Congress To Grill Bank CEOs On Bailout Funds Use
MADELEINE BRAND, host:
This is Day to Day. I'm Madeleine Brand. The leaders of some of the country's largest banks were on Capitol Hill today. They faced angry lawmakers, or at least lawmakers who represent angry Americans. Here's House Financial Services Committee Chairman Barney Frank.
Representative BARNEY FRANK (Democrat, Massachusetts): There has to be on the sense of the American people that you understand their anger, their frustration, and that you willingly cooperate, and in fact are willing to make some sacrifices so that we can get this whole thing working.
BRAND: NPR's Jim Zarroli has been following the hearings. He's here now. And Jim, the banks have gotten a lot of criticism for using at least some of that $165 billion in government bailout money for big bonuses and...
JIM ZARROLI: Mm hmm.
BRAND: Perks, and things that Americans got really angry about. What did they do to correct that perception today?
ZARROLI: Well, they certainly tried to correct it. They talked about how they'd forgone bonuses and perks. You know, one of - for instance, one of the controversies has been this purchase of a big corporate jet by Citigroup. And Vikram Pandit, the head of Citigroup, talked about that. He said the banks all took taxpayer money, and so they're having to operate in a whole new world.
Mr. VIKRAM PANDIT (CEO, Citigroup): We did not adjust quickly enough to this new world, and I take personal responsibility for that mistake. In the end, I canceled delivery. We need to do a better job of acknowledging and embracing the new realities. Let me be clear with the committee. I get the new reality, and I will make sure Citi gets it as well.
ZARROLI: So in general, this was just a full court press to try to address some of the public relations problems the banks have had. You know, they're having to do that - a lot of public anger, as you pointed out, and they have to be really worried about what Congress might try to do.
BRAND: So I guess they didn't take a corporate jet down to D.C...
(Soundbite of laughter)
BRAND: From New York. How did they respond, though, to the question that they've been hoarding this bailout money and not using it for what it was intended to do, which was to free up the credit markets?
ZARROLI: Well, yeah, they talked about a lot about how they're lending money, about all they're doing to help consumers and businesses, how they're committed to helping businesses, and how they're trying to help people stay in their homes. Here was Ken Lewis, who's the head of Bank of America.
Mr. KEN LEWIS (Chairman and CEO, Bank of America): The financial services industry is undergoing wrenching change. Now is a good time to remind ourselves that we play a supporting role in the economy, not a lead role. Our job is to help the real creators of economic value, people who make things, and people who use them, get together and do business. We bankers should find some humility in that.
ZARROLI: So again, an effort to just tell Congress they're on the right page. They know they have the responsibility to lend. But of course, there are problems for the banks, you know. They're required to hold a certain amount of capital on their balance sheets if they want to lend, so they have to be really careful about the kinds of loans they make because they can't jeopardize their capital levels, which is why you hear today so often that, you know, if you have good credit it's easy to get a loan, but if you're, you know, in a risky business or if you have less than perfect credit, the banks don't want you to come calling.
BRAND: Hmm. Well, sometimes it seems that if you do have good credit it's hard to get loans, and maybe one of the reasons for that is all these toxic assets that people keep talking about clogging the balance sheets of these big banks. And so did the bankers address that at all?
ZARROLI: Yeah, they did. This is one of the central problems, of course, that are facing the banks right now. They own all of these securities that aren't worth as much as they used to be. A lot of them tied to the mortgages that went bad. They can probably find someone to buy them if they price them low enough, but they wouldn't get as much as they think they're worth. And even more importantly, they'd have to acknowledge a loss. It would go on their balance sheets.
Vikram Pandit said today that that it would actually be irresponsible to Citigroup's shareholders if the banks started selling off assets for less than they're worth.
Mr. VIKRAM: When we look at some of the assets that we hold, we have a duty to our shareholders, and the duty is if it turns out they're marked so far below what our lifetime expected credit losses are, I can't sell that. That's not right for our shareholders to sell it. I'm not going to sell them at a dollar.
ZARROLI: And a lot of people say this is why the banking crisis is dragging on. Banks don't want to acknowledge their losses and take their medicine. Some of them might even become insolvent if they did. They're waiting to see if the government bails them out. And meanwhile, there's a stalemate.
BRAND: Right. And any suggestion at all that Congress might investigate any legal improprieties by the banks?
ZARROLI: Well, of course there are a lot of people investigating the banks and what went on right now, but that wasn't the point of this hearing. This was just about finding out what went wrong with the bailout, what needs to be done to turn things around.
BRAND: And a lot of humble pie.
BRAND: NPR's Jim Zarroli on Capitol Hill. Thank you very much.
ZARROLI: You're welcome.