Top Bankers Set for Washington Grilling
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.