Ieri sono stati messi alla berlina dallo House Financial Services Committee 8 banchieri di Wall Street circa l'uso dei fondi ottenuti attraverso l'adesione ai TARP
I CEO chiamati a testimoniare: Kenneth D. Lewis - Bank of America; Robert P. Kelly - Bank of New York Mellon; Vikram Pandit - Citigroup; Lloyd C. Blankfein - Goldman Sachs; Jamie Dimon - JPMorgan Chase; John J. Mack - Morgan Stanley; Ronald E. Logue - State Street; e John G. Stumpf - Wells Fargo.
DealBook ha pubblicato il resoconto dell'audizione che riporto qui di seguito.
5:03 p.m. | It’s over: The hearing adjourns.
4:58 p.m. | Lending — a tough job: Representative Dan Maffei, Democrat of New York, asks Mr. Dimon how he his going to get money into the system. Mr. Dimon says all the government programs need to be implemented quickly and on a coordinated basis. He also notes that nonbank financing companies have essentially dropped off lending leaving the banks to make up for that gap, which will be tough to fill.
4:50 p.m. | That other bailout (autos): Asked whether they have received any specific proposals from the auto industry for overhauling its debt. Mr. Lewis says his bank is deep in discussions with the automakers. Asked whether the auto companies should go into bankruptcy, Mr. Dimon says it depends on the terms, but either way his bank will not make money.
4:49 p.m. | We love Michigan, but…: Representative Gary Peters, Democrat of Michigan, asks if his state is being singled out as a place where the banks won’t lend. Mr. Dimon and Mr. Lewis say that they want to make every good loan they can, but that because Michigan has the highest unemployment in the nation, they will likely do less business there.
4:42 p.m. | Rewards for the long term: Representative Jim Himes, Democrat of Connecticut, asks if any of the bankers if they will craft compensation plans that reward people for longterm performance and not for taking huge risks. They all agree to do so.
4:33 p.m. | Lingering questions about A.I.G.: Mr. Blankfein is asked how much money Goldman Sachs received from the rescue of A.I.G. Mr. Blankfein says that his bank was called by the New York Fed to advise it on a private market solution to A.I.G., but that Goldman did not have unhedged exposure to A.I.G.
4:31 p.m. | No daydream believers: Representative Andre Carson, Democrat of Indiana, tells the bankers that “the public doesn’t believe you learned from your errors.”
4:27 p.m. | Survivor (not the TV show): Representative Donald A. Manzullo, Republican of Illinois, asks the bankers whether they would survive if unemployment rose to 11 percent and a 25 percent further decline in real estate prices Mr. Mack says it would be painful, but Morgan Stanley would survive. Mr. Blankfein says Goldman would survive, but “we may be in a downward bubble” since everyone is pessimistic.
4:20 p.m. | “Feed the troops”: Representative Joe Donnelly, Democrat of Indiana, tells the bankers to “feed the troops before they feed themselves.” “We are counting on your good judgment,” he says. He also asks the bankers whether they can work with small businesses who are paying their loans but their ratios might be off. Mr. Stumpf says they are working with small companies.
4:16 p.m. | Mark to market: Mrs. Biggert asks whether anyone would do away with mark-to-market accounting. Mr. Stumpf and Mr. Lewis said it should be modified for extraordinary times when there is no market for products.
4:13 p.m. | “We’re still standing”: Representative Judy Biggert, Republican of Illinois, asks how banks can restore confidence, and Mr. Dimon offers up some patriotic words: “We will beat this thing. We are bruised and battered, but we’re still standing and I believe America will do what it’s always done” and get through the problem.
4:10 p.m. | “Not a bad thing”: Responding to a question of whether some banks are too big, Mr. Mack says Morgan Stanley isn’t too big and he intends to grow, but notes there could be an issue with banks getting into too many businesses. Mr. Dimon says that “large itself is not a bad thing” and notes the United States military is big.
4:05 p.m. | Into the unknown: “The question I and nobody else will know is what would have happened” if the TARP money wasn’t there, Mr. Dimon says.
4:01 p.m. | Solvency? Yes. Nationalization? No!: Responding to a question about bank solvency, Mr. Pandit says Citigroup’s Tier 1 capital ratio is 12 percent, well above what the regulators require, and he believes the bank is very well capitalized. Mr. Lewis says his Tier 1 capital ratio is about 10.6 percent and notes that Bank of America made money last year. Asked about whether Bank of America or Citigroup should be nationalized, both bankers said no.
3:50 p.m. | Seeking commitments: Representative Mary Jo Kilroy, Democrat of Ohio, asks Mr. Lewis if he stands by his commitment that Bank of America will not need additional government funding. Mr. Lewis says stands by the statement. Ms. Kilroy asks the other members whether they can commit to fully paying back the government. Mr. Blankfein says that it is his expectation to pay the government back. Mr. Dimon, Mr. Kelly and everybody else says they also expect to repay the government. Mr. Pandit says he cannot commit to not accepting more capital under a government program because it may be beneficial to his shareholders.
3:42 p.m. | No less anger: A congressman from Texas says the American people won’t have any less anger after the hearing because they don’t know where the money has gone. He asks if the bankers can ascertain the amount of new money that has been lent out directly attributable to TARP. Everybody raises their hands except for Mr. Stumpf, who says all of the loans go into the same pool of capital.
3:30 p.m. | “Mr. Countrywide”: A congessman from Florida doesn’t seem to know who the bankers are. He mispronounces Mr. Dimon’s name and asks the panel who “Mr. Countrywide” is. Mr. Lewis said he is “not Mr. Countrywide.”
3:27 p.m. | More calls for a moratorium: Mr. Frank notes that the Office of Thrift Supervision has also asked for a moratorium on foreclosures until the home modification plan is in effect.
3:20 p.m. | “The better angels”: Representative David Scott, Democrat of Georgia, asks the bankers to “let the better angels of our nature to shine through,” quoting Abraham Lincoln. He asks them to commit to having a moratorium on all foreclosures until the Treasury secretary can implement his rescue plan. “That would be a tremendous gesture,” Mr. Scott says. Mr. Lewis asks for a time frame, Mr. Scott says three weeks. Mr. Pandit as well as everyone else says they will commit to keeping people in their homes.
3:10 p.m. | Reaching out to homeowners: Responding to a question from Representative Rubén Hinojosa, Democrat of Texas, Mr. Pandit says Citigroup tries to reach out to homeowners before they start missing payments.
3:08 p.m. | “They are suffering”: Representative Walter B. Jones, Republican of North Carolina, says: “For God sakes Mr. Lewis, do everything you can to free credit because they are suffering”
3:04 p.m. | And we’re back: Apparently in the middle of questioning.
3 p.m. | Still on break: Voting takes time, apparently.
2:22 p.m. | Break: A 20-minute recess while the representatives vote.
By the way, some advice for the panel: Mr. Blankfein’s name is pronounced “Blank-fine,” not “Blank-fin” or “Blank-feen.” Mr. Dimon’s name is pronounced “Dye-mon.”
Separately, banking chiefs: make sure your microphone is on before you start speaking. Thank you from the spectators’ seats.
2:15 p.m. | Was the bailout necessary?: At the time, Mr. Blankfein and Mr. Lewis say, no. But in hindsight, yes, in order to bring about stability.
A followup: Why can’t consumers get access to credit? Mr. Lewis ventures that it’s because of declining home values. Some verbal jujitsu follows, as the congressman assails the once-plentiful availability of credit cards. (His own daughter was once offered a card when she was younger.) “We’re the ones having to bail you out because of the losses there,” he says. The chiefs remain silent.
Now we move onto best practices. Applied to risk management, Mr. Mack says, the term would mean that the risk-management team would report directly to the chief executive and not a trading group.
2:11 p.m. | Where’s the private capital?: When private capital will come back into the banks? Mr. Blankfein says that it will come when uncertainty lifts.
Over-regulation is a potential problem, some of the chiefs agree with their interrogator.
2:06 p.m. | Where’s the money?: Will the banks lose more money? Mr. Stumpf recollects his time as a collector and says that job losses are key to answering the question. Mr. Pandit agrees that unemployment is important; when asked about when credit will flow again, he says “we’re doing everything we can.”
Mr. Mack says Morgan Stanley is lending to corporations. It doesn’t do much to consumers because it’s not a very consumer-facing firm.
2:02 p.m. | Back to TARP 2: First and foremost, this admission from Mr. Blankfein: Trains are more relaxing and conducive to reading.
Will TARP 2 work, asks Representative Patrick T. McHenry of North Carolina? Mr. Blankfein, Mr. Dimon and Mr. Kelly say yes, if done well. Mr. Lewis, his Carolinian compatriot, is asked about transparency — on the government side? Sure, comes the reply.
1:55 p.m. | “America doesn’t trust you anymore.”: How many banks lent money to investors who in turn bought credit default swaps? How many invested in CDS or off-balance-sheet vehicles like SIVs? More than a few executives raise their hands at one point or another.
“All of your or at least most of you engaged in at least some of the activities that led us to this crisis,” the interlocutor responds, specifically SIVs. “I can’t believe that no one has prosecuted any of you over this.”
Coming to Congress on their bicycles, after having bought Girl Scout cookies, and saying they’re sorry? Not enough. The congressman compares banking chiefs to bank robbers who say they’re sorry.
1:44 p.m. | Autos and bonuses: What are these banking chiefs’ views on the viability of the American auto industry? Several executives say that they are supportive of the industry, including by making auto loans.
Back to TARP money received in 2008, salary and bonuses, or lack thereof.
Mr. Stumpf: $25 billion. $850,000 salary. No bonus.
Mr. Pandit: $45 billion. $1 million salary. No bonus. He will take $1 salary until Citi turns a profit again.
Mr. Mack: $10 billion. $800,000 salary. No bonus.
Mr. Logue: $2 billion. $1 million salary. No bonus.
Mr. Lewis: $15 billion. $1.5 million salary. No “incentive.”
Mr. Kelly: $3 billion. $1 million salary. No bonus.
Mr. Dimon: $25 billion. $1 million salary. No bonus.
Mr. Blankfein: $10 billion. $650,000 salary. No bonus.
1:39 p.m. | All apologies?: Should the industry apologize for what happened? Mr. Mack says, essentially, yes, the industry has responsibility to shoulder for what has happened to the economy and to shareholders. He accepts some.
1:35 p.m. | What’s needed next: What can the government do to bring back stability? Mr. Pandit: stabilize housing and create jobs. Mr. Geithner’s speech on Tuesday was a good start, he said, but banks are awaiting more details.
Mr. Dimon: good fiscal stimulation is crucial. Mortgage-modifications are good.
Mr. Lewis: The TARP doesn’t have to have permanently changed the face of the free-market economy in the United States. Mr. Kelly agrees.
1:32 p.m. | Raise your hands: An insistent Mr. Ackerman asks about dividend payments made after the banks received government money. “Money is fungible, don’t insult our intelligence,” he says, before urging the banking chiefs to adopt a policy forbidding the payment of dividends.
Then he asks who owns or leases a corporate jet. All but Mr. Blankfein raise their hands. Mr. Ackerman again strongly suggests that banking chiefs forego their private corporate jets.
He then asks Mr. Pandit why Citi will not issue additional securities to protect taxpayers. Mr. Pandit says that he and his firm are striving to make taxpayers a profit.
1:22 p.m. | We’re back: Representative Scott Garrett of New Jersey asks Mr. Blankfein about Goldman’s exposure to A.I.G. The banking chief says that the insurance giant was a major player in the credit markets. While its notional exposure was $20 billion, Goldman significantly hedged its exposure and was collateralized, Mr. Blankfein said.
12:35 p.m | Break time: The hearing takes a short recess. The grilling will resume at 1:15 p.m.
12:32 p.m. | Skin in the game: The banking chiefs are asked how much personal money they have invested in their companies in the last six months. Mr. Dimon says $12 million, Mr. Lewis says he bought 400,000 Bank of America shares, and Mr. Pandit says $8.4 million; the rest of them say they had put nothing new into their companies.
12:30 p.m. | Where did it go?: The overarching question of the day gets asked again: “What did you do with the new money?” asks Gary Ackerman of New York, who comments that it seems to him that the banks aren’t loaning it out. Mr. Dimon says bank lending is flat year over year, but adds that there is a huge amount of nonbank lending that has gone away. Car financing, money funds and others stopped lending, he says, adding that JPMorgan lent out $50 billion to $75 billion to nonprofits and other institutions.
12:24 p.m. | Paying it back: Executives at some big banks have already suggested that they want to repay their TARP funding as quickly as possible. But Mr. Dimon of JPMorgan tells the panel that there is a legal impediment to paying the TARP money back before three years, even if he wanted to, because TARP recipients are required to replace it with private funds, and many banks don’t want to do that.
12:22 p.m. | Pay restrictions: Mr. Hensarling asks about executive compensation restrictions and whether they will lead to a loss of talent; this is an issue commonly raised by those who oppose pay limits for TARP recipients. Mr. Mack of Morgan Stanley says that at the most senior levels, he’s not concerned, but below that level he as already seen defections to European competitors and others.
12:19 p.m. | Too big to fail: Ms. Capito poses this question to the banking bosses on the panel: Are you too big to fail? Mr. Pandit replies that his company is a large bank, and in the current environment, nobody has been spared. But he also notes that Citi is reorganizing into two parts that are a lot smaller. Mr. Lewis says that diversified companies have done better, but asserts that the issue is not size, but a financial institution’s role in the capital markets in general. The real question, he says, is not size but “if you’re systemically important.”
12:17 p.m. | Back to credit cards: Representative Shelley Moore Capito of West Virginia revisits the credit card issue, asking why card holders who haven’t missed any payments are seeing an increase in their interest rates. Mr. Pandit responds that Citigroup hadn’t raised rates in two years, and states that funding costs went up, so they had to raise rates. Mr. Dimon tells the congresswoman to send him any customers who think they shouldn’t have their rates increased and he’ll deal with them.
12:10 p.m. | The Pfizer-Wyeth deal: The bankers are asked about the merger of drug companies Pfizer and Wyeth, which is being financed by billions of dollars in loans, some from banks represented at today’s hearing. The question comes from Representative Nydia M. Velazquez of New York, who says that the merger is expected to result in the loss of 19,000 jobs and wants to know why banks are lending only to big companies but not to small business. None of the bankers answer the question.
12:00 p.m. | Fannie and Freddie: Representative Edward R. Royce asks to what extent the mortgage securitization process, led by Fannie Mae and Freddie Mac, was part of the problem. Mr. Stumpf of Wells Fargo — which originated relatively few of the most exotic kinds of mortgage loans — says that the problem started a long time before 2007 with “crazy things” such as negative amortization loans and so-called liar loans. “There’s no question that Fannie and Freddie played a part in that,” Mr. Stumpf says.
11:58 a.m. | Valuing bad assets: Responding to a question from Representative Luis V. Gutierrez of Illinois, Mr. Pandit of Citigroup says that valuing assets on a company’s books is a complicated process. One way to do it is for the government to take the bad assets, take the losses and then “send us a bill” when the economy recovers.
11:51 a.m. | Super-regulator: Representative Peter King of New York asks about the creation of a systemic risk regulator and how that would work. Mr. Mack says the idea of a systemic risk regulator “is critical” and praises the idea of combining several regulators and having more global coordination. “We need to have a super-regulator,” he says.
Mr. Dimon also states that the regulators aren’t to blame for what happened, but says there is an alphabet soup of regulators and several unregulated businesses. He says he sees tremendous benefits to having one regulator that looks at everything with an eye toward systematic risk and suggests the Federal Reserve could be up to the job.
11:44 a.m. | Those Merrill bonuses: The conversation inevitably turns to the $3.6 billion in bonuses paid to Merrill Lynch employees right before the firm was bought by Bank of America. Representative Carolyn Maloney of New York asks: “How can you justify paying bonuses to managers who are running the company into the ground so much that they were forced to sell?”
Mr. Lewis says his personal involvement was very limited, but states that his company urged Merrill to reduce the bonuses substantially. Still, he says, Bank of America had no authority to force them to do anything before the merger closed.
11:39 a.m. | ‘An awful year’: “This is going to be an awful year for the credit card industry,” Mr. Lewis says, adding that he is prepared to deal with the loses. Mr. Dimon says he expects credit card losses at JPMorgan to be more than $10 billion this year, or 8 percent of the total credit card debt outstanding.
11:32 a.m. | Credit card rates: Representative Maxine Waters of California wants to know if any of the bankers have increased the interest rates on credit cards since they received TARP money. Mr. Lewis says Bank of America increased rates on 9 percent of its customers in 2008. The other bank executives also raise their hands and say they increased credit card rates.
Then Ms. Waters raises another issue: She says Bank of America paid itself $30 million in fees just to take the TARP money. Mr. Lewis says he doesn’t know what she is talking about. Mr. Pandit of Citigroup says the fees were paid to underwriters for issuing government-backed debt, which is standard industry practice.
11:27 a.m. | A market solution?: Is it time for the government to step back and let the market work through the toxic assets on banks’ balance sheets? That’s what Representative Randy Neugebauer is asking: “The deeper we get into this, the tougher the exit strategy is,” he says.
Mr. Blankfein says that accounting regimes allow banks to mark their assets at what they expect the value would be in the future. Mr. Pandit says his company has sold a lot of troubled assets over the last few months, but adds that there is not enough capital in the market to buy these assets unless they go for extremely low prices.
11:24 a.m. | When the wind shifted: Mr. Lewis of Bank of America says he began seeing economic headwinds in late July 2007 but thought “the economy was in pretty good shape” going into the fourth quarter of that year. Mr. Blankfein of Goldman says Wall Street became aware of the problem earlier, but people didn’t realize how much Wall Street was tied to Main Street.
11:20 a.m. | Preventing a replay: Representative Paul E. Kanjorski asks about what steps the government could take to make sure “this never happens again.” He also asks the Wall Street bankers how they missed the problems in the economy.
11:15 a.m. | A TARP optimist: Mr. Bachus notes that he thinks the TARP funds will be a very good investment for American taxpayers. He praises the banks for their efforts to reduce risk and leverage. He also says he “was shocked that lending wasn’t down 15 or 20 percent.” Mr. Bachus asks if the banks can avoid forcing good borrowers to make principal payments.
11:10 a.m. | On bonuses: “If you weren’t getting a bonus,” Mr. Frank asks, “what would you not do? Would you take longer lunches or leave early on Wednesday?” He goes on: “Why do you need to be bribed to have your interests aligned with the company?” Mr. Mack replies that “we love what we do, if you gave us no bonus we would still be here.”
11:08 a.m. | Foreclosures: Mr. Frank urges all the banks to withhold any foreclosures until the government’s rescue plan goes into effect.
11:06 a.m. | Opening statements end: It’s question time — or castigating time, depending on your point of view.
11:01 a.m. | And yet more loans: Mr. Stumpf, of Wells Fargo, says the bank made $72 billion in new loans in the fourth quarter. “We do business and lend money the old fashion way — responsibly and prudently,” he says. “We are Americans first and bankers second.”
10:55 a.m. | Citi’s plane: Toward the end of his speech, Mr. Pandit goes off script and acknowledges the public criticism earlier this month when Citigroup was set to take control of a new $50 million corporate jet. He apologizes for not reacting fast enough to the public outrage: “I get the new reality,” Mr. Pandit says.
10:52 a.m. | A few missteps: Mr. Mack says Morgan Stanley has increased transparency and reduced risk, “but they didn’t do everything right” and he takes full responsibility for that. In the fourth quarter, the firm raised over $50 billion in debt for corporations like General Electric and Time Warner Cable. Later, he says: “I know that the Americans are outraged about compensation costs.”
10:48 a.m. | Mutual funds: Mr. Logue, of State Street, says that after receiving the TARP funds, his firm helped made $1.5 billion in capital available to mutual funds to help them meet their redemption requests.
10:42 a.m. | More loans: Bank of America is lending, Mr. Lewis says in his opening statement. In the fourth quarter, the bank made $115 billion of new loans to consumers and businesses and refinanced thousands of loans over the quarter. “We understand that taxpayers are angry” and they deserve to know how we are spending their money, he said.
10:39 a.m. | A profitable bank:: Mr. Kelly, of Bank of New York Mellon, noted that his bank was profitable every quarter last year and said it didn’t really need the TARP funds. The funds allowed the bank to purchase mortgage securities and $900 million of debt securities from other financial institutions. “We have not used any of the funds to pay dividends or compensation,” he says.
10:34 a.m. | JPMorgan’s loans: Jamie Dimon is next — the bankers are speaking in alphabetical order — and he said he did not seek the government’s money. He also tells lawmakers that JPMorgan made over $150 billion in new loans in the fourth quarter, not including $50 billion in loans to other banks that the firm made on an overnight basis.
10:32 a.m. | Goldman’s bonuses: Addressing the sensitive issue of compensation, Mr. Blankfein says Goldman’s bonuses in 2008 were down 65 percent on average, and senior executives’ bonuses were down 75 percent. Goldman’s top management decided not to take any bonuses this year.
10:28 a.m. | Now to the bankers: Mr. Blankfein, the Goldman honcho, points out that his firm recently committed capital to student lender Sallie Mae to allow it to make more loans.
10:24 a.m. | Market confidence (or lack thereof): Representative David Scott of Georgia seems to want the bankers to single-handedly restore confidence to the markets at the hearing. “If there’s one thing you gentlemen can do today is to demonstrate that what has happened in the past is an aberration,” he said. “At the heart of this hearing is confidence.”
10:22 a.m. | Public perception: Representative J. Gresham Barrett of South Carolina says “his folks” haven’t seen the evidence that the money given to the banks is working and making their lives better.
10:17 a.m. | Government’s role: Representative Jeb Hensarling of Texas says some of the public pillorying that the bank executives are going to take today is deserved, but adds that government also has to own up to its responsibility as well.
10:13 a.m. | A distinction: Representative Spencer Bachus, the Republican from Alabama who is the committee’s ranking Republican member, offers a word of caution — “some wanted the money; some didn’t want the money” — and says it would be a mistake for the American people to look at this group as one group.
10:10 a.m. | ‘Collateral benefit’: “We are now in a serious negative economic situation,” Mr. Frank says in his opening remarks. “We have to get out from under where we are now.” Now he points to the banking executives. “You are the recipients of collateral benefit, but you need to understand how angry that makes people.”
10:05 a.m. | Not a laughing matter: Representative Barney Frank, the Massachusetts Democrat who chairs the committee, lays down the law to the audience. While he says he supports free speech, he wants the audience to stay silent, including any “forced laughter” that may come out of anyone’s comments.
10:01 a.m. | Paparazzi: Before the hearing starts, the always-colorful Jamie Dimon asks the gaggle of photographers, “What do you guys do with all these pictures?”
9:23 a.m. | The bankers’ statements: In statements submitted before the hearing and posted on the committee’s Web site, the executives generally defended how they have been deploying the funds they received from the government’s Troubled Asset Relief Program, or TARP.
Mr. Blankfein of Goldman Sachs said his firm was “actively putting our capital to work”; Mr. Lewis of Bank of America said his company was “lending far more” that it would have without the TARP; Mr. Dimon of JPMorgan said his firm continued to make loans even as it sought to maintain a “fortress balance sheet.”
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