With Contrition, Bankers say Bailout Has Helped

By: Jim Kuhnhenn AP
By: Jim Kuhnhenn AP

WASHINGTON (AP) - The nation's top bankers came to account for themselves Wednesday to a wary public, displaying a blend of financial might and humility as they pledged to build public trust with greater lending and fewer perks.

"We're Americans first and bankers second," John Stumpf, president and chief executive of Wells Fargo & Co., told a House committee.

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

Eight chief executives sat at a witness table for more than six hours Wednesday assuring lawmakers that an infusion last fall of $165 billion in taxpayer money to their banks was good for consumers. The money was part of a $700 billion financial rescue approved by Congress in October.

Lending has increased, 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, some of 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," said Sen. Lindsey Graham, R-S.C.

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 Obama administration overseer came as the House and Senate reached agreement on a $789 billion economic stimulus package that represented the other major component of President Barack Obama's response to the economic crisis.

The financial sector was also in law enforcement's cross hairs. 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 Stumpf and Mack were CEOs from The Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc., 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.

Frank urged them 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. The Office of Thrift Supervision, a government bank regulator, issued a similar call on Wednesday on the nation's savings associations.

Time and again, lawmakers asked whether money from the program,
formerly known as the Troubled Asset Relief Program, had helped
extend credit. Without exception, the executives said it had.

"We are still lending, and we are lending far more because of the TARP," said Kenneth Lewis, the chief executive at Bank of America.

Still, committee members appeared to have trouble squaring the bankers' answers with the experiences of their constituents.

"We hear voices form the other world, people who can't get loans, can't refinance their homes, can't send their children to college," said Rep. Gary Ackerman, D-N.Y. "It seems to me, and some of us, that this money hasn't reached the street."

Repeatedly, lawmakers prodded the executives to respond to questions about perks and policies by raising their hands. Rep. Dennis Moore, D-Kan., got the CEOs to disclose, one by one, how much each had been paid in 2008. Their salaries ranged from $600,000 to $1.5 million annually, without bonuses.

Later, they were asked what bonuses or incentives they had received in 2007. The answers were in the millions of dollars, though much was in shares of stock that have lost much of their value.

Citigroup's Vikram Pandit stood out as something of a renegade within his millionaire peers. He was the only one to agree to a proposal that would let bankruptcy judges alter home loans in an effort to prevent foreclosures.

He also said he has asked his board of directors to pay him a $1 annual salary, with no bonuses, until Citigroup returns to profitability. No other banker said they would take a lower salary.

Meanwhile, New York Attorney General Andrew Cuomo accused Merrill Lynch & Co. executives of corporate irresponsibility by secretly and prematurely awarding $3.6 billion in bonuses as taxpayers were bailing out the industry.

Cuomo made the claims in a letter to Frank, saying that Bank of America, which acquired Merrill last year, was apparently complicit
in the move to award bonuses before Merrill's dismal fourth quarter
earnings were announced.

Lewis, pressed about the bonuses at the hearing, said Bank of America was aware of the bonuses, but said they were set by pre-exisitng Merrill Lynch contract.

"They were a public company until the first of this year," Lewis said. "We had no authority to tell them what to do, just urge them what to do."
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Associated Press writers Liz Sidoti, Chris Rugaber and Devlin
Barrett contributed to this report.


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