No Private Jets as Wall Street CEOs Face US Congress

Once they were "masters of the universe," corporate jets at the ready.

But on Wednesday, eight top U.S. bank chief executives will fly commercial or ride Amtrak to explain themselves to Congress, testifying before the U.S. House Financial Services Committee about what's happened to some $176 billion in taxpayer money.

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That's the amount pumped into the banks by the U.S. Treasury Department since October when Congress created a historic $700 billion bank bailout.

Just days after former Treasury Secretary Henry Paulson began buying the banks' preferred shares last October to prop up their balance sheets, there were already questions about what the banks were doing with the money.

Reports surfaced of big executive bonuses, buyouts of other banks, expensive travel and hoarding cash. There were few signs the banks were injecting the money into the economy.

Even now, four months into the bailout, known as the Troubled Asset Relief Program (TARP), few fully understand what happened to the money, according to watchdog groups assigned to monitor it.

The CEOs scheduled to testify on Wednesday include Goldman Sachs' Lloyd Blankfein, JPMorgan Chase's James Dimon, Citigroup's Vikram Pandit, and Bank of America's Kenneth Lewis.

Read Full Testimonies of

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

Also testifying are John Mack of Morgan Stanley , Robert Kelly of Bank of New York Mellon , Ronald Logue of State Street Corp and John Stumpf of Wells Fargo .

Stumpf, Kelly, Logue, Mack and Pandit are taking commercial flights to Washington for the hearing, while Dimon and Lewis are taking the train, said bank officials.

Goldman said Blankfein will take "public transportation," but declined to give details, citing security concerns.

In prepared testimony, the executives sought to strike a conciliatory tone and assure lawmakers that government money was used for lending and not luxuries.

"We have a hard-earned reputation for frugality, not extravagance," Bank of America's Lewis said. "We will make our first dividend payment to the Treasury of more than $400 million next week."

Copies of the testimony were released by the committee.
     
'Political Theater'

The committee, chaired by Rep. Barney Frank, will press the CEOs for answers on how they used the bailout funds.

The hearings could mirror the October pasting that Richard Fuld, the disgraced head of Lehman Brothers, received from lawmakers, outraged over the bank's downfall.

In a sign of the crisis' global reach, top British bankers apologized to a parliamentary committee hearing on Tuesday for mistakes that brought Royal Bank of Scotland and HBOS to the brink of collapse.

"You've destroyed a great British bank," opposition Conservative politician Michael Fallon told Fred Goodwin, the RBS CEO ousted after the U.K. government rescued the bank by taking a 70 percent stake.

The Congressional hearing will be the first time so many U.S. bank CEOs face the wrath of Washington politicians since the global capital crunch hit home.

"This will be great political theater," said Jaret Seiberg, a policy analyst at investment firm Stanford Group Co.

For men accustomed to private jets, gilt-edged corporate luxury -- such as the $1.2 million that former Merrill Lynch CEO John Thain spent to renovate his office -- and thousands of employees at their beck and call, the public glare of a congressional hearing is seldom easy.

With Frank, the Massachusetts Democrat known for his sharp tongue and little patience for long-winded answers, wielding the gavel, committee members are likely to pillory the CEOs.

Lawmakers are expected to vent the same anger they say they're hearing from voters about TARP, the years of colossal executive pay, and the banks' role in pumping up the real estate bubble that triggered the economic crisis.
    
Distrust, Anger

When the new treasury secretary, Timothy Geithner, announced a new financial rescue plan on Tuesday, he also criticized past approaches and many Wall Street leaders.

"The spectacle of huge amounts of taxpayer assistance provided to the same institutions that helped cause the crisis added to public distrust," Geithner said at a news conference.

"The American people have lost faith in the leaders of some of our financial institutions, and they are skeptical that their government has used taxpayers' money in ways that will benefit them."

Auto industry executives ran into that buzzsaw of anger last year, when they flew on private jets to Washington to ask the government for billions of dollars in bailout money.

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Last week, the Senate voted to ban bonuses for top managers at banks and companies getting bailout assistance. The vote came a day after President Barack Obama put a $500,000 cap on executive pay and other restrictions on bailout beneficiaries.

Goldman's Blankfein did not get a 2008 bonus after taking home around $70 million in compensation in 2007. Blankfein received a $600,000 cash salary for 2008 and may have received other compensation not yet disclosed.

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