As I watched the bank CEOs testify before Congress this morning, what came to mind was the “seven dwarfs” hearing on cigarettes in 1994. The tobacco CEOs were all lined up with their hands raised in oath, and they all said nicotine was not addictive. Now, I’m not saying these bank leaders were lying or trying to mislead the public. But down the road, will we look back on this testimony and scoff?
“We are frugal,” said Wells Fargo & Co.’s John Stumpf. “We’re Americans first. We’re bankers second.”
I assume that Stumpf and his cohorts chose their words carefully, but as they attempt to regain the trust of a disgusted public, can they back up their claims?
Bank of America CEO Ken Lewis said “Make no mistake: We are still lending, and we are lending far more because of the TARP program.”
Okay, we’re going to hold you to that.
Robert P. Kelly of The Bank of New York Mellon promised “a very good return on the investment for taxpayers.”
Okay, we’re going to hold you to that.
And then, there’s this: the man overseeing the hearing is Rep. Barney Frank, the Democratic Chairman of the House Financial Services Committee. Frank received a letter from New York’s Attorney General Andrew Cuomo. In this letter, Cuomo accuses Merrill Lynch executives of secretly and prematurely awarding $3.6 billion in bonuses before fourth quarter earnings came out. Cuomo says Merrill moved the date in order to “richly reward failed executives.” And he says Bank of America, which bought Merrill last fall, was apparently complicit in this. The bank did not comment.
If the banks truly “stand ready to do our part going forward,” as JP Morgan Chase CEO Jamie Dimon testified, then paying secret bonuses when taxpayer money is involved has to stop. Or else, these CEOs may wind up as cartoon characters like their tobacco counterparts.
And by the way, I do believe bailouts are addictive.
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