Banks Promise They Won't Use Bailout Money For Pay

WASHINGTON — Some of the nation's largest banks sharing in the $700 billion government bailout of the financial industry tried to assure lawmakers Thursday they are using the money to make more loans and help financially strapped homeowners avoid foreclosure.

Barry L. Zubrow, chief risk officer with JP Morgan Chase & Co., told the Senate Banking Committee that a portion of the $25 billion capital infusion it received from the Treasury Department was being deployed to "expand the flow of credit" and to assist with rewriting residential mortgages for up to 400,000 families.

Zubrow and executives with Goldman Sachs Group Inc., Bank of America Corp. and Wells Fargo & Co. told the committee that none of the $75 billion they have received collectively from the government is being used to pay salaries or bonuses.

"The committee has asked whether (bailout) funds would be spent on executive compensation," said Jon Campbell, regional banking president for Wells Fargo & Co. in his testimony. "The answer is no. Wells Fargo doesn't need the government investment to pay for bonuses or compensation."

Some of the executives said bonuses this year will be lower because of the economic downturn.

"Employee compensation will be dramatically affected by changes in the overall economic and financial environment and our performance for the full year, but it certainly will not increase as a result of receiving TARP (Troubled Asset Relief Program) funds," said Gregory Palm, general counsel for Goldman Sachs.

Bank of America's board has decided that this year's bonus compensation pool will be reduced by more than 50 percent, Anne Finucane, a marketing and corporate affairs executive, told the committee.

Finucane said Bank of America originated more than $50 billion in mortgage loans in the third quarter of 2008 but acknowledged that "we are lending less than we were a year ago."

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Campbell said Wells Fargo's commercial real estate loans are 37 percent above a year ago.

Despite the reassuring words, lawmakers pressed hard for commitments to more lending.

"Let me say as clearly as I can," said committee chairman Sen. Christopher Dodd, D-Conn. "Hoarding capital and acquiring healthy banks are not _ I repeat are not _ reasons why Congress authorized $700 billion in emergency funding."

Sen. Charles Schumer, D-N.Y., said he and other lawmakers are looking at requiring banks to make more loans as a condition for taking part in the $350 billion second half of the bailout. Congress can block release of the second $350 billion. It also can rewrite the law to put new conditions on its use.

"Any new capital injections must come with tougher requirements," he said.

Treasury already has lent or committed $290 billion of the first half. Democrats are working on a bill they hope to pass next week that would devote another $25 billion to the beleaguered auto industry, with the specific intent of helping General Motors Corp. avoid bankruptcy.

The banking executives also were questioned about using bailout money to acquire other banks.

Sen. Sherrod Brown, D-Ohio, noted that Cleveland-based National City Bank was denied Treasury funds, only to be taken over by PNC Financial Services Group Inc. of Pittsburgh on the same day that PNC was approved for $7.7 billion in bailout money.

"The taxpayer funds that would have been allocated to National City were instead allotted to PNC," Brown said.

The executives said their banks have no new acquisitions planned beyond the spate of mergers that occurred before Congress passed the bailout bill.

Comments

[deeppeace]

And we believe them...why?!

[TheOpus]

i think even the tro//s are in agreement with us on this one.
i wish pelosi had a spine.

[bija]

You can't just give taxpayer money to these corporations and expect them to do the right thing. There has to be strings attached and consequences if they don't use it properly.

[SeenItBefore]

Congress had better do something to curb the wanton distribution to executives and lobbyist and Congress... and... oh never mind!

[Sergeantsmom]

Not using the Bailout funds for bonuses is beside the point. The banks are using the Bailout funds for operatiions, to allow them to shift OTHER MONEY to bonuses.
No further Bailout funds should be released to ANY INSTITUTION that compensates ANY EMPLOYEE OR CONTRACTOR more than $200,000 if that person was involved in financial decisions prior to Sept. 2008.

[Challie]

Maybe it's a pipe dream, but will public awareness of this FINALLY get people caring about corporate oversight? That would be the only silver lining to this mess. Here's to hoping.

[PhantomAviator]

..

Isn't that PRECIOUS!!!

"...a portion..."

Pennies to the pigs!! Let them eat CAKE!!!

.

[AchievePeace]

So, the CEO's of these banks (not sure which banks because the Bush administration doesn't feel like sharing that information) are telling us the funds will not be used for compensation and goodies - and just how will we know that? There is no, nada, absoutely 0 oversight by anyone outside of the Bush cabal. And the timing of the "bailout" really is fascinating. The financial meltdown occurred just as Congress was getting to leave for a vigorous and all consuming round of campaigning. $350B dollars later, and the U.S. distracted by the election, and who really knows where the money went. Now Congress has the right to withhold the other $350B+ in funds. Fat chance. Even if they got their act together and tried to do so, something tells me that Bush would use his executive power to drain the rest of the money before Congress even was aware of what was happening. Our grandchildren who get to pay for this will be looking back at this wondering what kind of total idiots allowed this to happen.

[Tabasco]

"Banks Promise They Won't Use Bailout Money For Pay"

Sure. We can suddenly trust them not to screw this up......

[spinns17]

i say we take all there assets untill they get this mess fixed

[Big0725]

Like I said before, I have two establishments that I do my banking with, both local to Miami.

I actually know the names of some of the officers of my commercial bank. No bad loans, no bailout needed. But they're getting hit because money is tight.

And what's this that American Express wants 3.5 billion dollars? For what?

[HockeyMom]

After years of charging people up to 35% interest they need bailing out?
Give me a break, they need a weekend trip to Paris and their yacht needs new mahogany paneling. You and I can go eat "cake".

[agpaul]

YEA RIGHT!!! Maybe not in payroll but in benefits, and paid vacations, and perks......

[Mnemanth]

"...[They] must remember it's intended use..."
I promise not to use this money to pad my own pocket. I swear!

Anyone in charge who's leaving this up to trust in the good nature of these executives should be shot outright.
Give me a break! "They need to remember"? They "promise"? What is this- elementary school?
These are business people, and business is about the dollar. Who here has ever been involved with a contract negotiation? Nothing- I mean NOTHING- is left up to trust in "good will". If it's not stated in black and white, then people are going to do whatever they can to take advantage of the loop hole for their own benefit.
What a bunch of incompetent- or, worse, self serving- a**holes we've allowed to take over this country. This isn't petty cash they're stealing. This is- now think!- $700 BILLION DOLLARS!!

[spinns17]

how bad ,does anyone think this will get.or how long will the congress and senate ,will let them play the clock out.i say obama should keep all the bush crooks on u,ntill they get this right.so that he will not get the blame.maybe he can use palin lol

[Chillinout]

Of course they are not going to use the bailout money for pay. They will keep the bailout money in one account and pay their executives out of another account.

Of course what people may not see is that if they didn't have billions in bailout funds, they wouldn't be able to pay those salaries out of that other account. There is no way these executives are going to give up their bonuses and golden parachutes, regardless of what anyone says.