Bankers React to Their Show Trial
It’s the morning after, so let’s see how bankers felt about being in the hot seat Wednesday before Congress. Top financial executives of banks that received federal bailout funds got a grilling from the members of the House Financial Services Committee, who gave them a hard time about their bonuses and lack of lending.
With a few exceptions, lawmakers kept the populist rhetoric to a minimum. Still, the bankers came away annoyed, Bloomberg reports:
With more scrutiny ahead, bankers including JPMorgan’s Jamie Dimon, Morgan Stanley’s John Mack and Goldman Sachs Group Inc.’s Lloyd Blankfein have said they’d like to repay government loans as soon as possible. BB&T Corp. CEO Kelly King told an investor conference yesterday that his Winston-Salem, North Carolina-based bank wants to be first to get out of TARP and escape U.S. restrictions, which can be added retroactively.
“We’d like nothing better than to pay it back early,” Bank of America CEO Ken Lewis said during the hearing. His company, based in Charlotte, North Carolina, has received $45 billion of TARP plus $118 billion in guarantees. Asked why some banks spurned the funding, Lewis said, “They don’t want the government involved in their business, it’s as simple as that.”
There was a bit of theater in the proceedings Wednesday that caused one financial analyst to spurn bank stocks, saying that the bankers clearly have to bow to the government:
The CEOs sat as politicians ordered them to raise their hands when asked yes or no questions, including whether they were lending more and giving themselves bonuses, and they had to wait when the committee recessed so that lawmakers could attend to other business.
“This is going to be a good ‘Saturday Night Live’ skit,” said Alabama Representative Spencer Bachus, the committee’s top Republican.
It wasn’t pretty up there. But if bankers don’t want Washington in their business, they should have made sure they kept themselves solvent. It’s hard to keep a straight face, listening to bankers saying they don’t want government meddling in their businesses. If government had meddled a little more, maybe they wouldn’t have made lousy mortgages and sold the toxic securities that put us in the mess we’re in right now.
Maybe Congress was just putting on a show trial that did nothing to illuminate the problem, and only served to strip the bankers of their dignity. But the banking industry has choices. As some executives said, they’ll pay the money back as soon as possible and get government out of the way. Good for them. But that’s not the biggest lesson here.
And until bank executives learn that lesson, they’ll likely find themselves in front of Committee Chairman Barney Frank (D-Mass.) again, sitting in the hot seat once more.