The House Financial Services Committee staged a bit of theater today for the benefit of U.S. taxpayers. Eight Wall Street CEOs were called in to explain exactly what they are doing with the TARP funds. There is plenty to be outraged about in the current financial crisis, but the committee members spent the majority of their time formulating sermons instead of asking the executives actual questions.
After 90 minutes of mostly meandering statements about the need for a new regulatory framework and the manner in which each firm had used TARP funds, Representative Maxine Waters (D-Calif.), took more precise aim. Visibly agitated, she called the executives in front of her "captains of the universe," and turned to the subject to credit cards. She wanted to know if any of them had "sent letters to customers indicating you were increasing the interest rate on their credit cards?"
Bank of America CEO Ken Lewis tried to sweeten the sour mood by quipping that he thought he was more akin to a "corporal" than a captain—but Waters was not amused and shut him up quickly. "Yes or no, Mr. Lewis?" she barked. Lewis explained that rates had gone up on 9 percent of customer cards before Waters cut him off and demanded: "Raise your hand if you increased rates!" Several hands went up.
Waters then demanded that Lewis and Citi CEO Vikram Pandit explain why Bank of America and Merrill Lynch paid themselves, respectively, $21 million and $30 million in fees just to take the government's TARP money. Lewis looked confused and confessed he didn't know if his company had made such arrangements or not. Both men fidgeted in their seats, but then Pandit explained that the fees were paid to underwriters for the purpose of issuing government-backed debt, a standard industry practice.
In general, throughout the hearing, it wasn't clear who was more confused by the mess we're in: the Congressmen or the executives. Representative Gary Ackerman (D-N.Y.)—the man who accused the SEC of "not being able to find its own backside with two hands in room with the lights on" during a recent Madoff hearing—took the mic and provided the most exciting exchange of the day.
"I'm hearing about how you've all made so many loans in the past year, but that isn't reassuring," said Ackerman, referring to the summaries given by the CEOs at the beginning of the proceeding regarding their lending activity. "That's what you're supposed to do. What I want to know is what have you done with the new money?"
Jamie Dimon attempted a back-of-the-napkin calculation, estimating the $25 billion JPMorgan had received had resulted in $50 billion to $75 billion in loans. Ackerman, who excels at the art of scolding, cut him off abruptly to change the subject. "Why can't people get mortgages?" he barked. Without waiting for the answer, he asked if each of the men would send in writing what in fact they had done with their TARP funds. Then Ackerman put this doozey of a question to the panel: "How much of your personal money—new money—have you put into your company?"
Goldman Sachs CEO Lloyd Blankfein stammered to explain how his wealth is already in the company before Ackerman squeezed a "nothing" out of him.
JPMorgan CEO Jamie Dimon: "$12 million."
Bank of New York Mellon CEO Robert Kelly: "Nothing."
Bank of America CEO Ken Lewis: "I've bought 400,000 shares."
State Street CEO Ronald Logue: "Nothing."
Morgan Stanley CEO John Mack: "Nothing."
Citigroup CEO Vikram Pandit: Inaudible, but Pandit has bought several million Citi shares in the past 12 months.
Wells Fargo CEO John Stumpf: "Nothing."
Enlightening.
