'Here's the problem... people really hate you,' US bankers told

Wall Street's most powerful figures yesterday faced Congress to explain why taxpayers' money is being spent on bonuses, jets and junkets. Stephen Foley reports

It took lawmakers three hours to hear the word that the US public has been demanding for months, but it came first out of the mouth of John Mack, the chief executive of Morgan Stanley.

"If we could play the clock over again, we would do it differently," he said. "I'm especially sorry for what has happened to shareholders, and as a knock-on effect of that, what has happened to the American people. I take that responsibility for my firm."

Mr Mack and seven other of the most powerful men on Wall Street had been summoned to Washington to face lawmakers who, channelling public fury, assailed them over their bonuses and the recklessness that had brought the financial system to the edge of collapse.

What exactly, Republicans and Democrats alike demanded, did the US taxpayer have to show for the $176bn (£123bn) in bailout money that has been pumped into their eight firms since last October, without causing a notable increase in lending and alleviating the squeeze on businesses and consumers who need credit?

Announcing the hearings last week, Barney Frank, the chairman of the Financial Services Committee, said that public patience with Wall Street bailouts had worn thin.

"As I've said to a couple of the bankers, 'Here's this problem: People really hate you, and they're starting to hate us because we're hanging out with you,'" Mr Frank said.

Yesterday, he urged them to be "cooperative, not grudgingly, not doing the minimum" as the US government seeks to impose a new culture of responsibility on an industry that has become known for its enormous pay packets, corporate jets and lavish junkets.

"Understating that there is substantial public anger and alleviating that public anger not with mumbo jumbo but with reality is essential if we're going to have the support in the country to take the right steps," Mr Frank said.

Public anger boiled over last month when it was revealed that the total amount of bonuses paid out to staff for 2008 was $18.4bn – a figure that prompted President Barack Obama to describe the pay-outs as "shameful" while banks were being propped up by taxpayer money, and led him to impose a pay cap of $500,000 on executives of banks that need more emergency cash.

"It is abundantly clear that we are here amidst broad public anger at our industry," Lloyd Blankfein, the head of Goldman Sachs, said.

The chief executives before Congress included Vikram Pandit, the head of Citigroup, which received government guarantees of more than $300bn after coming close to collapse in December.

Mr Pandit made $216m when Citigroup bought his hedge fund business to lure him to a top job at the company and paid him bonuses to sign on as chief executive in 2007.

Yesterday, he took the lead in promising that Wall Street understands the new realities of life with the government as a significant investor. "I've told my board of directors that my salary should be $1 per year with no bonus until we return to profitability," he said. "We will hold ourselves accountable and that starts with me," he said.

Outside the House of Representatives office building where the hearing took place, about a dozen protesters taunted Bank of America's Ken Lewis. "Hey, Ken Lewis, feel our pain," they chanted.

"I feel more like corporal of the universe, not captain of the universe at this moment," Mr Lewis said inside, after coming under intense questioning from the California Democrat Maxine Waters.

Lawmakers' opening statements reflected public outrage over the economic crisis, but the questioning stayed mostly civil, in contrast to a grilling last week by many of the same lawmakers of securities regulators over Bernard Madoff's alleged fraud.

The intensity was dialled up as the hearing went into the afternoon, however. A Massachusetts congressman said that he wondered why the bank bosses hadn't been prosecuted. "I have some constituents who have robbed your banks, and they say the same thing, they say they are sorry, they didn't mean it, they won't do it again if you'll only let me out."

One by one the executives said that they did not take a bonus for 2008 and would not be having a salary increase this year. Between them, the eight took home around $400m in 2007, the last year for which figures have been published.

All the talk about bonuses triggered Mr Frank's ire, prompting him to demand why they needed bonuses at all when a good salary would do. "At your level, why do you need bonuses?" he demanded. "This notion that you need some special incentive to do the right thing troubles people."

"It's complicated," Mr Mack replied, citing the risks involved, the global nature of the banking business and the size of the companies. "If you gave me no bonus for the best year, I'd still be here."

South Carolina Republican Gresham Barrett said: "My folks simply have not seen the evidence that the money you were given is working or making their lives better."

But the executives insisted that money from the Wall Street bailout fund – known as the troubled asset relief programme, or Tarp – is being lent out into the real economy. "Make no mistake: We are still lending, and we are lending far more because of the Tarp," Mr Lewis said.

"The American people are right to expect that we use Tarp funds responsibly, quickly and transparently," Mr Pandit said.

In the dock: The bank bosses facing the music

Vikram Pandit

Vikram Pandit replaced Charles Prince, who left Citigroup in November 2007. The bank's shares have fallen by 79 per cent since 13 October and Citigroup, which required an emergency bailout in November after market panic on its prospects, has so far received around $45bn from the US Treasury. Pandit is foregoing his bonus for 2008, but will still earn more than $400,000.

Jamie Dimon

Jamie Dimon, chairman and chief executive of JP Morgan, joined the bank in 2004 when it bought rival Bank One, which he led. He was paid $1m a year in both 2006 and 2007 and turned down his bonus for 2008. JP Morgan has accepted about $25bn of US government bailout money, though it has emerged from the crisis stronger than some rivals, having absorbed the failed Bear Stearns and Washington Mutual last year.

Kenneth Lewis

Kenneth Lewis, Bank of America's CEO, was hailed for his acquisition of Merrill Lynch last year, but may have been better off doing more due diligence. Bank of America shares have fallen 76 per cent since mid-October, to a large extent on the back of write-downs related to Merrill. Bank of America has so far received $45bn in bailout assistance from the US Treasury. Lewis earned $24.8m incompensation in 2007.

Lloyd Blankfein

Lloyd Blankfein succeeded former Treasury Secretary Hank Paulson as CEO of Goldman Sachs in 2006. Goldman Sachs shares have fallen 19 per cent since October 13 and the bank has so far received $10bn from the US Treasury. Blankfein earned a record $70m in compensation in 2007, though he and other top Goldman executives were among the first on Wall Street todecline bonuses for 2008.

John Mack

John Mackbecame CEO of the New York-based investment bank Morgan Stanley in 2005. He then presided over the expansion of trading and privateinvesting. Mack has kept the bank on its feet by securing $9bn from Japan's Mitsubishi UFJ Financial. Morgan Stanley has also received $10bn from the US Treasury. Mack has given up bonuses for the past two years but earned $1.6m in 2007.

Robert Kelly

Bank of New York boss Robert Kelly was CEO of Mellon Financial Corporation from February 2006 until its merger with BoNY in 2007. Bank of New York shares have fallen about 15per cent since mid-October, making it one of the better-performing US banks in the period. Even so, Bank of New York has received $3bn from the US Treasury. Kelly earned $20.1m in total compensation in 2007.

John Stumpf

John Stumpf became CEO of the historic US bank Wells Fargo in June 2007, just as the credit crunchbegan. In 2000, he oversaw Wells Fargo'sacquisition of First Security Corp, and last year spearheaded its acquisition of Wachovia. Wells Fargo shares have fallen 46 per cent since mid-October, as the bank has received $25bn from Treasury. Mr Stumpf earned $22.9m in total compensation in 2007.

News
people
News
people
News
peopleStella McCartney apologises over controversial Instagram picture
Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
PROMOTED VIDEO
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
News
i100
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
News
people
News
The village was originally named Llansanffraid-ym-Mechain after the Celtic female Saint Brigit, but the name was changed 150 years ago to Llansantffraid – a decision which suggests the incorrect gender of the saint
newsA Welsh town has changed its name - and a prize if you can notice how
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Kristen Scott Thomas in Electra at the Old Vic
theatreReview: Kristin Scott Thomas is magnificent in a five-star performance of ‘Electra’
News
Destructive discourse: Jewish boys look at anti-Semitic graffiti sprayed on to the walls of the synagogue in March 2006, near Tel Aviv
peopleAt the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Life and Style
Couples who boast about their relationship have been condemned as the most annoying Facebook users
tech
Arts and Entertainment
Hayley Williams performs with Paramore in New York
musicParamore singer says 'Steal Your Girl' is itself stolen from a New Found Glory hit
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

Time to stop running

At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence