Three chief executives with ties to the mortgage crisis were paid $460 million over five years, according to a congressional report issued Thursday.Until the laws are changed and people are held accountable for their actions nothing will ever change. Who really thought it was a good idea to lend money to people who could not afford it and then bundle those bad loans into securities sold all over the world? It was the same executives that made millions while putting the US and other world economies on the verge of a worldwide recession.
On Friday, the House Committee on Oversight and Government Reform is set to examine CEO pay in light of huge losses in the financial sector stemming from the mortgage crisis.
The panel, chaired by Rep. Henry Waxman, D-Calif., will hear testimony from Charles Prince, former CEO of Citigroup Inc.; Stanley O'Neal, former CEO of Merrill Lynch & Co.; and Angelo Mozilo., chief executive of Countrywide Financial Corp., the nation's largest mortgage lender.
The committee asked each company for internal documents about executive pay. Committee staffers reviewed company email, board minutes and federal regulatory filings, according to the 23-page memo made public Thursday.
The memo states that the three companies combined lost more than $20 billion in the last two quarters of 2007, as investments related to subprime mortgages fell apart. Meanwhile, the stock of Citigroup, Merrill Lynch and Countrywide declined drastically.
"The hearing provides a lens through which to examine whether the executive compensation and severance arrangements at these companies provided appropriate incentives to protect shareholders from these losses," the committee said.
The committee is also expected to look at how the compensation and severance packages of Mozilo, O'Neal and Prince were set and approved by their respective boards.
"In many cases, the consultants hired to advise on executive pay were simultaneously receiving millions of dollars from the corporate executives whose compensation they were supposed to assess," according to the memo.
Also scheduled to testify are Richard Parsons, chair of Citigroup's compensation committee and former CEO of Time Warner, the parent company of CNNMoney.com. The chairmen of the Countrywide and Merrill Lynch compensation committees are also set to address the committee.
Calls to Merrill Lynch and Countrywide were not immediately returned. A Citigroup spokesman declined to comment.
Damon Silvers, associate general counsel of the AFL-CIO, which is often critical of executive compensation, believes the hearing will have an important symbolic impact.
"We hope it will put pressure on folks to give some money back and send a signal to other execs that they can't get away with these perverse incentives," Silvers said.
Many argue that it was the deregulation of the banking industry that was the impetus for what is happening now. I could not agree more. Banks and brokerage houses should not be tied together. Our financial security is too important to allow this type of rogue investing. These CEO's rolled the dice and the American taxpayer lost. There should be an immediate call for the return of these ill gotten gains or a class action lawsuit that would cost them more in fees then they ever earned.