Lawmakers Grill Subprime Execs on Pay
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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.
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And I'm Melissa Block.
Before the subprime mortgage market collapsed, some top executives of mortgage and finance companies made a killing. Thanks to high salaries and generous stock options. Some of them were grilled about that today by a congressional oversight committee looking into CEO pay.
NPR's Chris Arnold has more.
CHRIS ARNOLD: One of the executives on the Hill today was Angelo Mozilo. He is the founder and chairman of the home lender Countrywide. In recent years, Mozilo made more than $400 million selling his Countrywide stock. He increased his stock sales in 2006 and 2007, then the bottom fell out. It came to light the Countrywide was in serious trouble with risky unorthodox loans.
Representative HENRY WAXMAN (Democrat, California; Chairman, House Oversight and Government Reform Committee): Well, Mr. Mozilo, you had a good timing because Countrywide's stock has fallen nearly 90 percent since you amended your stock trading plan.
ARNOLD: The oversight committee's Democratic chairman Henry Waxman questioned Mozilo today about those stock sales.
Rep. WAXMAN: You tell the shareholders the Countrywide stock was undervalued and a great investment to make. But when you acted in your personal capacities, you were selling millions of shares. I'd like you to respond to that.
Mr. ANGELO MOZILO (CEO, Countrywide Financial): Mr. Chairman, I was with the company 40 years. I was going to retire. Almost all of my net worth was in Countrywide. I had to come to a point of diversifying my investments, my assets, and that point came in 2004, and I consistently followed that plan.
ARNOLD: The committee also questioned Charles Prince, the former head of Citigroup. He got a $10 million bonus after Citigroup posted $10 billion in subprime losses. Likewise, Stanley O'Neal, the former CEO of Merrill Lynch, was asked about $161 million that he received after being forced out of his company. Henry Waxman:
Rep. WAXMAN: But it seems like CEOs hit the lottery when their companies collapse.
ARNOLD: For their part, all the executives said the money that they got was based on their performance in past years when times were good. Unlike Mozilo, Charles Prince said he was not cashing his stock in in the recent years. Republican Darrell Issa questioned Prince.
Representative DARRELL ISSA (Republican, California): How much skin do you still have in Citibank?
Mr. CHARLES PRINCE (Former CEO, Citigroup): I own about a million shares. Except for a few shares I sold in 1999, I haven't ever sold any share.
Rep. ISSA: Okay.
ARNOLD: The Republicans on the committee were generally not critical of the executives. Ranking Republican Tom Davis of Virginia did not like the idea of dragging them up in front of the cameras to shame them.
Representative TOM DAVIS (Republican, Virginia): Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual, like an island tribe sacrificing a virgin to a grumbling volcano. But in the end, it won't answer the questions that need to be answered about corporate responsibility and economic stability.
ARNOLD: But that didn't sit so well with Nell Minow who testified today.
Ms. NELL MINOW (Co-Founder, The Corporate Library): We're not talking about - these guys - these are not scapegoats and they are certainly not virgins. Yeah, they are…
ARNOLD: Minow was the co-founder of The Corporate Library, which does research on corporate governance. She said it's great if the CEO makes $100 million…
Ms. MINOW: It's when they get paid that kind of money by - for destroying shareholder value, it's an outrage, it's appalling.
ARNOLD: Meanwhile, the fallout continues. Foreclosures are at 50-year highs and rising, and the financial sector has been losing jobs for seven straight months.
Chris Arnold, NPR News.
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