Barney Frank has done the impossible. He’s actually made Ken Lewis seem somewhat sympathetic.
I didn’t get a chance to watch Lewis and the seven other financial services CEOs who went before Frank’s Financial Services Committee Wednesday. But I read their prepared statements and the Q&A that followed.
My first reaction: outrage—but not at the CEOs, who, as I’ll show in a minute, didn’t have anything to do with the creation of the credit mess that they were suddenly being made to answer for.
But those congressmen! What a bunch of vain, overstuffed, under-IQed, preening blowhards. For a moment, I thought they would have been better off using their time Wednesday to actually study the “stimulus” bill so many seem intent on voting for. Then I thought, why bother? Half those bozos probably don’t know how to read.
The supposed purpose of the hearing Wednesday was to determine how the big banks have used the TARP money the government gave them. But that’s of course bogus. If that were all the committee wanted, the answers could have been provided with a written response - which Citi (NYSE:C) in fact has already prepared.
Rather, the hearing was a photo opportunity for Frank and others on the committee who are so eager to blame bankers for every problem the economy faces today. Unfortunately, Frank and his pals called the wrong guys. Back up for a minute. Congress passed the TARP legislation in the blink of an eye back in September, you may recall; then in October, Hank Paulson summoned the CEOs of ten banking organizations—including the eight who testified yesterday--to Washington, and flatly informed them that they all would participate in a capital investment plan, in order to help prop up the financial system.
Which is to say, the money was jammed down the companies’ throats whether they wanted it or not, which, you may also recall, many didn’t.
And now these same CEOs are viewed as the bad guys. It’s insane.
Barney Frank and others on the committee seemed intent on extracting their pound of flesh. More generally, people seem to be becoming semi-psychotic. Patt Morrison, a columnist for the Los Angeles Times, who I assume is a reasonable, gracious individual when she’s not foaming at the mouth, had this to say last week:
I want groveling. I want show-trial sweating and stammering. I want their nine-figure bonus checks endorsed over to the rest of us. I want my 401(k) money back. I want blood. I’m a vegetarian, but I’d make an exception for a smoking plate of CEO en brochette.
Hold on there, Looney Tune! Of the eight CEOs whose heads you can’t wait to see put on a pike, six run companies that (by no coincidence) had little to do with the creation of the credit crunch, and that have come through the crisis largely unscathed. Of the other two, one (Citigroup’s Vikram Pandit) inherited his bank’s problems, while the other (BofA’s Lewis) foolishly acquired it.
These are not the people who burned down the house. The CEOs who testified Wednesday must surely curse the day they ever heard of the TARP and must deeply regret agreeing to take the government’s money. They made no secret of the fact Wednesday that they didn’t need or ask for the capital, but that it was forced upon them. But the committee was oblivious. One member, Democrat Paul Kanjorski from Pennsylvania, was sticking with the script no matter what. “For anyone who contends that you do not need the money and that you did not ask for it,” he told the CEOs, “please find a way to return that money to the Treasury before you leave town.”
So clever, Congressman! Kanjorski has to know (he has to, right?) that the banks can’t simply “return the money” they were forced to take (even though they must be dying to) because it came with a passel of repayment restrictions that will essentially keep it at the banks for years to come. Banks are also required to raise a comparable amount of Tier 1 capital if they want to pay the money back—which, in the current, panic-stricken environment, would be incredibly expensive.
So Kanjorski was just monkeying it up for the cameras—which, of course, was the whole purpose of the exercise in the first place.