Contrite Bank CEOs Pledge To Reform Sector
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Also on Capitol Hill today, eight captains of the banking industry tried to explain to Congress what has been done with the billions they've received from the government. Since the Congress passed the $700 billion rescue bill, there have been loud complaints about banks hoarding the money instead of lending it. As NPR's John Ydstie reports, the bankers told a different story.
JOHN YDSTIE: Americans across the country were looking forward to this hearing, relishing the thought of highly-paid banking industry titans being called on the carpet. Opening statements from members of the House Financial Services Committee, like South Carolina Republican Gresham Barrett, reflected the anger.
Representative GRESHAM BARRETT (Republican, South Carolina): Like other states, South Carolina is struggling and too many of my people are losing their jobs, duty or actions, which have driven this economy into the ground.
YDSTIE: Committee Chairman Barney Frank of Massachusetts had this to say.
Representative BARNEY FRANK (Democrat, Massachusetts; Chairman, House Financial Services Committee): I urge you strongly to cooperate with us, not grudgingly, not doing the minimum, but understanding that there is a substantial public anger and alleviating that public anger, not with mumbo-jumbo, but with reality is essential if we're going to have the support in the country to take the right steps.
YDSTIE: Then there was this from Republican Jeb Hensarling of Texas.
Representative JEB HENSARLING (Republican, Texas): What gets people upset, and rightfully so, are executives being rewarded for failure, especially when those rewards are subsidized by the U.S. taxpayers.
YDSTIE: After the venting from lawmakers, the bankers parried with opening statements of their own. They defended their use of the $165 billion they've collectively received from the TARP. Most claimed to have increased lending, including John Stumpf of Wells Fargo.
Mr. JOHN STUMPF (Wells Fargo): In the last 18 months, when many of our competitors retrenched, Wells Fargo made $540 billion in new loan commitments and mortgage originations.
YDSTIE: To a man, the CEOs said they had not used the money to give themselves bonuses. Here is John Mack of Morgan Stanley.
Mr. JOHN MACK (Morgan Stanley): We have not used it to pay compensation, nor do we use it to pay any dividends or lobbying costs. At Morgan Stanley the most senior members of the firm, including myself, did not receive any year-end bonus in 2008.
YDSTIE: While no bonuses were the rule for the eight CEOs, Vikram Pandit of Citigroup wants them one better.
Mr. VIKRAM PANDIT (Citigroup): We will hold ourselves accountable and that starts with me. And I have told my board of directors that my salary should be one dollar per year with no bonus until we return to profitability.
YDSTIE: With the flurry of claims and a willingness to take less compensation, the bankers seemed to throw a wrench in the committee's plan to use them as human pinatas, in the words of a Wall Street Journal editorial this morning. The first round of questions focused on better regulation of the industry, something the bankers seemed ready to accept and even welcome.
But, finally, New York Democrat Gary Ackerman brought the bankers back to the theme of the day. Ackerman said there are calm assurances that they were using the TARP funds to increase lending, didn't square with what he was hearing in the real world.
Representative GARY ACKERMAN (Democrat, New York): Where people can't get loans, where people can't refinance their homes, where people can't buy automobiles, can't send their children to college, it seems to me and to some of us, that this money hasn't reached the street, that you're not loaning it out. How do you explain that?
Mr. JAMIE DIMON (JPMorgan Chase): Can I take a crack at that, Mr. Congressmen?
YDSTIE: This is Jamie Dimon of JPMorgan Chase.
Mr. DIMON: There is a huge amount of non-bank lending which has disappeared, which is the same thing of the consumer. Finance companies, car finance companies, mortgage companies, money funds, bond funds that did withdrew money from the system and make it much harder in the system. That created some of this crisis we have.
Rep. ACKERMAN: Can you…
YDSTIE: So, according to Dimon, it's other financial intuitions, not the group assembled today, withholding credit from Main Street. In the end, the bankers survived the day without many bruises. Their expected public lashing really didn't materialize.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.