Friday, February 13, 2009

Bankers vs. the House Banking Committee: Highlights & Lowlights

Opening Statements
Anybody who listened to the opening statements (Feb. 12, 2009) might have wondered what the fuss is all about. It appears that many of the banks were profitable last year and took the TARP money only as sort of a favor to the Federal government. This got shot down pretty much through later questioning when it turned out that although all the bankers promised to return the funds by 2012, with interest, and would like to do it earlier there was one small hitch: to return it they must replace it with private capital and that they don't have. Still, I give the bankers points for a lack of arrogance and a recognition of the concerns of the Congress.

Republican Talking Points
I almost felt sorry for some of the Republican questioners as they desperately tried to get these Captains of Capitalism to buy in to Republican philosophy:

Are the regulators keeping you from making loans? No.
Is this government intervention destroying the free market system? No.
Shouldn't we step back and wait and think things through before we proceed? No.
Was TARP really needed? Is it working? This question was asked several times in different ways and the answers were a bit more ambiguous. Still, the most favorable to Republicans were still pretty weak: one CEO said he hadn't thought at the time that it was needed but, in retrospect, yes it was. Another, Jamie Dimon I think, said they'd be arguing about it for years, but he thinks it was, and that (at worst) it kept things from getting much worse.
Is a stimulus needed? Yes.
Isn't the idea of a systemic regulator bad? No. In fact, every single CEO welcomed the idea of more government regulation. That must truly have been galling.

Will those answers have changed the minds of the Republicans who asked the quesions? No. These Republicans are almost all ideologues who can't be bothered having their minds changed by simple facts. Indeed, in previous hearings I recall several basically admitting, when presented with facts they didn't like: "I know what I know". These Republicans are, politically, the equivalent of Creationists.

Quality of the Questions
I've watched almost all the hearings broadcast on C-SPAN since the start of this crisis last September and the questions, in general, from this committee were among the worst - to the point of being outright embarrassing. There were the grandstanders, of course. Ever since Ackerman got his 30 seconds of fame last Fall with the issue of private planes when the auto CEOs testified, an increasing number of his colleagues have decided they want their 30 seconds of fame, too. So we got a lot more blustering outrage than is usual - as well as the normal attempts to embarrass as much as possible those who are testifying. But the sheer ignorance of how the banking and financial systems work that was evident in many of the questions was truly appalling. Choosing the dumbest (in the sense that they demonstrated ignorance of how the system works) questions would be difficult, but Gutierrez (from Illinois, I believe) ranked among the least well-informed. It doesn't take much imagination to guess that probably all of the CEOs found themselves asking how they ever got in the position of having to politely answer questions put by such, to be kind, financially illiterate people (and they must have wondered how those Representatives managed to get elected let alone get positions on this committee - a question I was asking myself). On the positive side, the experience may be another spur for these executives to get their companies out from under government intervention asap. I doubt they want to go through a similar round of humiliation again.

My Favorite Comment
My favorite comment came from Emanuel Cleaver at the end of his questions (which fell into the outrage and "shame on you" category) when he remarked that he was "woefully unimpressed" by the diversity of the panel in front of him and for as many rows behind them [presumably filled by their staff] as he could see. Kudos to Mr. Cleaver. With the exception of Pandit from Citi, they were all white men. Otherwise there was not a woman, African-American, Asian or Hispanic in sight.

Overall Impression
Generally speaking, I was impressed by the bankers. These guys, for all the mistakes they've made, know change is needed and know that part of that change is increased regulation. Jamie Dimon, Mack, and Blankfein were especially fine witnesses. Pandit did the worse but then Citi is probably in worse shape than any of the other banks. And Lewis from B of A seemed to find the attacks harder to take.

Finally, I couldn't help but wonder how many years it has been since any of these men has had to raise a hand in answer to a question - let alone been subject to the level of abuse they had to absorb.


Will said...

Check your facts. John Mack is Lebanese. Since when are woman, African-Americans, Asians and Hispanics the only minorities.

Also, Vikram Pandit started at Morgan Stanley and rose to Pres and COO of Investment Banking, the same firm that employed Zoe Cruz as Co-President(a Greek-born American woman) and employes Walid Chammah (a Lebanese native) who replaced replaced Zoe, COO Global Wealth Managemenr AND Co-President James Gorman (Australian born, although a white male), unfortunately loses Chief US Equity Strategist Abhijit Chakrabortti who just left (he was considered one of if not the top strategist on Wall Street), and so on. We are talking top level positions with a wealth of diversity. This is the real Wall Street. I don't know a lot about the commercial banking side, but the diversity arguement for investment banks is an old, tired arguement. Stanley O'Neal was a black CEO at Merrill as late as Oct. 30, 2007, and Goldman Sachs oozes of the same diversity as Morgan.

Emanual Cleaver is a moron, much like most of his Financial Services Committee members. The hearings were an absolute joke of unpreparedness and lack of general knowledge of the industry and each banks individual role in the industry.

YAB said...

He, and I, were commenting on the visuals at the hearing. (I didn't know Mack was Lebanese.)

Regardless of the internals of the companies (commercial & investment), the people the CEOs brought to the hearing were, as far as I could see, almost all white men. That may not say anything to you but it certainly does to me. Over 50% of the population is female - but there wasn't one woman at any of these companies in a sufficiently important position to have been at the hearing, even in a back row? To say nothing of other non-white men?

As for the preparedness and value of the questions, I agree with you - as I think was clear from my post.

But thank you for the comment.

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