The House Financial Services Committee's supposed grilling of the CEOs of the eight largest US banks has turned into a much more civil affair than many had anticipated. Partisanship and acrimony are present only at trace levels; blame is also nearly undetectable. But this is a live blog, so things could get interesting at any minute. Keep following.
1:26pm: Rep. Scott Garrett, R-N.J., is asking Goldman Sachs CEO Lloyd Blankfein about AIG's collapse and its effects on other financial institutions. Mr. Blankfein is explaining that Goldman's exposures were hedged.
1:27pm: A new point: "Money is fungible." A new question: What bonuses and dividends did you pay since you got taxpayers' money?
CEOs are asked to raise their hands unless they're suspending dividend payments until they return taxpayer funds. Or if they're suspending them. The witnesses are confused. So am I.
1:31pm: OK now the pressure is mounting. They're being asked whether they want to issue more preferred warrants to the taxpayers. They're saying no.
1:33pm: Rep. J. Gresham Barrett, R-S.C. is warning the CEOs that if they don't "get it right" the government is going to completely take them over. "That scares the fire out of me," he adds.
1:36pm: Rep. Barrett asked Mr. Pandit and Mr. Dimon how to restore market confidence. Where is the confrontation here? He prefaced his questions with a gentle admonition, almost an insider's head's up about their perilous situation. But now he's asking Ken Lewis if the bailout has "changed the free market system here in the United States." Mr. Lewis is saying "I'm not so skeptical to say that we've turned the corner on that one."
1:39pm: Chairman Barney Frank isn't even in the room. Did he lose interest? Rep. Gregory Meeks, D-N.Y. is chairing, and he's asking the CEOs whether their industry feels the need to apologize to the American people.
There's silence. Then Mr. Mack says "as an industry, clearly, we made mistakes." Too much leverage. Too many bad loans. "For that, we are sorry. I'm especially sorry for what's happened to shareholders," he adds.
At this point the acknowledgments of culpability are so scant that Mr. Mack just distinguished himself.
1:45pm: Rep. Thaddeus McCotter, R-Mich., says his constituents feel they've been redlined recently by banks. He then asks whether the big banks are doing enough to help save the auto industry.
Mr. Mack replies that Morgan Stanley "couldn't be any more focused and committed, not only in spirit, but on our balance sheet."
I am going to have to get over my shock soon at the gentleness with which the committee is treating these guys. They must be thinking by now that all of the sleep they lost preparing for this hearing was for nothing.
1:48pm: The CEOs are listing their compensation. Mr. Stumpf just admitted he can't remember exactly what his salary was in 2008. He made about $850,000. Mr. Pandit made $1 million. Mr. Mack made $800,000. Actually, $800,000 seems to be a magic number. Except for Ken Lewis, who made $1.5 million last year.
1:52pm: Rep. Leonard Lance, R-N.J. just asked everybody when they plan to repay their Tarp loans. Mr. Mack said he expects to have most of it returned by 2012.
Now Rep. Lance is asking about the contractual nature of the Merrill Lynch bonuses. "I believe that Tarp funding is fungible and from our perspective those bonuses are really Tarp funds." Is he suggesting a clawback?
"We are deeply concerned...and I would hope that in your responsibilities you could impress upon your colleagues who have come from Merrill Lynch...that this is preciesly what the American people did not want to have happen with Tarp."
"Things have changed," Mr. Lewis replied. "We are in charge now."
1:57pm: Fireworks, comparatively. Rep. Michael Capuano, D-Mass., just compared the big bankers to bank robbers. "You created the mess we're in," he's yelling. "Now you're saying 'sorry, trust us, and by the way, we don't even want the money.' Interesting. No one's ever come to me and said we want to force you to take a billion dollars."
He's just announced that he doesn't have any actual questions, but that he just wants to take his five minutes to speak. "America doesn't trust you anymore," he's saying. "I don't have one single penny in any of your banks, not one. Because I don't want my money put into CDOs and credit default swaps and big bonuses. Until that changes, I won't be able to trust you. Who's the person who discovered CDOs? Find him. Fire him."
Glass-Steagall, anyone?
2:01pm: Rep. Patrick McHenry, R-N.C. is asking whether safety and soundness is the top priority. Everyone is saying yes. Mr. McHenry concludes that Tarp funds weren't necessarily meant for lending; they were meant for safety and soundness.
2:04pm: Now he's asking for opinions on the new bailout plan Treasury Secretary Timothy Geithner announced yesterday. The responses are generally optimistic.
2:07pm: Rep. Emanuel Cleaver, D-Mo., just gave Citigroup props for being "the only firm that has made an attempt to be transparent" about what they did with their Tarp money.
2:14pm: Rep. Eric Paulsen, R-Minn., asks the CEOs what risks there are in overregulation. Mr. Lewis responds that competitiveness with foreign companies could be hindered.
Rep. Frank says he doesn't buy the argument. He wants to see data proving that foreign firms, for instance, can pay their workers more.
2:16pm: Mr. Blankfein is justifying the bailout: It provided safety and soundness. Mr. Lewis concurrs. "I think we have lent more money because we have the Tarp capital," he adds.
2:21pm: There's a 20 minute recess. Stay tuned for more.
