring back the guillotine for these bankers. These bankers have foreclosed on and displaced millions of Americans from the homes all the while taking taking huge public bailouts and then themselves taking huge salaries and bonuses while average Americans were suffering severely.

We need to restrict the size of banks so that we don't see anymore of this bank-eat-bank insanity that fueled a lot of these bankers crazy schemes.

We need to put back up the wall between securities and banking.

We need to put those bankers who were responsible for what has happened in PRISON!

[reveal4]

us...Wonderfully stated and brilliantly synopsized.

[alphaa10000]

WHAT WENT WRONG ON WALL STREET

Wall Street 2008 was both a clash of ideologies and a crime scene, as well as abject failure of the GOP mendacity politely termed "lessez faire" (DEregulation) in public policy.

The great irony is this-- the Usual Suspects who clamor for more Pentagon spending to police our global interests are the very people who yearn for a domestic bull market left to govern itself by its own, supposedly innate wisdom. The very concept of the "free market" is self-serving GOP and Wall Street mythology for which all of us have paid far too long.

In his memoir, The Age of Turbulence, and in public statements, Alan Greenspan finally and publicly confessed the flaw in his free market ideology that the market is a rational, intelligent entity. But was Wall Street catastrophe a mere flaw or an utter collapse of his own belief system, as rigid in its own way as any Soviet dialectic might have been, just before the Soviet system collapsed? Cynics suspect Greenspan was content to ignore warnings and accept adulation, so long as the band kept playing.

Clinton Treasury Secretary Robert Rubin manifested the same myopia, but with an extreme arrogance that defies description-- after all, Rubin (eerily anticipating the Wall Street bailout Paulson demanded in 2008) had "saved" Mexico from financial collapse by pumping in a massive infusion of US-taxpayer-backed capital, by which private US banks acquired ownership of Mexican institutions. That is, US banks took risks with taxpayer money, but they, not loan guarantors, retained ownership.

Bill Clinton, who helped make Rubinomics possible, was counseled and swayed by abstruse arguments from Treasury Secretary Rubin that repeal of Glass-Steagall and other regulations would ease pressures on banks to take unwarranted risks. In fact, the Rubin Rx was a prescription for exactly the opposite-- the collapse of the American financial system in an orgy of fraud and greed in late 2008.

On Treasury Secretary Rubin's own watch, he adamantly refused to heed a menacing bubble of huge proportions in the dot.com boom, fueled by an increasingly deregulated frenzy of speculation.

The same speculative market soon re-emerged in the Bush term as a housing market bubble, but with a newly-deregulated vengeance. This time, the so-called subprime market was a horrific creation of Wall Street banks, lusting for unprecedented margins of profit. Legitimizing their risky high-yield speculations, after all, had been the real motive behind Rubin's push for deregulation.

But early warnings in the Bush term passed unheeded because the banks were already making too much money to stop, and the GOP found regulation politically incorect. While some 61 percent of "SubPrime" mortgage applicants would have qualified for normal mortgage terms, the banks, themselves, offered them their home-brewed Structured Investment Vehicles, instead. These SIVs were unsafe at any market valuation, under standard lending rules.

The much-maligned Community Reinvestment Act was not a major contributor to subprime defaults. A later congressional review revealed that 50 percent of sub-prime lending was completely outside the CRA, and that another 25-30 percent was only partially involved with CRA regulation. Clearly, it was the banks, themselves, who greedily sub-primed their way well-past any legitimate requirements of the CRA, itself.


END NOTE--

Whatever political capital Wall Street and Rubin gave Clinton, Democrats in congress were not nearly as sanguine about deregulation. It was Sen. Gramm and GOP associates who led the charge in 1998 and 1999 to drop derivatives altogether from SEC oversight. In contrast, Democrats in both houses fought a rear-guard action in a GOP-dominated congress, extracting concessions for consumer privacy and housing, before reluctantly agreeing to a conference bill.

Acting chairman of the Commodity Futures Trading Commission, Brooksley Born, a critic of deregulation, desperately needed backup as the GOP, Greenspan. Rubin and Summers sought to defame and delegitimize Born at every turn. As Levitt now admits, the two chairpersons in concert might have accomplished more than token resistance. All of which makes the solitary, courageous stand taken by Born a true profile of courage.

http://www.pbs.org/wgbh/pages/frontline/warning/view/

GLB was drafted by the GOP in a GOP-dominated congress, driven through GOP committee and passed on an almost perfect party-line GOP vote in the US Senate, with Democrats in almost perfect opposition. This partisan delineation makes clear which party drove the policy of deregulation.

Greenspan, Rubin, Gramm and the GOP were ardently evangelical about deregulation-- the very policy which left Wall Street in flames. Deregulation remains the ideological creature, horn and hoof, of the GOP. The circus tent of free-market, lessez faire mythology cannot protect the GOP from criticism it has worked so hard to merit.

[reveal4]

The fringers are incapable of objectivity, or citizenship. The fringe is kept in an almost perfect state of delusion about 110% of the time. The fringe is about 10 to 15% of the population, and Wall Street reform will go forward in spite of the village goofballs.The Democrats will give new marching orders to the "fat cats" and stop the fleecing of America by the Wall Street robber barons. To heck with the fringe. The fringe is incompetent to discuss any issue, any time, for any reason, under any circumstance....Absolutely incompetent.

[curse914]

Actions speak louder than words and Obama has not reinstated any of the previous regulations that kept this sort of economic implosion from happening.

[ffoulkes-2009]

reveal, you ARE the fringe. Only the far LEFT fringe...don't even start to believe you are with the mainstream.

[retm-w]

Congress can't even clean up their own house( Rangel, Waters and how many more). Now they are going to put on a big show, that will mean absolutely nothing. The dems and pubs are in Wall streets pocket.

[reveal4]

retm-w...Nothing will please you if it is done by Democrats. Your completely obcessive partisanship shines through each and every comment you post. You hate Democrats. Like the President said...It is time for citizenship, not partisanship. This is completely impossible in your case. Your obcession with Democrat bashing is overwhelming. The President and Congress will rein in Wall Street in spite of the fringe compulsion with their own superiority complex.

[rightbehind]

I have no doubt the housing crisis was engineered. They sold way too many hedge funds and derivative collectors. Betting that home loans would fail and being in a position to make it happen indirectly through sky rocketing fuel cost and massive job losses. They need to investigate those that sold them and who they sold them to. The same companies morgan stanley and goldman sachs that got bailout money had their, "most desired" former enron employee speculators driving up fuel cost. The same enron employees that caused the rolling blackouts in California. I think leg irons are in order. Drag them all in!

[reveal4]

When the right wing in concert with the GOP wage war against Wall Street reform...It will be a perfect opportunity for the Democratic Party to tie the GOP and Wall Street and the "Tea Party" folks and the talk radio crowd to the financial collapse that rocked the world. The righties will be fighting for Wall Street and the Democratic Party should do it's best to make a point of it in the upcoming elections.

[retm-w]

Wonder how many Dems will get tied to the financial collapse, Barney Frank is one that comes to mind.

[cbsblogger]

These Congressional dog and pony shows are utterly ridiculous because these members pretend to be outraged and stomp their feet, and then take their bribes from these people in the back rooms.

[rightbehind]

It's about the truth.