Congress to grill eight bank CEOs on use of bailout funds
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The circus comes to Capitol Hill today: The House Financial Services Committee, chaired by Rep. Barney Frank (D-Mass.), has called the chief executives of eight major banks to testify about how they’ve used the billions of dollars of government capital they’ve received.
Scheduled to testify beginning at 7 a.m. PST are the CEOs of Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo.
Most of them have prepared just a few pages of testimony, which are available here.
Bloomberg News reports that, ‘Like auto industry executives before them, most bankers will shun corporate aircraft for the trip to the nation’s capital. Bank of America CEO Kenneth Lewis was set to take an eight-hour train ride from his bank’s headquarters in Charlotte, N.C. a spokesman said.’
In the prepared testimony, Goldman Sachs CEO Lloyd Blankfein strikes the most contrite chord:
It is abundantly clear that we are here amidst broad public anger at our industry. In my 26 years at Goldman Sachs, I have never seen a wider gulf between the financial services industry and the public. Many people believe -- and in many cases, justifiably so -- that Wall Street lost sight of its larger public obligations and allowed certain trends and practices to undermine the financial system’s stability. . . . We have to regain the public’s trust and do everything we can to help mend our financial system.
BofA’s Lewis sounds, well, not so contrite. He says:
The real debate is about what business activities are appropriate for a company that receives an investment from the federal government. In some cases, I think public judgments on this question have been right on. There has been no shortage of examples of executives spending money in ways that did not have a direct benefit to the business. In other instances, I think banks have been criticized for activities that, in fact, have very serious, and very effective, business purposes. Marketing activities, which drive sales and business growth, are just one example.
BofA took heat for spending marketing dollars at the Super Bowl earlier this month.
Apart from the inevitable huffing and puffing about executive pay, I hope Frank’s committee will ask the bankers some serious questions -- for example, does Treasury Secretary Timothy Geithner’s plan for a ‘public-private investment fund’ to buy toxic loans from banks have a chance at succeeding? And just what dollar volume of loans would the banks like to unload to such a fund?
-- Tom Petruno
Top photo: Goldman Sachs CEO Lloyd Blankfein. Credit: David Karp / Associated Press