Monday, February 23, 2009

Wall Street in Washington

On February 11, CEOs of eight debt-ridden banking firms appeared before Congress. The WSJ live-blogged the proceedings. To see what these leaders have to say is an eye-opener. It seems like no TARP was ever needed or wanted by these executives, according to their testimony....

J.P. Morgan CEO Jamie Dimon: “While we did not seek the TARP funds…to strengthen our already-strong capital base…we are using that money to expand the spirit of TARP.”

(It was my understanding the spirit of TARP was to inject capital into firms that were desperately undercapitalized - so one must wonder why JP Morgan felt compelled to put the hand out for federal funding...)

Bank of New York Mellon chief executive Robert Kelly (whose bank was apparently profitable throughout 2008): “We were strongly encouraged to participate [in TARP] and we did, very quickly.”

(Who encouraged this savvy leader to take money his company didn't need? And why did he comply?)

Goldman Sachs CEO Lloyd Blankfein: “We understood that TARP funds were never meant to be permanent capital. We look forward to paying it back…so that money could be used elsewhere.”

(We'll see this money again? In my lifetime?)

Astronomical sums have been handed over to these people - and the crisis deepens. More people are laid off every day.

“I get the new reality,” says Citigroup's Vikram Pandit. “My goal is to return Citi to profitability as soon as possible and I have told our board of directors that my salary should be $1 a year with no bonus until we return to profitability.”

The new reality in American business. CEOs promising to earn a dollar a year until they see "a return to profitability."

Makes you wonder why we took such a sharp detour from profit in the first place.

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