Today, the House Financial Services Committee held a hearing entitled "TARP Accountability: Use of Federal Assistance by the First TARP Recipients." Testifying before the Committee were the following CEOs representing eight of the nine initial voluntary recipients of $125 billion in TARP funds provided under the Capital Purchase Program (CPP) this past October (the ninth company, Merrill Lynch & Co., Inc., was acquired by Bank of America on January 1):

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

Chairman Barney Frank (D-MA) set the initial tone for the hearing, stressing that the purpose of the hearing was not necessarily for investigative or enforcement purposes, but rather to "help formulate policy going forward," in the face of the economic "dilemma" and "negative optimism" prevalent throughout the country today. In the interest of getting the system working again, Chairman Frank urged the witnesses to be "ungrudgingly cooperative" with Congress in order to help alleviate the public anger over the TARP investments. In hopes of finding some explanation and degree of clarity about how the institutions are spending taxpayer funds, Rep. Paul E. Kanjorski (D-PA) made it clear that if the witnesses felt their institutions did not need the TARP funds, they should "please find a way to return that money to the Treasury before you leave town." Total CPP funding, including the amounts provided to the institutions represented before the Committee, has now reached $195.567 billion in over 400 institutions in nearly all 50 states and Puerto Rico, according to the TARP Transaction Report covering the period ending February 6, 2009.

Each witness introduced their banking institution, acknowledged the responsibilities associated with receiving taxpayer funds, and cited examples of how the receipt of TARP funds have supported their institution's increased retail and commercial lending, financing, and/or supported other financial institutions in the economy, as applicable. This included Goldman Sachs' "commitment of over $13 billion in new financing to support clients," State Street's $1.5 billion of new liquidity facilities to its mutual fund customers, and billions in new 2008 fourth quarter loans by Bank of America ($115 billion) and Wells Fargo ($72 billion). Several of the witnesses, including Morgan Stanley CEO John Mack, stated that TARP funds were "[n]ot used" to pay executive compensation, "nor did we use it to pay any dividends or lobbying costs." All the witnesses stressed their institution's sense of urgency and willingness to repay the Treasury as soon as possible, with a return on investment for taxpayers.

Each CEO noted that they received no bonuses for 2008, and Citigroup CEO Vikram Pandit announced at the hearing that he would be receiving a $1 salary and no cash bonuses until the company returns to profitability.

Following testimony by the witnesses, Chairman Frank noted that the Office of Thrift Supervision (OTS) had, earlier that day, urged OTS-regulated institutions to suspend foreclosures on owner-occupied homes until the Financial Stability Plan's "home loan modification program" is finalized in the next few weeks, as to which OTS Director John Reich stated that "OTS-regulated institutions would be supporting the national imperative to combat the economic crisis by suspending foreclosures until the new plan takes hold." Chairman Frank asked each witness to commit to impose "a moratorium on all home foreclosure" at their institutions, at least until the Affordable Housing Support and Foreclosure Prevention component of Treasury Secretary Timothy Geithner's Financial Stability Plan is further detailed and set in motion. With prodding from Chairman Frank, David Scott (D-GA) and other Committee members, each CEO committed that their institution would suspend foreclosures for at least three weeks.