Only three of the eight CEOs testifying before the House on their use of government bailout funds bought shares in their companies over the last six months as the stocks were plummeting.
Only three of the eight bank chief executives testifying before the House Financial Services Committee on Wednesday on their use of government bailout funds bought shares in their companies for their own portfolios over the last six months as the stocks were plummeting.
Jamie Dimon of J.P. Morgan Chase & Co. said he invested $12 million to increase his already large holdings of the New York banking giant, Bank of America Corp, chief executive Ken Lewis said he accumulated another 400,000 shares of his Charlotte, N.C.-based company, and Citigroup Inc. CEO Vikram Pandit said he invested another $8.4 million in the New York banking giant he runs.
The CEOs who didn’t increase investments in their firms over the last half year were Lloyd Blankfein of The Goldman Sachs Group Inc. in New York, Bank of New York’s Robert Kelly, New York-based Morgan Stanley’s John Mack, Boston-based State Street Corp.’s Ronald Logue and San Francisco-based Wells Fargo & Co.’s John Stumpf.
They were responding to a question from Rep. Gary Ackerman, a New York Democrat, one of several committee members who expressed dismay over how the banks are making use of about $165 billion they have received in recent months from the government and the failure of the money distributed thus far to revive lending at the banks.
He didn’t expand on why he asked the question. The executives who bought shares weren’t given a chance to say how or why they upped their investment, some of which could have come from automatic-investment plans.
Legislators peppered them with populist questions and suggestions. They ranged from proclamations about the need for banks to give up private airplanes (only one banker said his firm doesn’t use them) to detailed questions about what banks are doing to help consumers with underwater mortgages, and automakers with their problems and how much each executive made last year.
None received a 2008 bonus, and no one made more than $1.5 million for 2008, the executives said, though they weren’t questioned about compensation from previous years when their companies were liberally making loans that eventually damaged their balance sheets. Goldman’s Mr. Blankfein, for example, made $69 million in 2007, and his two top lieutenants each made $67.5 million.
One congressman said any bank that accepted funds from the Troubled Asset Relief Program shouldn’t be paying more than a penny-a-share dividend, a level that only two banks on the panel have descended to. All said they hope to repay their TARP money quickly.
“The entire industry shares some of the responsibility, and for that, we are sorry,” Morgan Stanley’s Mr. Mack said when asked about the hole that banks dug for themselves and the economy by overleveraging themselves and making poor loans. “I’m especially sorry for what has happened to shareholders and the knock-on effect on the American people.”
