This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7883136.stm

The article has changed 5 times. There is an RSS feed of changes available.

Version 2 Version 3
US bank bosses to face grilling US banks defend bail-out spending
(about 10 hours later)
Bosses of eight US banks that have received billions of dollars of bail-out funds are due to face a tough time later before a Congressional hearing. Bosses of eight US banks have attempted to reassure a Congressional hearing that the US government's banking bail-out has been well spent.
The chief executives of firms including Citigroup and Bank of America will have to tell the House Financial Services Committee how the money is being spent. The chief executives of firms including Citigroup and Bank of America have told the House Committee they have increased lending and prevented foreclosures.
The eight firms have so far received $166bn (£114bn) of public funds.The eight firms have so far received $166bn (£114bn) of public funds.
Members of the House committee have already expressed anger at what they see as a lack of accountability. Members of the committee have already expressed concern at what they see as a lack of accountability.
As the meeting started, the committee's chairman, Massachusetts Democrat Representative Barney Frank, warned the bank bosses that "there's a great deal of anger in the country, much of it justified".
"I want to know where the money has gone," said Democrat Paul Kanjorski.
Republican Gresham Barrett said: "My folks simply haven't seen the evidence that the money you were given is working or making their lives better."
Transparency callTransparency call
The eight chief executives due to attend are Vikram Pandit of Citigroup, Jamie Dimon of JP Morgan Chase, Kenneth Lewis of Bank of America, Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley, Robert Kelly of Bank of New York Mellon Corp, Ronald Logue of State Street and John Stumpf of Wells Fargo. The eight chief executives attending are Vikram Pandit of Citigroup, Jamie Dimon of JP Morgan Chase, Kenneth Lewis of Bank of America, Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley, Robert Kelly of Bank of New York Mellon Corp, Ronald Logue of State Street and John Stumpf of Wells Fargo.
BAIL-OUTS RECEIVED Bank of America - $45bnCitigroup - $45bnJP Morgan Chase - $25bnWells Fargo - $25bnGoldman Sachs - $10bnMorgan Stanley - $10bnState Street - $3bnBank of New York Mellon - $3bnBAIL-OUTS RECEIVED Bank of America - $45bnCitigroup - $45bnJP Morgan Chase - $25bnWells Fargo - $25bnGoldman Sachs - $10bnMorgan Stanley - $10bnState Street - $3bnBank of New York Mellon - $3bn
They are all due to detail how they have spent their funds so far, and the extent to which this has enabled them to raise lending levels. Mr Frank also asked the executives to justify the payment of bonuses despite the financial crisis.
The committee will also be wanting detailed information on any 2008 bonuses paid out at the eight banks. Citigroup boss Vikram Pandit said he had asked to take a salary of $1 a year with no bonus until Citigroup returned to profitability.
"The American people are right to expect that we use [the bail-out] funds responsibly, quickly and transparently," said Citigroup's Mr Pandit in prepared remarks. Lawmakers were also concerned about allegations from New York Attorney General Andrew Cuomo that investment bank Merrill Lynch brought forward the payment of $3.6bn worth of bonuses to its bosses, despite needing to be rescued by Bank of America.
Mr Dimon said in his written testimony that the $25bn received by JP Morgan Chase had allowed the bank to delay the start of repossession proceedings on more than $22bn of mortgages held by about 80,000 homeowners. Kenneth Lewis said that his bank, which acquired Merrill last autumn, had urged Merrill executives to reduce the bonuses.
"Our goal, my goal, is to make this a profitable investment for the American people, as soon as possible," he added. "[But] we had no authority to tell them what to do, just urge them what to do," he said.
Mr Lewis of Bank of America said it was right that "taxpayers want us to manage our expenses carefully, and provide transparency about how we are putting their money to work to restart the economy". "Nobody on our [BoA] management team received any incentives, no-one has a golden parachute or severance. Major changes will be made but we cannot make them until we own the company."
"Despite recessionary headwinds, we are lending," he added. 'Mistakes'
'Great theatre'
The hearing, which is due to start at 1500 GMT, will be chaired by Massachusetts Democrat Representative Barney Frank, who is known for his short temper.
2007 PAY DEALS Jamie Dimon, JP Morgan Chase - $28mKenneth Lewis, Bank of America - $25mLloyd Blankfein, Goldman Sachs - $70mJohn Mack, Morgan Stanley - $2mRobert Kelly, Bank of New York Mellon - $20mRonald Logue, State Street - $28mJohn Stumpf, Wells Fargo - $13mVikram Pandit, Citigroup - $574,0002007 PAY DEALS Jamie Dimon, JP Morgan Chase - $28mKenneth Lewis, Bank of America - $25mLloyd Blankfein, Goldman Sachs - $70mJohn Mack, Morgan Stanley - $2mRobert Kelly, Bank of New York Mellon - $20mRonald Logue, State Street - $28mJohn Stumpf, Wells Fargo - $13mVikram Pandit, Citigroup - $574,000
"This will be great political theatre," said analyst Jaret Seiberg of investment firm Stanford Group. The executives were keen to explain how they had spent their funds so far, and the extent to which this had enabled them to raise lending levels.
In his opening statement, Citigroup's Mr Pandit emphasised the number of customers his bank had helped to avoid losing their homes.
"We have helped 440,000 homeowners avoid foreclosure," he told the committee.
He said Citi would pay $3.4bn in annual dividends to the US government in return for its investment in his company. "My goal is to make this a profitable investment," he said.
"We will continue to make changes and to put the company back into profitability… The old models no longer work, we need to do a good job of embracing the new realities," said Mr Pandit.
Mr Dimon of JP Morgan Chase said the $25bn received by his bank had allowed it to delay the start of repossession proceedings on more than $22bn of mortgages held by about 80,000 homeowners.
Looking back at the cause of the credit crunch, he told the meeting that "today's economic crisis is a result of a lot of mistakes by a lot of people".
"The measure of strength of a country or company is not whether they have problems, but how they deal with them."
Mr Lewis of Bank of America said it was right that "taxpayers want us to manage our expenses carefully, and provide transparency about how we are putting their money to work to restart the economy".
"Despite recessionary headwinds, we are lending," he added, saying that the banks had to show more "humility".
"The American people are right to expect that we use [the bail-out] funds responsibly, quickly and transparently," said Citigroup's Mr Pandit in prepared remarks.
Mr Stumpf of Wells Fargo said: "We lend money the old-fashioned way, responsibly. As a result, we earned profitability last year of $3bn."
"Our mortgage lending is built on responsible servicing. Because of that, 93% of our customers are current on their mortgage payments," he said.
Bailed-out
The eight banks secured their bail-outs under the $700bn Troubled Asset Relief Program first unveiled by President George W Bush in October.The eight banks secured their bail-outs under the $700bn Troubled Asset Relief Program first unveiled by President George W Bush in October.
Bank of America and Citigroup have both received $45bn, while JP Morgan Chase and Wells Fargo got $25bn.Bank of America and Citigroup have both received $45bn, while JP Morgan Chase and Wells Fargo got $25bn.
Goldman Sachs and Morgan Stanley both got $10bn. State Street and Bank of New York Mellon were each given $3bn.Goldman Sachs and Morgan Stanley both got $10bn. State Street and Bank of New York Mellon were each given $3bn.
When asked about how much of their personal new money the executives had invested in their business in the last six months, Mr Dimon said he had invested $12m, Mr Pandit said $8.4m, while Mr Lewis said he had bought 400,000 shares. The rest did not invest anything.
On Tuesday, new Treasury Secretary Timothy Geithner announced a new banking bail-out package totalling $1.5 trillion.On Tuesday, new Treasury Secretary Timothy Geithner announced a new banking bail-out package totalling $1.5 trillion.
This includes the creation of a new fund into which banks can dump any remaining toxic debt.This includes the creation of a new fund into which banks can dump any remaining toxic debt.