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With contrition, top bankers say bailout helped ease lending

Goldman Sachs’ CEO Lloyd C. Blankfein, left, and JPMorgan Chase’s CEO James Dimon testify on Capitol Hill Wednesday.

Associated Press

Goldman Sachs’ CEO Lloyd C. Blankfein, left, and JPMorgan Chase’s CEO James Dimon testify on Capitol Hill Wednesday.

WASHINGTON — The titans of Wall Street, already humbled by the financial meltdown, were hauled before Congress for the first time Wednesday to face the rage of a nation.

Lined up in a row at a nationally-televised hearing, the chiefs of eight banks that received $165 billion in federal bailout funds were pounded with ferocious questions from lawmakers demanding to know whether the firms were misusing taxpayer dollars.

"I feel more like corporal of the universe, not captain of the universe at the moment," said a sheepish Kenneth Lewis, chief executive of Bank of America.

"As an industry, we clearly made mistakes," added John Mack, chairman and CEO of Morgan Stanley.

Lending has increased, though, they told the House Financial Services Committee, and CEO bonuses have been eliminated.

And while some lawmakers said they hoped that by their testimony the bankers could gain some credibility, their inquisitors weren't convinced.

"America doesn't trust you anymore," declared Rep. Michael Capuano, D-N.J. Added committee Chairman Barney Frank, D-Mass: "There has to be a sense of the American people that you understand their anger."

To a man — and, yes, all eight CEOs are male — the executives said they would pay back the taxpayer money by 2012 and sooner if they could help it.

As they made that pledge, senators on the other side of the Capitol were pressing Treasury Secretary Timothy Geithner without success to reveal how much more money the federal government would have to inject into the financial system to improve lending and reverse the escalation of mortgage foreclosures. Geithner only conceded that further requests could be possible.

"So you have no clue," Sen. Lindsey Graham, R-S.C., told him.

Geithner, a day after he outlined an overhaul to the government bailout, continued to face questions about the lack of details in his plan and promised specifics "as quickly as we can."

The blunt treatment of the financial sector and its White House overseer came as the House and Senate reached agreement on a $790 billion economic stimulus package.

The financial sector was also in law enforcement's crosshairs. FBI Deputy Director John Pistole told the Senate Judiciary Committee Wednesday that the FBI is conducting more than 500 investigations of corporate fraud amid the financial meltdown.

At the House Financial Services Committee, the bankers represented the eight firms that received capital injections last fall in hopes that the money would unfreeze credit and lead to more lending. Joining Lewis and Mack were CEOs from Goldman Sachs, Wells Fargo, Citigroup, JP Morgan Chase & Co., State Street Corp. and the Bank of New York Mellon.

Treasury chose those banks for infusions because they were relative healthy banks that could spur more banking activity and eliminate the stigma of taking taxpayer money for other financial institutions.

Committee Chairman Barney Frank, D-Mass Frank urged the bankers to impose a moratorium on foreclosures until Geithner comes up with a plan to spend at least $50 billion of the bailout funds on foreclosure mitigation.

Meanwhile, New York Attorney General Andrew Cuomo accused Merrill Lynch executives of corporate irresponsibility by secretly and prematurely awarding $3.6 billion in bonuses as taxpayers were bailing out the industry. The company paid out bonuses of more than $1 million to 696 people last year.

Cuomo said Bank of America, which acquired Merrill last year, was apparently complicit in the move. Lewis, pressed about the bonuses at the hearing, said Bank of America was aware of the bonuses.

With contrition, top bankers say bailout helped ease lending 02/11/09 [Last modified: Wednesday, February 11, 2009 11:40pm]
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