The heads of three companies implicated in the mortgage crisis have been asked to explain how they collectively received hundreds of millions of dollars in compensation while their companies were losing money.
Slated to appear Friday before the House Oversight and Government Reform Committee were Angelo Mozilo of Countrywide Financial, the nation's largest mortgage lender; Stanley O'Neal, formerly of Merrill Lynch & Co.; and Charles Prince, formerly of Citigroup.
The committee, chaired by Rep. Henry Waxman, D-Calif., has held several hearings on the issue of high executive compensation. Last December it looked at large, publicly traded companies that hire compensation consultants who are receiving millions of dollars from corporate executives whose compensation they were supposed to assess.
Republicans on the committee questioned the need for the hearing, saying it falls outside the panel's primary role of investigating waste, fraud and abuse in the federal government.
"A sanctimonious search for scapegoats may feel good, but it benefits no one," said Rep. Tom Davis of Virginia, the top Republican on the committee. "It's always easy to blame people with a lot of money," said Rep. Darrell Issa, R-Calif., saying Waxman was "going to grind an old ax on an issue organized labor has pushed for years."
Waxman's committee also recently held a highly publicized hearing where lawmakers questioned pitcher Roger Clemens, who denied charges from a former trainer who said he had injected the all-star with steroids and human growth hormones.
According to the committee, Mozilo received $250 million in compensation from Countrywide from 1998, when he became CEO, through the end of last year.
It said that Countrywide announced a $1.2 billion loss in the third quarter of 2007 and lost another $422 million in the fourth quarter. By the end of the year the company stock had fallen 80 percent from its five-year peak in February. During the same period, Mozilo received a $1.9 million salary, received $20 million in stock awards contingent upon performance and sold $121 million in stock.
O'Neal received a retirement package of $161 million when he departed last October. But the committee said that if Merrill Lynch had terminated O'Neal for cause rather than allowing him to retire, he would not have been entitled to $131 million of that in unvested stock and options. During 2007 the firm reported $18 billion in writedowns related to subprime and other risky mortgages.
Similarly, Prince received a bonus of $10.4 million for the 2007 performance year and was allowed to retain almost $28 million in unvested stock and stock options because Citigroup allowed him to retire rather than terminating him for cause.