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US bankers’ turn to testify on loans

Eight chief executives will slip behind a witness table in the Rayburn House Office Building on Wednesday to face a battery of questions about how they have used more than $160 billion in taxpayers' money.

business Updated: Feb 12, 2009 11:33 IST
Jim Kuhnhenn

If Treasury Secretary Timothy Geithner could get an earful of skepticism over the government's financial bailout plans, the top US bankers can expect no less when they make their maiden voyage to Congress as recipients of the widely criticised funds.

Eight chief executives will slip behind a witness table in the Rayburn House Office Building on Wednesday to face a battery of questions about how they have used more than $160 billion in taxpayers' money.

In prepared testimony, the chief executives applauded the program for making more loans available and promised to pay their share of the money back to the Treasury over time. Anticipating confrontations over their own compensation, several asserted that none of the government's money went to bonuses or dividends.

But members of both political parties have been smarting over the implementation of the $700 billion financial package, which started under President George W. Bush and now is in the hands of the Obama administration. The lingering suspicions present one of President Barack Obama's biggest obstacles as he attempts the dual challenge of prodding the financial sector to ease credit while aiming to create jobs with an economic stimulus package.

Meanwhile, New York Attorney General Andrew Cuomo is accusing Merrill Lynch executives of corporate irresponsibility by secretly and prematurely awarding $3.6 billion in bonuses as taxpayers were bailing out the industry.

Cuomo is making the claims in a letter to House Financial Services Committee Chairman Barney Frank, a Democrat. Cuomo says that instead of disclosing its bonus plan in a transparent manner designed to assure the payments were warranted, Merrill Lynch moved the date of bonuses to richly reward "failed executives." Cuomo says Bank of America, which acquired Merrill last year, was apparently complicit in the move to award bonuses before Merrill's dismal fourth quarter earnings were announced. Cuomo says four executives alone received bonuses totaling $121 million.

There was no immediate comment from the company.

On the bailout, Sen. Richard Shelby, the top Republican on the Banking Committee, assailed the administration Wednesday for what he said was a lack of details on a plan that would among other things leverage over $2 trillion into the shaky financial system.

Speaking of Geithner's briefing for the panel Tuesday, Shelby groused: "He had nothing really to say ... He basically admitted this. He wasted about three or four hours of the Senate's time, and we want to know where the specifics are and he doesn't have them."

In any case, doubts are sure to arise on Wednesday when Blankfein and the chief executives of Bank of America, Citigroup, JP Morgan testify before the Senate.