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It might not be quite as dramatic as the recent Congressional hearings on steroid use in baseball, and Roger Clemens won’t be there to attract hordes of
Jul 31, 2020236.7K Shares3.2M Views
It might not be quite as dramatic as the recent Congressional hearings on steroid use in baseball, and Roger Clemens won’t be there to attract hordes of reporters. But today’s Capitol Hill showdown on CEO compensation packages for financial industry executives still should provide plenty of interesting fodder.
That’s because the Angelo Mozilo, the former head of Countrywide Financial Corp., Stan O’Neal, former CEO of Merrill Lynch & Co., and Charles Prince, Citigroup Inc.’s ousted CEO, have some ‘splaining to do about their big payoffs in the midst of the subprime mortgage meltdown and the housing collapse.
All three are expected to testifybefore the House Oversight and Government Reform Committee, chaired by Henry Waxman. They’re going to be grilled about how their packages were put together and why they think they deserved them. The numbers are mind-numbing: O’Neal tookhome $161.5 million in accrued benefits when he retired in October. Prince leftwith $29.5 million. Mozilo soldmore than $360 million of Countrywide stock prior to his company’s implosion.
Expect Mozilo, a brash, outspoken personality,not to be too apologetic. Mozilo feels he deserves credit for forfeiting$37.5 million in payments he could have collected that were tied to the deal to sell Countrywide to Bank of America. But given that Countrywide was the industry leader in selling to subprime borrowers no-documentation loans and adjustable rate mortgages – and that those very loan products are blamed for rising defaults and foreclosures – don’t expect the committee to offer him a big hug.
Committee members should worry less about Prince’s package than his decisions as head of Citigroup, which bought up subprime companies over the past decade and moved aggressively into those products. Citigroup also seems to have a problem tallying up the extent of its huge losseson mortgage-related securities. This makes Wall Street nervous, and it makes consumers wonder what would happen if they called Citigroup to say they didn’t really know how much money they had in their accounts but wanted to spend it anyway.
O’Neal most likely will be asked about collecting all that money as his former firm suffered its worst quarterly loss in history. Merrill Lynch laid off1,600 employees recently.
No doubt all three will find complicated and reasonable-sounding justifications for their packages, or they’ll just blame their compensation committees. Either way, none of it is likely to go over big. Especially when the housing market’s collapse is causing people who didn’t take out subprime loans to see their properties fall in value and foreclosures scar their neighborhoods.
Rhyley Carney
Reviewer
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