House Hearing Featuring CEOs of Eight TARP Recipients Starting Now

Click here for the broadcast of the House Financial Services Committee hearing featuring the CEOs of eight TARP fund recipients. The hearing started at 10 a.m. ET.

The witness list is as follows:

* Lloyd C. Blankfein, Chief Executive Officer and Chairman, Goldman Sachs & Co.
* James Dimon, Chief Executive Officer, JPMorgan Chase & Co.
* Robert P. Kelly, Chairman and Chief Executive Officer, Bank of New York Mellon
* Ken Lewis, Chairman and Chief Executive Officer, Bank of America
* Ronald E. Logue, Chairman and Chief Executive Officer, State Street Corporation
* John J. Mack, Chairman and Chief Executive Officer, Morgan Stanley
* Vikram Pandit, Chief Executive Officer, Citigroup
* John Stumpf, President and Chief Executive Officer, Wells Fargo & Co.

Andrew Ross Sorkin of the New York Times suggested the following questions be asked of the CEOs:

Here are 10 questions members of the committee might consider asking:

1. Pretend for a moment that you are on the biggest road show of your life. Try to sell American taxpayers on why they should invest in your firms and what kind of returns they should expect. Please be specific. Can you provide a 12-month forecast, a 24-month forecast and a 5-year forecast of both your earnings and a price target that you’d put on your own stock?

2. The government has lent your firms hundreds of billions each at an annual cost of 5 percent. There is speculation in the marketplace that you have turned around and used the money to buy corporate bonds with yields as high as 20 percent, like Alltel debt, for example. If that is the case, this new “carry trade” is allowing you to arbitrage the difference using taxpayer money. Is this so? And if it is, should it be?

3. This question is for Mr. Pandit of Citigroup. When you sold your hedge fund, Old Lane Partners, to Citigroup for $800 million in 2007, you pocketed $165.2 million cash. At the time, you did not reinvest any of that cash in Citigroup’s stock; you invested the after-tax proceeds into Old Lane, which you’ve since shuttered. Since then, your biggest purchase of Citigroup stock amounted to $8.4 million, when it was trading at $9.25 a share. (It closed Monday at $3.95). Only a fraction of your net worth appears to be in the company you run. Why? And why should taxpayers be willing to make a bet on a company that so far you seem unwilling to bet on yourself?

4. Last month, several banks — Citigroup, Bank of America, Goldman Sachs and JPMorgan Chase, among them — lent $22.5 billion to Pfizer to help finance its acquisition of Wyeth. The two drug companies said that part of the motivation of the deal was to cut $4 billion in annual costs. Much of that is likely to come in the form of jobs, 19,500 in total according to Pfizer, at a time when the country can ill afford more people out on the street. Given that Congress is considering a stimulus plan to help create and save jobs, is it consistent to allow TARP-funded banks to make loans to corporations that will inevitably hurt the economy, at least in the short run?

5. This question is for Mr. Dimon of JPMorgan Chase, Mr. Lewis of Bank of America and Mr. Pandit. Much has been made of the subprime debacle. But few seem to be willing to talk about another looming crisis: credit card debt. People like Nouriel Roubini, the professor who has predicted much of this crisis, have estimated that you could have losses of as much as $3.6 trillion, which would bankrupt the industry. What do you make of that number? And since credit card defaults are correlated to employment, what happens if unemployment goes as high as 10 percent or more? What is the highest unemployment level that you’ve used in your forecasting models? And do you have adequate reserves for your worst-case situation? If your assumptions are wrong, what happens?

6. The termination of the Glass-Steagall Act, the Depression-era laws that separated commercial banking and investment banking, enabled you to run a casino inside your bank because it allowed the combination of traditional banking and the riskier side of Wall Street, investment banking. While the house usually wins, you lost big time. Do you think Glass-Steagall should have been repealed? Do you think there should be a limit on the amount of leverage, or borrowed money, that your banks can employ? (Not just capital ratios.) What’s appropriate?

7. Your compensation structure has been “heads I win, tails I win” for you and many of your employees, despite putting your firm and the nation’s fiscal health in jeopardy. What’s the right model? And how do you feel about forcing your employees to risk their own money, not just the firm’s, when they make a trade or participate in a transaction that puts shareholder capital at risk?

8. Treasury has proposed a $500,000 cap on compensation for banks that take new TARP money. Many of you have privately complained that you will lose your top talent. Are these the same people that helped lose your banks billions? And can you quantify the impact on your earnings without such “talent?”

9. Mr. Blankfein and Mr. Mack, both of you have been outspoken about your firm’s intention to repay the TARP money that you received as fast as possible. Mr. Blankfein, you have also hinted that you have little intention of changing your firm’s business model despite being granted bank holding company status and access to the Federal Reserve’s discount window. Please explain whether we should have provided you the money in the first place and whether your status as a bank holding company should be rescinded? If both took place, could you survive?

10. Please explain how you feel about the newest TARP proposal from the Treasury secretary, Timothy F. Geithner. Would you be willing to sell toxic assets into a “bad bank” if you are forced to realize serious losses? At what price would you be willing to sell your toxic assets? And finally, should the Bush administration have pursued its original TARP plan to buy assets as opposed to making capital injections? How do you grade the success of the program?