The House Financial Services Committee's interrogation of the eight biggest bank CEOs continues; opening statements are over and the questioning is about to begin. Stay tuned.
11:11am Rep. Barney Frank, D-Mass., is making some preliminary requests of the CEOs following their opening statements. He requests that all banks impose a foreclosure moratorium. He adds, "if you have any desire to give the [Tarp] money back, we will take it."
11:12am: Rep. Frank: Why do you need bonuses? Can't we just give you a good salary and do your job?
Mr. Mack: "We all grew out of small firms...they took very low salaries and at the end of that if the firm did well you got a bonus...At my level, we love what we do. If you gave me no bonus I would still be here."
Rep. Frank: "Great. I will not bill you for my services as an efficiency consultant."
11:14am: Rep. Spencer Bachus, R-Ala.: "You gave taxpayers an equity share in your businesses at depressed prices...with all investments there may be some losses but I truly believe unless there's a worst-case scenario for the next five or 10 years, the taxpayers--I believe this is going to be the best investment they've ever made." He is really cheering them on. "You kept millions of Americans in their homes."
11:16am: Rep. Bachus asks commercial bankers, why are you calling the principle on mortgages that are still current?
Mr. Stumpf begins to answer when Rep. Frank interjects--the bankers will put their answers in writing.
11:20am: Rep. Paul Kanjorski, D-Penn., just called the witnesses "the greatest financial minds" in the country. Then he asked, "when did you first learn about the financial crisis," and why didn't you alert the rest of us?
Mr. Lewis: "Treasury Secretary Paulson called me in late August of 2007, when things started to really melt down..." but the economy still looked good back then.
Mr. Blankfein: "There was a bifurcation that was in the air at the time: these are problems of Wall Street, not problems of Main Street."
Is this a hearing about the causes of the financial crisis? Where's the heat, people?
11:25am: Rep. Kanjorski asks whether we have seen "the worst of this thing" yet. The gavel starts tapping...Rep. Frank is still hounding the committee members to stick to the clock. I think he expects the hearing to last for hours. Slow torture?
11:27am: Rep. Randy Neugebauer, R-Tx., asks: When can we just sit back and let this thing work itself out? He's asked everyone. Mr. Blankfein, first in the line of bankers at the table, is the one who always ends up answering these open-ended queries.
11:31am: Mr. Pandit explains why banks can't sell bad assets at fire-sale prices: It's not fair to the shareholders. He says credit has to get flowing freely enough that buyers can begin to afford to pay real prices.
11:32am: Rep. Maxine Waters, D-Calif.: "I come to this with very very strong opinions about what we need to do to regulate this industry...I would like to know if any of you or all of you--any of you--since you received Tarp money increased the amount of interest on the credit cards by sending out lenders to the consumers...indicating that this was part of the contract even though it might have been in small print."
Rep. Waters, to Lewis: "Did you do this?"
Mr. Lewis: "In 2008 we increased rates on 9% of our customers..."
She cuts him off. She makes everyone else who "sent the letters" raise their hands.
11:34am: Rep. Waters says loan mods through industry programs aren't working. "I have spent hours on the phone trying to connect with your loss mitigation department," she tells Mr. Lewis.
11:35am: Rep. Waters, to Lewis: "Do you have a loss mitigation department offshore?" Lewis: "I don't know."
11:37am: Rep. Waters: "Bank of America, you paid yourself $30 million in fees just to accept our Tarp money. Citigroup, you paid yourself $12 million. Why did you do that?"
Mr. Lewis: "I don't know what you're talking about."
Mr. Pandit: Those were underwriting fees for issuing FDIC-guaranteed debt!
Rep. Kanjorski: Enough. When the Chairman gets back he's going to penalize me.
11:40am: Ken Lewis is fielding a large portion of the questions but nobody seems to needling him yet about the Merrill Lynch deal. Are they afraid? Do they lack confidence?
11:42am: Mr. Pandit is wearing an American flag lapel pin. How patriotic!
11:44am: Rep. Carolyn Maloney, D-N.Y., has finally brought up the Merrill deal. "Some alarming facts have come out...Bonuses to Merrill employees, they doled out over $3.6 billion just days before Bank of America bought the collapsing firm." She wants to hear a justification for that.
11:47am: Rep. Maloney, to Mr. Lewis: "Did you know how big these bonuses were going to be?...Did you discuss them prior to the merger?"
Mr. Lewis: We urged Merrill to reduce their bonuses, "but we had no authority to tell them what to do."
11:49am: These time limits are brutal. Rep. Maloney used almost all of hers detailing the bonus payouts that turned out to be so nonsensical when Merrill's losses came to light. Now Rep. Gary Ackermann, D-N.Y., is asking about regulation in the future.
Mr. Mack: "There needs to be, I believe, a coming together of regulatory oversight." He also wants "global regulatory coordination."
11:54am: Mr. Dimon named lots of different regulators, I think he meant to make things sound overly complicated. He wants a single regulator, and he thinks the Fed would make a good systemic risk regulator, since creating a whole new one could take too long. Lawmakers should be taking note of this, but some could argue they should then do the opposite of what these guys are suggesting.
11:59am: Rep. Gutierrez is bringing it back to the underwriting fees. He wants everyone to put in writing how much the banks paid themselves "for selling what a kindergartener could sell in the market today." Zing!
11:55am: Rep. Luis Gutierrez, D-Ill. is asking the CEOs how they think the toxic assets should be priced. For the all the build-up, this hearing is displaying more of the vulnerabilities of the Financial Services Committee than it is of the CEOs. They're being treated like any other set of experts summoned to advise the committee.
11:59am: Rep. Gutierrez has brought the discussion back to underwriting fees. He's asking the CEOs to put in writing exactly how much they paid themselves "to sell what a kindergartener could sell in today's market." Zing!
12:02pm: Asked about causes of the crisis, Dimon blames securitization and bad underwriting. He cited banks, mortgage companies, and others for the crisis. He only mentions three banks by name -- all of them defunct: Washington Mutual, Wachovia and Countrywide. Wamu, of course, was bought by JPMorgan after it failed last year.
12:05pm: Rep. Nydia Velasquez, D-N.Y., points out that Citigroup supported bankruptcy cramdowns and asks Mr. Pandit to explain why. Mr. Pandit says loan mods are very important.
Rep. Velasquez wants the other CEOs to say whether they support bankruptcy cramdowns. Mr. Blankfein is saying no, there are too many consequences. Now they're scuffling. The other CEOs are saying loan mods are great but should be explored before bankruptcy. Rep. Velasquez isn't pushing the issue.
12:10pm: Smackdown! Rep. Velasquez has presented the case of a Florida man who lost his house. Unfortunately, she's cut off before she can finish. Time's up.
12:12pm: Right now the score is: Pandit, some points, other CEOS, no points. Mr. Pandit is talking about raising rates on credit cards, but he's generally appeared in contrast to the others, especially on bankruptcy. Now, nobody's interrupting him, and Rep. Shelley Moore Capito, R-W. Va., isn't arguing.
12:15pm: Rep. Capito is asking Mr. Pandit, "are you too big to fail?" Pandit: "We're a big bank...but diversification has not necessarily been the driver of why Citi is the size it is, investor needs have driven our growth...we are restructuring Citi into two parts."
12:18pm: Now Mr. Lewis is talking about the "beauty of diversity." He adds, "the size thing" is not about size, it's about systemic risk "no matter what your size is." He wants "an overlay of supervision to what we have now.
12:19pm: Mr. Stumpf says systemic risk is all about management culture. Rep. Melvin Watt, D-N.C., cuts him off and asks whether the size of the stimulus is great enough. He wants the answer in writing.
12:20pm: Rep. Jeb Hensarling, R-Tx.: "What you do with your money is your business; what you do with the taxpayer money is our business." He claims he's studying "every comma and semicolon" in the executive compensation caps the Treasury Department announced last week. He's asking the CEOs whether they're worried about losing talent because of the capped pay.
Mr. Mack: "At the most senior levels, I'm not as concerned." But lower levels, like executives managing different regional banking operations, are already being lured away.
12:24pm: Rep. Hensarling: What is preventing you from paying the CPP money back?
Mr. Dimon explains that banks that pay the money back early have to "replace it with the sametype of capital," and doing that is hard.
12:25pm: Rep. Hensarling asks whether bankers are caught between lawmakers telling them to make loans and regulators telling them not to. The answer seems to be that the regulators actually aren't trying to constrict lending.
12:28pm: Rep. Ackerman just called the CEOs' responses "words, words, words."
Rep. Ackerman: It's not impressive that you've kept up lending. Why didn't we get answers about what you did with the new Tarp money?
Mr. Dimon: We did.
He points out that banks aren't the only lenders out there. Car companies and other non-bank lenders have cut back their lending.
Rep. Ackerman: What did you do with the $25 billion you got in Tarp funds?
Mr. Dimon: "I believe we lent out probably $50 milllion to $75 million within a couple of weeks of that, most of it being not for profit, $1 billion to the state of Illinois, interbank lending..."
He's trying to list his activities, but Rep. Ackerman keeps cutting him off.
12:30pm: Lunch break. If only this hearing were exciting as it is punctual. Follow me to the next post when the witnesses return.