"We're lending," chief executives of major banks plan to tell
Congress Wednesday, according to prepared remarks.
In testimony prepared for the House Committee on Financial
Services, bank chieftains including JPMorgan Chase & Co.'s
(JPM) Jamie Dimon, Bank of America Corp.'s (BAC) Kenneth Lewis and
Citigroup Inc.'s (C) Vikram Pandit vigorously assert that they are
lending despite economic headwinds, and are lending more because of
the government capital they had received.
Their testimony will come at a time when anger at Wall Street
has soared over its role in triggering the recession, at its
receipt of financial bailout money, and at what politicians and the
public perceive to be a cavalier attitude toward perks and pay
despite losses and public funding. Anger has also been fanned over
assertions that the banks have cut back on lending despite
receiving money under the Troubled Asset Relief Program, or TARP.
The bankers acknowledge the public anger in their remarks, and seek
to portray their banks as using TARP investments to blunt the
recession's effects on Main Street.
Bank of America's Lewis says in prepared remarks that taxpayers
deserve to know "what return they are making on their investment,
and when it will be paid back," and that Bank of America intends
"to pay all the TARP funds back as soon as possible."
Lewis also confronts the public's growing fury over bankers'
huge salaries and bonuses, as well as banks holding lavish events
for employees and customers. Lewis' own bank came under fire during
the National Football League's Super Bowl, where Bank of America
held an elaborate event to attract customers.
Lewis acknowledges the public's frustration, and says some of
the criticism was warranted, but not all.
Compensation is intended "to grow our business, enhance
profitability and generate returns for investors," Lewis says in
his remarks, including "the investors that are the focus of this
hearing: U.S. taxpayers."
Citigroup's Pandit, in prepared remarks, details Citi's use of
the $45 billion the government has given the bank. "In late
December, utilizing TARP capital, we authorized our line businesses
to provide $36.5 billion in new lending initiatives and other new
programs." He said the programs "are expanding mortgages, personal
loans and lines of credit for individuals, families and businesses
and creating liquidity in the secondary markets." Citi said, and
Pandit will reiterate, that it helped to prevent 440,000
foreclosures of homeowners last year.
He plans to tell the House panel that he "removed the people
responsible for Citi's financial distress" as he made changes at
the company. He says Citi originated $75 billion of consumer and
business loans in the fourth quarter, "a significant commitment
given the difficult economic environment."
JPMorgan's Dimon, in his prepared remarks, calls for the
creation of a new bank regulatory system, including "the creation
of a systemic risk regulator," and unified standards for mortgage
modification programs.
But Dimon also hammers home a theme he has repeatedly touched in
recent months: the dramatic retreat of money market and hedge funds
that crippled the commercial paper market - a lending pullback that
has nothing to do with banks.
Like Citi's Pandit, Dimon points to his company's $150 million
in new loans to consumers, businesses, and other banks in the
fourth quarter as "especially significant in light of the continued
deterioration of the economy...and a steep decline in demand for
credit." Dimon reiterates that the bank prevented 330,000 home
foreclosures last year.
But he also warns, "We should not forget that eroding credit
standards by many market participants played a large role in
creating the current economic malaise."
In the prepared remarks, Dimon reminds Congress that JPMorgan
sought "to help stabilize our financial system" with its purchases
of Bear Stearns Cos. Inc. and Washington Mutual Inc.
Dimon himself did forgo his cash and equity bonus, but says in
his remarks that "our employees worked harder than ever and
performed admirably for the company and for clients under
enormously challenging conditions in 2008. I believe the
compensation we paid them was appropriate."
For America's two biggest investment banks, Goldman Sachs (GS)
and Morgan Stanley (MS), their CEOs will also outline to the panel
how they used TARP money.
Goldman Sachs' Lloyd Blankfein says in his remarks that his firm
established a $10.5 billion senior loan fund that makes loans to
companies in need of capital. It also used the extra capital to
help Sallie Mae late last year provide more than $1.5 billion of
student loans.
Meanwhile, Morgan Stanley's John Mack will note the company
helped clients raise $56 billion in debt to invest in their
businesses. The firm also doled out $650 million in new consumer
loan commitments extended in the last three months of 2008.
The CEOs, who in 2006 were among the highest paid executives in
the country, also plan to use their testimony to defend accusations
of excess on Wall Street.
"I believe that both our firm and our industry have far to go to
regain the trust of taxpayers, investors and public officials,"
Mack said. "As a recipient of an investment from the U.S.
government, we recognize our serious responsibilities to the
American people."
Both Mack and Blankfein note that they elected not to receive a
bonus in 2008. Both say that they are realigning compensation
practices more toward multiyear performance, wile Blankfein says
top management should be forced to retain most of the equity they
receive "until at least they retire."
Ronald Logue, the chief executive of State Street Corp. (STT),
which in October received $2 billion in government investment
capital, will tell the panel that State Street has set a goal of
increasing the credit available to its core clients by $2 billion.
So far, he says in prepared remarks, State Street has approved more
than $1.5 billion and expects that level to reach $2 billion
soon.
Bank of New York Mellon Corp. (BK) CEO Robert Kelly says his
company is more like a "bank for banks" that helps financial
institutions conduct business. He says the company used the $3
billion in TARP money to purchase $1.7 billion of mortgage-backed
securities and $900 million of other debt securities to help add
liquidity into the markets. In addition, about $400 million was
used for interbank lending with healthy financial companies.
-By Matthias Rieker, Dow Jones Newswires, 201-938-5936; Marshall
Eckblad, 201-938-4306; and Joe Bel Bruno, 201-938-4047;
joe.belbruno@dowjones.com