Financial Crisis Committee Begins Hearings; Blankfein Takes the Train
(January 13, 2010) – The leaders of America’s largest banks are marching to Washington to defend bank bonuses and discuss the cause of the financial crises with the Financial Crisis Inquiry Commission (FCIC).
Bank of America CEO Brian Moynihan, JPMorgan Chase’s Jamie Dimon, Goldman Sachs CEO Lloyd Blankfein, and Morgan Stanley’s John Mack will testify today at the FCIC in Washington. They are expected to spend two days testifying before such luminaries as Federal Deposit Insurance Corporation Chairman Sheila Bair, Securities and Exchange Commission Chairman Mary Schapiro, and former California Treasurer Phil Angelides. The FCIC has six members appointed by Democrats and four by Republicans.
The FCIC has a mandate to investigate the financial crisis and make recommendations to Congress on how to avoid such problems in the future. The Commission mirrors that seen following the great Depression — the New Deal’s Pecora Investigation – which indirectly led to the passage of the Glass-Steagall Act and the Securities Exchange Act. The report is expected by December 15, 2010, and hearings will continue throughout the year.
A likely cause of headlines will be Blankfein’s defense of bank bonuses, which again soared in 2010 as banks returned to profit. Goldman Sachs reportedly paid more than $20 billion in bonuses in late 2009, which has already drawn criticism from Washington and beyond. Numerous pension funds have sued Goldman Sachs over its bonus pools, claiming that paying out so much to employees harms shareholders.
A result of the bonus issue and other concerns, President Barack Obama is expected to announce a fee on financial institutions that took Troubled Asset Relief Program (TARP) funds during the financial chaos of autumn2008. The fee is intended to recoup potential taxpayer losses, but is seen by critics as harmful to a recovering financial sector.
In an ai5000 exclusive, Lloyd Blankfein was found taking the Acela Express Tuesday night from New York City to Washington for the hearings. When asked how he felt, he responded with one word: “Great.” A crowd gathering around him as he prepared to depart on the 6:00 PM train was generally supportive, with numerous bystanders shouting encouragement to Blankfein. Blankfein’s travel arrangements stand in stark contrast to two other executives – Moynihan and Dimon – who used company jets to travel to the nation’s capital. Many will remember the controversy surrounding executive travel by the leaders of the nation’s automobile companies when they were called to Washington in 2008: After flying on company jets and taking flak, the CEO of the Big Three later traveled to the Potomac by car.
Look for continuing coverage of the FCIC hearings through 2010 from ai5000news.com.