- The Washington Times - Thursday, February 12, 2009

Eight of the nation’s most prominent bankers, representing an industry pilloried for its lavish bonuses and perks, defended their use of billions of taxpayer bailout dollars Wednesday before a House panel whose members collected $1.8 million in political donations connected with those banks during the last election.

The expected public grilling of top officers of Goldman Sachs Groups, Citigroup, Bank of America and other top financial firms by the House Financial Services Committee, which authorized the enormous bailout, at times resembled more a mild toasting.

The bankers uniformly denied charges that they had hoarded or wasted the more than $165 billion they received from the Treasury Department’s $700 billion Troubled Asset Relief Program, or TARP. But they also acknowledged that they made mistakes and have much to do to regain Americans’ confidence.

“We didn’t do everything right, far from it,” John J. Mack, chairman and chief executive officer of Morgan Stanley, told the packed hearing.

“I believe that both our firm and our industry have far to go to regain the trust of taxpayers, investors and public officials. … It’s our goal and our desire to repay the taxpayers in full as soon as possible,” Mr. Mack said.

Also Wednesday, the private watchdog group OpenSecrets.org released a survey showing that members of the House panel — one of the largest in Congress — received $1.8 million in donations during the 2008 election from political action committees, executives and family members associated with the eight banking companies at the hearing.

The companies’ political action committees and employees gave a total of $10.6 million to all members of the 111th Congress in the last election cycle, with more than 60 percent going to the majority Democrats.

Among committee members, Rep. Jim Himes, a freshman Connecticut Democrat whose district is home to many major financial companies, received the most money — $195,350 from the company PACs and individuals. Rep. Spencer Bachus of Alabama, the ranking Republican on the House panel, was the top Republican recipient at $116,950.

At the hearing, lawmakers from both parties expressed frustration over the disconnect between the bankers’ claim that they had used the TARP money to make new consumer and business loans and the flood of calls from constituents complaining of foreclosed mortgages, canceled credit lines and higher credit card and consumer loan rates and fees.

“It’s as if there were two different worlds,” said Rep. Gary L. Ackerman, New York Democrat. “We listen to you and we hear words, words, words and no answers. It seems to me and some of us that this money hasn’t reached the street that you’re not loaning it out.”

Said Rep. Michael E. Capuano, Massachusetts Democrat, “You come to us today on your bicycles after buying Girl Scout cookies and helping out Mother Teresa. You created the mess we’re in. And now you’re saying, ‘Sorry, trust us.’”

At the hearing, committee Chairman Barney Frank, Massachusetts Democrat, warned the bankers to be “ungrudgingly cooperative” to counter public fury over the perceived lack of results from the bailout to date. He questioned why senior executives needed year-end bonuses to do their work.

“If you weren’t getting a bonus, what would you do?” he asked. “Would you leave early on Wednesday?”

But all eight bankers told the panel that they had not received a bonus above their base salary in 2008 and all said they hoped to repay the TARP money they received before 2012. The eight firms represented were Goldman Sachs, Bank of America, Citigroup, JPMorgan Chase, State Street Bank, Bank of New York Mellon, Wells Fargo and Morgan Stanley.

Citigroup CEO Vikram Pandit did apologize for belatedly canceling an order for a $50 million corporate jet last month after a public outcry.

“We did not adjust as quickly enough to the new world. It was my mistake,” Mr. Pandit said. “I get the new reality, and I will make sure Citicorp gets it as well.”

Avoiding a public relations disaster that befell the heads of the Big Three automakers when they sought a taxpayer bailout last fall, the eight executives either drove or flew by commercial airline to Washington for their command performance.

John Stumpf, president and CEO of Wells Fargo & Co., was one of several bank executives who insisted they used the TARP money to make new loans, despite reports to the contrary.

“Last quarter, we made $22 billion in new loan commitments and $50 billion in mortgages a total of $72 billion in new loans. That’s almost three times what the U.S. Treasury invested in Wells Fargo,” he said.

Jamie Dimon, CEO of JPMorgan Chase and Co., argued that much of the contraction in lending nationwide was not the fault of commercial banks but of non-bank lenders such as mortgage banks and consumer finance companies that have been wiped out in the economic downturn.

Mr. Bachus warned against “name-calling or the blame game,” noting that many of the banks originally were reluctant to take the TARP money and agreed to accept it only after strong urging from the Treasury Department last fall.

But New York Attorney General Andrew M. Cuomo sent a letter this week to Mr. Frank accusing Bank of America of complicity in Merrill Lynch’s awarding $3.6 billion in bonuses to its executives days before Merrill Lynch’s poor fourth-quarter earnings report.

Kenneth Lewis, Bank of America CEO, said at Wednesday’s hearing that his bank knew about the bonuses but could not cancel the contracts, which Merrill Lynch had signed on its own before Bank of America acquired it.

Also Wednesday, a Massachusetts state official said Ruth Madoff, the wife of Ponzi-scheme suspect Bernard Madoff, withdrew more than $15 million from a firm co-owned by her husband — including $10 million on the day before his arrest.

Massachusetts Secretary of State William Galvin cited subpoenaed records from Cohmad Securities Corp., though it was not clear whether Mrs. Madoff knew of the $50 billion scheme’s imminent collapse when she made the wire transfers.

Congress is demanding more oversight and disclosure as the Treasury prepares to spend the second $350 billion under the bailout plan. President Obama has called “outrageous” reports that Wall Street firms paid out more than $18 billion in bonuses, despite massive losses for the industry.

Lawmakers warned that the banks could expect more scrutiny as the program moved forward.

“When you took taxpayer money, you moved into a fishbowl,” said Rep. Paul E. Kanjorski, Pennsylvania Democrat.

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