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Wall Street CEOs feel the rage in Washington

By Steve Holland and Kevin Drawbaugh
/ Source: Reuters

By Steve Holland and Kevin Drawbaugh

WASHINGTON (Reuters) - Wall Street bank executives felt the rage of Democrats and Republicans in the U.S. Congress on Wednesday over how they used $176 billion in bailout money without making a noticeable impact on the anemic economy.

Lawmakers seized the opportunity presented by a congressional committee hearing on the troubled bailout program to grill eight bank CEOs and vent rising public anger over the economic crisis.

Questions abound about what the banks have done with the money, given an ongoing credit crisis that has added to the country's deteriorating economy. The hearing came a day after Treasury Secretary Timothy Geithner failed to inspire market confidence over the government's financial bailout plans and sent stock markets plunging.

Democratic Rep. Barney Frank, chairman of the House of Representatives Financial Services Committee, set the tone for the hearing by telling the CEOs they need to understand Americans' anger and frustration and cooperate with lawmakers willingly, "not grudgingly, not doing the minimum."

"I want to know where the money has gone," said Democratic Rep. Paul Kanjorski of Pennsylvania. He told the executives that if their banks did not use the money, "Please find a way to return that money before you leave town."

South Carolina Republican Rep. Gresham Barrett said: "My folks simply haven't seen the evidence that the money you were given is working or making their lives better."

Randy Neugebauer, a Texas Republican, referred to the bankers as "TSEs" or taxpayer-supported entities. "I think we can call this a shareholders meeting," he said.

Bankers sought to be contrite, assuring lawmakers that the billions of dollars in taxpayer money had been used to boost lending, not to pay executives, lobbyists or shareholder dividends.

"We have a hard-earned reputation for frugality, not extravagance," said Ken Lewis, CEO of Bank of America. "Taxpayers have invested in our company, and they deserve to know what return they are making on their investment and when it will be paid back."

Toward that end, Lewis said, he and other top bank managers went without bonuses for 2008, while less-senior executives had their 2008 incentive payments cut by an average of 80 percent.

The chief executives each read a prepared statement arguing that their institutions used taxpayer funds responsibly.

They said they have increased lending since the bailout began, and that they are embracing some reforms being proposed for the badly crippled U.S. financial system.

Outside the Rayburn building where the hearing took place, about a dozen protesters taunted Bank of America's Lewis. "Hey, Ken Lewis feel our pain," they chanted.

Jamie Dimon, head of JPMorgan Chase & Co, said he is endorsing a proposal to create a systemic risk regulator to help oversee U.S. markets.

"This would allow us to begin to address some of the underlying weaknesses in our system and fill the gaps in regulation that contributed to the current situation," he said. "We stand ready to work with you on the range of issues confronting the financial services sector and our economy."


The United States is struggling with its worst financial crisis in generations, brought on in large part by the bursting of a massive debt bubble fueled by financial institutions.

With the economy now mired in a deepening recession, the hearing before the House Financial Services Committee was the first time so many bank CEOs had felt the wrath of Washington politicians since the crisis fully took hold.

"It is abundantly clear that we are here amidst broad public anger at our industry," said Lloyd Blankfein, CEO of Goldman Sachs Group Inc.

Besides Blankfein, Lewis and Dimon, CEOs testifying were Vikram Pandit of Citigroup Inc, John Mack of Morgan Stanley, Robert Kelly of Bank of New York Mellon Corp, Ronald Logue of State Street Corp and John Stumpf of Wells Fargo & Co.

"The American people are right to expect that we use (bailout) funds responsibly, quickly and transparently," Pandit said in his prepared remarks.

(Additional reporting by John Poirier, Karey Wutkowski, Rachelle Younglai and Julie Vorman; Editing by Tim Dobbyn)