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ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

FEBRUARY 11, 2009 

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U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

FEBRUARY 11, 2009 

Printed for the use of the Committee on Financial Services 

Serial No. 111–4 

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(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

CHARLES A. WILSON, Ohio 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

BILL FOSTER, Illinois 

ANDRE ́ CARSON, Indiana 

JACKIE SPEIER, California 

TRAVIS CHILDERS, Mississippi 

WALT MINNICK, Idaho 

JOHN ADLER, New Jersey 

MARY JO KILROY, Ohio 

STEVE DRIEHAUS, Ohio 

SUZANNE KOSMAS, Florida 

ALAN GRAYSON, Florida 

JIM HIMES, Connecticut 

GARY PETERS, Michigan 

DAN MAFFEI, New York 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

BILL POSEY, Florida 

LYNN JENKINS, Kansas 

CHRISTOPHER LEE, New York 

ERIK PAULSEN, Minnesota 

LEONARD LANCE, New Jersey 

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

February 11, 2009 ............................................................................................ 1 

Appendix: 

February 11, 2009 ............................................................................................ 105 

WITNESSES 

WEDNESDAY, FEBRUARY 11, 2009 

Blankfein, Lloyd C., Chief Executive Officer and Chairman, Goldman Sachs 

& Co. ..................................................................................................................... 9 

Dimon, James, Chief Executive Officer, JPMorgan Chase & Co. ........................ 11 

Kelly, Robert P., Chairman and Chief Executive Officer, Bank of New York 

Mellon ................................................................................................................... 12 

Lewis, Kenneth D., Chairman and Chief Executive Officer, Bank of America .. 14 

Logue, Ronald E., Chairman and Chief Executive Officer, State Street Corporation ................................................................................................................. 15 

Mack, John J., Chairman and Chief Executive Officer, Morgan Stanley ........... 16 

Pandit, Vikram, Chief Executive Officer, Citigroup ............................................. 18 

Stumpf, John, President and Chief Executive Officer, Wells Fargo & Company ....................................................................................................................... 20 

APPENDIX 

Prepared statements: 

Bachmann, Hon. Michele ................................................................................. 106 

Castle, Hon. Michael N. ................................................................................... 107 

Kanjorski, Hon. Paul E. ................................................................................... 108 

Perlmutter, Hon. Ed ......................................................................................... 109 

Peters, Hon. Gary C. ........................................................................................ 110 

Price, Hon. Tom ................................................................................................ 111 

Wilson, Hon. Charlie ........................................................................................ 112 

Blankfein, Lloyd C. ........................................................................................... 113 

Dimon, James ................................................................................................... 120 

Kelly, Robert P. ................................................................................................. 125 

Lewis, Kenneth D. ............................................................................................ 129 

Logue, Ronald E. .............................................................................................. 134 

Mack, John J. .................................................................................................... 139 

Pandit, Vikram ................................................................................................. 142 

Stumpf, John ..................................................................................................... 189 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Responses to questions submitted for the record from: 

Blankfein, Lloyd C. ........................................................................................... 194 

Dimon, James ................................................................................................... 200 

Kelly, Robert P. ................................................................................................. 218 

Lewis, Ken ......................................................................................................... 229 

Logue, Ronald E. .............................................................................................. 246 

Mack, John J. .................................................................................................... 256 

Pandit, Vikram ................................................................................................. 264 

Stumpf, John ..................................................................................................... 317 

Frank, Hon. Barney: 

Letter from Andrew M. Cuomo, Attorney General, State of New York, 

dated February 10, 2009 .............................................................................. 329 

Page

IV 

Frank, Hon. Barney—Continued 

Written statement of the RainbowPUSH Coalition ....................................... 332 

Office of Thrift Supervision News Release, entitled, ‘‘OTS Urges Temporary Halt to Foreclosures,’’ dated February 11, 2009 ............................ 334 

Ellison, Hon. Keith: 

Article by Adam J. Levitin, entitled, ‘‘Rein in the credit card games,’’ 

dated November 28, 2008 ............................................................................. 335 

Letter to Hon. Steve Bartlett, President and CEO, The Financial Services 

Roundtable, from Change to Win, dated February 10, 2009 ..................... 337 

Garrett, Hon. Scott: 

‘‘Wall Street Journal Op-Ed: Don’t Push Banks to Make Bad Loans,’’ 

by Bert Ely .................................................................................................... 350 

(1) 

TARP ACCOUNTABILITY: USE 

OF FEDERAL ASSISTANCE BY 

THE FIRST TARP RECIPIENTS 

Wednesday, February 11, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in room 2128, 

Rayburn House Office Building, Hon. Barney Frank [chairman of 

the committee] presiding. 

Members present: Representatives Frank, Kanjorski, Waters, 

Maloney, Gutierrez, Velazquez, Watt, Ackerman, Sherman, Meeks, 

Moore of Kansas, Capuano, Hinojosa, Clay, McCarthy of New York, 

Baca, Lynch, Miller of North Carolina, Scott, Green, Cleaver, 

Moore of Wisconsin, Hodes, Ellison, Klein, Wilson, Perlmutter, 

Donnelly, Foster, Carson, Speier, Minnick, Adler, Kilroy, Driehaus, 

Kosmas, Grayson, Himes, Peters, Maffei; Bachus, Castle, King, 

Royce, Manzullo, Jones, Biggert, Miller of California, Capito, Hensarling, Garrett, Barrett, Neugebauer, Price, McHenry, Marchant, 

McCotter, McCarthy of California, Posey, Jenkins, Paulsen, and 

Lance. 

The CHAIRMAN. The hearing will come to order. 

Before the clock starts, let me make some procedural announcements. I don’t know why I said, ‘‘let me.’’ Since I am in charge, I 

will just do it. 

First of all, this is not an audience participation event. There are 

police officers here. We expect this to go well, but we will not have 

disruptions. 

I am a great believer in free speech, but there are time and place 

restrictions that are totally consistent with a free-speech absolutist 

position. Interruptions and shouts will interfere with the discussion. People are totally free to go outside and to other places during 

the meeting time and say rude things about any or all of us, but 

not during the hearing, and I will enforce that. 

I also will urge people to withhold applause, forced laughter, and 

other interjections, in part because this is a larger committee than 

I wish that it was, and we have a great deal of interest in this subject, and I do not want to lose time that we would otherwise be 

able to put to these constructive purposes. I regret the fact that I 

have to take up this time now. 

I will also make the members aware that I am going to be enforcing the 5-minute rule; and this means the following. After yesterday, I remind you of this: Members are entirely free in their use 

2 

of the 5-minute rule to use 4 minutes and 54 minutes speaking, 

and then announcing at minute 4, seconds 55, that they have a 

question, but do not expect an answer. If you leave 8 seconds for 

a complicated answer, you probably won’t get it here. 

I will say, in defense of some of the witnesses, it may be necessary, if it appears you are unable to answer the questions, it will 

be because haven’t left the time to do it. We will, of course, take 

those answers in writing. 

So I would urge members, if you are asking a question to which 

you want an answer, please leave some time for there to be an answer. If you just want to say something and ask a rhetorical question, that is your right. It is in the House rules. But I do want to 

explain that I am not going to be allowing people to extend their 

time by leaving a question of some complexity with only a couple 

of seconds to be answered. 

With that, we will begin. I will now start the clock for my own 

strictly enforced 5 minutes. 

The separation of powers becomes relevant here. There is a great 

deal of anger in the country, much of it justified, about past practices, and a number of people can legitimately be criticized. There 

is also a concern that there may have been things done for which 

there should be some action, civil recoveries. In some cases, people 

have been talking about prosecution, although I do not mean to 

imply that anyone here faces that. 

The role of the Congress, however, is different. We are not the 

Executive Branch with enforcement powers. We are not the Securities and Exchange Commission or the Comptroller of the Currency. 

We are not ourselves regulated. 

We formulate regulatory policy. I believe our major function and 

the purpose of this hearing is to help formulate policy going forward. Understanding what happened, why it happened, and what 

didn’t happen are essential elements of formulating policy going 

forward. So, yes, this hearing will focus on what has happened, but 

that is in the context, I believe, given our legislative function, of 

trying to devise what we do going forward. 

Now, we have this dilemma. Because I believe an absence of sensible regulation—not deregulation, but non-regulation—a series of 

new financial activities and, in some cases, entities grew up in our 

country, and those activities did a lot of good. But as will happen 

when you have a total absence of regulation, they also did some 

harm, more harm than almost anybody had anticipated. In consequence, we are now in a very serious negative economic situation. 

We have two roles. One is to adopt rules that will make it much 

less likely that we will have a repeat of this, and I think that is 

the easier job, intellectually, and I even think politically, because 

of the view in the country. 

But we have to get out from under where we are now, and here 

is the dilemma: There is in the country a great deal of anger about 

the financial institutions, including those represented here. There 

is anger about us. There is anger about the Executive Branch. 

There is a great deal of anger. 

We have this dilemma. It is essential if we are to reverse the economic negativism that we now confront that we, among other 

3 

things, get the system of extending credit back into its fullest operation. 

I suppose, theoretically, you could junk the current system and 

start a whole new one. The amount of time and effort that would 

take would, obviously, make that totally impractical. We have no 

option if we are to get credit flowing again in this country other 

than to work with the existing institutions, not every institution as 

it was originally constituted but with the existing institutions. And 

the problem is that there is a great deal of anger at the institutions, and it is impossible to get the credit system working again 

without doing some things that will be seen to benefit the institutions. 

I have said this is the opposite of that terrible problem in warfare of collateral damage, when innocent people are injured in the 

course of trying to obtain a military objective. One of the problems 

we have, gentlemen, is that you are the recipients of collateral benefit. That is, in an effort to get the credit system functioning, 

things will be done that will be to the benefit of the institutions 

over which you preside because there is no alternative. 

But you need to understand, as I think many of you do, how 

angry that makes people, and in the interests of getting the system 

working again, I urge you strongly to cooperate with us, not grudgingly, not doing the minimum, but understanding that there is a 

substantial public anger. And alleviating that public anger not with 

mumbo jumbo but with reality is essential if we are going to have 

the support in the country to take the right steps. 

I admired much of Secretary Paulson’s tenure. But beginning last September when he asked us for the $700 billion authorization, and I raised the compensation issue, he was very resistant, 

and I must tell you that he blamed you to some extent, not you individually, but you as a profession. He said that if we put strict 

compensation restrictions on people, they won’t cooperate. 

I hope that is not true. I hope the argument that people would 

put their own economic self-interest in the narrow term ahead of 

a necessary program to get the country back isn’t the case. We 

need to look at that. We need to talk about it. I think some of you 

have been laggard in understanding that. 

I urge you going forward to be ungrudgingly cooperative and understand that these are extraordinary times. We are going to be 

taking and have been taking extraordinary measures which will be 

to the benefit of some of the institutions or all of the institutions 

over which you preside. There has to be on the sense of the American people that you understand their anger, their frustration, and 

that you willingly cooperate and in fact are willing to make some 

sacrifices so that we can get this whole thing working. 

The gentleman from Alabama. 

Mr. BACHUS. Thank you, Mr. Chairman. 

Gentlemen, we in Congress, I think, have screwed up health care 

pretty badly, and K through 12 through our involvement, and now 

we are turning our attention to you, and may God help us and help 

you and all the American people as we do that. 

I think that together it is important that we don’t engage in 

name calling or the blame game, that we take a forward look and 

that we together try to do what is best for the American people. 

4 

And to a certain extent that is going to be on your part and our 

part, as the chairman said, winning back their trust and their confidence, and we can best do that by doing it as partners. I hope 

that the questions focus on how we can get this economy moving 

and what your institutions can do. 

I do want to say this as a word of caution. These are several different institutions, eight different institutions. Some wanted the 

money. Some didn’t want the money. I am not sure the American 

people, I think they are going to look at you as a unit, but I hope 

they don’t do that, because that would be a mistake. Because you 

are all in a different situation. Your financial condition is different, 

and you should not be treated as one. 

I think you and I both agree that we need to get the government 

and government investment out of the banks as soon as we can and 

get about the business of you doing what you do well and with a 

minimum of unnecessary influence and interference from us. 

Thank you very much for your presence. 

The CHAIRMAN. I used 5 minutes. The gentleman used 2 minutes. Do you want to go to Mr. Royce? A minute-and-a-half. 

Mr. ROYCE. Thank you, Mr. Chairman. 

In the United States, the mortgage-backed securities market was 

kick-started and has been sustained here by the activities of what 

we call government-sponsored enterprises. And the first Ginnie 

Mae guaranteed mortgage-backed security was issued back in 

1970, Fannie Mae securitized its first pool in 1981, and Freddie 

Mac issued the first CMO backed by 30-year-fixed mortgage rates 

in 1983. Now, the pool was refinanced with the issue of three classes of securities that matured sequentially. 

We have all watched this evolution as we watched the leveraging 

of 100 to 1 by these institutions and the warnings to us by the Federal Reserve that something had to be done, otherwise, it was going 

to create systemic risk. Indeed, we have also watched the demand 

on these institutions, the 10 percent of that $1.5 trillion going to 

loans to people who wouldn’t have the capacity to pay them back, 

and, indeed, we had at least a trillion lost out of Fannie Mae and 

Freddie Mac just out of that. 

National mortgage conduits such as Fannie Mae and Freddie 

Mac do not exist in Europe, and without depth and liquidity of 

MBS, ABS, asset-backed markets, securitization is not as valuable. 

It cannot be as popular, especially when banks have alternative 

techniques for refinancing their mortgage portfolios there. 

For example, in the U.K., it strikes me that is the largest market 

in Europe, for these types of securities, 6 percent of U.K. mortgages 

are securitized. In the United States, right now, it is 60 percent— 

60 percent. And one of the questions I have, and we will listen to 

the testimony here, but to what extent was the securitization process— 

The CHAIRMAN. The time allocated—let me be clear. This is an 

allocation that the Minority gave me. The gentleman was given a 

minute-and-a-half. I cleared this with the Minority. This is not arbitrary. He has other people he wants to deal with. When I do rap 

the gavel, I hope people will understand we are operating within 

the limits of other members getting a fair chance. 

5 

So the gentleman’s time has expired. The gentleman used an 

extra 38 seconds. 

I will now recognize the gentleman from Pennsylvania for 2 minutes. 

Mr. KANJORSKI. Mr. Chairman, today we will learn how some of 

the richest and most powerful men in America are spending billions of dollars of taxpayer money. Because some of my colleagues 

will probably ask our witnesses to explain their enormous bonuses 

being issued in a time of great national suffering, I will not do so. 

And because my colleagues will likely inquire as to their ownership of numerous vacation homes while millions of Americans face 

foreclosure on the only home they have, I will leave that subject 

alone. 

Because some of the members will undoubtedly seek to understand how you can underwrite frivolous junkets when most Americans would almost do anything to get a job, let alone a vacation, 

I will defer that question, too. 

Instead, I want to know where the money has gone and why it 

went there. My constituents in Pennsylvania regularly ask me why 

you needed their money and how you are using it. This is your opportunity to explain to them just exactly what you are doing, and 

for anyone who contends that you do not need the money and that 

you did not ask for it, please find a way to return that money to 

the Treasury before you leave town. 

As executives at large companies, you once lived in a one-way 

mirror, unaccountable to the public at large and often sheltered 

from shareholder scrutiny. But when you took taxpayer money, you 

moved into a fishbowl. Now everyone is rightly watching your 

every move from every side. Millions are watching you today, and 

they would like some degree of explanation and responsibility. I do, 

too. 

The CHAIRMAN. The gentleman from Texas, Mr. Hensarling, is 

recognized for 11⁄2 minutes. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

I believe I will have plenty of opportunities to disagree with our 

President in the next several years, not the least of which is a piece 

of legislation known as the stimulus package that I believe will 

stimulate big government much more so than the economy. But let 

me make a point where I do agree with our President. 

In announcing the executive compensation limits, our President 

said, ‘‘This is America. We don’t disparage wealth, we don’t begrudge anybody for achieving success, and we believe success 

should be rewarded. But what gets people upset, and rightfully so, 

are executives being rewarded for failure, especially when those rewards are subsidized by the U.S. taxpayers.’’ 

I hope that this committee hearing does not turn out to be a time 

for class warfare, but I do hope it becomes a time and an opportunity for taxpayer accountability and taxpayer transparency. I believe in the hours to come that you gentlemen before me will certainly have lots of opportunities to be criticized, castigated, secondguessed, and otherwise publicly pillared. 

I have a couple of observations. Number one, some of that will 

be richly deserved. My other observation is that many who dish it 

out to you are also partially responsible for the mess in which we 

6 

find ourselves now. Outside of the soft money actions of the Federal Reserve, no matter how noble the intentions, Federal registration— 

The CHAIRMAN. I thank the gentleman. 

Mr. HENSARLING. I took the chairman at his word. 

The CHAIRMAN. Well, I certainly don’t want to discourage that as 

a precedent, so I thank the gentleman. 

The gentlewoman from California for 2 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

This is an important hearing today. The question has been asked 

over and over again, what did the banks do with the taxpayers’ 

money? The taxpayers of America are very, very upset about the 

fact that they allowed the banks to borrow their money, the taxpayers’ money, in unprecedented amounts, billions of dollars, and 

when the taxpayers went back to the banks to say, may I have a 

loan, may I have a loan to buy a car, may I have a loan to pay 

my student fees, may I have a loan for a mortgage, the banks are 

saying no. 

To add insult to injury, the banks have sent out notices to credit 

card holders, taxpayers again who have loaned money to the big 

banks, the banks are saying to the credit card holders, oh, we are 

going to increase your interest rates. We know you were paying 13, 

14, 15 percent already, but now it is going to cost you 18, 19, 20 

percent. 

So the taxpayers have lent their money to the big banks, who are 

supposed to be big business persons, expertise in business management, who are failing. They have gone back to ask for some assistance. They are being denied. 

In addition to that, Mr. Chairman, I want to talk a little bit later 

on when I question about the fact that these banks not only took 

huge amounts of money from the taxpayers under the banner of 

TARP, they then charged and made money, the banks, on the 

money that we gave them, in fees. We have not talked about the 

fees that these banks have made as they processed our money, but 

I am going to reveal here today that they took the money and they 

earned more money on the money that we gave them, instead of 

allowing that money to be managed by others who were waiting to 

participate. 

I yield back. 

The CHAIRMAN. I thank the gentlewoman. She almost met the 

gentleman from Texas’ standard. Very close. 

The gentleman from South Carolina, Mr. Barrett, for a minuteand-a-half. 

Mr. BARRETT. Thank you, Mr. Chairman. 

Gentlemen, normally, I would strongly oppose the nature of this 

hearing. There are few things more dangerous to me than letting 

government run our banks or having a bunch of politicians make 

your business decisions. But now that you have received hardearned taxpayer money, you owe my constituents some explanation 

on how you have gotten yourselves into this position and how you 

spent their money. 

Like other States, South Carolina is struggling and too many of 

my people are losing their jobs due to your actions which have driven this economy into the ground. Small businesses back home, peoVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
7 

ple I know, friends I go to church with, are closing their doors, losing their jobs, and they are not getting bailed out. My folks simply 

haven’t seen the evidence that the money that you were given is 

working or making their lives better. 

So I look forward to this hearing today, and I hope that you gentlemen will provide us the answers that we all need. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman from Illinois for a minuteand-a-half. 

Mrs. BIGGERT. Thank you, Mr. Chairman, and thank you for 

holding today’s very important hearing. 

Last year, in December, nearly 2 months ago to the day, I joined 

Republican Leader Boehner and 81 other House Republicans and 

signed a letter requesting this hearing. I am glad that this has finally happened. 

We should have had a hearing before passing legislation on the 

Floor to reform TARP. TARP was a rush job. When Congress 

passed the financial rescue passage, it was to stave off a dire and 

immediate threat to our entire economy, and we are by no means 

out of the woods yet. 

Treasury needs to provide much greater transparency and show 

us where the American taxpayers’ money is going before requesting 

more and before rolling out a new plan to use trillions, let me repeat, trillions, more of taxpayer dollars. 

Have the funds been used to get credit flowing again, not just to 

financial institutions but to consumers and small businesses? How 

do we know additional TARP money is needed? Who needs it? How 

much more will be used? 

Only today, for the first time, have we had the opportunity to 

publicly hear about the first $350 billion that was used by the aid 

of the 362 firms, excluding two of the big three auto companies 

across the country that received taxpayer TARP funds. What went 

wrong? Who is to say that we are not putting good money after 

bad? I hope today’s witnesses will shed some light on these looming 

questions. 

And let me be frank: My constituents in Illinois are angry, and 

so am I. We don’t believe that taxpayer money has been spent 

wisely. We don’t have the answers that we need. 

Thank you, and I yield back. 

The CHAIRMAN. The gentleman from Georgia, Mr. Scott, for 1 

minute. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

I think it is very important that you gentlemen represent the 

heart of our system, the very foundation of our system, and it is 

shaking at the roots. The confidence of the American people is at 

a low ebb. I think if there is one thing that you gentlemen can do 

today it is to illustrate very firmly that what has happened in the 

past, $18 billion of this money, of taxpayer money going out to you, 

is an aberration and to send a very important message to the 

American people that you understand this is not the Congress’ 

money, it is not your money, this is money that is coming directly 

from the pockets of American taxpayers, but, more importantly, it 

is coming from our grandchildren and our children’s indebtedness. 

8 

The future foundation of our economic system is going to weigh 

on this hearing today. Because at the heart of it is confidence. If 

we leave here today knowing that we have restored the confidence 

of the American people, then this hearing will be most certainly 

worth it. 

Thank you. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentlewoman from Kansas for 11⁄2 minutes. 

Ms. JENKINS. Thank you, Mr. Chairman. 

Our economy continues to lag. Every day, Americans struggle to 

pay their mortgages and put food on the table while their home 

values drop. Businesses have had to scale back, forcing massive 

layoffs and furloughs. There is no question times are tough. 

Congress has had to act quickly to make difficult policy decisions 

in uncharted territory, yet those circumstances do not give government a blank check. Times like these call for increased scrutiny before rushing to spend billions of hard-earned taxpayer dollars on 

programs which may not effectively address the root of the problems we face. 

Today, we will hear from institutions that received billions in government aid. The question remains, was $700 billion in TARP 

funds a wise use of taxpayer dollars and effective in its mission to 

return stability to financial markets, and this on top of actions by 

the Federal Reserve, the FDIC, and others with a price tag well 

into the trillions? 

My constituents in Kansas sent me to Washington with a clear 

mandate to protect the dollars they send to Washington. Being 

tight-fisted with taxpayer dollars should not lead to inaction but to 

increased accountability, transparency and scrutiny. Congress injected hundreds of billions in TARP dollars. I am eager to hear 

from today’s witnesses on progress or lack thereof on reviving our 

struggling economy and financial markets. 

I yield back the balance of my time. Thank you. 

The CHAIRMAN. The gentleman from Texas is recognized for 1 

minute. 

Mr. NEUGEBAUER. I thank the chairman. 

I look forward to this panel today. I think I can maybe call this 

a shareholders meeting, because, although I didn’t vote for the 

TARP program, the American taxpayers have put money into your 

entities. So I think what they are going to be looking forward to 

hearing from the CEO’s who are managing their money is how are 

we doing. 

I think one of the things that concerns me is that there was a 

lot of criticism of the GSE format in our country of governmentsponsored entities, where we had basically competing interests. We 

had shareholders, and we had basically political interests. Unfortunately, that was a flawed model, but yet we have now employed 

that model for the rest of the financial industry. 

So instead of calling you GSEs, I am going to call you TSEs, and 

that is taxpayer-supported entities. I don’t support that model. I 

think it is a flawed model because it is a competing interest. But 

now that the American people are your shareholders there is a new 

accountability structure that will come, and I hope today you will 

be able to articulate how this money that the American people 

9 

have invested in your entities has benefited you. But, more importantly, what they want to hear is what it is doing for them. So I 

look forward to the testimony today. 

The CHAIRMAN. Finally, I ask for a unanimous consent request 

for the gentleman from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

I ask by unanimous consent that H.R. 387 be placed in the 

record, the TARP Accountability Act, which will deal with transparency in lending as it relates to the TARP funds. 

The CHAIRMAN. Without objection, it is so ordered. 

That I believe is the bill that passed as an amendment before the 

House by the gentleman, Mr. LaTourette. 

Mr. GREEN. Yes, Mr. Chairman, that is correct. 

The CHAIRMAN. We will now hear from our witnesses. 

I will begin—I don’t know what order. It appears to be alphabetical. Yes, it appears to be alphabetical, so no one will read any significance into it. 

I will begin at the top of the alphabet with Mr. Blankfein. 

STATEMENT OF LLOYD C. BLANKFEIN, CHIEF EXECUTIVE 

OFFICER AND CHAIRMAN, GOLDMAN SACHS & CO. 

Mr. BLANKFEIN. Chairman Frank, Ranking Member Bachus, and 

members of the committee, I appreciate the opportunity to appear 

before you. 

It is abundantly clear that we are here amidst broad public 

anger at our industry. Many people believe, and in many cases justifiably so, that Wall Street lost sight of its larger public obligations 

and allowed certain trends and practices to undermine the financial system’s stability. We have to regain the public’s trust and do 

everything we can to help mend our financial system to restore stability and vitality. Goldman Sachs is committed to doing so. 

We take our responsibility as a recipient of TARP funds very seriously. We view the TARP as important to the overall stability of 

the financial system and, therefore, important to Goldman Sachs. 

We serve a number of important roles, including that of advisor, 

financier, market maker, asset manager, and co-investor. Our business is institutionally dominated, with the vast majority of our capital commitments made on behalf of corporations and institutional 

investors. We are not engaged in traditional commercial banking 

and are not a significant lender to consumers. 

As a financial institution focused on this wholesale client base, 

Goldman Sachs actively provides liquidity to institutions which 

helps the capital markets function. In short, our businesses require 

that we commit capital, and our ability to do so has been enhanced 

since receiving this investment under the Capital Purchase Program. 

As a financier, clients frequently expect our advice to be accompanied by access to the capital necessary to make that advice actionable and practical. For instance, we often provide backstop or 

contingent credit, such as a commitment to make a bridge loan, 

until other sources of more permanent capital can be arranged. 

Since receiving the $10 billion of capital on October 27th and 

through January, 2009, Goldman Sachs has committed over $13 

billion in new financing to support our clients. This compares with 

10 

$4.5 billion in the 3 months prior to receiving the government’s investment. 

For example, we put our capital to work on behalf of Sallie Mae 

to allow them to provide more than $1.5 billion of student loans. 

We made a significant investment in the C.J. Peete Department’s 

housing complex, a mixed-income housing project in New Orleans. 

We also committed capital to Verizon Wireless, Pfizer, and a number of other significant corporations. 

As a market maker, we provide the necessary liquidity to ensure 

that buyers and sellers can complete their trades. In dislocated 

markets we are often required to deploy our capital to hold client 

positions over longer term while the transaction is completed. Last 

month, for instance, we provided short-term liquidity to a portion 

of the mortgage market through a large agency mortgage transaction. This significant extension of our capital helped keep mortgage rates from increasing by allowing billions of dollars of mortgage securities to be financed. 

We also are an active co-investor with our clients. Over the summer, we established a $10.5 billion senior loan fund which makes 

loans to companies in need of capital. The fund invests both our 

own capital and that of our clients. Already, it has made approximately $5 billion in commitments. 

The committee has also asked us to address our compensation 

policies and practices. Since we became a public company, we have 

had a clear and consistent compensation policy. We pay our people 

based on three factors: the performance of the firm; the performance of the business unit; and the performance of the individual. 

We believe this approach has incentivized our people to act in a 

way that supports the firm as a whole and to not be narrow-minded about their specific division or business unit. 

More broadly, it has produced a strong relationship between compensation and performance. From 2000 to 2007, Goldman Sachs’ 

earnings grew twice as fast as our aggregate compensation expenses. For our 9 full years as a public company, which includes 

an exceptionally difficult 2008, the firm generated an average return on equity of 21 percent for our shareholders. 

While the firm produced a profit of $2.2 billion in 2008, our revenues were down considerably. End-of-year bonuses were down an 

average of 65 percent. Our most senior people, the firm’s 417 partners, were down 75 percent. The bulk of compensation for our senior people is in the form of stock which vests over time. 

I would also note that Goldman Sachs has never had golden 

parachutes, employment contracts, or severance arrangements for 

its executive officers. 

We also recognize that having TARP money creates an important 

context for compensation. That is why in part our executive management team requested not to receive a bonus in 2008, even 

though the firm produced a profit. 

Mr. Chairman, our firm recognizes the extraordinary support the 

government has provided to the financial markets and to our industry. We will live up to the spirit and letter of the responsibilities our regulators, the Congress and the public expect of us, and 

we will do so whether we still have TARP funds or not. 

11 

We appreciate that the TARP funds were never intended to be 

permanent capital. When conditions allow and with the support of 

our regulators and Treasury, we look forward to paying back the 

government’s investment so that money can be used elsewhere to 

support our economy. 

Thank you. 

[The prepared statement of Mr. Blankfein can be found on page 

113 of the appendix.] 

The CHAIRMAN. Next, Mr. Dimon. 

STATEMENT OF JAMES DIMON, CHIEF EXECUTIVE OFFICER, 

JPMORGAN CHASE & CO. 

Mr. DIMON. Chairman Frank, Ranking Member Bachus, and 

members of the committee, my name is Jamie Dimon. I am the 

chairman and CEO of JPMorgan Chase. I look forward to today’s 

discussion and ask that my complete written statement be entered 

into the hearing record. 

The CHAIRMAN. Without objection, all statements and any supporting material from any of the witnesses will be made a part of 

the record. 

Mr. DIMON. I would like to highlight a few key points to my written testimony. 

First, JPMorgan is lending. Through our 5,000 branches in 23 

States, we continue to provide credit to tens of millions of customers, including individual customers, nearly 2 million small business clients, large corporations, other banks, not-for-profits and 

States and municipalities. While we did not seek the $25 billion TARP funds we received 

on October 28, 2008, it strengthened our already strong capital 

base which is the foundation of all of our lending activities. We are 

putting that money to use in a way that respects the spirit of 

TARP while maintaining the safe and sound lending practices and 

strong balance sheet that has helped to make and to keep 

JPMorgan a healthy and vibrant company, a company that employs 

224,000 people worldwide, gives away $100 million a year to charity, and pays approximately $10 billion in tax to State, local, and 

the Federal Government over the last 10 years each. 

Over 50 million Americans own our stock, and our stockholders 

include people from all walks of life: retirees; teachers; union members; and our own employees. We feel a deep obligation to honor 

this faith in us, including the investment the government made to 

us in TARP, by maintaining prudent underwriting standards. 

In the fourth quarter, despite reduced customer demand for credit, we made over $150 billion in new loans. In addition, we lent an 

average of $50 billion every night to other banks. 

Also during the fourth quarter, we purchased almost $60 billion 

of mortgage-backed and asset-backed securities, which had the benefit of supporting the agency debt markets and promoting liquidity 

in the housing capital markets. 

Overall, in the fourth quarter, our consumer loan balances increased by 2.1 percent compared to the third quarter, while overall 

personal consumption expended in the country decreased by 2.3 

percent. That is to say we lent more even as customers were cutting back their spending during the quarter. 

12 

Second, JPMorgan is committed to keeping borrowers in their 

homes by making sustainable, properly underwritten loan modifications, in some instances even before a default occurs. We have extended our modification efforts to cover not only the mortgages we 

own but also the investor-owned loans that we service, about $1.1 

trillion of loans. We believe we will avert 650,000 foreclosures by 

the end of 2010. 

We believe it is the right approach to the consumer and for the 

stability of our financial system as a whole. Homeowners should 

have equal access to a sustainable mortgage modification without 

having to resort to bankruptcy and put their credit histories at 

risk. We urge Congress and the Administration to help adopt a uniform national standard for loan modification programs. 

Third, JPMorgan has been willing to take very significant actions 

to help stabilize the financial system, and we stand ready to do our 

part going forward. In March of 2008, at the request of the U.S. 

Government, we worked to prevent an uncontrolled collapse of 

Bear Stearns. In September of 2008, we were the only bank prepared to acquire the assets of Washington Mutual after the FDIC 

seized that institution. Taken together, these two transactions 

saved nearly 40,000 jobs and prevented further market instability. 

Finally, it must be said that today’s economic crisis is the result 

of a lot of mistakes made by a lot of people and all of us who are 

here today, and many who are not here, bear some measure of responsibility for the current state of the financial markets. The ongoing financial crisis exposed significant deficiencies in our current 

regulatory system which is fragmented and overly complex. There 

is a great deal we need to address to overcome these weaknesses. 

We agree with Chairman Frank that Congress and the President 

should move ahead quickly to establish a systematic risk regulator. 

In the short term, this will allow us to address in our system and 

fill the gaps in regulation that contributed to the current situation. 

There are tremendous challenges facing the financial services industry and the American economy, but the United States has faced 

serious problems before. The measure of strength for a country and 

a company is not whether or not there are problems. It is how they 

deal with those problems, overcome them, identify them, and move 

on. I am confident that we will do this again and we will all emerge 

better because of it. 

Thank you. I look forward to your questions. 

[The prepared statement of Mr. Dimon can be found on page 120 

of the appendix.] 

The CHAIRMAN. Next, Mr. Robert Kelly. 

STATEMENT OF ROBERT P. KELLY, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, BANK OF NEW YORK MELLON 

Mr. KELLY. Mr. Chairman, Ranking Member Bachus, and members of the committee, my name is Bob Kelly. I am chairman and 

CEO of The Bank of New York Mellon. I appreciate the opportunity 

to speak with you about our participation in the Capital Purchase 

Program. 

The business model of The Bank of New York Mellon is quite different from a traditional retail or commercial or investment bank. 

In contrast to most of the companies here today, our business 

13 

model does not focus on the broad retail market or commercial 

banking or investment banks, and we don’t focus on mortgages, 

credit cards, or auto loans. In fact, we don’t do typical lending to 

corporate businesses. 

A good way to think of The Bank of New York Mellon is we are 

a bank for banks. We are an infrastructure bank. The lion’s share 

of our business is dedicated to helping other financial institutions 

be more successful around the world. We invest mutual fund and 

pension monies, and we administer the complex back-office processes. We also provide critical infrastructure for the global financial 

markets by facilitating the movement of money and securities 

through the markets. Finally, we provide some financing to other 

banks so they can make mortgages and other loans and other instruments available to consumers and businesses. 

You should know that we were profitable every quarter last year, and we paid over $4 billion in income and other taxes globally. 

While some of our assets were invested in mortgage-backed securities which did incur losses, they have been more than offset by our 

profits throughout the year. We continue to have the highest debt 

ratings of U.S. banks rated by Moody’s, and we have the second 

highest rating by Standard and Poor’s. In October, the Treasury allocated to us $3 billion of the $350 

billion allocated to date. The financial markets were very dangerously in total gridlock at the time and deteriorating rapidly. We 

were in a deep financial crisis at that time. We understood that a 

clear goal at the time was to have a range of institutions, including 

relatively healthy companies like The Bank of New York Mellon, 

participate in the Capital Purchase Program, removing any stigma 

that might be associated with accepting Treasury capital and helping reassure the markets of the stability of the financial system. 

We were strongly encouraged to participate, and we did very quickly. In exchange for the $3 billion investment, the U.S. Government 

received preferred stock and warrants, and we agreed to pay the 

government $150 million a year in dividends until we repaid the 

$3 billion. The $3 billion in capital that we received from Treasury 

allowed us to do quite a bit more than we would have otherwise 

to improve the movement of funds in the financial markets. 

We purchased $1.7 billion in mortgage-backed securities and debentures issued by the U.S. Government through the governmentsponsored agencies. This helped to increase the amount of money 

to lend to qualified borrowers in the residential housing market. 

We purchased $900 million of debt securities of other healthy financial institutions to improve liquidity and help them lend to consumers and businesses. 

And we used the remaining $400 million for interbank lending 

to other healthy financial institutions. Again, it was both liquidity, 

funding, and stability. 

We have not used any of the funds to pay dividends, bonuses, or 

compensation of any kind, nor will we. In fact, we will not use any 

of the funds to make acquisitions either. 

We still have a long way to go to get the credit markets and the 

U.S. economy functioning properly again. Bank capital must be rebuilt, low-quality assets must be sold or written off, sound lending 

14 

must occur, and confidence in our system must be restored. The 

Bank of New York Mellon will not only repay the $3 billion to the 

Treasury, but we also fully intend to deliver a very good return on 

investment for taxpayers. 

Thank you. 

[The prepared statement of Mr. Kelly can be found on page 125 

of the appendix.] 

The CHAIRMAN. Mr. Lewis. 

STATEMENT OF KEN LEWIS, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, BANK OF AMERICA 

Mr. LEWIS. Thank you, Mr. Chairman, Congressman Bachus. 

I would like to start by making two key points: First, all of us 

at Bank of America understand the responsibilities that come with 

access to public funds. Taxpayers want to see how we are using 

this money to restart the economy and want us to manage our expenses carefully. These expectations are appropriate, and we are 

working to meet them. 

Second, as we manage our business going forward, we are doing 

our best to balance the interests of customers, shareholders, and 

taxpayers. But the fact is, it is in all of our interests that banks 

lend as much as we responsibly can, maximizing credit while minimizing future losses. That is how consumers and businesses can 

prosper. It is how investors, including taxpayers, can earn returns. 

Bank of America serves more than half of all U.S. households 

and millions of businesses. We know that the health and strength 

of our company depends on the health and strength of the U.S. 

economy. We have every incentive to lend and, despite recessionary 

headwinds, we are lending. In the fourth quarter alone, we made more than $115 billion in 

new loans to consumers and businesses. We also renewed about 

$70 billion in credit lines and made some bulk purchases of loans 

to reach a total of $181 billion in total lending activity, which was 

included in our TARP report. We also reaffirmed three 10-year, nationwide goals that are critical to the health of our communities: 

$1.5 trillion for community development lending, $2 billion in philanthropic giving, and $20 billion in environmental lending and investment. 

We are working to keep people in their homes. While Bank of 

America exited subprime lending in 2001, we inherited a substantial portfolio when we acquired Countrywide. We modified 230,000 

loans in 2008 and have more than 5,000 associates working full 

time with homeowners to meet our target of up to 630,000 loan 

modifications. We remain committed to investing in our communities and are proud of our six consecutive CRA outstanding ratings. 

Last fall, at the urging of the U.S. Government, Bank of America 

accepted $15 billion in TARP money. Additionally, the government 

agreed to provide $10 billion to Merrill Lynch and an additional 

$20 billion to enable the closing of our acquisition and thereby prevent another shock to the financial system. We will make our first 

dividend payment to the Treasury of more than $400 million next 

week, we will pay about $2.8 billion in interest for the year, and 

we intend to pay all the TARP funds back as soon as possible. 

15 

But we understand that taxpayers are angry, and they deserve 

to know how their funds are being used. We recently announced 

that we will regularly make a full report to the public about our 

business activities in 10 categories that are important to the Nation’s economic recovery. The $115 billion in new loans we made 

last quarter is a good example. But it is obviously not the whole 

story. 

The real issue I believe is this: Taxpayers feel, and rightfully so, 

that if a bank is receiving public money, all its financial decisions 

should signal a conservative, sober, and frugal approach to the financial health of the company. 

I will simply say this: Bank of America has for years been the 

most financially efficient large bank in the country. When we expend resources, we do so only after careful analysis of how that expenditure will strengthen our business and generate returns for investors, now including U.S. taxpayers. Our core business is strong. 

Even in the midst of a deepening recession, we earned more than 

$4 billion last year. Even so, that performance was disappointing, 

and I therefore recommended to our Board of Directors, and they 

agreed, that we would pay no year-end compensation to me or any 

of our most senior executives for 2008. Executives at the next tier 

down had their year-end incentive payments cut by an average of 

80 percent. 

The financial services industry is undergoing wrenching change. 

Now is a good time to remind ourselves that we play a supporting 

role in the economy, not a lead role. Our job is to help the real creators of economic value—people who make things and people who 

use them—get together and do business. We bankers should find 

some humility in that. 

This is also a time for getting out there in the marketplace and 

making every good loan we can to boost the economy and restore 

confidence to the markets. It is a time for determination in the face 

of our generation’s greatest economic challenge. 

Thank you. 

[The prepared statement of Mr. Lewis can be found on page 129 

of the appendix.] 

The CHAIRMAN. Mr. Logue. 

STATEMENT OF RONALD E. LOGUE, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, STATE STREET CORPORATION 

Mr. LOGUE. Mr. Chairman, Ranking Member Bachus, and members of the committee, thank you for inviting me here to testify 

today. I appreciate this committee’s critical role in overseeing the 

taxpayers’ investment in State Street, and we are pleased to have 

an opportunity to describe our use of that investment. 

State Street Corporation is one of the world’s largest providers 

of services to institutional investors such as mutual funds, pension 

funds, endowments, and foundations. Unlike more traditional 

banks, we do not directly provide ordinary retail banking services, 

including mortgages, credit cards, or other consumer credit. We 

have no retail branches. 

Our loan activity primarily relates to the provision of credit and 

liquidity to our core customer base of institutional investors. Our 

role enables the investment process to run smoothly and as inVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
16 

tended and ultimately to help our customers’ customers, citizens 

with savings, average Americans, to be able to access their investments when they need to. 

With this unique role, even prior to the receipt of the Capital 

Purchase Program funds, we were responding to the market turmoil following the collapse of Lehman Brothers in September by increasing our provision of liquidity and credit to our core institutional investor customer base. And even with the increased challenges presented to the post-Lehman financial markets, State 

Street was profitable in all four quarters of 2008, and we also expect to be profitable in 2009. 

I believe State Street was asked to be one of the first banks to 

participate in the Capital Purchase Program because of our unique 

and critical role as the back office for the global securities industry. 

Our $2 billion investment from the Capital Purchase Program was 

announced on October 14th, and shortly afterwards, I set a goal to 

immediately deploy $2 billion in additional capacity to our institutional investor customers. 

For example, following the collapse of Lehman Brothers, many 

mutual funds faced increased demands for redemptions. Our provision of liquidity to these funds helped to ensure that investors in 

these funds had access to their money when they needed it. As of 

the end of January, we have approved more than $1.5 billion in liquidity requests for 19 customers representing hundreds of mutual 

funds, and we can and do account for every dollar. 

Let me state categorically that we have not used Capital Purchase Program funds for employee compensation or dividend payments. We have also implemented all applicable executive compensation restrictions and requirements. In recognition of the unprecedented circumstances the industry is facing, I am foregoing 

incentive compensation for 2008 along with six other members of 

our leadership team. We have also imposed a salary freeze and reduced by 50 percent overall incentive compensation for all but our 

most junior employees. 

In conclusion, we believe our use of the Capital Purchase Program funds follows the intent of Congress consistent with our role 

in the marketplace. Specifically, we focused on providing badly 

needed credit and liquidity to our core institutional customer base, 

which in turn helps to enable individuals to have access to their 

investments or retirement funds during this time of unprecedented 

turmoil. 

I would be pleased to answer any questions. 

[The prepared statement of Mr. Logue can be found on page 134 

of the appendix.] 

The CHAIRMAN. Mr. Mack. 

STATEMENT OF JOHN J. MACK, CHAIRMAN AND CHIEF 

EXECUTIVE OFFICER, MORGAN STANLEY 

Mr. MACK. Mr. Chairman, Ranking Member Bachus, and members of the committee, I appreciate the opportunity to speak to you 

today about our role in the TARP program— 

The CHAIRMAN. Could you turn your microphone on? 

Mr. MACK. I was trying to pull a fast one. I am sorry. I will skip 

the prelims then. 

17 

Thank you for having me here. I look forward to answering questions and really talk about how we use our TARP capital with this 

credit squeeze that is hitting the American economy. Also, I would 

like to discuss some of the changes we are making at Morgan Stanley as well as the broader reforms we would urge you to restore 

confidence in our industry and the markets. 

The events of the past months have shaken the foundation of our 

global financial system, and they have made clear the need for profound changes to that system. At Morgan Stanley, we have dramatically brought down leverage, increased transparency, reduced 

our level of risk, and made changes to how people are paid. 

We have maintained a high level of capital through the crisis. 

Before the TARP investment, our Tier 1 capital ratio, a key measure of regulatory capital, was approximately 15 percent, one of the 

highest in the industry. We also delivered positive results for 2008 

to our shareholders. 

But we didn’t do everything right. Far from it. And make no mistake, as head of the firm, I take responsibility for our performance. 

I believe that both our firm and our industry have far to go to regain the trust of taxpayers, investors, and public officials. As a recipient of an investment from the U.S. Government, we recognize 

our serious responsibilities to the American people. It is our goal 

and our desire to repay the taxpayers in full as soon as possible. 

Morgan Stanley’s business, in contrast to some of our peers, has 

always been focused primarily on institutional and corporate clients, and our business model is less about lending than about helping companies raise debt and equity in the capital markets. 

Between October and December, we increased the total debt 

raised for clients as lead manager nearly fourfold. Indeed, during 

the fourth quarter, we helped clients raise $56 billion in debt to invest in their business, including American companies like Pepsi 

and Time Warner Cable. We have also helped clients raise $40 billion in equity to fund their businesses, including a major capital 

raise for GE, and we made $10.6 billion in new commercial loans. 

In our much smaller retail business, Morgan Stanley made $650 

million of commitments to lend to consumers during the last 3 

months of 2008. 

I have told you how we are putting TARP capital to work, and 

we are also filing monthly reports with Treasury detailing our use 

of capital. But I should also tell you what we haven’t done with 

TARP funds. We have not used it to pay compensation, nor did we 

use it to pay any dividends or lobbying costs. 

I know the American people are outraged about some compensation practices on Wall Street. I can understand why, and I couldn’t 

agree more that compensation should be closely tied to performance. 

At Morgan Stanley, the most senior members of the firm, including myself, did not receive any year-end bonus in 2008. I did not 

receive a bonus in 2007 either, and I have never received a cash 

bonus since I have been the CEO of Morgan Stanley. The only 

year-end compensation I have ever received was paid in Morgan 

Stanley equity, so my interests are aligned with shareholders. 

We also were the first U.S. bank to institute a ‘‘clawback’’ provision that goes beyond TARP requirements. It allows us to reclaim 

18 

pay from anyone who engages in detrimental conduct or causes significant financial loss to our firm, and we are tying future compensation more closely to multiyear performance. 

We have much work to do in our industry and across the markets. Real problems remain that are preventing economic recovery. 

We need to find ways to increase lending and restore consumer and 

market confidence. Perhaps most importantly, we need to enact reforms to the most fundamental issues laid bare by the recent turmoil: 

First, we need to fundamentally improve systemic regulation. 

Our fragmented regulatory structure simply hasn’t kept pace with 

the increasingly complex and global market. I agree with your proposal, Mr. Chairman, to create a systemic risk regulator. 

Second, we need greater transparency in our financial markets, 

both for investors and regulators. To regain trust in the markets, 

investors and regulators need a fuller and clearer picture of the 

risks posed by increasingly complex financial instruments. 

Morgan Stanley shares your desire to restore faith in our financial markets and get the American economy going again. We know 

that won’t be easy, and we know it will take time, but we are committed to working closely with you as well as our regulators and 

other market participants to achieve these important goals. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Mack can be found on page 139 

of the appendix.] 

The CHAIRMAN. Mr. Pandit. 

STATEMENT OF VIKRAM PANDIT, CHIEF EXECUTIVE OFFICER, 

CITIGROUP 

Mr. PANDIT. Mr. Chairman, Ranking Member Bachus, and members of the committee, I am Vikram Pandit, chief executive officer 

of Citigroup, and I appreciate this opportunity to speak with you 

today. 

Americans from all walks of life are facing crippling economic 

hardship. Foreclosures, lost savings, and widespread layoffs are 

having a devastating impact on millions of Americans. Institutions 

are searching for ways to respond to this crisis. 

Against that backdrop, the American people are right to expect 

that we use the TARP funds responsibly, quickly, and transparently to help Americans. They also have a right to expect a return on this investment. 

I know that the TARP funding decision was difficult for Congress, but I intend to make sure that, when it comes to Citi, you 

will look back on it and know that it was the right decision for the 

Nation and also for the American taxpayers. 

Last week, we published this report. This describes exactly how 

we are using TARP funds to expand the flow of credit. We posted 

the report on online, and we will update it each quarter. 

In late December, utilizing TARP capital, we authorized our line 

businesses to provide $36.5 billion of new lending initiatives and 

new programs. These programs are expanding mortgages, personal 

loans, lines of credit for individuals, families and businesses, and 

creating liquidity in the secondary markets. Our TARP report exVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
19 

plains these efforts in detail, and I would ask to submit it as an 

addendum to this testimony. 

More generally, in the fourth quarter of 2008, we provided approximately $75 billion in new loans to U.S. consumers and businesses, a significant commitment given the difficult economic environment, and we will continue our lending activities in 2009 in a 

responsible and disciplined way. 

Since the start of the housing crisis in 2007, we have worked successfully with approximately 440,000 homeowners to help them 

avoid foreclosures. We are also adopting the FDIC’s streamlined 

model for loan modification programs. In the last year, we have 

kept approximately 4 out of 5 distressed borrowers in their homes. 

We have extended our foreclosure moratorium to help millions of 

other eligible homeowners whose mortgages we service, and we 

continue to reach out to homeowners who may be experiencing financial difficulty despite being current on their payments. 

These efforts demonstrate that we are committed to supporting 

American businesses and helping families stay in their homes. 

Equally important, we are committed to providing the American 

public with a return on its investment in Citi. We will pay the U.S. 

Government $3.4 billion in annual dividends on that investment, 

and our goal, my goal, is to make this a profitable investment for 

the American people as soon as possible. The best way for us to 

make this happen is to return our company to profitability. 

When I became CEO a little bit more than a year ago, I demanded accountability. I removed the people responsible for Citi’s 

financial distress. I formed a new management team. I restructured the company. I streamlined our core businesses. I installed 

new risk processes and new risk personnel. And I will continue to 

make the decisions necessary to put the company on a strong footing. 

Mr. Chairman, the world is changing very fast, and we need to 

acknowledge and embrace this new world very quickly. We understand that the old model no longer works and the old rules no 

longer apply. 

I would also like to say something about the airplane that was 

in the news. We did not adjust quickly enough to this new world, 

and I take personal responsibility for that mistake. In the end, I 

canceled delivery. We need to do a better job of acknowledging and 

embracing the new realities. Let me be clear with the committee, 

I get the new reality, and I will make sure Citi gets it as well. 

One final note, Mr. Chairman. Our responsibility is to promote 

the recovery of our financial system and benefit our shareholders. 

We will continue to do everything we can in that regard at this 

critical moment in history. We will hold ourselves accountable, and 

that starts with me. I am personally accountable. My goal is to return Citi to profitability as soon as possible, and I have told my 

board of directors that my salary should be $1 per year with no 

bonus until we return to profitability. 

Thank you, Mr. Chairman. I look forward to your questions. 

[The prepared statement of Mr. Pandit can be found on page 142 

of the appendix.] 

The CHAIRMAN. Mr. Stumpf. 

20 

Before the gentleman—this is a very important subject. We are 

getting kind of a buzz of conversation. It accumulates. I would ask 

people to please keep down the conversation. I am talking about us 

up here. If you have to talk, go somewhere else. It is getting a little 

distracting. 

Mr. Stumpf? 

STATEMENT OF JOHN STUMPF, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, WELLS FARGO & COMPANY 

Mr. STUMPF. Mr. Chairman, Ranking Member Bachus, and members of the committee, I am John Stumpf, president and CEO of 

Wells Fargo & Company. 

Our company has been serving customers for going on 158 years. 

We are virtually in all businesses, and our team members are in 

all different States of the United States. We are a community bank. 

We have 281,000 team members. They live and work in thousands 

of communities, big and small, across North America. I have been 

a community banker with our company for almost 3 decades. I personally have lived and worked in places in Minnesota, Colorado, 

Texas, and now California. 

Across the country, many of our customers are facing difficult 

times. We are very proud that Wells Fargo has been open for business for our customers. In the last 18 months, when many of our 

competitors retrenched, Wells Fargo made $540 billion in new loan 

commitments and mortgage originations. Last quarter alone, we 

made $22 billion in new loan commitments and $50 billion in new 

mortgages, a total of $72 billion in new loans. That is almost 3 

times what the U.S. Treasury invested in Wells Fargo. 

With the merger, we have reopened lines of credit to some 

Wachovia customers who previously had been denied credit. We do 

business and lend money the old-fashioned way: responsibly and 

prudently. As a result, we earned a profit last year of almost $3 

billion. 

We understand the very important responsibility that comes with 

receiving public funds. We are always careful stewards of our 

shareholders’ money. The investment by the government is being 

used in the same prudent way. We have never been wasteful. We 

spend money to support business and make profit for our investors, 

and we are frugal. 

Last year, our overall corporate expenses actually declined 1 percent while our revenue rose by over 7 percent. We said from the 

start that we will use the government’s investment to help make 

more loans to credit-worthy customers. We said we would use the 

funds to find solutions for our mortgage customers who are late on 

their payments or facing foreclosure so they can stay in their 

homes. We also said we would report on our progress. We have 

done just that. 

We recently announced our first dividend payment to the taxpayers of more than a third of a million dollars. We are Americans 

first, and we are bankers second. So we see this taxpayer investment first and foremost as an investment in the future economic 

growth of our country. We are proud to be an engine for that 

growth. In the last quarter of 2008, we had double-digit loan 

growth in areas like student loans, agricultural loans, middle marVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
21 

ket commercial loans, SBA or Small Business Administration 

loans, and commercial real estate loans. 

Now, as to mortgages, last year we made $230 billion in mortgage loans to 1 million customers—half for purchases and half for 

refinances to lower mortgage payments. At year end, we had $71 

billion of mortgages still in process, up three-fold annualized from 

the third quarter, a sign of strong momentum going into 2009. 

Our mortgage lending is built on solid underwriting and responsible servicing. Because of that, 93 out of every 100 of our mortgage 

customers are current on their mortgage payments. That performance is consistently better than the industry average. 

In 2008, we nearly doubled our team dedicated exclusively to 

helping customers stay in their homes, which improved our outreach. Because of that, we were able to contact 94 of every 100 customers who are 2 or more payments past due on their mortgages. 

Of those we contacted, we were able to work out a solution for 7 

out of 10 of those we contacted. 

This resulted in our being able to deliver 706,000 solutions to 

Americans, avoiding foreclosure, during the last year-and-a-half 

alone. That is 22 percent of the 3.2 million solutions reported by 

the industry. Last quarter alone, we provided 165,000 solutions to 

our mortgage customers. That was 3 times as many as the last 

quarter of 2007. 

Across the country, we are partnering with real estate agents, 

cities, and nonprofits to speed up the selling of bank-owned properties so they can become once again owner-occupied. 

Mr. Chairman, and members of the committee, thank you, and 

I would be happy to answer your questions. 

[The prepared statement of Mr. Stumpf can be found on page 189 

of the appendix.] 

The CHAIRMAN. Mr. Stumpf, before my time starts, let me just— 

I think you said a third of a million and you meant a third of a 

billion. 

Mr. STUMPF. A billion. 

The CHAIRMAN. It was $371 million. Let me just make sure we 

have that corrected. 

Let me announce before, again, I get to my questions, I think 

this will be as important today in dealing with the economy of this 

country as we are likely to have, in many ways, short of voting on 

major things. I am, therefore, going to ask the witnesses—my intention would be—it is a large committee, there is a great deal of 

interest. I appreciate the forthcoming nature of the testimony. My 

intention would be to take a break at about 12:30 to 1:15 and then 

ask people to come back and stay. I mean, I assume, from your 

standpoint, the day is shot anyway. And if you could come back, 

and maybe we can stay till 5 o’clock. It may be an imposition, but 

I think, given the importance of what we are all trying to do together, that is justified. And I want to maximize the ability of my 

colleagues to be able to ask questions. 

So, with that, I will now—one other thing. We have a statement 

submitted to me by the Reverend Jesse Jackson on behalf of the 

RainbowPUSH Coalition—I ask unanimous consent to put it into 

the record—talking about the need for home foreclosure, for opening the credit markets, for student loans and minority participaVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
22 

tion. And I ask that this be made a part of the record. Without objection, it will be made a part of the record. 

Now, as to my questions, let me begin—and this is something I 

discussed with my colleague from Ohio, Mr. Driehaus. 

Mr. Dimon, you said that you hoped the Administration will be 

adopting a uniform mortgage modification program. Mr. Geithner 

had said that he plans to do that. Let me say this. I have been unwilling to join in general calls for moratoria on foreclosures when 

they were open-ended because I wasn’t sure that they would be 

helpful or even applicable. We wouldn’t know who they would be 

applicable to. 

But it does seem to me here we have the commitment of Secretary Geithner that he will be putting at least $50 billion, in addition to other resources that are already available—Fannie Mae, 

Freddie Mac, and IndyMac, etc.—at least $50 billion additional 

funding into a sort of system-wide effort to do mortgage modification. I believe that we are going to be pushing for even more. If 

that works, there could be more. 

I would ask all of you now to please make sure that we have a 

moratorium in effect until we get that program and until you know 

if people can qualify. We know the tragedy of the people who get 

killed or injured in a war after a ceasefire. Having someone suffer 

foreclosure because 2 weeks hadn’t gone by for this program would 

be unacceptable. So I urge you and I will urge everybody who is 

in this business to withhold foreclosure until we get Mr. Geithner’s 

program. And then we can—and, again, I would assume no one 

would be foreclosed who could meet that. 

The second point I want to make—and I understand that not everybody volunteered for the money. In some cases—let me acknowledge, Bank of America, I understand an administration which was, 

I think, severely affected by the negative reaction to their allowing 

Lehman Brothers to go under, I understand they were eager for 

you to go ahead with the Merrill Lynch purchase. And I do think 

it is fair to note that the second round of TARP funding was in conjunction with your taking on a purchase that they very much wanted you to do. 

But we are now talking about some restrictions, and including— 

and I hope you will—you know, legally, there are limitations on 

what we can do retroactively, but there are no limitations on what 

you can voluntarily do retroactively. We are going to be imposing 

some restrictions, going forward. There are going to be some tough 

requirements coming from the Inspector General, Mr. Barofsky, to 

ask you for some very specific accounting. 

I just want to make this very clear. In the bill that passed the 

House involving the second half, we have a provision that says, if 

you don’t like the conditions, and if you think you are being illtreated by our requests that you tell us how you spent it, we will 

take it back. If you are ready to give us back all the money with 

an appropriate interest rate and your regulator doesn’t have a 

problem with that, then—that wasn’t yet in the law, but let me tell 

you, if you want to give back the money, we will take it. And if 

there are any obstacles to your giving it back legally, we will undo 

those obstacles. I believe there would be great support for doing 

that. 

23 

Now, let me ask you, on the incentive—and I am glad to say that 

many of you are not taking bonuses. But I have to say this. If you 

believe in bonuses, then is that something bad? I mean, I guess the 

question is this. You have bonuses over time. If, in good times, you 

were told you weren’t going to get a bonus, what part of your job 

would you not do? I mean, if you weren’t getting a bonus, would 

you, like, leave early on Wednesday or would you take longer 

lunches? Would you bypass a certain class of investors? 

You say and somebody said, well, your incentive comes in shares 

that align your interest with that of the company. Here is one of 

the problems: Why in the world are some of the most highly paid, 

talented people who have jobs that are fun—let’s be clear, it is not 

always fun, this is not amusement park time—why do you need to 

be bribed to have your interests aligned with the people who are 

paying your salary? 

And this is part of the problem. I know it is a problem with people at the lower end who get bonuses, and that has been built into 

their compensation. But at your level, again, why do you need bonuses? Can’t we just give you a good salary or give yourselves a 

good salary—you are in charge of that—and do the job? This notion 

that you need some special incentive to do the right thing troubles 

people. 

Anyone who wants to answer, please go ahead. 

Mr. MACK. I will try, Mr. Chairman. It is a good question, and 

it is complicated. 

At least from the investment banking perspective, we all grew 

out of small partnerships. It was historical. Morgan Stanley did not 

go public until 1986. When I joined the firm, there were 325 people 

and probably 20 partners. They took very low salaries. And at the 

end of that, you got a bonus if the firm did well. 

I think what we have seen, at least from investment banking, is 

a carry-on of that methodology. And, without question, given the 

kind of risk that we take today, the global nature of our business, 

and the size of our business, all that has to be looked at again. 

To answer your question specifically, at least at my level—and 

I think my colleagues here would say the same—we love what we 

do. If you gave me no bonus in the best year, I would still be here. 

The CHAIRMAN. I appreciate that answer, and I thank you very 

much. So it does seem to me, if there weren’t bonuses, we would 

still get our money’s worth. So I will not bill you for my services 

as an efficiency consultant, and I appreciate the answer. 

The gentleman from Alabama. 

Mr. BACHUS. Thank you. 

The chairman mentioned this being a very important day. I 

agree, not because of the vote on the stimulus package. I believe 

it could be a very important day because I think this hearing and 

the testimony today could go a long way towards restoring confidence in our financial services industry and in the people who run 

it. 

If they publish the right story tomorrow—you never know what 

the story will be. But what I heard—and a lot of this I know, but 

I don’t think most of the American people know it—is that we gave 

taxpayers, or you gave taxpayers, an equity share in your businesses at depressed prices. And, as many of you have said, there 

24 

is going to be, in some cases, a handsome profit and, others, a profit. And, as with all investments, there may be some losses. But I 

truly believe, unless there is a worst-case scenario for the next 5 

or 10 years, the taxpayers are going to—actually, this is going to 

be one of their best investments. 

You paid a dividend of 5 percent, and a lot of people would love 

to have that today. You have made mortgage modifications by the 

millions. Government efforts, on the other hand, have almost been 

very unsuccessful. And you did that at no expense to the taxpayers. 

You underwrote the losses. So you kept millions of Americans in 

their homes, families. You assumed failing institutions at the urging of the regulators. And, in most cases, if not all cases, this was 

a great benefit to the taxpayers, who insure those deposits. That 

is a real plus. As Mr. Mack said, you have reduced risk and leverage, something that has to be done. It is a necessary thing. And, 

as I have heard, you have maintained a high level of charitable 

contributions. And so I commend you on all of that. 

Now, the thing that we need to talk about is lending. But I will 

tell you that, in an economy as bad as our economy is and in a 

challenging time and with deposits in some cases eroding and an 

economy in certain areas in shambles, I was simply shocked that 

lending wasn’t down 10 or 15 percent across America. And when 

it came out that it was down 1 percent across the board, I thought 

that was wonderful news. That our economy could go through that 

type of shock and lending would go down 1 percent, I almost don’t 

believe that. But it is a very good number. And I thought it should 

have been a wonderful, positive story. And I think that the capital 

injection cases, in some case, made a difference, although I don’t 

know how much. 

I have one question, one urging. I hear from responsible borrowers who are not in default and who are paying their payments 

on time, their interest payments in some cases, that their principal 

is being called, that they are being asked to do a 10 percent calldown on their principal, or that their credit lines are being restricted. And I know, in some cases, that this is probably a good 

lending practice because you are seeing some deterioration. 

But I would ask you, can we do a better job in that? And can 

the regulators assist you in that, or is there something that we can 

do to avoid those cases? Because there are people who can make 

interest payments now, but they cannot begin to pay down principal. It is just the wrong time. 

So, to any of you who would like to answer that question. Or I 

will call on Mr. Lewis. Or, Mr. Stumpf, you didn’t want the money, 

you took it, and you wish you didn’t, I am sure. And we are going 

to make money on that investment, but you can answer the question. 

Mr. STUMPF. Well, thank you. And we have clarified our statements. We are happy to have the money. It strengthened the industry, and that is good— 

Mr. BACHUS. But, yes, I guess what I meant is, first you said, 

we don’t need the money. But I appreciate it. 

Mr. STUMPF. With respect to borrowers, in our company, frankly, 

we have been growing loans the last 18 months. As I mentioned 

25 

in my testimony, many others have retrenched. And we think these 

are actually good times to make loans to credit-worthy borrowers. 

We make money when we make loans. That is our business. We 

want to serve customers, help them educate children, buy homes, 

help small businesses to develop products and services that they 

can sell and serve other customers. In some cases, it is prudent. 

You have to cut back on a line, but we have not done it systemwide. It has been very much individual, one customer at a time, 

working with them. And we want to stick with them if we possibly 

can. But also, unfortunately, not every borrower who wants or 

needs money can afford it today. And we have to be prudent— 

The CHAIRMAN. If the gentleman would yield briefly, that is such 

an important question that so many of us have been asked to get 

answers to. I would ask those to whom it is relevant—obviously, 

not Mr. Blankfein or Mr. Kelly or Mr. Logue or Mr. Mack, but for 

the commercial bankers who are before us, if you could answer in 

writing, that would be very helpful. I think we would all like that, 

because I think that is one of the most frequently asked questions 

we have. So for Mr. Dimon, Mr. Lewis, Mr. Pandit, Mr. Stumpf, if 

you would answer that in writing, that would be very helpful. 

Mr. STUMPF. If I could add one other thing? We have about $175 

billion of untapped lines of credit—home equity lines, credit card 

lines—that are not in use. 

The CHAIRMAN. The gentleman from Pennsylvania. 

Mr. KANJORSKI. Thank you very much, Mr. Chairman. 

I am going to take the opportunity—having eight of the world’s 

finest financial minds lined up before the committee is too great an 

opportunity not to ask some simple, but I think important, questions. 

We are going to be called upon constantly to relook at re-regulation, and the common expression is ‘‘Washington,’’ so this never 

happens again. And how often we have heard that as we go 

through history. Well, I am not quite that optimistic that we have 

the capacity to stop the natural adjustment of the marketplace 

from never happening again. 

But I do wonder—and anyone can take the question to start 

with—when did you first realize that the economy was in trouble? 

What actions did you take, either privately within the corporation 

or publicly, to alert those of us in government and the leadership 

of government? And just when was that? And why does it appear 

to the general public that all the finest minds in finance missed the 

most obvious—this disaster, if you will? 

I do not want you to stampede now in wanting to answer that 

question. 

Mr. LEWIS. I will start, sir. 

Mr. KANJORSKI. Good, Mr. Lewis. 

Mr. LEWIS. To Secretary Paulson’s credit, I can vividly recall him 

calling me in August of 2007 when things really started to melt 

down. And so, late July to early August or mid August was kind 

of the timeframe that we saw real challenges in the economy— 

Mr. KANJORSKI. Let me stop you there. I am going to try to jump 

in, because I am really interested in this question. 

That is when the marketplace and subprime loans started to disintegrate? 

26 

Mr. LEWIS. Correct. 

Mr. KANJORSKI. But everybody was starting to see it then. Was 

that the first inclination you had as a banker that we had trouble? 

Mr. LEWIS. It was for us, in terms of capital markets. We were 

not in the subprime business, so we don’t make subprime loans, 

and so we wouldn’t have seen that. But the capital markets meltdown in August was the first time that we began to see the severity of what was going on and became very concerned. And there 

was a lot of communication with Treasury and the Fed by that 

time. 

Mr. KANJORSKI. So is it right for me to conclude that you thought 

everything was going to continue and go along at the level of leverage that existed in our system and there wasn’t going to be any repercussions from that? 

Mr. LEWIS. I think more so we did not see the economy—we 

thought the economy was in relatively good shape going into the 

third quarter of 2007. And so that was more, as a commercial 

bank, was our focus than necessarily the leverage and the capital 

markets piece. 

Mr. KANJORSKI. Mr. Blankfein, you are out there in the cutting 

edge of putting money out. Is that approximately the same time 

you saw this? 

Mr. BLANKFEIN. Yes. We had some signals before that, with respect to the market. But if you remember—and this kind of commentary came out of the Central Bank, our Central Bank and 

other places, and commentators—there was a bifurcation that was 

in the air at the time: These are problems of Wall Street, not problems of Main Street. 

When there were conversations about whether we needed an interest rate cut or not, the conversation was, should we do something that helps Wall Street maybe that is contrary to the interest 

of Main Street? Because it was thought at the time that these 

problems in subprime and real estate were mostly of securities and 

an isolated problem and were the problems of Wall Street. 

I think one of the lessons we learned is that was kind of a foreshadowing, the problems that we saw in the securities market were 

directly related to—because they all sprang from the real estate 

sector. It was a foreshadowing of what we saw in the real economy. 

But, for a long time, people made the bifurcation and separated 

Wall Street from the real economy. 

And I think one of the lessons we learned now is they are inextricably wound together. Wall Street can’t prosper with Main 

Street in poor economic health, because we lend money and we 

need to be paid back for sure. And, obviously, we know now, absent 

credit and liquidity, the real economy suffers. And so I think that 

is one of the lessons learned from this incident. 

Mr. KANJORSKI. Okay. I have very little time left, but I am going 

to ask the question anyway. What do you see in the future? Have 

we seen the worst of this thing? Have we failed to describe the 

problem adequately for the American people and for the public generally? And if we have failed to do that, is it important that we describe this problem in as great a detail and dramatically as possible so we get everybody signed onboard? And if we do that, do 

you have any fear that will precipitate a further negative reaction? 

27 

The CHAIRMAN. I am afraid there won’t be time for that question 

to be answered. 

The gentleman from Texas. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

One of the things that—there has been a lot of focus on all of 

the bailout activities. The TARP plan was primarily directed at 

toxic assets. That is the big topic. And somehow, if we fix the toxic 

assets, we fix the economy. I don’t necessarily agree that is the 

case. 

But one of the things that I hear from a lot of other people that 

I talk to is that the reason that nobody is selling their assets is because they don’t like the price, that there is a market for some of 

these assets out there, and that there is a reluctance on the sellers 

because they keep hearing people from government say, you know 

what, we may have a plan to help you. And so nobody wants to go 

out and start taking those hits that they have hopefully written 

down on their books and then find out later on they missed out on 

a good deal. 

The other piece of it is that everybody’s solution is to somehow 

sanitize these toxic assets with taxpayer money. I don’t think that 

is necessarily in the shareholders’ or the taxpayers’ best interest. 

Is it time for the government just to kind of step back and let 

the markets work through this? If you have these assets written 

down appropriately, then it shouldn’t be affecting your balance 

sheet that much; it is just going to affect your liquidity. 

And, at the same point, we are taking some of these very extreme measures, and we are really not asking your bondholders or 

your shareholders to get in the game with us. 

But, more importantly, the primary question that I want to know 

is, at what point in time do we say, you know, this is enough and 

the market just kind of has to work this thing out and we back off 

of the government intervention? Because the deeper we get into 

this, the tougher the exit strategy is going to be. And how we ever 

get the markets, quite honestly, back to where they were will take 

a long, long, long time. 

So, Mr. Blankfein, do you want to start with that? 

Mr. BLANKFEIN. Again, as a commentator—because, again, we 

are not in the consumer businesses as such, and we are under a 

mark-to-market accounting regime, so we are required to mark at 

the fair-value price that is in the market today. But, as a commentator, I would say that accounting regimes, I think, for banks—and 

people can comment on this—allow people to mark securities where 

they are generally—certain kinds of instruments that they have on 

their balance sheets—essentially where their expectation will be 

that those assets will be economically valued over time. 

Right now, because of the lack of capital in the market, those assets couldn’t be sold at that price even though, if held on the balance sheet, a bank can reasonably expect that they would get value 

for that at a higher price. But if they tried to sell it today, there 

is really no risk capital that would pay that price. The supply and 

demand would only cross at a much lower level. 

So I think banks would generally say, we are going to hold these 

securities, earn the fair value over time, and not hit a bid where 

it would clear today. That is disadvantageous for the system, beVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
28 

cause I think what the system would like is for banks to sell. But 

there is no incentive to sell at a price that they perceive as too low, 

because that low price is generated by the fear and the general crisis in the environment and the lack of risk capital coming in. 

Mr. NEUGEBAUER. Well, some people would say that one of the 

reasons that they don’t want those transactions to start is they are 

probably going to start at a much lower level than they have actually been marked on the books. 

Mr. BLANKFEIN. Well, that is correct. It would be lower. 

Mr. NEUGEBAUER. And so then there is this fear that now I am 

going to have to actually write down my assets more, and I would 

rather just sit here. And now that the government is propping up 

my balance sheet, I can sit here and kind of ride this storm out. 

The question is, how does that stimulate the economy? I say it 

probably doesn’t. 

Mr. Pandit, do you want to take a shot at that? 

Mr. PANDIT. I will. Congressman, we have sold a lot of assets. We 

sold half a trillion of assets just in the last year, of which $150 billion is what you would call these challenged assets. Every time 

there was a market, we took advantage of it. And we have been 

continuing to do that where there is a market. Although we continue to do that as well, we, too, mark to market. And those marks 

are reflected in the losses that we have taken, as well as in our 

income statements and balance sheets. 

The reality is that, as we speak about what is going on, it is not 

only an issue of credit not flowing, lending not flowing. There is not 

enough funding out there in the marketplace for people who have 

risk capital to step up and say, I want to buy a lot of these in size. 

To say there is always a market, that is a tautology. I can sell a 

$100 bill for a dollar. But the point is that when we look at some 

of the assets that we hold, we have a duty to our shareholders. And 

the duty is, if it turns out they are marked so far below what our 

lifetime expected credit losses are, I can’t sell that. That is not 

right for our shareholders to sell it. I am not going to sell them at 

a dollar. 

So everything you are working on is just right. It is about credit 

starting in the marketplace. It is about funding flowing. It is about 

capital flowing. When that happens, you will get a real bid. In the 

meantime, when we find one, we are always there to sell these assets and get them off our balance sheet. 

Mr. KANJORSKI. [presiding] The gentlelady from California, Ms. 

Waters. 

Ms. WATERS. Thank you very much, Mr. Chairman and members. 

Let me just say to our captains of the universe who are sitting 

here before us that it seems that, all of my political life, I have 

been in disagreement with the banking and mostly financial services community because of practices that I have believed to be not 

in the best interest always of the very people that they claim to 

serve. 

I have been through the red-lining fights. I have been on the 

fights of discriminatory practices over the years and a lack of business lending and available capital to small and minority businesses. I have been through and still, I suppose, am engaged in a 

29 

fight about predatory lending. And so I come to this with very, very 

strong opinions about what we need to do to regulate this industry. 

Let me just ask a few questions. And I won’t ask you to expound 

on them. But I would like to know if any of you or all of you, any 

of you, since you received TARP money, increased the amount of 

interest on the credit cards by sending out letters to the consumers, 

to your credit card holders indicating that this was part of the contract, even though it may have been in small print, and you now 

have the ability to do it. 

Did anyone? Did any of you do that? 

Mr. LEWIS. Let me start, Congresswoman. 

Ms. WATERS. I would just like to ask each of you. Bank of America, I suppose—did you do this? 

Mr. LEWIS. Yes, I was volunteering. 

First of all, I feel more like corporal of the universe, not captain 

of the universe, at the moment. 

Ms. WATERS. Did you increase your credit card interest rate? 

Mr. LEWIS. In 2008, we increased rates on 9 percent of our customers. 

Ms. WATERS. Okay, thank you very much. 

Did anyone else increase their credit card rates after you received TARP money? Anyone else? If so, would you just raise your 

hand? 

Thank you. You sent out the letters that I am trying to describe, 

saying that you have the authority to do that. 

Did any of you reduce the amount of credit that was available 

to credit card holders because they shopped at certain stores? Just 

raise your hand if you did. 

None of you did. Let the record reflect no one raised their hand. 

On loan modifications, where you claim to do such a good job, I 

disagree with you. Many of you know that I help to implement loan 

modifications, working with my constituents. I would like to thank 

Wells Fargo for the response that you gave me when I brought to 

your attention how poor your loan modification work is under your 

servicing company. 

I have not heard from Bank of America, even though they know 

that I have spent hours on the phone trying to connect with their 

loss mitigation department. 

Bank of America, do you still have loss mitigation departments 

offshore, where you are using foreign companies or individuals to 

respond to our taxpayers? 

Mr. LEWIS. If we have a loss mitigation department offshore, I 

do not know about it. 

Ms. WATERS. I am sorry, I can’t—you do have them offshore, who 

are supposed to be doing loan modification work or loss mitigation 

work for you, is that correct? 

Mr. LEWIS. I do not know that we have or we haven’t. All I know 

is that we have 5,000 people working on the issue. 

Ms. WATERS. Thank you. So you do have offshore loss mitigation 

work going on. 

Now, we have many of our constituents who try to get to you to 

get a loan modification before they get in trouble. How many of you 

have a policy that says you have to be 2 months or more behind 

before you will deal with them on loan modifications? 

30 

None of you require that you must be 2 months or more behind 

before you can get loan modification from your banks, is that right? 

Mr. PANDIT. Congresswoman, I would speak on behalf of Citi. We 

have a new program where we are reaching out to half-a-million 

customers where we reach them even if they are current in their 

payments. It is not about whether you are behind on your payments for a couple of months. This is a— 

Ms. WATERS. I just want to know, sir, how many of you require 

that you have to be behind for 2 months? 

Okay. We will get—if I may, Mr. Chairman, I just want to also 

say that I think it is important for us to understand why you paid 

yourself fees on the money that we gave you. 

As a matter of fact, Bank of America, you paid yourself $30 million in fees just to accept our TARP money. 

Citigroup, you paid yourself $21 million in fees. Why did you do 

that? 

Mr. LEWIS. I don’t know what you are talking about. 

Ms. WATERS. Do any of you understand what I am talking about, 

in terms of processing the TARP money that you got and the fees 

that you have—yes? 

Mr. PANDIT. May I answer, Congresswoman? 

Ms. WATERS. Yes. 

Mr. PANDIT. I think you are referring to the $17 billion of debt 

we issued under the FDIC-guaranteed program on which we paid 

underwriting fees to underwriters, us and a lot of others. We have 

to raise that money in the market, and we have to follow the practices by which we raise it, which is to underwrite that debt, and 

we have to pay the underwriters to raise that money. I think that 

is what— 

Ms. WATERS. You do the guarantees. You get guarantees. But 

you absolutely collect fees to do the work to place the money, is 

that right? 

Mr. PANDIT. We have to pay underwriters and other people who 

sell those bonds. 

Ms. WATERS. But you are not paying anybody. You are keeping 

the money yourself. 

Mr. KANJORSKI. Ms. Waters, I am just going to have to call you 

down, because, when the chairman gets back, he is going to penalize me. And I don’t know what that penalty— 

Ms. WATERS. I appreciate that very much. But let the record reflect that we need to find out why they are paying themselves fees 

on the money that we give them. And we need to have a roundtable 

discussion with them to find out what they are going to do to discontinue this practice. 

Mr. KANJORSKI. All right. 

Gentlemen, you heard the question. If I could make a request, 

perhaps individually for your companies, you could respond in writing to Ms. Waters’ question. 

And next, we have Mr. Castle. 

Mr. CASTLE. Thank you, Mr. Chairman. 

Gentlemen, this all seems to come in waves, and I sort of see another tidal wave behind the mortgage foreclosure and the other 

waves, and that is the area of credit cards. 

31 

There are many economists and others who believe that, with the 

breakdown of the economy, that we are going to have multi-trilliondollar losses as far as credit cards are concerned. And this could 

actually lead to a situation in which we have bankruptcy in the industry. And a lot of this, obviously, relates to the unemployment 

rate and the people just not having the ability to pay who had the 

ability to pay before. 

My question—and perhaps I will ask Mr. Dimon and Mr. Lewis 

this question—is, are you prepared for that? Or perhaps you disagree with the premise that this is going to happen. But there are 

many who do speculate in the next few months to 2 or 3 years that 

we are going to have significant problems in the credit card industry. And I don’t know what your level of preparation for that is. 

Mr. LEWIS. It is clear that this year, in particular, is going to be 

the year of consumer credit losses, because it is so intertwined with 

the performance of the economy. With regard to credit card losses, 

the general rule of thumb is at a percentage point to the unemployment rate to get your loss rate, at least in our mix of portfolios. 

And so, clearly, this is going to be an awful year for the credit card 

industry and for all credit card portfolios. There is no doubt about 

it, because the more optimistic views are unemployment at 8 or 81⁄2

percent, and that would cause very high loss rates in the credit 

card portfolios. 

Mr. CASTLE. Are you prepared to manage that? 

Mr. LEWIS. We are doing everything we know to do in our loss 

mitigation efforts, in our call center efforts, to mitigate as much as 

possible and to cut expenses as much as possible. 

Mr. CASTLE. Thank you. 

Mr. Dimon? 

Mr. DIMON. I think it is not as dire as that because I think all 

credit card debt in America is maybe $1 trillion. And when you 

have a credit card business, you know that there are going to be 

cycles. It usually follows unemployment; it will get worse when unemployment goes up. 

We expect, and we have told our analyst community, that our 

losses will be probably 71⁄2, maybe 8 percent this year. It will be 

worse than that—8 percent of total outstanding, that is well over 

$10 billion of losses. And, yes, we are more than adequately prepared to deal with that. We are properly reserved for it. And that 

is one of the costs of being in the business. 

Mr. CASTLE. Thank you. 

Mr. Pandit, you and actually others who testified indicated that 

you are handling your mortgage foreclosures, that you are actually 

hopefully doing a good job with respect to those who have mortgages with you. 

We have had a plan put forth in legislation by Congress which 

has not been particularly successful to this point. We have had discussions of other plans. Mr. Geithner yesterday mentioned that as 

part of his plan, which a lot of people feel is a little bit ill-defined 

at this point. 

My question to you is, are you satisfied with what you and other 

bankers are doing? Or is there a plan that we should be adopting, 

maybe not with respect to the companies represented here but to 

other not only banking interests but mortgage interests created for 

32 

that purpose that weren’t particularly well-funded, etc., and helping those who are going into foreclosure, that we should be doing? 

Do you have a precise recommendation with respect to that? 

Mr. PANDIT. Congressman, what I would say is that when we can 

talk to the individual who is in the home, we have a very, very 

high percentage of success in keeping that person in the home. The 

challenge is, when times get tough, people don’t want to own up 

and say, hey, I am going to have an issue. And so people put their 

heads in the sand and they don’t own up, and that is really a bad 

place to be. 

What we find is half the foreclosures that we enter into are for 

people we have never talked to. Anything you can do to have more 

community service, more effort to say to people, you know what, 

there is no shame, there is no stigma, we are going through this 

together, open up, figure out some way to go talk to your lenders, 

that would be good for us. Because we think we can help those people. 

Mr. CASTLE. I assume, of all the commercial banks here, that you 

are in the same basic position; if you talk to the people, you will 

try to work out a plan to help them with their foreclosure circumstances. You all represent large, pretty well-capitalized entities 

that, according to your reports today, are doing reasonably well. 

But I am more concerned about the mortgages that were created 

by mortgage banks that are no longer in business and perhaps 

have been assigned to or sold to other entities at this point and 

which are going to be true foreclosures. 

Do any of you have any ideas about what we, as a government, 

should be doing to help in those circumstances? And I appreciate 

what you are doing individually as companies. 

Mr. DIMON. I think one of the legitimate issues is that people, 

if they don’t know who their servicer is and they don’t know who 

to call, that there are some great ways to modify loans. We should 

find ways to make sure that all loans are modified that way. And 

we have shared with the Treasury, the FDIC, the OCC, which several banks here have best practices, and we think that everyone 

should follow its best practice, and we will do the best job we can 

for everybody. It has been haphazard in the last year. 

The CHAIRMAN. The gentlewoman from New York. 

Mrs. MALONEY. Thank you. 

First, I would like to welcome the panelists, some of whom are 

headquartered in the district I am honored to represent. And I particularly would like to thank Bank of America for deciding to build 

a major headquarters in New York in the dark days after 9/11. It 

was very important for our morale. Thank you. 

But, Mr. Lewis, as a New Yorker, I followed the Bank of America-Merrill Lynch merger with great interest. Earlier this year, I 

believed that the government intervention to add $45 billion to get 

the merger done, along with $188 billion guaranteed for the bad 

loans of Merrill, was in the interest of the American taxpayer and 

our economy. But recently, Secretary Geithner said that we were 

shoring up banks not for the sake of the banks, but for the sake 

of American taxpayers. 

But, in the case of this merger, some alarming facts have come 

out in a report that was recently issued by Attorney General AnVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
33 

drew Cuomo. In it, he points out that bonuses to Merrill employees—they doled out over $3.6 billion just days before Bank of 

America bought the collapsing firm with the help of taxpayer 

money. 

Also, we learned that Merrill moved up the timing of these bonuses for the fourth quarter of 2008 to December 8th, a full month 

before the fourth quarter earnings came out on January 16th. And 

Merrill’s fourth quarter earnings were terrible. They lost over $16 

billion, capping a year in which they lost a jaw-dropping $27 billion. 

I can understand paying bonuses for outstanding performance, 

for building jobs, growing the economy. But how can you justify 

paying bonuses to managers who were running their company into 

the ground to the point that they were forced into a merger? Also, we learned that the $3.6 billion in bonuses was not distributed fairly or over the board to all the employees, but was highly 

concentrated to the top. The top 14 employees received about a 

quarter of a billion dollars. The top four employees received a combination of $121 million, and the top 30 about $20 million apiece. 

So that those who were most responsible for the losses were the 

most richly rewarded. 

And, for me, the worst aspect of this business is that Merrill paid 

these bonuses out just before the January 1st merger with your 

bank. Couldn’t this reasonably be described as looting the company 

prior to the merger? 

And since Merrill’s contribution deteriorated in its condition so 

much in November and December, even those bonuses were paid 

out—when they were paid out, the government had to inject $45 

billion to make the merger happen. So it appears the American taxpayers, they are the ones who are stuck with the bill for paying 

huge bonuses to the very people whose poor judgment and mismanagement cost this country billions of dollars. 

So my question to you is, did you know how big those bonuses 

were going to be? Did you know that they were going to be paid? 

Did you discuss it with anyone prior to the merger? And were you 

aware that government, taxpayers were going to have to pay for 

these bonuses for the losses to the company? 

Thank you. 

Mr. LEWIS. Thanks for the question, and thanks for the first comment. 

My personal involvement was very limited, but let me give you 

my general understanding of what happened. 

First of all, I do know that we urged the Merrill Lynch executives who were involved in this compensation issue to reduce the 

bonuses substantially, particularly at the top. I will remind you, 

though, that they were a public company until the first of this year. 

They had a separate board, separate compensation committee, and 

we had no authority to tell them what to do, we could just urge 

them what to do. So we did urge. 

There was some feedback, in that, to your point, at the very top 

there were some contracts that were of tens of millions of dollars 

to several individuals that were legal contracts that Merrill had 

made to those individuals. And it is my understanding those 

skewed these amounts pretty substantially. 

34 

I can only contrast that to Bank of America’s policies. First of all, 

as I mentioned, nobody on my management team received any incentives. Nobody on my management team has a contract or a golden parachute or severance. And then finally, we pay our bonuses 

on February the 15th of the following year. 

So major changes will be made, but we could not make them 

until we owned the company. 

Mrs. MALONEY. Okay. Thank you. My time has expired. 

The CHAIRMAN. The gentleman from New York. 

Mr. KING. Thank you, Mr. Chairman. 

I want to thank the witnesses for their testimony today. 

I would like to direct my questions to Mr. Dimon and Mr. Mack. 

Our chairman, Mr. Frank, has proposed the creation of a systemic 

risk regulator. And in your testimony, Mr. Dimon, and yours, Mr. 

Mack, both of you endorsed the concept of a systemic risk regulator. I would like to ask you several questions and then just turn 

it over to you for the balance of the time. 

If we do establish this systemic risk regulator, which existing 

regulators would this replace? Do you have concerns that the regulator would be created in such a way as to impede our competitiveness with the rest of the world? 

And secondly, how would this regulator have worked? Looking 

back at the last several years, how would this regulator have mitigated or even prevented the current situation we have? 

And, with that, I ask Mr. Dimon and Mr. Mack if they could answer the question. 

Mr. MACK. Well, Congressman, the world has turned into a global trading market. So the idea of a systemic risk regulator, I think, 

is critical. Our businesses are much more complex than they were 

40 years ago when I first got in the business. And I would argue, 

and you heard from Secretary Paulson, that, if you go back, some 

of our existing laws were written right after the Depression. We 

had Glass-Steagall at that time. It was a real separation of risktaking. So, on one hand, you had the Federal Reserve with regulatory authority, clearly, with the banks and the SEC with the investment banks. 

There needs to be, I believe, a coming together of regulatory 

oversight. So that is at the first level. And I think it is up to a 

number of hearings and discussions on how that takes place, but 

I would like to see a combination of some of our regulators. 

If you go back a very short time ago, the New York Stock Exchange had a regulatory arm and ASD had a regulatory arm, and 

they put it together as FINRA. I think that consolidation of regulatory authority needs to continue. 

I think there needs to be some type of global regulatory coordination much more efficient than we have today. And, again, that is 

complicated because each country, especially the major companies 

where we are doing trading or sales—and not just for the investment banks, but clearly for the banks also—the coordination, I 

think, is critically important. 

I also think, you know, as you look at the different jurisdictions, 

whether now that we report to the Fed and the SEC, you are also 

involved with the commodities business, you are involved with the 

FDIC. We need to have a coordinated super-regulator for the finanVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
35 

cial service business. How we put that together is going to be a 

number of conferences and meetings, but I do urge all of you to 

pursue that. And we will be as helpful as possible in trying to help 

define what the issues are. 

Mr. KING. Okay. 

Mr. Dimon? 

Mr. DIMON. Yes, so, first, I want to start by saying that there are 

a lot of things that need to be fixed in the regulatory system. They 

were not to blame for all the things that happened. So I am not 

trying to push the blame to anyone else. But we should recognize 

these issues and problems and fix them if we want to fix these 

problems going forward. 

We have a Byzantine alphabet soup of regulators that get involved in systematic regulation. And I also should point out, by the 

way, a lot of companies that were heavily regulated have problems, 

and a lot of companies that were not heavily regulated have problems. So it isn’t quite clear that was the solution. 

But the OTS had enormous problems with WaMu and Countrywide, who are no longer here and were acquired by some that are 

coming to the table. Fannie Mae was regulated by the—I forgot the 

name at the time, but it has a different name today. We have the 

SEC, the CFTC, the OCC. 

A lot of unregulated businesses caused some of the problems, like 

the mortgage business. The unregulated mortgage part of the business was far worse than the regulated part, which was in the commercial banks. And I think it would have been good to have taken 

a good look at that. And some other problems that were caused by 

insurance companies that really weren’t under the jurisdiction of a 

regulator that was into the global capital markets like AIG and 

some of the monolines. 

So I think it would be a tremendous benefit to have one regulator 

looking at anything that can cause systemic risk that is constantly 

looking for things like that and trying to look around the corner. 

And it should be a U.S. system and globally coordinated. But it 

doesn’t have to, obviously, be exactly the same in every single country. 

I think there is a regulator who, kind of, does a lot of this already, which is the Federal Reserve. I think if you try to invent a 

new one it will take a long time. I think they do have the capability, the people, the knowledge, and maybe should have a broadened mandate to do this too. 

Mr. KING. In the few seconds that are left, are any of you opposed to having a systemic risk regulator? 

Okay. 

Mr. Chairman, I yield back. 

The CHAIRMAN. The gentleman from Illinois, Mr. Gutierrez. 

Mr. GUTIERREZ. Thank you, Mr. Chairman. 

First, I would like to begin by thanking Mr. Pandit for coming 

and visiting with me yesterday. It was a good meeting and very 

helpful. 

And then ask him, how do you see, going forward, what it is we 

do in terms of pricing the assets that you have on your books so 

that we can figure out, going forward, what it is we do with them 

36 

and thereby begin a real recapitalization of your financial institutions and other financial institutions? 

How do we get a market price so that we know the depth of our 

credit crunch right now? When we had Paulson come before us in 

the beginning, he said he was going to go and buy or somehow take 

toxic assets. And then, a couple of months later, much to my surprise, after we had authorized the money, he simply infused money 

into financial institutions, took $350 billion, and spread it out. 

How do we get to a pricing so we know what our economic situation truly is? 

Mr. PANDIT. Congressman, I appreciate that question. 

Let me start by saying that the first and foremost line of attack 

has to be do everything we can in the capital markets to improve 

liquidity, improve credit flowing, improve private capital coming in, 

because that can unfreeze the markets. And maybe that is a way 

in which you get these assets out in the marketplace. So that is the 

front line. And we heard some of that yesterday from Treasury Secretary Geithner, as well. 

The valuation question is, of course, difficult because we own all 

kinds of assets. There are mark-to-market assets, and there are assets that are called accrual assets, where you take losses as they 

go. 

Mr. GUTIERREZ. So if we took the largest 50, starting with the 

8 of you, and the largest 50 and we took all these assets, so that 

we know—so that the investment community can come in and say, 

‘‘Okay, we know what the standing of Bank of America is, 

JPMorgan Chase is, we know what you have on your books,’’ how 

would we do that? 

Mr. PANDIT. It is an extraordinarily difficult question, but, on the 

other hand, there have been countries around the world who have 

addressed that. 

One way in which countries have addressed that is by saying, we 

will take these assets, we will accrue the losses we take on these, 

and we will send you a bill when we get to a more stable economy. 

And that has been the prevalent approach that has been taken in 

the Netherlands, that has been taken in the U.K., that has been 

taken in a variety of different parts of the world, which is rather 

than to address where to price them today because today’s prices 

are affected by so many things—lack of liquidity, etc. 

Mr. GUTIERREZ. I don’t think anybody can price them, right? 

Mr. PANDIT. Exactly. And so you have to say, let’s put them on 

the side, take them, create a bill of the losses, and then come back 

to the banks and recover those losses at the back end. That has 

been a popular— 

Mr. GUTIERREZ. Let me ask you then, is there a formula, is there 

a mechanism, are there discussions between the Federal Government and the banking community to get that done, in your opinion? 

Mr. PANDIT. We have not had those discussions, Congressman. 

We think that at the right time—and hopefully now that Treasury 

Secretary Geithner has laid out his framework, it may be an appropriate time to start talking about different ways in which we can 

do that. 

37 

As I said, again, we don’t necessarily need to reinvent things. 

They have been done around the world today, and we should be 

able to take a look at that. But we welcome that dialogue. 

Mr. GUTIERREZ. Let me just say to all eight of you who are here 

before us this morning, I would like for all of you to just kind of 

put in writing so that we could have it on the record—and I don’t 

expect the answer here this morning—if each of you could just tell 

us how much your bank has paid itself on FDIC-guaranteed or 

other government-guaranteed financing, and what percentage of 

those finances were completed solely for the purpose of funding 

your bank. 

An example: I won’t name the bank, but you go out and you take $3 billion in one deal, and you go out with FDIC insurance, and 

you go to the market and you sell $3 billion worth of bonds in order 

to give yourself more liquidity. And they are FDIC-insured. Are you 

then paying your own investment banking firm—I am sorry, Mr. 

Chairman. 

The CHAIRMAN. Finish the question. 

Mr. GUTIERREZ. Are you then paying your own investment banking firm? And how much are you paying your own staff, in terms 

of underwriting fees for selling what a kindergartner could sell out 

in the market today? 

The CHAIRMAN. Let me just say, as we conclude this, we will take 

these answers in writing. Also, all members have the right to submit further written questions. I think this is important. There will 

be some clarification. So we will be submitting some further written questions, as well. 

And next, Mr. Royce. 

Mr. ROYCE. Thank you, Mr. Chairman. 

I will go to Mr. Dimon and Mr. Stumpf for a question, and this 

would go back to my opening statement that I was raising, sort of 

the root causes of the problem we are in. 

I recall in 2005 the Federal Reserve testifying before us saying 

that Fannie Mae and Freddie Mac were creating a systemic risk to 

the U.S. financial system. So I will go back and pose this question. 

To what extent was the securitization process, led by the GSEs, 

part of the problem here in terms of the bubble? We had leveraging 

100 to 1 at these institutions. They had a portfolio of $1.5 trillion 

that they arbitraged to get to. That was a loss of eventually $1 trillion in that sector. So was there a market perception because government-backed corporations were at the heart of the U.S. housing 

sector that this was a safe and secure investment and did this play 

a role in ballooning up this market and creating the moral hazard 

problem that some economists argue came into play? 

Mr. STUMPF. Congressman, thank you for the question. 

Let me just say that I think this problem started a lot earlier 

than 2007. Back in 2002 and 2003, Wells Fargo was the number 

one mortgage company in the country and we saw crazy things 

happening, things about the so-called liar loans, leveraged risks to 

subprime borrowers, the so-called negative ARM loan. We didn’t 

negative ARM any loans in our business, and why would you ever 

do that for a homeowner, for probably the most important asset 

they will ever have, where they can owe more later in the mortgage 

than what they started with. 

38 

So I think there are a lot of issues. So we backed out. We didn’t 

do any of those loans. We didn’t see how it would be helpful to our 

customers and ultimately to our shareholders, so we didn’t participate in that. 

There is no question that Fannie and Freddie played a part. I 

don’t know what percentage it was. I know that credit became too 

available and too inexpensive, and the risk and reward got separated through innovation. 

The day I got my first mortgage, the bank that made it put it 

in their portfolio, and if they had enough bad ones, they probably 

fired the banker. Now you would have people originating the mortgage who were separate from the person who packaged it, who was 

separate from the person who owned it, and the risk and reward 

got separated. 

Mr. ROYCE. One of the things that struck me was who would 

have bought some of the Countrywide subprime loans except 

Fannie and Freddie; and Congress had given them an allocation or 

a goal that 10 percent of their portfolio would be a certain type of 

loan, typically Alt-A or subprime. 

Let me go to Mr. Dimon for his thoughts on this. 

Mr. DIMON. Albert Einstein says keep things as simple as possible, but no simpler, so I am going to give you three root causes. 

Housing in total. There was a bubble, and a lot of things added 

to that. Securitization of very low interest rates. I wouldn’t blame 

the GSEs, but I would put them in the category. Most importantly, 

bad underwriting on the part of some banks, on the part of a lot 

of mortgage companies and under-regulated businesses. A lot of 

companies here didn’t do option ARMs, but option ARMs obviously 

sunk Countrywide, and probably Wachovia and WaMu. So the 

whole housing issue is one. 

I think when the economists talk about what caused some of the 

lower rates and things like that, I would put in the category the 

excessive trade deficit and Fed policy over an extended period of 

time created a little bit of a speculative bubble. And I would put 

in the category excess leverage, and that excess leverage was in 

consumers, it was in hedge funds, it was in banks, it was in investment banks, it was in European banks, and it was pretty much 

around the world. 

Some of these things, by the way, were known in articles talked 

about, but no one predicted the ultimate outcome. Maybe people 

just thought we would have a regular type of recession and this 

stuff would clean up on its own. 

Mr. ROYCE. Mr. Blankfein, I saw your piece in the Financial 

Times on the rating agencies. What role did they play? 

Mr. BLANKFEIN. Well, one of the big problems is that people subcontracted risk management out to rating agencies. And I think we 

have all done that to some extent. We are all culpable for that. So 

we join the rating agencies in the problem. But, obviously, they got 

these things quite wrong and never reinvestigated, and they were 

too much relied upon by institutions. 

So, for example, when loans were packaged and resold, once they 

bore the stamp of a rating agency at a certain level no more investigation was done and that certainly contributed to the accumulaVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
39 

tion of assets on people’s balance sheets that they wish weren’t 

there. 

Mr. ROYCE. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlewoman from New York, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Mr. Pandit, last January, we learned that Citigroup was supporting legislation that would let bankruptcy adjust mortgages for 

at-risk borrowers. I would like, since you are quite a convincing 

person, that you provide the rationale for supporting that legislation so that your colleagues who are sitting at the table understand 

why it is important to support that type of legislative initiative. 

Mr. PANDIT. Thank you very much, Congresswoman. 

None of these decisions are easy. Let’s start there. But these are 

unusual times. They need unusual tools, and we have to admit 

that. What we found is that when we talk to homeowners, we can 

figure out a way to keep them in their homes. So when we go back 

to this particular legislation, to us what was important was to say 

let’s apply it retroactively, meaning it is for loans that have been 

made up to now. It is not about the future of the market. 

Ms. VELAZQUEZ. So what you are telling me is what you are 

doing in supporting bankruptcy cramdown is a better answer than 

foreclosure. 

Mr. PANDIT. To me, the proposal that is in there that says the 

homeowner has to have had a negotiation with the bank or mortgage owner for 10 days before bankruptcy gives us the opportunity 

to talk to them and renegotiate that. We think that is good for 

America. 

By the way, if they do go into bankruptcy, we have enormous 

confidence in the judicial system in America. 

Ms. VELAZQUEZ. I would like to go down the table here, starting 

with Mr. Blankfein, and ask you, would you be supportive? 

Mr. BLANKFEIN. I agree with what Mr. Pandit said about in difficult times you can make difficult decisions, and I would say we 

would not be supportive in general because these things have consequences. And if you allow these contracts to be changed in bankruptcy and admit the vagaries of that kind of uncertainty, one of 

the consequences we may find that may be unwanted is that less 

capital flows into these markets. 

Ms. VELAZQUEZ. So are you implying that Citigroup lost their 

mind? 

Mr. BLANKFEIN. No, as I started out by saying, you can come out 

on either side of the line. 

Ms. VELAZQUEZ. I just want a yes or no answer. I don’t have 

much time. 

Mr. BLANKFEIN. If they have, it is not because of this issue. 

Mr. DIMON. No, we don’t agree. 

Ms. VELAZQUEZ. Next, Mr. Kelly. 

Mr. KELLY. Limiting foreclosures is incredibly important, I think, 

to America, and we have to solve that, but cramdown legislation is 

problematic. 

Ms. VELAZQUEZ. Mr. Lewis. 

40 

Mr. LEWIS. We think something could be worked out, but we 

want encouragement for the borrower to talk to the lender for some 

period of time, first. 

Ms. VELAZQUEZ. Mr. Logue. 

Mr. LOGUE. We agree that anything that we can do to help in 

the area of mortgage foreclosure is good. However, we do think 

there are also consequences to the proposed legislation that may 

not be beneficial. 

Ms. VELAZQUEZ. Mr. Mack. 

Mr. MACK. I would agree with my colleagues on the right. We 

need to negotiate and try to work things out. 

Mr. STUMPF. And I agree also we need to work without bankruptcy. I think bankruptcy has some really negative consequences. 

Ms. VELAZQUEZ. Thank you. 

Gentlemen, there have been talks about a $68 billion merger between drug giants Pfizer and Wyatt. About $22.5 billion, or about 

a third of this transaction, will come from bank loans and especially banks that are taking TARP money. While you are giving 

away money to corporate giants, the Federal senior loan officer survey showed that over 74 percent of respondents reported tighter 

credit lending standards on loans to small firms in the last quarter 

of 2008. And I heard some of you saying that you are lending to 

small businesses. But let me just say that the numbers don’t lie. 

This is the Federal Reserve’s own survey. Credit for small firms is 

lower than it has ever been in the history of the Fed survey. 

So can you explain why your institutions are finding money to 

fund a multi-billion dollar merger that will produce 19,000 job 

losses but will not find more money to lend to small businesses? 

Of course, you are not going to provide an answer. 

Let me just say, here is the case of a businessman, a responsible 

businessman from Florida, who was paying his loan on time to a 

bank that received $3.4 billion in TARP money last year, and he 

asked for an extension on the maturity date of his loan to continue 

to make payments until the markets settled, and he was denied. 

The bank took their properties. That is what we have here on this 

table. 

The CHAIRMAN. The gentlewoman from West Virginia. 

Mrs. CAPITO. Thank you, Mr. Chairman. I would like to thank 

the gentleman. 

I have two questions, I hope, in the time I have allotted. 

I have several constituents I have heard from. We all have heard 

from constituents about the credit card debt issue. One gentleman, 

a minister, 77, holds a Chase card. His rate has just been jacked 

up on him. He now thinks he has to get a second job to be able 

to pay for his medicines. He never missed a payment. He is not delinquent on anything. 

Another is a woman who had a Citigroup card for 14 years. She 

never missed a payment. She called Citigroup and they said, you 

have never abused your account; we are not going to raise your interest rate. Her interest rate was raised from 6.74 to 24.99 percent. 

Her payments now—she doesn’t pay her whole balance, obviously, 

every month, but she has never missed a payment in 14 years. 

These folks feel—and I think that when I saw Citigroup’s, your 

report to Congress, you mentioned here since receiving the first inVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
41 

stallment of TARP, Citi has made plans to expand its lending activities further and extend affordable credit to lower-risk borrowers. Well, that is not what I am hearing from my constituents. 

Can you please help me with this and help them? Because they 

feel that their good credit and their good faith and their good practices, that it is on the backs of them not only as taxpayers but also 

as creditors, they are being asked to pay more. 

Mr. PANDIT. I appreciate that, Congresswoman. 

We did not raise rates on cards for 2 years. Our funding costs 

went up, as did everybody elses. Credit costs went up dramatically. 

The question was one of keeping credit flowing. So we finally decided that, in order to keep credit flowing in a responsible way, we 

had to change rates on these cards. 

What I would also tell you is, together with that program, we 

also expanded our forbearance program. Our forbearance program 

is in talking to individuals and customers to lower their rates 

where it is appropriate. So we kept the credit flowing, but we also 

created a mechanism for either people to opt out and/or to change 

the rates on those cards on a case-by-case basis. 

Mr. DIMON. Congresswoman, I think, first of all, JPMorgan 

Chase tries to uphold the highest standards, and several years ago 

we got rid of universal default, double-cycle building. Universal default allows you to raise rates on someone for something like a 

change in a FICO score. There are very limited rate increases. 

There are also rate decreases. So both take place, but they are very 

limited. And whenever we hear about a circumstance like this, if 

we did the wrong thing, we should fix it. Send it to me, and we 

will take care of it. Sometimes I hear this and the facts aren’t what 

you were told. 

Mrs. CAPITO. Well, I think we are hearing it across the country. 

Mr. DIMON. Well, send them all to me, and we will deal with 

them one by one, and we will treat the client in the proper and appropriate way. 

Mrs. CAPITO. Thank you for your response. 

Last question. Many of your institutions over the years have had 

significant acquisitions, and one of the stated intents was to spread 

the risk so if one part of your business is not doing as well the 

other parts can hold it up. We have a whole new lexicon here in 

the last several years in the financial services business, but one 

that I don’t think was set up for financial institutions is now ‘‘too 

big to fail.’’ 

Are you too big to fail and how do you respond to that? Mr. 

Pandit? 

Mr. PANDIT. We are a large bank, and we are in 109 countries. 

We help American businesses around the world, we help Americans 

at home, and there is a size that comes with that. 

What we found, Congresswoman, is that in the environment we 

are going through, nobody has been spared. People talk about decoupling. There is no decoupling. Every asset class has been linked. 

So diversification has not necessarily been the driver of why Citi 

is the size it is. The driver has been what do our clients need and 

how do we provide them those services, and that has led to the size 

of the operations that we are at. 

42 

Having said that, for our own sake, we have reduced the size of 

the company. We have reduced the assets, and we are restructuring Citi into two parts. One is going to be our ongoing business, 

which is a lot simpler than the business we had before and a lot 

smaller. 

Mrs. CAPITO. How much time do I have left? 

Ms. WATERS. [presiding] You have a couple of seconds left. 

Mrs. CAPITO. Anybody else? 

All right. Thank you. 

Ms. WATERS. The gentleman from North Carolina for 5 minutes. 

Mr. WATT. Thank you, Madam Chairwoman. 

I am actually going to follow up on the question that Mrs. Capito 

has raised here, and I want to follow it up with Mr. Lewis and Mr. 

Stumpf, because they are the two banks that have the largest presence in my congressional district. But I suspect it is a question that 

is applicable to all of these folks. Because if you were asked to take 

TARP money, then you probably fit into the category of too big to 

fail. 

I think I started this discussion with Hugh McCall some years 

ago around the issue of deposit caps and became convinced of the 

merits of having banks large enough to be worldwide competitive, 

and so I understand that aspect. 

I have had the discussion with Ken Thompson and even back to 

John Medlin when they were saying that Wachovia didn’t have to 

worry about that because it didn’t have a nationwide footprint, but 

now Wells Fargo, the owner of what used to be Wachovia, does 

have a nationwide footprint. 

Then, most recently, yesterday, Secretary Bernanke started to 

raise more concerns about this whole question of too big to fail. 

So I guess my question is whether, in that context, an even more 

aggressively regulated framework for larger banks, and maybe 

even not only banks but institutions that have systemic risk potentials, might be appropriate? What is your assessment of that, Mr. 

Lewis and then Mr. Stumpf? And the rest of you all can respond 

in writing, I guess, because we won’t have time to hear from everybody. 

Mr. LEWIS. Well, on the positive side, I think if, instead of looking at size, you look at the beauty of diversity, the beauty of diversity of people, products, and geography—despite the fact that this 

has been an incredible timeframe in terms of a recessionary environment, it seems like the diverse companies certainly have done 

better than the monolines and the ones that were so focused on 

wholesale funding. So I think there has been some strength admitted or obvious in this time from banks that have that diversity. 

The size thing, I think, is more an issue of not size but what your 

role is in the capital markets and markets in general and, therefore, do you pose a systemic risk no matter what your size it is. 

We saw some of that when we saw the Lehman failure and the 

things that happened from there. 

So I don’t know if it is ‘‘too big to fail’’ as an issue, but if you 

are systemically important, the consequences of an institution failing is pretty severe. 

43 

Mr. WATT. And should you then have a more aggressive regulatory framework? Or how would you address that, I guess is the 

question I am trying to get to the bottom of. 

Mr. LEWIS. I think that therefore calls for an overlay of supervision beyond what we have now. 

Mr. WATT. Mr. Stumpf. 

Mr. STUMPF. Thank you, Congressman. 

I think success and failure is more a condition of culture and 

leadership and values than it is as it relates to small or large. In 

our case, we have a strong culture. We were able to buy a firm, 

merge with a firm using our own money. 

Mr. WATT. I don’t want to cut you off, but I know where you are 

going, and I am not sure that is going to address the public necessity, because then that leaves it to the individual goodwill, good intentions or good execution, which, if it is a systemic problem, may 

work out well, may not work out well. 

Let me ask one other question going back to credit card risk and 

the impact on the economy in general. Is it your estimate—and you 

can submit this in writing—that the size of this stimulus is sufficient to serve the purpose for which it is being represented? I will 

let you respond to that later. 

Ms. WATERS. Thank you. 

The gentleman from Texas, Mr. Hensarling. 

Mr. HENSARLING. Thank you, Madam Chairwoman. 

Gentlemen, if there is one overarching message from a number 

of us, it is what you do with your money is your business; what 

you do with the taxpayer money is our business. Having said that 

in my opening statement, I spoke about the Administration’s executive comp proposals. I am still studying every comma and semicolon within it. But although sometimes life is full of lousy options, 

I tend to err on the side of the taxpayer. 

One thing that did concern me was a front page article in the 

Financial Times, I think it was yesterday. The headline is, ‘‘Deutsche Bank chief says U.S. pay curb could spur defections. President 

Obama’s sweeping restriction on pay at U.S. banks could push 

their best staff to defect to overseas rivals, Joseph Ackerman, Chief 

Executive of Deutsche Bank, Germany’s biggest bank, predicted 

yesterday.’’ 

Clearly, there must be some balance here. But are you concerned 

at the loss of talent through this program? 

Anyone who cares to comment, we will take the first volunteer. 

Mr. MACK. Yes, Congressman. I think at the most senior levels 

I am not as concerned, but at levels below that—and we are seeing 

it already with some of our European managing directors and executive directors. Some of the European banks have already gone out 

and put packages and multiyear guarantees in front of them. So it 

is a competitive issue. But I think it is for that group of individuals 

below the most senior management. I am concerned about it, 

though. 

Mr. HENSARLING. A second question: I think a number of you 

have indicated that, in retrospect, perhaps you didn’t exactly volunteer to take the capital infusion from the Federal Government, and 

if you had your druthers you would pay it back. Aside from market 

conditions, which we are all painfully aware of, is there a legal imVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
44 

pediment—I don’t have the wording of these investment vehicles in 

front of me, but is there a legal impediment—if Congress wanted 

to allow you to pay the money back and you wanted to pay the 

money back, what is it that is preventing that? Mr. Dimon? 

Mr. DIMON. Part of the agreement was that if you pay it back 

before the end of 3 years, which is now somewhat less than that, 

you have to replace it with an equivalent type of capital. So a lot 

of the firms that might want to pay it back don’t want to go raise 

all that capital which they don’t necessarily think they need. So 

this is a legal impediment at this point. Chairman Frank mentioned that may get changed, but that has not been changed yet. 

Mr. HENSARLING. Any other comments? 

Seeing none, we will go on to the next question. 

I want to echo some of the sentiment that I have heard from my 

colleagues and a lot of angst from my constituents in the Fifth District of Texas who don’t understand about their credit limits being 

limited, capital that was previously available to them. 

I am curious, as you continue to hear a message from many in 

Congress saying loan, loan, loan, I continue to hear anecdotes from 

bankers I know saying they are hearing the opposite message from 

their regular interests, saying contract, contract, contract. Now all 

of this evidence I am hearing is anecdotal. But could somebody 

speak to that dynamic? Perhaps my anecdotal evidence is—Mr. 

Stumpf? 

Mr. STUMPF. Congressman, maybe I will take a shot at that. 

Clearly, all of us want to make good loans; just making loans for 

loans’ sake is not going to help anyone. Actually, we are finding opportunities to make good loans, and the regulators are not, at least 

in our case, any different than they were before, concerned about 

safety and soundness as they should be. But we are not being encouraged by them not to make loans. 

Mr. HENSARLING. Anybody else wish to comment on that? 

If not, speaking for myself and many others, if you don’t think 

they can repay it, please don’t loan them the money. It is kind of 

what got us into this economic crisis in the first place. 

I want to go back to the issue of a systemic regulator. Some of 

us still have concerns that with institutions that are deemed systemically significant, it becomes a self-fulfilling prophecy that they 

are too big to fail. Witness Fannie and Freddie. Chairman Greenspan—I didn’t agree with everything he said and did—but for years 

and years and years, he warned that one of the greatest points of 

systemic risk in our economy was Fannie and Freddie, yet many 

Members of Congress fought for years and years and years to make 

sure they didn’t have any regulation. Many said that Congress 

would never bail them out, and now we have bailed them out. So 

does that not become a self-fulfilling prophecy? 

Ms. WATERS. The gentleman’s time has expired. 

The gentleman from New York. 

Mr. ACKERMAN. Thank you, Madam Chairwoman. 

Sometimes some of us think we are living in two different 

worlds. One world is here; and we listen to the group of you giving 

us very calm assurances that everything is okay, under control, 

and there are no problems, that you are lending out all this money 

and that everything is hunky dory. And then we leave here and go 

45 

home to our districts all over America, and I think we all hear basically the same thing, and that is the voices from the other world, 

the real world, where people can’t get loans, where people can’t refinance their homes, where people can’t buy automobiles, can’t send 

their children to college. And we listen to you and we hear words, 

words, words, and no answer. 

It seems to me, and to some of us, that this money hasn’t 

reached the street, that you are not loaning it out. When the press 

makes inquiries as to what you did with the first tranche of money 

that we gave you, many billions of dollars, your answer is it is none 

of your business and we don’t have to tell you because we weren’t 

required to and if you want new restrictions on what we do and 

what we have to do, then put it in the next tranche of money. 

The fact that we heard from so many of you that you have made 

so many loans in the past year is not reassuring, because that is 

what you are supposed to do. But what did you do with the new 

money? That is not really anything that many of you have addressed today. It seems to me that of the $302.6 billion that have gone out in TARP, the 8 firms that you represent have received $165 billion, 

much more than half of all the money we have lent, lent almost 

300 institutions across America. 

How do you explain that? 

Mr. DIMON. Can I take a crack at that, Congressman? 

First, I think what I heard is that every person up here believes 

the government absolutely has the right to ask the question about 

the TARP money, what we are doing, that we are doing things in 

the best interests of the company. 

Mr. ACKERMAN. Why didn’t we get answers? Why didn’t the press 

get answers? Why didn’t anybody get answers? 

Mr. DIMON. I can’t explain with the press. I am telling you everyone here has said that and is doing everything they can to do it 

right. 

There is something that explains part of the difference of what 

you are saying. Bank lending is kind of flat year over year, up a 

little bit or down a little bit, and one of the other Congressmen 

mentioned it. There is a huge amount of non-bank lending which 

has disappeared, which is the same thing to the consumer, finance 

companies, car finance companies, mortgage companies, Countrywide, funds, money funds, bond funds, that did withdraw money 

from the system and make it much harder in the system. That created some of the crisis we have. 

Mr. ACKERMAN. Can you give us a list of what you did? How 

many billions did your company get? 

Mr. DIMON. We got $25 billion. 

Mr. ACKERMAN. Can you tell us what you did with $25 billion? 

Not what you did with all your other money but with that $25 billion? 

Mr. DIMON. I believe that we lent out, probably exclusively be- cause of that, probably $50- to $75 billion within a couple of weeks 

of that, most of that being in government and not-for-profit, $1 billion to the State of Illinois, interbank lending, the purchase of 

mortgage securities. 

Mr. ACKERMAN. Why can’t people get mortgages? 

46 

Mr. DIMON. I believe that we did $35 billion in mortgage originations. 

Mr. ACKERMAN. What did you do last year, and the year before? 

Mr. DIMON. In this same quarter, I don’t remember the number, 

but I would say approximately the same. 

Mr. ACKERMAN. So with $25 billion more, you gave out the same 

as you did the year before. So there is no increase. 

Mr. DIMON. In that product. Some products were up, and some 

products were down. 

Mr. ACKERMAN. But if you did $35 billion last time, you did $35 

billion this time, we gave you $25 billion more to do it, nothing of 

that went out then. 

Could you each send us in writing what you did with all of those 

billions of dollars that you got? Is anybody unwilling to do that at 

this point? Is anybody going to say, it is not your business; we don’t 

have to? We will expect that from each of the eight of you in writing then. 

Okay, the $165 billion that we have put into your companies 

shows that we have some degree of confidence in what you are 

going to do with that money and that you are going to be around. 

Each of you are individually wealthy. Could you go down the line 

and just give us a number, how much of your personal money you 

have invested in your company in new money during the last 6 

months? And zero is a number. 

Mr. Blankfein? I can’t hear you. Just a number. 

Mr. BLANKFEIN. My wealth is in my company, because that is 

how I get compensated. In new money that went in, zero, because 

that money is already in my company. 

Mr. ACKERMAN. Mr. Dimon? 

Mr. DIMON. $12 million. 

Mr. KELLY. I did not put any new money in. 

Mr. LEWIS. I have bought 400,000 shares, and I have forgotten 

the amount. But I bought 400,000 new shares. 

Mr. LOGUE. Nothing. 

Mr. MACK. Nothing. 

Mr. PANDIT. $8.4 million. 

Mr. STUMPF. Nothing new. All of it is in. 

Mr. ACKERMAN. Thank you, Madam Chairwoman. 

Ms. WATERS. Thank you very much. On that note, we will recess 

until 1:15. So I would like to ask all the members and our witnesses to please return promptly at 1:15 so that we can continue 

our questions. Thank you very much. 

[recess] 

Mr. MEEKS. [presiding] The committee will come to order. The 

Chair recognizes Mr. Garrett of New Jersey for 5 minutes. 

Mr. GARRETT. I thank the Chair, and I appreciate the fact that 

we are holding this hearing today, although some may argue that 

we are holding it a day late and a dollar short. A number of us requested such a hearing back in December before we released the 

second round of $350 billion of TARP, the idea being that before 

we authorize the expenditure of $350 billion for a second time, 

maybe we should know how we spent the first one. Unfortunately, 

that is not the way we operate here in Congress. 

47 

Secondly, I would like to make the point to thank the chairman 

for advocation for the committee with regard to the cause of why 

we are here today. And he said in his opening statement that it 

was not deregulation, but nonregulation or the absence of regulation that helped bring us to where we are today. That is significant 

because many times we have heard from the other side of the aisle 

that there was rampant deregulation occurring over the last decade 

or so, opening up the marketplace to allow all sorts of other activity 

to occur. I appreciate the chairman edifying us that it was, in fact, 

as many of us have said, not deregulation, but perhaps some gaps 

and lack of regulation. 

Turning then to some questioning. Mr. Blankfein, I would ask 

with regard to your company and your information that you can 

enlighten me on the situation with AIG. Some people say that 

when the Federal Government stepped in and helped bail out AIG, 

what they really were doing was saving the counterparties or saving the banks in their relationship with AIG. I wonder if you could 

just sort of enlighten us as to what your relationship is with or was 

with AIG, and what your position with as far as counterparty obligations, what the dollar amounts may have been at that point in 

time. 

Mr. BLANKFEIN. Sure. AIG was a very large, obviously very large, 

company. It also was a very large player in the credit markets insuring credits. We and many people on Wall Street and many businesses who would have had exposures would have dealt with AIG. 

In our dealings with AIG, we were always subject to a collateral 

arrangement, and so that with respect to our dealings with AIG, 

we were always fully collateralized and had de minimis or no credit 

risk at any given moment because we exchanged collateral. So we 

had outstanding positions, as did most people, but we had no credit 

exposure because we had collateral from them and in some cases 

other kind of credit mitigants. 

Mr. GARRETT. I have heard rumors or stories in the paper and 

what have you as far as a position dollar amount. Can you give us 

a ballpark figure? 

Mr. BLANKFEIN. Our total outstanding, if you look at the nominal amounts of positions, would have been $20 billion worth of nominal 

positions. That wasn’t the exposure. The exposure was substantially less. And we exchanged collateral. 

I do know where the source of the rumors were. There was a 

New York Times story that was partially retracted that made the 

statement that AIG was being saved for the benefit of the 

counterparty. Now, to some extent AIG had obligations to a lot of 

people. Had they defaulted on their obligations, they would have 

gone bankrupt, and that would have triggered. And in a particular 

statement they said Goldman Sachs had a huge obligation, which 

we immediately denied. Our CFO and our earnings call said to the 

world that we had no significant credit exposure to AIG, and I repeat that to you now. 

Mr. GARRETT. So if they were fully collateralized, then what was 

then, A, the point as far as the statements made by some that Federal dollars that actually went through AIG to you would not be 

a correct statement, because they were already fully collateralized? 

Mr. BLANKFEIN. We were collateralized. 

48 

Mr. GARRETT. If you were collateralized, then what was the necessity for the Fed to step in at that point to bail them out? 

Mr. BLANKFEIN. AIG had exposures. It wasn’t being driven in 

any way by its exposures to Goldman Sachs. 

Mr. GARRETT. My time runs quick. Were you hedged on the way 

down as well for that? 

Mr. BLANKFEIN. We had a collateral—yes, the answer is yes, we 

always had hedges. Sometimes the hedge—I am sorry. Sometimes 

the collateral would lag, and we would also take out credit insurance against their exposure. So it was always our intention. We 

manage all our risks, including our credit risks. 

Mr. GARRETT. Help me understand this in 15 seconds. Does that 

mean that you can sort of win on the way up and on the way down, 

too? 

Mr. BLANKFEIN. No, no, no, no. It just meant that we were insured against losing money because of their default. 

Mr. GARRETT. So you benefited on the fact that they were 

collateralized? 

Mr. BLANKFEIN. We had transactions with them, and if they had 

gone the wrong way, they would have owed us money. We assume 

they would pay it, but if they defaulted, they wouldn’t pay us. We 

insured against that default. We didn’t win money from it. We 

wouldn’t have made money, but we protected our downside. 

Mr. GARRETT. I appreciate that. My time has run out. Thank 

you. 

Mr. MEEKS. Mr. Sherman of California. 

Mr. SHERMAN. Thank you. 

Several of the witnesses have said that they have not used taxpayer money to pay bonuses and dividends. Gentlemen, money is 

fungible; don’t insult our intelligence. It is a rather silly claim to 

say, well, we just used the depositors’ money or the investors’ 

money to pay the dividends and the bonuses, and then we put the 

taxpayers’ money in our vault pending the day when those depositors want to make a withdrawal. 

The issue is what dividends and bonuses did you pay or will you 

pay while you are holding taxpayer money? The chairman correctly 

states taxpayers want their money back ASAP, which is why it is 

outrageous that some of you have paid, all of you have paid, dividends or had stock repurchases. You had extra money, and instead 

of loaning it to the economy, instead of repaying it to the taxpayers, which is what you should have done, you sent it out as 

dividends to your shareholders; 8 out of 8 of you have paid dividends since October 1st, and 7 out of 8 of you have paid dividends 

after you got the TARP money. So I want you to provide a statement on your dividend policies for the record. 

But for now, I would like you to just raise your hand unless you 

have adopted a policy that prevents future dividends and future 

stock repurchases until the taxpayers are repaid. Please raise your 

hand unless you have such a policy. 

So I see only the first two witnesses, Blankfein and Dimon, have 

raised their hand. The rest of you have adopted such a policy? 

Do you have a policy against paying dividends to your common 

shareholders while you are holding taxpayer money? 

49 

Mr. LOGUE. Congressman, we have reduced our dividend to one 

cent. 

Mr. SHERMAN. Is that a policy? Does anybody else have—I will 

give you 1 cent a share? Does anybody other than Mr. Logue have 

a policy against paying dividends in excess of 1 cent a share for so 

as long as you hold the taxpayers’ money? 

Mr. PANDIT. That is where we are as well, Congressman. 

Mr. SHERMAN. So I see Mr. Lewis and the gentleman from 

Citicorp raising their hands. The rest of you ought to adopt such 

a policy. 

Next is a question insisted upon by three new friends I have in 

Detroit. I would like you to provide for the record a detailed statement about planes and perks, but for now I would like you to raise 

your hand if your company currently owns or leases a private 

plane. 

Let the record show all the hands went up except for the gentleman from Goldman Sachs. 

Gentlemen, we know that it is extremely expensive to operate 

these planes, that you could sell them and generate capital for your 

company, and that capital could be used to repay taxpayers immediately. The big show of not buying one particular new plane flies 

in the face of how you are really flying. The third issue. The first $254 billion of TARP money was invested, and all parties announced that this was at par, that the 

Treasury was getting securities worth as much as the Treasury 

was investing. The Congressional Oversight Panel last Friday distributed this chart which is behind me, which shows that the taxpayers were screwed to the tune of $78 billion, much of it by the 

firms represented here. 

I would like you to raise your hand if you plan to suggest to your 

board of directors that they issue additional preferred shares and 

warrants to the taxpayer to fully compensate for the shortfall demonstrated by the Congressional Oversight Panel. 

Let the record show no hands went up, and that all of the witnesses are content to leave a situation where the taxpayers have 

been undercompensated to the tune of $78 billion. 

So I will ask the gentleman from Citibank particularly, you received $45 billion in cash. It has been demonstrated, I think conclusively, by the Congressional Oversight Panel that you only delivered securities, preferred stock and warrants with a value of $251⁄2

billion, shorting us to the tune of $191⁄2 billion. Are you content to 

just sit there and say, sorry, we gave you too little securities, we 

are happy that we gave you so little, and we are not going to give 

you more? 

Now, before you answer, don’t tell me that the securities could 

go up in value and could be worth hundreds of billions of dollars. 

Trust me, if I sold you General Motors stock today for $10 a share, 

you would call that an unfair transaction because the market says 

today it is worth about $3 a share. So why are you unwilling to 

issue additional securities to make the taxpayers fully compensated? 

Mr. PANDIT. Congressman, I haven’t looked at this analysis. We 

would like to look at the numbers. And I haven’t done that. I don’t 

know exactly where all these numbers come from. 

50 

Mr. SHERMAN. That comes from the Congressional Oversight 

Panel in the hearings of last week. 

Mr. PANDIT. I appreciate it. Ultimately, my goal is to make this 

an extremely profitable investment for the U.S. Government. I plan 

to pay it back. In the meantime, we are paying $3.4 billion annually as dividends on this investment. 

Mr. MEEKS. Mr. Barrett of South Carolina for 5 minutes. 

Mr. BARRETT. Thank you, Mr. Chairman. 

Thank you, gentlemen. Thank you for being here today. 

Gentlemen, I believe in the power of the free market, I believe 

in entrepreneurship, I believe in risk, I believe in innovation. But 

I want you to understand, and I know you do, that your decisions 

have real consequences, and when we stray away from making 

good commonsense business decisions and moral decisions, that we 

put a lot of things in jeopardy. And I know you know this, but we 

have people in America and people in this Congress that if you 

don’t get it right, they are going to take control, and they are going 

to get it right, and that scares the fire out of me, because I believe 

that our free market and our capitalistic society is at stake. And 

I am not trying to be overdramatic, but it rests on you, so please 

get it right. 

Mr. Pandit, thank you for your report today. I look forward to 

taking a look at that, and I applaud you for getting that. I hope 

that you get all 435 Members that information. 

I keep hearing from a lot of people that stability and consistency, 

certainty is what we need. What can the Federal Government do 

right now, in your opinion, that can help the stability and the certainty of the market today, or is there anything we can do? 

Mr. PANDIT. Congressman, we are in the midst of a once-in-amany-generation economic event, and it really is about GDP and 

unemployment. We need to arrest that, and the plans that have 

been talked about so far, I think, are responsive. 

We have to stabilize housing. It started there, we need to fix it 

there; keep people in their homes, avoid foreclosures, try to get 

that destabilized. We need to make sure we get credit flowing 

again, and that is clearly a very important part of what the Federal Government and the Federal Reserve Bank can do. And we 

need to create jobs. I think those three are still the goals. 

We were pleased to see Treasury Secretary Geithner’s report yesterday, but we are all awaiting a lot more details to see exactly 

how it is going to work. 

Mr. BARRETT. To your point, the Federal Government has done 

some things, and there is talk about spending this next $350 billion 

with Secretary Geithner. Do we need to take a wait-and-see approach, a little more measured approach now, Mr. Pandit, and say 

let some of this stuff percolate before we commit anything else? 

Mr. PANDIT. Congressman, that is a very good question, and, 

again, there are no easy answers to that. Let me tell you that we 

always deal with economics, but there is also an issue of confidence. And I don’t have a formula as to how to fix confidence. We 

know what we can do economically. I think confidence is up to all 

of us here in this room, including the Treasury Secretary and the 

President and everybody else. And one thing we do know about 

confidence, when broken, you get to fixing it really fast. 

51 

Mr. BARRETT. Mr. Dimon, the same question. Is there anything 

that you know that we can do to bring some certainty into the market, the Federal Government? 

Mr. DIMON. I think it is a combination. There is no one thing. 

But I think very well-designed fiscal stimulation. I know something 

got voted on in the conference today. I can’t evaluate the effectiveness of all of that because I am not capable of doing that, but that 

is one piece. 

I think the Secretary of the Treasury yesterday spoke about four 

different types of things: TALF, which I think will be helpful and 

important; financing mortgages, making them both cheaper and 

more affordable, and we spoke earlier today about making mortgage modifications easier to do and quicker; the public-private 

bank; and the stress testing; and additional capital of banks. If 

these things are done, they are done quickly, coordinated, consistent, fairly, I think they will have a very good effect and start 

to turn this around. 

Mr. BARRETT. Thank you, sir. 

Mr. Lewis, do you believe that this TARP program has permanently changed the face of the free-market system in the United 

States? 

Mr. LEWIS. It certainly is the most unusual thing I think we 

have ever done, at least in my almost 40 years in this industry, but 

I don’t think it has to. I think you could have a scenario where the 

economy does improve, that the banks within the 3-year period do 

pay it back, and that we get back to normal. So I am not so skeptical to say that we have turned the corner on that point. 

Mr. BARRETT. Mr. Kelly, the same question. 

Mr. KELLY. I would say the system is not permanently changed. 

I think there are a number of learnings in that we have had the 

worst economic downturn since the 1930’s. I think there are very 

good learnings on this. They are complicated. There are a lot of 

things we have to do. I do think we have a very good chance to as 

a group, as an industry, to repay the TARP money and for the taxpayers to ultimately make a lot of money on it. 

Mr. BARRETT. You guys fix this thing so we can get out of this 

stuff. 

Thank you, Mr. Chairman. 

Mr. MEEKS. I yield myself 5 minutes. 

Chairman Frank initiated talking about we look back so that we 

can make sure we can go forward. Barack Obama is now the President of the United States because he said there should be change 

in Washington, and I think that there is one thing that we have 

in common, that is, those in the financial services industry and 

those of us who sit in Congress, is that right now both of us, your 

industry and mine, have a credibility problem with the American 

people. There is enough blame, there is a lot of blame to go around, 

but we both have a credibility problem, and that is the kind of 

change that we are talking about. And when I think about this crisis that we are currently engaged in, there are some things that 

I think surely that we should have done probably as Members of 

Congress. And maybe we should say to the American people that 

we are looking to get it right this time and apologize to them for 

not getting it right the first time. In regards to a lot of the investVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
52 

ments that was made, clearly there are some things, some bad investments that were made. 

So my first question is, do you feel that the industry has anything to apologize to the American people for so that we can try 

to have some reconciliation to move forward and gain some credibility back? Does the industry have anything that we should apologize to the American people for because we didn’t catch this, and 

now we are in this terrible situation? Anyone. 

Mr. MACK. That is a tough question, so let me just say that as 

an industry, clearly we made mistakes, whether it is leverage—at 

least speaking of my company, at one point we had 32 times leverage—whether it was in loans that we made that we shouldn’t have 

made, whether it was in some of the complex instruments. So I 

think from Morgan Stanley’s point of view, if you go back and play 

the clock over again, you definitely would do it differently. 

I think the entire industry shares some of that responsibility, 

and for that we are sorry for it. I am especially sorry for what has 

happened to shareholders, and the knock-on effect to that has been 

what has happened to the American people. But clearly as an industry we have accountability, and we are responsible. It is much 

broader than just this group of people, but we all have responsibility. I will take that responsibility for my firm. 

Mr. MEEKS. Thank you. 

Let me move forward and to try to get to this question that I 

think was asked by Ms. Waters earlier, and, yes, we were talking 

about, I believe, the underwriters’ fees, when you heard that question before, that I guess internally you will pay the underwriters 

within your companies, etc. 

Let me extend that to ask this: When you are talking about the— 

whether it is the FDIC or the TLGP program and the 

underwritings, is there any opportunity or have any of you utilized 

any small or minority- or women-owned firms? I know that in listening to Mr. Mack earlier, he said a lot of folks initiated from 

small firms before they got to big firms. But looking at the fees 

that were paid internally, or so it appears to me, I am wondering 

whether or not anyone has given any money or utilized that to give 

it out to some underwritten by small or minority-owned firms or 

women-owned firms? 

Mr. STUMPF. I might take that. In our company, and I believe it 

is in many of the companies we have, minority vendor programs 

were not only Tier 1 but Tier 2, so we put our products and services out for bid for whatever it might be. 

Mr. MEEKS. I am talking now specifically about the TARP and/ 

or the FDIC Temporary Liquidity Guarantee Program and the fees 

that would be utilized by underwriters therein. I think that Mr. 

Pandit talked earlier about that; the money that is legal, that you 

have to—by law you have to have it underwritten. 

My question is, there are also opportunities there for it to be 

farmed out to others or contracted out to other minority firms or 

small firms, and I was wondering if anyone has done it with any 

of those fees specifically, with public dollars. 

Mr. STUMPF. Yes, we have done that. 

Mr. PANDIT. Congressman, I don’t have the facts. I can get you 

the facts. I believe we do that, but let us get you the information. 

53 

Mr. MEEKS. I would like to get the information from everyone 

else. 

Finally, let me ask Mr. Blankfein, I think that I caught the word 

in your testimony that you said you are a wholesaler, and therefore 

you don’t get into the housing market. However, it would seem to 

me that since housing is the—and foreclosing, keeping people in 

their homes is most importantly, is there anything as a wholesaler 

that you in your company can do to make sure that we are keeping 

people in their homes? 

Mr. BLANKFEIN. Thank you, Congressman. 

We are not an originator of mortgages because we don’t deal with 

the consumer, however, we own a mortgage servicing company that 

is responsible for interacting on behalf of the owners of mortgages, 

and that is Litton Servicing. That company has been very foresighted and innovative in the way it has approached its dealings 

in modifying mortgages. 

Mr. MEEKS. I have to cut you off. Can I get that in writing? 

And I would move to Mr. McCotter from Michigan. 

Mr. MCCOTTER. Thank you, Mr. Chairman. 

Coming from Michigan, the reports about the failure of the Wall 

Street bailout to date has caused a lot of concern. There is a lot 

of suffering going on in Michigan; high unemployment, highest in 

the country, a very difficult time finding credit. It is so difficult for 

them to get credit despite the Wall Street bailout that they were 

told would work that they are beginning to think they are being 

redlined by banks. I simply bring this to your attention without my 

own comment on it. 

The question that I do have regarding the auto industry is, we 

are seeing the UAW, we are seeing the auto executives, we are seeing suppliers, car dealers, everyone coming together to make sure 

that the American-based auto industry survives. I would like to 

know what your view of the survival of the American auto industry 

is, and if as stakeholders in that process you are willing to help ensure that the restructuring process is successful. 

Mr. MACK. Congressman, we have—and clearly not just my 

firm—we have relationships with the Big Three automakers. We 

have loans on our books to them. One of the things that hopefully 

we will be able to do as markets open up for them, as we have done 

in the past, raise either debt money for them or preferred or find 

foreign investors who will put money in with them. So from my 

perspective, we couldn’t be any more focused and committed not 

only in spirit, but on our balance sheet. 

Mr. STUMPF. Congressman, we are closer to the customer end of 

that situation. We finance and do business with many of the 20,000 

different auto dealers there are in the Nation. We are buying about 

$1.5 billion of consumer auto paper a month in our company, and 

we view that as good credit, and it helps hardworking Americans 

buy cars. 

Mr. LEWIS. I would say that, number one, we are working with 

GM as we speak to convert their debt to equity; secondly, that we 

like automobile loans, and actually in January they were up 7 percent over January of 2007—2008. 

Mr. MEEKS. Mr. Moore of Kansas for 5 minutes. 

Mr. MOORE OF KANSAS. Thank you, Mr. Chairman. 

54 

I have a series of questions I would like to ask, and ask each of 

you to respond, and start if we could with Wells Fargo, Mr. Stumpf 

at the end, and just move this way, if you would, please. 

How much taxpayer money did your company receive in the past 

5 months? Number two is how much salary did you receive in 2008, 

and how much, if any, bonus or other financial consideration did 

you receive? And I would like to go down the line with those two 

questions, please. 

Mr. STUMPF. We received $25 billion. My compensation in 2008 

was—I am embarrassed, but I think it is 850—I can’t remember 

the exact number; let us say $850,000. And as far as bonus, our 

company, our board of directors makes that decision in February 

regarding 2008, but there is no mystery there. Unless we reach at 

least a 15 percent internal rate of return or 235 earnings per share. 

We don’t qualify. And we didn’t make either of those. So there will 

be no bonus. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Mr. Pandit with Citigroup. 

Mr. PANDIT. Congressman, we received $45 billion of TARP 

money. My compensation for the year 2008 was my salary, which 

is $1 million. I received no bonus. And as I stated earlier, I plan 

to take $1 a year in salary and no bonus until we return to profitability. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Morgan Stanley, Mr. Mack. 

Mr. MACK. Congressman, $10 billion in TARP funds. My salary is $800,000 in salary and zero bonus. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Mr. Logue, State Street Corporation. 

Mr. LOGUE. Congressman, we received $2 billion in TARP funds. 

My salary is $1 million, and my bonus is zero. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Bank of America, Mr. Lewis. 

Mr. LEWIS. 2008, $15 billion in TARP money, $1.5 million salary, 

no incentive. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Mr. Kelly, Bank of New York Mellon. 

Mr. KELLY. $3 billion in TARP money, Congressman, and my sal- ary is $1 million and zero bonus. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Mr. Dimon, JPMorgan. 

Mr. DIMON. We got $25 billion in TARP money. My salary is $1 

million, and there was no bonus paid for 2008. 

Mr. MOORE OF KANSAS. Thank you, sir. 

And Mr. Blankfein, Goldman Sachs. 

Mr. BLANKFEIN. $10 billion in TARP money, $600,000 in salary, 

no bonus. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Again, start at this end this time and go back the other way. 

How much salary will you receive in 2009, has that been determined; and what do you expect to receive, if any, in the way of bonuses in 2009? 

Mr. BLANKFEIN. 2009 salary is still $600,000, and we are a long 

way from bonus time. 

55 

Mr. MOORE OF KANSAS. Okay. Mr. Dimon. 

Mr. DIMON. My salary is $1 million, and we are a long way from 

bonus time, too. 

Mr. MOORE OF KANSAS. Instead of going through all this, is there 

anybody whose salary will have changed from last year? 

Mr. PANDIT. As I said earlier, Congressman, I told my board I will take $1 a year in salary. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Anybody else? 

Okay. I would like to start now, and begin down here, if you 

would, please, with Goldman Sachs, and ask, will you expect that 

your company will be able to pay back taxpayer funds by 2012? 

Mr. BLANKFEIN. It is my hope to do that well before that. Markets are uncertain. If it can be, we will. 

Mr. MOORE OF KANSAS. Thank you, sir. 

Mr. Dimon. 

Mr. DIMON. Yes. 

Mr. MOORE OF KANSAS. Mr. Kelly. 

Mr. KELLY. Yes. 

Mr. MOORE OF KANSAS. Mr. Lewis. 

Mr. LEWIS. Yes. 

Mr. MOORE OF KANSAS. I am having trouble seeing a little farther on down there. 

Mr. LOGUE. Yes. 

Mr. MOORE OF KANSAS. Yes, sir. 

Mr. MACK. Yes. 

Mr. MOORE OF KANSAS. All right. 

Mr. PANDIT. Yes. 

Mr. STUMPF. And yes for Wells Fargo. 

Mr. MOORE OF KANSAS. Very good. 

Thank you, Madam Chairwoman, and thank you to the gentlemen on the panel. 

Mrs. MALONEY. [presiding] The gentlemen yields back. 

Mr. Lance from New Jersey is recognized for 5 minutes. 

Mr. LANCE. Thank you very much. And good afternoon to all of 

you gentlemen. 

Mr. Stumpf and the entire row, as a follow-up to the question 

that was just asked, how many of you would be able to pay back 

the TARP funding early and not related to the 3 years, but perhaps 

early? And I know there may be legislation that is being written 

so that you don’t have a penalty for paying back this money early. 

So how many of you could expect to pay it back early? 

Mr. STUMPF. In Wells Fargo’s case, it would depend on the credit 

markets more than anything else. 

Mr. LANCE. Mr. Pandit. 

Mr. PANDIT. Congressman, we are all dependent on the markets, 

market conditions. As soon as possible. 

Mr. MACK. Given that I think the markets have improved, we 

think maybe not the entire amount by 2012, but some portion of 

it prior to that. 

Mr. LANCE. Thank you. Mr. Mack. 

Mr. LOGUE. Congressman, I would agree with my colleagues that 

it will depend on the markets. Hopefully we will be able to give it 

back prior to 2012. 

56 

Mr. LEWIS. I would agree, markets and the economy, and we 

would like nothing better than to pay it back early. 

Mr. KELLY. And I agree with my colleagues. 

Mr. DIMON. We hope to pay it back earlier, and that would just 

be in consultation with our regulators and the Secretary of Treasury. 

Mr. BLANKFEIN. Same. And the expectation, present expectation, 

is that it would be early. 

Mr. LANCE. Thank you. And following up on a line of questioning 

from Congresswoman Maloney earlier in the hearing. And this is 

to you, Mr. Lewis. And I recognize that you are Bank of America 

and not Merrill Lynch, and there was a great deal of pressure on 

Bank of America to merge with Merrill Lynch, but we are all disturbed about the level of bonuses from Merrill Lynch. Was Bank 

of America aware of the contractual nature of those bonuses? 

Mr. LEWIS. Yes. As we got on in our due diligence, we saw the 

contracts, yes. 

Mr. LANCE. And are those contracts a matter of public record, or 

can they be made a matter of public record? 

Mr. LEWIS. I don’t know the answer to that, but there were—as 

I mentioned, there were two or three that were very, very large 

and were contractual obligations of Merrill Lynch. 

Mr. LANCE. I certainly would be interested, and I imagine the 

committee would be interested, in whatever information is available as a matter of public record regarding that. I believe that 

TARP funding is, of course, fungible, and that from our perspective 

those bonuses are really from TARP funds. 

Now, you state quite accurately in your testimony that as a practical matter, we cannot tell you whether the next loan we make is 

funded by TARP or from preferred stock placed with other investors, etc., and I certainly respect that point, Mr. Lewis. But from 

the perspective of those of us in Congress, we are deeply concerned 

about the level of bonuses of Merrill Lynch, and I would hope that 

in your responsibilities that you could impress upon your colleagues who have come to Bank of America from Merrill Lynch, to 

an even greater extent than you have done already, that I think 

it is the consensus of Congress that this is precisely what the 

American people find objectionable with the first portion of TARP. 

Mr. LEWIS. Sir, we have owned Merrill now for 42 days, and 

things have changed. We are in charge now. 

Mr. LANCE. Thank you very much, Mr. Lewis. 

I yield back the balance of my time. 

The CHAIRMAN. I thank the gentleman. 

And the gentleman from Massachusetts is recognized for 5 minutes. After the budget discussion, we just have 5 minutes or a little 

more. He is on the Committee of House Administration. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Gentlemen, you have been asked a lot of questions, and you 

seemingly answer them honestly to me. I have a couple of more detailed questions. 

Just by a show of hands, how many of your banks either directly 

or indirectly—and by indirectly I mean by loaning money to people 

that you knew would be using this money to invest in credit default 

swaps. How many of you engage in that? 

57 

Mr. MACK. We engage in credit default swaps, but when you are 

asking the question are we lending money for them to do that, I 

have to come back and give you specifics. I cannot tell you. 

Mr. CAPUANO. Fair enough. 

How many of you directly engage in purchasing or investing in 

credit default swaps? How many of you directly or indirectly engaged in CDOs? How many of you have— 

The CHAIRMAN. Excuse me, we have a very good recorder, but recording raised hands doesn’t work, so we will need some oral responses. 

Mr. CAPUANO. We can fill that in later. That is fair. 

And how many of your banks had or currently have special investment vehicles, those off-the-books, somehow unregulated subsidiaries of the bank or sister corporations? 

Mr. MACK. We have SPVs 

Mr. LEWIS. We do, too. 

Mr. CAPUANO. So basically all or most of you engaged in all or 

some of the activities that actually created this crisis, in my opinion, because every one of those activities, especially the SIVs, especially the SIVs—to me, I think they are illegal. I cannot believe no 

one has prosecuted you on this. But then again, we have had no 

prosecutorial action whatsoever the last Administration, and the 

new Administration has a little time to figure this out. We will find 

out whether anybody really cares. How can possibly any regulated 

bank have something on its books that is totally unregulated, for 

all intents and purposes does the same thing the bank does? That 

is for your lawyers to answer, and my hope is that you will be answering those questions in court someday. We will find out later 

on. 

But basically you come to us today on your bicycles, after buying 

Girl Scout cookies and helping out Mother Teresa, telling us, we 

are sorry, we didn’t mean it, we won’t do it again, trust us. Well, 

I have some people in my constituency who actually robbed some 

of your banks, and they said the same thing, they are sorry, they 

didn’t mean it, they won’t do it again, just let them out. 

Do you understand that this is a little difficult for most of my 

constituents to take that you learned your lesson? And it is all the 

same people doing this, the same people who created SIVs, who 

created CDOs, who created credit default swaps that never existed 

a few years ago. You created them. You created the mess we are 

in. And you are not the only ones, don’t get me wrong; you just 

happen to be the only ones here today. I can’t wait to get the credit 

rating agencies here someday again. And now you are saying, 

sorry, trust us, and by the way, we don’t even want the money. Interesting. No one has ever come to me and say, you must take billions of dollars. 

And as I heard it earlier, you have an option. Basically they said 

you have to capitalize better because we no longer trust your books. 

You can either take this money and do it, or you can do it on your 

own. If you don’t want the money, you can give it back, you just 

have to come up with the capital. As I understand it, if you can’t 

do it, I think many of us would be happy to change that law. 

You have to understand, I don’t really have a question, but I was 

told that I can use the 5 minutes, because the questions I have, you 

58 

have answered them, and you are going to continue to answer 

them, and that is all well and good. 

The problem I have is that, honestly, none of us, America doesn’t 

trust you anymore. I, for one, between myself and my various campaigns and my own personal business stuff, I get a lot of money 

to put in banks. I don’t have one single penny in any of your banks, 

not one, not one, because I don’t want my money put into CDOs 

and credit default swaps and making humongous bonuses, me personally. Until that changes, none of us really believe—I won’t say 

none of us, I don’t believe anything will change until you change 

the people who brought you into SIVs. 

Who was the brilliant person who came and said, let us do credit 

default swaps? Find him. Fire him. Tell me you fired them. Get out 

of CDOs. Start loaning the money that we gave you. Get it on the 

street. And don’t say, oh, well, we are not using that money for bonuses. Come on. Money is all of a sudden not fungible in your entity. It is fungible everywhere else, but not in your entities. Get our 

money out on the street. And if you don’t want to give it back, don’t 

come in here and tell me you can’t. Yes, you can, as long as you 

live up to the requirements that are put under you now in the new 

world that you created and we have to clean up. 

With that, Mr. Chairman, I yield back the remainder of my time. 

The CHAIRMAN. The gentleman from North Carolina, Mr. 

McHenry. 

Mr. MCHENRY. Thank you, Mr. Chairman. And thank you all for 

testifying today. As a taxpayer, and I guess now a stockholder, we 

appreciate it. There has been a lot of discussion and debate. 

The CHAIRMAN. I apologize to the gentleman. Start the clock 

over. The gentleman is recognized. 

Mr. MCHENRY. Thank you, Mr. Chairman. 

There has been a lot of debate here in Congress about what the 

TARP funds went to: Was it consumer lending, or was it safety and 

soundness? There has been a lot of debate, and part of the reason 

why is the former Secretary of the Treasury did a great sales job 

and said if we obligate taxpayer dollars for your financial institutions, whether you liked it or your board liked it or your investors 

liked it or not, that it would increase consumer lending. It was 

nothing more than a sales job, as I think is pretty evident. 

But my question to you, and we could just go in alphabetical 

order, just yes or no, is your first obligation to your depositors, to 

your board, to your investors; is your first obligation the safety and 

soundness of your institution? 

Mr. Blankfein. 

Mr. BLANKFEIN. I think so. 

Mr. DIMON. Yes. 

Mr. KELLY. Yes, safety and soundness. 

Mr. LEWIS. Safety and soundness. 

Mr. LOGUE. Absolutely safety and soundness. 

Mr. MACK. Safety and soundness. 

Mr. PANDIT. Yes. 

Mr. STUMPF. Yes. 

Mr. MCHENRY. Thank you. 

59 

I think we have completely resolved whether the TARP funds 

were for you to simply lend or for the safety and soundness of our 

financial system, okay. 

I have a question. Mr. Blankfein, Secretary Geithner has outlined his TARP II proposal, and again, we just have an outline. 

What are your general thoughts on this proposal, and will it work? 

Mr. BLANKFEIN. Again, I have just seen the outline, and I probably haven’t read it even as closely as you have, given my traveling 

in these past couple of days. 

Mr. MCHENRY. Well, the train is a much more efficient way to 

travel, right? 

Mr. BLANKFEIN. It is relaxing, and you can read. 

My feeling is that they are committed to trying a lot of things, 

and they are taking a lot of initiatives. And I think here there is 

nothing ideological. There are a number of different things like insurance, like an aggregator bank, like extending credit for other institutions. And I think they are trying all of them in some way, 

shape, or form. And I think that is actually what the situation kind 

of calls for, because we are not really sure what will work, but I 

think they will be in a position to emphasize those that are getting 

traction. 

Mr. MCHENRY. Are you comfortable with more transparency and 

disclosure of where the funds go and how they are used? 

Mr. BLANKFEIN. Well, I have heard the intent, and of course we 

have seen the outline, but certainly all signs now are that they are 

really committed to transparency. 

Mr. MCHENRY. Mr. Dimon, what are your thoughts on the new 

Geithner proposal? 

Mr. DIMON. I think the important part is that all of these things 

be done well. The devil is in the details and how they get executed. 

Some we know about. The fiscal stimulus plan got passed today. 

I am not an expert in that. 

Mr. MCHENRY. It didn’t get passed. 

Mr. DIMON. I mean, the conferees agreed to it. I think the TALF 

plan will work and serve a purpose. I think guarantees will work 

and serve a purpose. I don’t know yet about the mortgage plans. 

It is important that take place with modifications and make it 

cheaper for Americans. And I have to see more detail on the stress 

tests and capital injections. I do think if all these things are done 

well and properly, it will have a very big beneficial effect on this 

country. 

Mr. MCHENRY. And opening up to CNBS, do you all agree? If you 

could both touch on that. Is that healthy? 

Mr. DIMON. I think that helps, yes. 

Mr. MCHENRY. Is that necessary, Mr. Kelly? 

Mr. KELLY. There is no question that the real estate market is 

under—commercial real estate market is under a great deal of 

stress, and it is going to continue to be, and it will probably be 

worse a year from now than today. So I have certainly heard from 

a number of real estate executives that they need access to funds, 

and I would think that this would be helpful. 

Mr. MCHENRY. Mr. Lewis, I just live in the suburbs of Charlotte. 

Your institution is vital to us as was, is Wachovia and now Wells. 

The question I have to you is about transparency and disclosure. 

60 

I think your institution has been hammered on the street because 

of a lack of transparency and disclosure as to what the government 

funds are for. What is the reasoning the government has given you 

these extraordinary sums of money? Would you be comfortable with 

greater transparency and disclosure of the decisionmaking of how 

government obligates funds? 

Mr. LEWIS. Yes. I don’t know exactly what you are talking about 

in terms of what more needs to be done, but, of course, as of use 

of the TARP money, we have voluntarily said that each month we 

are going to show what we are doing with it, how we are using it. 

Each week I meet with my executives to talk about what more can 

we do. So we are very focused on lending money. 

Mr. MCHENRY. Well, no. The disclosure of how government 

makes the decision on giving you funds. I am asking from a government perspective, should we disclose more there? 

Mr. LEWIS. Correct. I think I have, but if you want more, you certainly can have it. 

The CHAIRMAN. The gentleman’s time has expired, and the gentleman from Missouri is recognized. 

Mr. CLAY. Thank you, Mr. Chairman. 

Since last October, the taxpayers have injected more than $300 

billion into the financial system to stabilize key institutions, including yours. With the exception of Citibank, which has at least made 

an effort at honest disclosure, the rest of you haven’t seen fit to follow suit. The American people are now your partners, and your 

partners have a right to know where their money went. So on behalf of the taxpayers who now own a portion of your institutions, 

what did you do with the money? And I will start with Mr. Stumpf. 

Mr. STUMPF. Thank you. 

Now, the question with respect to what we did with the money? 

Mr. CLAY. Yes, what did you do with the money? 

Mr. STUMPF. Well, we have about $100 billion of capital in our 

company. There is $25 billion added to that, and as I stated in my 

testimony, we use those funds and the funds of our other investors 

to run our business on behalf of our communities, our team members, our customers, and our shareholders. Last year we made a $3 

billion profit doing that, and we have had a long history of using 

our capital to advance the kinds of businesses we do, and making 

loans is a big part of it. 

Mr. CLAY. Have you modified any mortgages? 

Mr. STUMPF. Sure. We have modified 706,000 mortgages in the 

last year-and-a-half, 22 percent of all the mortgages that were reported by the industry in modifications. 

Mr. CLAY. One of the most frustrating aspects of this crisis, that 

every time we think we understand how bad things are in the financial sector, something that one of you failed to disclose comes 

to light, and the situation gets worse. So I want all of you to look 

us in the eye, give it to us straight, and tell this committee how 

many more potential losses are out there? What do you see on the 

horizon? What are you forecasting? 

Mr. STUMPF. To me, it is all about jobs. I started out in this industry 35 years ago as a collector, and the same four things that 

affected a consumer delinquency are the same four today. It is 

death, divorce, an unscheduled medical payment, and a job loss. 

61 

Nothing has happened to the first three. Job loss is the key, so 

this is all about jobs. And if you can tell me what is going to happen to unemployment, I probably can tell you what is going to happen in credit. But I think we are still having a very challenging 

time, and I commend you and the rest of Congress who are working on ways to help this economy going with jobs, and we want to 

participate in helping you with that. 

Mr. CLAY. Thank you for that response. 

Mr. Pandit, what do you see in the forecast? 

Mr. PANDIT. Congressman, I have to agree with the fact that 

when it comes to consumer banks or commercial banks, profits and 

losses are completely tied to GDP and unemployment. That is what 

determines where things are. One thing that is different about this 

cycle is that it is not tied in the same way as it was before, which 

means that it becomes difficult to forecast completely. Having said 

that, anything we can do to be on the plan to keep people employed 

and increase the amount of employment can only help us. 

Mr. CLAY. Do you envision credit being freed up? I mean, I just 

had a group of commercial developers come to my office and say 

they cannot build any new developments because they don’t have 

access to credit. Now, when does that change? 

Mr. PANDIT. Everything you are doing, the plan that the Secretary of Treasury talked about yesterday, all of these are steps to 

help increase the flow of credit in the U.S. economy. We are doing 

everything we can. And as you pointed out, clearly we have made 

an extreme effort to account for every dollar of TARP money that 

we received, and we are tracking it, and we are going to do our 

part. 

Mr. CLAY. Thank you for your response. 

Mr. Mack, what do you see in the forecast? 

Mr. MACK. Well, it is not unlike what my colleagues to the left 

have said. The only thing I would add to that, if you go back into 

right after the failure of Lehman Brothers in September and into 

December, we are finally beginning to see the capital markets open 

up where we can raise money for corporations to help them invest 

in their business. We are beginning to see investors come in where 

they will invest in businesses. 

Mr. CLAY. Excuse me. How about extending credit? 

Mr. MACK. We are doing that. But again, we are very small in 

the consumer business. 

Mr. CLAY. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. Let me say I think we can probably get two more 

questions in. People need to go vote. It is the first vote. We will 

be coming back. There are three votes. So, gentlemen, I appreciate 

this. I think this has been very important. 

The gentleman from Minnesota, Mr. Paulsen, for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

With some of the retroactive rules for TARP recipients, and also 

more pending stabilization programs from the Treasury and the 

Fed that are yet to come, and the uncertainty now about future 

regulatory reform, I am just wondering how concerned are you or 

are you very concerned that those factors or these factors are going 

to potentially drastically discourage injection of private capital into 

your institutions that really could help you shore up your balance 

62 

sheets rather than the government providing that capital? I mean, 

how concerned are you about that? 

Mr. BLANKFEIN. Which retroactive changes are you referring to? 

Mr. PAULSEN. I am just saying in terms of, like, the retroactive 

rules that have gone forward, the pending stabilization programs 

coming forward, uncertainty about new regulatory reforms. I mean, 

how concerned are you about those issues addressing private capital coming into your institutions right now as opposed to sitting 

back and waiting for these other things to take place? 

Mr. BLANKFEIN. They have certainly created some uncertainty. 

That is not there, and so that is a deterrence. On the other hand, 

you have to balance it against the fact that there are some things 

that need to be fixed. And so any uncertainty is disliked by the 

market. On the other hand, we know that we he have to make 

changes, so we are going to go ahead and have these changes. 

Mr. PAULSEN. And maybe I can just follow up, Mr. Chairman. 

Some of you have already said you feel that you have not been 

given a very clear directive from Congress or the government how 

to use the money that has been provided that has come directly 

from the TARP funds. Aside from that directive, what other recommendations do you have for the government or for future disbursements now of those funds either to your companies or the 

other recipients that may get them in terms of just good advice to 

make sure it flows more smoothly? 

Mr. LEWIS. Frankly, I think the issue is more the economy and 

creating demand than any other single item. As I mentioned, lending money is at the core of what a commercial bank does, and we 

don’t optimize our profits unless we lend money. So we need to 

have more demand, and the critical thing there is for the economy 

to turn around. 

Mr. PAULSEN. Maybe I can ask one other question. As we consider the regulations for the financial markets, because we are 

going to be doing that now to sort of get rid of the crisis that we 

are in, prevent another one from happening or deepening this crisis 

actually, what are the largest concerns about overregulating, going 

down the road of Sarbanes-Oxley in terms of moving in that direction, and stepping too far where we are intending to be helpful, but 

actually it could be very harmful? Is there anything specific you 

can draw out that we should be very cautious of? 

Mr. LEWIS. I think my main concern around compensation, for 

instance, is it is okay to do the things that are being talked about 

at the very top, but if you start to go too low in the organization, 

you will run off key talent to foreign competitors. 

Mr. PAULSEN. Is that a shared view among others? 

Mr. KELLY. It is one of our greatest worries. 

Mr. STUMPF. Yes, there are many businesses that we are in that 

are commission-based, for example, and if we limit across-the-board 

or whatever, we could lose some of the most productive people and 

some of the most important parts of our business. 

Mr. PAULSEN. Thank you. 

Mr. STUMPF. It is widely dispersed. 

The CHAIRMAN. While the gentleman yields back, let me take advantage, because I am going to ask you to submit in writing, I understand the argument you make about foreign competition. It has 

63 

been my impression that people here have generally been better 

compensated than people in these other countries. So I would ask 

you to submit to me some cross-national comparisons. I am, frankly, skeptical from what I have seen that they are paying so much 

more in other places. Certainly not at your level. So I would be interested in those cross-national comparisons. 

You are going to have to prove to me that you are really at risk 

there if there is some moderation. 

The gentleman from California. 

Mr. BACA. Thank you very much for holding this hearing, and I 

want to thank all of the CEOs for coming here. 

One of the questions that I have, here in the hearings, a lot of 

you indicated that you have a responsibility to the stockholders. I 

agree that you have the responsibility towards your stockholders. 

Well, we have a responsibility to the American people, and that is 

why we are having this hearing right now, is the American people 

lack trust and confidence in the banking industry, especially with 

what is going on right now. 

I want to ask a couple of questions. One is, how do you feel about 

the bailout? Do you feel that the bailout was necessary? Any one 

of you. 

Mr. BLANKFEIN. I didn’t necessarily think it was necessary at the 

time, and this was said at the time. They were looking ahead at 

an emerging recession that was going to get worse, and for prudential reasons, it was necessary for the systemic and safety and 

soundness, and as subsequent events have borne out, I think it has 

provided safety and soundness and taken some of the risk away 

from the system. 

Mr. BACA. Anyone else want to attempt to answer? 

Mr. LEWIS. I actually agree. I know at the time, we did not feel 

like we needed the $15 billion, but I think in light of the severity 

of the recession and in light of the speed in which the economy deteriorated, I think we have lent more money because we had the 

TARP funds and that level of capital. 

Mr. BACA. Well, apparently, the consumers out there feel that 

there hasn’t been enough money that has been lent out. There are 

a lot of small businesses in my area and throughout a variety of 

different areas right now that can’t obtain loans right now, don’t 

have access. Even developers. I know that my colleague just asked 

that question a while ago. 

Why is it they don’t have access to credit right now, and why 

isn’t it available for small businesses and developers? Because we 

need to turn this economy around, and if they can’t employ and 

can’t get the money, and you are somehow reviewing and extending 

before you make any kind of decisions, you are hurting us at the 

same time. Can any one of you answer why not? 

Mr. LEWIS. Well, I would say that the single biggest factor both 

for the small business and consumers, particularly relating to real 

estate, is the declining home values and loan-to-value issues with 

that. A small business, usually most of the equity that a small 

business owner has is home equity, and as those values come 

down, you have loan-to-value issues. 

Mr. BACA. Anyone else want to answer that? 

64 

Let me ask another question. A lot of you said earlier that part 

of the problem has been the credit line. Well, a lot of the problems 

that came out in the credit lines that were offered and credit cards 

that were given out, most of you are guilty of that; all of you that 

offered a lot of these credit cards to many individuals, students, 

student loans, others that went out in different areas. I know my 

child during that period of time—she is an adult now—got a little 

thing: Apply for a credit card. 

Now the credit cards have led to a lot of the problems because 

you are going to end up losing. You are the ones who made the 

mistake in offering and giving those credit cards. You should be responsible. The American people and the taxpayers should not be responsible for the mistakes you did in going out and trying to get 

so many consumers to tie into credit cards. 

How do we answer and how do we deal with your problems in 

trying to attract many individuals to get into the credit cards? I 

know all of you want to make a profit, and you do make a profit 

by going to individuals who are applying for these credit cards. 

These are students. These are a lot of our kids who are solicited 

by your industry to apply, and yet you know the interest rate goes 

up. It continues to go up on them. Some of them who started, some 

of them can’t even buy a car. Some of them want to end up buying 

a home, but it is the credit cards, and you are the ones, and we 

are the ones who have to bail you out because of what you have 

done and the losses there. Anyone who would like to attempt that? 

Let me ask another question then. Some of you mentioned best 

practices. What do you mean by ‘‘best practice statement’’ and what 

needs to be done? Most of you say you follow best practices. 

Mr. MACK. Well, I am not aware of what exactly people have 

said, but best practices from our point of view is in every discipline 

we are in. So, in risk management, as an example, to make sure 

that we have an independent risk management that reports to the 

CEO and chairman but not to some trading group. That would be 

an example of best practices. 

That is one, I think, if all these firms had had that established, 

there is a possibility some of this wouldn’t have been as bad as it 

ended up being. 

The CHAIRMAN. The time of the gentleman has expired. 

We have to vote. We will come back after the vote. It will be 

about 20 minutes. I thank you for staying with us. We are now in 

recess for this vote and 2 more 5-minute votes. 

[recess] 

The CHAIRMAN. Let’s get started. 

We will now turn to the gentleman from North Carolina. 

Mr. JONES. Mr. Chairman, thank you very much, and I want to 

thank you for holding this hearing. I agree with you in your statement this morning that this might be one of the most important 

hearings that we could hold to help the American people to know 

why this Congress passed the TARP bill and how their, meaning 

the taxpayers, how their life is going. 

I want to start with Mr. Pandit. This might have been asked before, but I am going to ask it in a different way. I am looking at 

a New York Times article, November 15, 2008: Despite pledge, 

Citigroup to raise credit card rates, blaming difficult requirement. 

65 

Citigroup is reneging on a promise it made to tens of millions of 

credit card customers in good times. 

In April of last year, I joined Mrs. Maloney in her legislation to 

bring sunshine to the charges on credit cards. I wrote to Mr. 

Bernanke and I received this on April 16, 2008. Bank card revenues in billions of dollars: In 2006, after tax, those banks that 

issued credit cards or get fees and interest from credit cards made, 

in 2006, $18.37 billion. 

Now, since the the taxpayer has done so much for you and your 

banks, is it even possible, and I will go back to Mr. Pandit, is it 

even possible when the average penalty interest rate averages 

24.51 percent, I am not saying that is Citigroup, I don’t know, but 

when the taxpayer is hurting so badly and he or she has helped 

you out from making bad decisions, could there be a period of time 

that you would say to the American credit card holder, no longer 

am I going to ask you to pay 24 percent so I can make billions of 

dollars. What I am going to do for the good of the American people 

is say 9 percent. Why can’t you do something like that? 

This country is in a recession, headed for a depression, and these 

poor taxpayers in my district, the Third District of North Carolina, 

a family of 3 or 4 has an income of about $37,000 gross, and most, 

like myself, have a credit card. Why can’t you do something for 

them? Can you reduce that rate for a year or two? 

Mr. PANDIT. Congressman, on the credit cards, we did not change 

our rates for 2 years. We changed our rates in response to keeping 

credit flowing because credit costs and funding costs have gone up 

dramatically. We also gave every one of the cardholders an option 

to opt out of that. 

We have also, in addition to that, created forbearance programs. 

We talk to card members one on one. We talk to them about their 

rates. We figure out what is affordable, what is not. We keep doing 

that. 

But the problem goes beyond that, Congressman. You know that. 

It is about not only cards; it is about housing. We continue to help 

people with their housing, too. We have taken mortgage rates down 

to 4 percent. We have extended maturities to 30 or 40 years. We 

have forgiven principal, and we continue to go down the path. 

What you are asking for is right, a lot of forbearance, and we are 

with you on that. 

Mr. JONES. Well, I have one more question that will be for Mr. 

Lewis, Mr. Chairman. 

But, at this time, to help the image of the banking industry, 

show compassion. Show compassion for that American citizen who 

is out there losing their job, having a cut in pay. Because, believe 

me, the majority of the people are not members of the country club, 

and I am not saying you are. But the image of the banking industry is about as low as it has ever been, and I think with what I 

have suggested or not, you need to nationally speak to some of 

these things, all of you, if you issue charge cards, and say that, yes, 

we are going to suck it up, too, by the way, Mr. Taxpayer, and we 

are going to take less in interest, so you can have a better quality 

of life and maybe meet some of your bills. 

In the time I have left, Mr. Lewis, I am going to read an e-mail. 

66 

The CHAIRMAN. The gentleman has 10 seconds left. You may 

have to get your answer in writing. 

Mr. JONES. I talk so slow, I can’t do it. 

Will there be another round, Mr. Chairman? 

The CHAIRMAN. Possibly. We will get it in writing if we can’t get 

it otherwise. Ask the question, sure. 

Mr. JONES. This is the e-mail, and I am going to make it real 

quick, Mr. Chairman: The original course of action to be taken by 

Congress to save our economy was to buy up toxic loans from financial institutions as a way to free up these banks to make loans. 

The last point: The bank that I have been dealing with for 31 

years basically told me that they wanted my children to personally 

endorse all loans. They have decreased just about every loan-tovalue ratio so that it would take more equity, raised my internal 

rate, raised my fees. 

Mr. Lewis, when you all leave here today, for God’s sake, do 

whatever you can to free credit to the people across this Nation, because they are suffering and they are hurting. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from Texas, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Mr. Chairman. I want to say thank 

you for having this hearing and I hope that many of my constituents down in deep south Texas are listening to this important and 

informative hearing. 

Regarding back mortgages that your institutions hold, I want to 

know if your personnel attempted to contact homeowners who have 

mortgages with your institutions to determine their financial status and whether they will be able to hold on to their homes? 

In a nutshell, what type of outreach have all of you and your 

companies made to help homeowners on the verge of losing their 

homes? I will start with the first presenter. 

Mr. BLANKFEIN. We are not an originator, but we are a servicer 

of mortgages, and our mortgage servicer, Litton, has been very aggressive in reaching out to homeowners to modify loans, to take the 

debt-to-income ratio to the lowest level of 31 and even to forgive 

principal where that will help the homeowner stay in his home. 

Mr. DIMON. We work extensively to contact anyone who is in default, and we also try to contact those that we think might have 

a problem based upon some analytics we do. We do it all the time, 

consistently, and we have been doing it well over a year-and-a-half. 

Mr. KELLY. Congressman, we are not in the mortgage business. 

Mr. LEWIS. Congressman, we do have an outreach program. We 

have had it for some time. As I mentioned, we have 5,000 people 

working on loss mitigation. We take about 80,000 calls a day in our 

call centers. So we are very focused on the outreach and getting to 

the issue before it becomes a critical issue. 

Mr. LOGUE. Congressman, we are also not in the mortgage business. 

Mr. MACK. Congressman, we are very small in the mortgage 

business through Saxton Mortgage, and we do have an outreach 

program in trying to work with homeowners in keeping their 

homes, reducing principal, and lowering their rate. 

67 

Mr. PANDIT. Congressman, not only do we make mortgages, we 

service mortgages. We have been able to talk to mortgage servicers, 

and we have consent from 90 percent of them to allow us to modify 

mortgages that they have given us. 

In addition to that, we have something called the CHAPS program. We are reaching out to half-a-million homeowners, not because they are delinquent or can’t make the payment. This is an 

early warning system. We are not waiting for fire alarms to go off. 

We have installed smoke detectors. In a sense, we need to know 

they might get in trouble. We are doing all of that. 

In addition to that, we have kept 440,000 people in their homes 

who would otherwise be distressed borrowers and, last year, that 

was 4 out of 5 people we talked to we have kept in their homes. 

Mr. STUMPF. Congressman, we service one in seven mortgages in 

America. We have doubled our staff to 6,000 people who make 

thousands and thousands of calls a day contacting people who are 

either past due or potentially would become past due. And we have 

learned that when you talk to them early, it is much better than 

not talking to them at all. 

We talk with 94 of every 100 customers who are 60 days past 

due or more. And when we do talk to them, as I said in my testimony, for 7 out of 10, we find a solution. We have done 706,000 

solutions in the last year-and-a-half. 

Mr. HINOJOSA. Citi was probably one of the first who agreed to 

the possibility that bankruptcy judges might be able to make some 

changes on the terms of the loans, and then others, even in my district, agreed to that. Is that something that is already in place that 

allows the bankruptcy judges to change and alter those terms? Is 

that something—I am going to ask Citi to answer that question. 

Mr. PANDIT. Congressman, that legislation has not yet been 

passed. 

Mr. HINOJOSA. It has not been passed. That is what I thought. 

Do those of you who answered that you do have home mortgages 

believe that would possibly stop the numbers that are falling off 

the cliff and falling into foreclosure? Because listening to Chairman 

Bernanke yesterday, things are going to get worse before they get 

better, and I think that we really need to hear some answers on 

how we can stop this. 

The CHAIRMAN. I would say not every member can be here at all 

times, and at times, I am absent myself. The panel was polled by 

one of our questioners as to where they stood on the bankruptcy 

issue, so we do have it in the record, their views on whether or not 

we should do the bankruptcy bill. 

Mr. HINOJOSA. Thank you, Mr. Chairman. 

The CHAIRMAN. It was behind in the early returns. 

The gentleman from Massachusetts. 

Mr. LYNCH. Thank you, Mr. Chairman, and the ranking member. 

There has been a lot of criticism here today and probably welldeserved, but I do want to point out, Mr. Logue, I read your testimony regarding State Street, and I am pleased that you were 

straightforward. You took the $2 billion in the TARP. You lent that 

out directly, which was the purpose of the program, and also I noticed that in capping executive compensation, you went right down 

68 

the line all the way except for your most junior employees, and I 

think that was commendable. 

A number of the witnesses today have talked about support for 

a new regulatory framework to help us get out of this situation, 

and I do want to point out that the last major dislocation we had 

in the markets like this was back in 1929, the crash, and I asked 

this question yesterday of Chairman Bernanke. Back then, the 

leaders on Wall Street of the major banks and investment houses 

got together with Members of Congress, and in order to pay for the 

new regulation that had to be put in place to stabilize the markets, 

they came up with an idea called transaction fees. 

What they did, the leaders of the financial services industry back 

then and Members of Congress, is they imposed a transaction fee 

of 1/300th of 1 percent of every share traded on the major exchanges in the United States at the time. At that point, back in 

1929 and 1930, there were only about 5 million shares a day being 

traded. Today there are 5 billion shares, on a good day, although 

we haven’t had a good day in awhile. 

I want to ask you, we have had this money going out the door 

left and right here, trillions, and no one has come forward with a 

way to pay some of this back. I have about 40 percent of my district that doesn’t have money in the stock market. They don’t have 

401(k)s, they don’t have any investment at all in the market, yet 

they are being asked to bail the banks out, you folks out, and they 

have no hope of return. 

What I am asking you, each of you, do you support the idea of 

a small, and I mean, look, this could be microscopic, given the volume of trades every day, and I would not leave out the bond market either; they would have to be assessed at some point, but is 

there any appetite out there to look at transaction fees as a way 

to pay some of this back, rather than putting the entire weight of 

all this support, all these bailouts, on the backs of the American 

taxpayer? 

Mr. LOGUE. Congressman, I think it is something that definitely 

could be discussed with the exchanges. It is an idea that I haven’t 

heard yet, but I think it is something that could be explored. 

Mr. LYNCH. Mr. Pandit? 

Mr. PANDIT. Congressman, I have not looked at that in a long 

time. Different countries have done that in different time periods. 

This is an unusual time period. We should look at it, and if you 

don’t mind, let me think about it a little bit more. If you like, we 

can come back to you. 

Mr. LYNCH. Mr. Dimon? 

Mr. DIMON. We would have no problem paying some fees to help 

bear the costs of I think you mentioned regulation or something 

like that. 

Mr. LYNCH. Right now, we have a continuing process of doing 

that, and I believe the money comes directly to Congress, but we 

use it to fund the SEC. 

Mr. Lewis? 

Mr. LEWIS. I had assumed that the banking industry was going 

to pay for it one way or another. I just hadn’t thought about the 

way. But, of course. 

Mr. LYNCH. Mr. Mack? 

69 

Mr. MACK. I think we should consider it, but at the same time 

I think we need to become careful. Exchanges have become global, 

and we need to be sure that we do not drive volume out of the 

United States into other countries. Other than looking at that, I 

think it makes sense to consider it. 

Mr. LYNCH. All right. 

Mr. Chairman, I yield back my time. 

The CHAIRMAN. Let me take the gentleman’s remaining time, because he is on to something. Let me remind people, in the TARP 

bill which we passed, we adopted an amendment sponsored by our 

colleague on the Ways and Means Committee from Tennessee, Mr. 

Tanner, which says that, at the end of 5 years, 5 years from October, the President then in power, that is after the next Presidential 

election, is mandated to send to Congress a proposal; he is to get 

from CBO the net cost of the TARP, of the $700 billion, whatever 

the net cost is to the Federal Government, and send to the Congress a piece of legislation that would pay for that by some combination of fees and taxes on the financial industry. So that is in 

fact in the law that is being sent to us. 

People can say, well, he is going to send it to us. I will tell you, 

4 years from now, I don’t think it is going to be any different. I 

don’t think Members of Congress are going to say, no, no, no, no, 

we don’t want to do that to our good friends in the financial industry. Let’s do it somewhere else. 

So something like that is mandated for a President to send us 

41⁄2 years from now. 

Mr. LYNCH. Mr. Chairman, I am just fearful that the urgency 

that we have around this issue right now, if things start to get better— 

The CHAIRMAN. I appreciate that. If the gentleman will yield, I 

think that is a good point. I should have phrased it more explicitly. 

I think on the side of that argument is to say to the financial community, look, you are going to have to do this some years from now, 

why not start doing it now, because, in fact, if you begin to phase 

it in, there is less likely to be a big bump at any time. 

The gentleman from North Carolina. You want to wait? 

The gentleman from Georgia. 

Let me just say this. I am looking at the members here. We can 

finish this—I am sorry, Mr. Posey is back, and we will get to him 

after the gentleman from Georgia. We can probably finish it in a 

little over an hour if we have their indulgence. Our colleague, the 

gentlewoman from Ohio, is going to have to leave at 4 o’clock to 

go preside over special orders. So I would hope the members would 

not object if I took her out of order. We will then be able to reach 

everybody, and anybody who has to sit and listen to special orders 

deserves a certain consideration. 

The gentleman from Georgia, then the gentleman from Florida, 

and then the gentleman from North Carolina. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

I certainly appreciate you all being here. It is a very, very important hearing. 

But I believe we have a unique chance today to do something 

very special for the American people. You all have come under 

great attack for selfishness, for greed, not you collectively, but the 

70 

banking industry. And I want to ask you to do something that 

Abraham Lincoln suggested we do that worked very good back then 

when he said, at certain times in our history, we need to allow the 

better angels of our nature to shine through. And we have such a 

time that you could do this with millions of Americans watching 

this on television across this country. 

We are losing 7,200 homes to foreclosure every day. There is 

nothing more draining. Yesterday, Secretary Geithner came up 

with his plan, so-called plan. Many people have questioned that. 

But I think he did a wise thing, especially when it comes to home 

foreclosures. 

I am asking you at this time to commit to this committee and 

to the people across America that you will do something here that 

will manifest your better angels of your nature, and that is to commit to having a moratorium on all foreclosures that each of your 

banks and affiliates deal with until the Treasury Secretary can put 

together this package. 

Now, mind you that this committee and the TARP bill has put 

forward up to $100 billion. So far, the Obama Administration has 

said they are willing to look at it with $50 billion—that is a lot of 

money—and that he would only require a need of doing this in 

about the next 3 weeks. But I think that would be a tremendous 

gesture, to say you will not foreclose on any American’s home until 

we put the plan in place. That is the fair thing to do. 

Will you do that? Could I get a yes-yes here, because the record 

needs the yes? 

Mr. LEWIS. Actually, if we could put a timeframe on it, and not 

just leave it open-ended, and say it is 2 weeks or 3 weeks, we 

would do that. 

Mr. SCOTT. Okay; 3 weeks. 

Mr. LEWIS. We would do that. 

Mr. SCOTT. That is good news. 

Mr. Pandit, could you concur with that for 3 weeks? 

Mr. PANDIT. There are two types of homeowners. There is the investor, and there is the person living in the home. We will commit 

to making sure that the people stay in their houses as a moratorium. 

Mr. SCOTT. Thank you. 

Mr. Stumpf? 

Mr. STUMPF. Yes, we have already put a moratorium in or on 

those homes where we are the investor through Wachovia, especially their pick-a-pay portfolio. We have contractual arrangements 

with our investors, because most of what we service is for someone 

else. And I can’t commit to you. I will look at what that language 

looks like. 

The CHAIRMAN. If the gentleman will yield for 1 minute to say, 

and I will give you back your time, I hope fairly soon to have legislation passed on a bipartisan basis that will give you some protections against those lawsuits, assuming you are doing it in their economic interests. So help is on the way in that regard. 

Mr. SCOTT. Well, thank you all for that commitment to forego the 

foreclosures, and I thank you, on the parts of all Americans who 

need this help to get some confidence. 

71 

Really quickly, there is an issue that is going to be coming before 

Treasury regarding FAS 157. I think you all know what that is in 

terms of the instrument that is used to assess the value, the fair 

market value of your liabilities and assets. But there is an unequal 

application of that, because there is a FAS 114, that is more applicable and causes a more severe situation to your smaller banks, 

your community banks. 

Would you not agree that if the Treasury is going to change FAS 

157 that affects your larger banks like yourselves, wouldn’t you 

think that same application should be true for the change to FAS 

114? 

Mr. DIMON. I don’t think everyone here is familiar with FAS 114. 

Mr. SCOTT. What FAS 114 does is it requires the value of the 

loan be set at the fair market value of the collateral or market-tomarket. So, in other words, there really is no difference, except 

that it makes it much more difficult, say, when you are dealing 

with a home foreclosure, where most of these assessments are 

made basically on a case of what we would call a willing buyer to 

a willing seller. But in foreclosure, neither party is willing. They 

are forced. So when they accumulate the value of their assets, I 

mean, it is a false way of doing it. 

But at any rate, there will be this change coming forward. The 

community banks, the smaller banks are very much aware of it. All 

I am simply saying is the smaller banks should be fed out of the 

same spoon as the larger banks when it comes to assessing their 

assets. 

Thank you very much for the commitment on going forth with 

the foreclosures. 

The CHAIRMAN. Before going to the gentleman from Florida, I 

ask to put into the record, I know I have general leave, but I 

thought I would announce this. The Office of Thrift Supervision 

dated today urged OTS-regulated institutions to suspend foreclosures on owner-occupied homes, as Mr. Pandit indicated, until 

the financial stability plan’s home loan modification program is finalized in the next few weeks. 

So the Office of Thrift Supervision has now joined in the call for 

a moratorium until we see the plan from Mr. Geithner on owneroccupied homes. This will be in the record. 

The gentleman from Florida. 

Mr. POSEY. Thank you very much, Mr. Chairman. 

I don’t want to beat a dead horse, and my dad always told me, 

you should never ask somebody how much they made, but since 

somebody already asked that and the door is already opened, one 

question that kind of begs for an answer is the question of what 

your compensation was before the train wreck, not necessarily the 

last year, but what it was the year before? 

If we could start at one end, salary and bonuses for 2007? 

Mr. BLANKFEIN. In 2007, $600,000 of salary and something like 

$67 million worth of shares and some cash at the values that pertained in 2007, which wouldn’t look familiar to you now. 

Mr. DIMON. For the year 2007, $1 million of salary and $29 million of cash and stock. Again, the stock is not worth what it was 

then. 

72 

Mr. KELLY. Congressman, in 2007, it would have been $1 million 

salary, and with all the long-term option type compensation in 

total, it was around $20 million. 

Mr. LEWIS. You said 2007; 2007 would have been around $14 

million, all inclusive, including stock and cash. 

Mr. LOGUE. Congressman, I believe it was $1 million in salary, and total compensation of about $20.5 million, if my memory serves 

me well. 

Mr. MACK. Compensation was $800,000 and zero bonus. 

Mr. PANDIT. $250,000 in salary and $2.5 million in stock. 

Mr. STUMPF. I had $800,000 in salary, $4.2 million in cash bonus, and $3.2 million in stock, in option value, which today, of 

course, is worthless. 

Mr. POSEY. I think that might help give us a little more insight 

into the train wreck. 

Mr. Dimon, there are some arguments on both sides about this 

cramdown. Can you tell me the effect the cramdown would have on 

your institution? 

Mr. DIMON. Let me just start by saying that we are deeply in 

favor of having solutions for modifications. We have done 300,000 

already. We expect to do 650,000. 

Mr. POSEY. That is the next question. But right now, if there was 

an arbitrary cramdown, if the judge could reduce the amount— 

Mr. DIMON. We believe an arbitrary cramdown would greatly increase the cost of mortgage losses and that it would also increase 

the cost of all unsecured credit as you gave an incentive for people 

to declare bankruptcy. 

Mr. POSEY. Does anyone beside Mr. Pandit agree with that? I 

mean, it is logical. It makes sense to me. 

The next is, I gave an example talking to the Treasury about some constituents. They have about a $400,000 loan on a house 

that is now worth about $250,000. They lost their jobs, couldn’t 

make a couple of payments, got behind, started a little business, 

and were able to catch up. And their company, and at the time I 

didn’t want to mention it because it would be indiscrete, but it is 

Countrywide, refused to accept any payments unless they got 

caught up in full. 

So their CPA advised them, give the doggone house back and go 

buy a short sale down the street. You will $150,000 better off. I understand that, perhaps, whoever is servicing the Countrywide 

paper may be concerned about some liability, and that is the only 

possible excuse for not using the good judgment of trying to mitigate such a stupid, horrendous, upside-down loss. 

Would the ability to have servicers modify mortgages without liability be appealing, and do you think that would lead us toward 

a solution to this foreclosure crisis? We can start at the end with 

Mr. Blankfein. 

Mr. BLANKFEIN. I think doing something about the liability 

would be helpful. We are modifying these mortgages without that 

protection now, and so we would welcome the protection. 

Mr. POSEY. Is it your own loans, or loans you might service? 

Mr. BLANKFEIN. If it was our own loans, we wouldn’t be worried 

about it at all. It is other people’s loans that we are servicing. 

Mr. POSEY. And you are modifying loans you are servicing now? 

73 

Mr. BLANKFEIN. Yes, we are, and reducing principal, because we 

think that is the best way of recovering value. People tend to stay 

in houses and support their payments when they have equity. So 

we believe we are carrying out a duty to our investors if we in fact 

cut principal down and keep people in their homes and let them 

have positive equity in their homes. 

Mr. POSEY. Mr. Lewis, you are Mr. Countrywide, Mr. Bank of 

America? 

Mr. LEWIS. No, I am not Mr. Countrywide. But we are being very 

aggressive in doing modifications with loans that we service. We 

have changed the policies at Countrywide, but it would help if we 

got some help on that issue. 

Mr. POSEY. But you have already changed the policy, like these 

people should be getting some kind of response rather than walking away? 

Mr. LEWIS. I can’t imagine we would do that under our policies, 

because that would be a perfect loan modification situation. 

Mr. POSEY. It is a no-brainer. Maybe I can get my staff to get 

one of your cards or something and they can contact you directly 

to see that gets taken care of. 

Mr. LEWIS. I will. 

Ms. WATERS. The gentleman’s time has expired. 

Mr. Miller. 

Mr. MILLER. Thank you. 

I am against arbitrary cramdown, too. However, judicial modifications based upon the very clear, well-established legal standards based upon a wealth of case law says bankruptcy courts can 

modify every other kind of secured debt, I think would be a great 

advantage in modifying mortgages. 

In the Washington Post article this morning on the Geithner 

plan, buried two-thirds of the way into the story on the inside after 

the jump from the front page, there are these two sentences: Many 

financial analysts have concluded that the current values banks 

have assigned to these assets are much higher than they are 

worth, but if banks wrote them down to their actual value, many 

of the firms would collapse. 

There are two versions of what is wrong with the banks now. 

One is that there is a liquidity problem, that you have assets that 

are hard to value, for which there is no active market, and the uncertainty about how much your assets are really worth is a financial constraint. The other is that there is a solvency problem, that 

the assets aren’t worth much, and if they were placed on a market, 

the reason there isn’t an active market is that no one who owns 

them is selling them, and they really aren’t worth much and a 

great many financial institutions are in fact insolvent. 

Now, all of you have said that you all don’t have a problem, that 

you are safe and sound. But a lot of analysts think that some others in the industry apparently might have a big problem. Probably 

most credulous of financial institutions, valuations of their assets 

is IMF. They estimate assets are overvalued by about $500 billion. 

The least credulous, the most skeptical, not surprisingly, Nouriel 

Roubini, Dr. Doom, estimates they are overstated by $3.6 trillion. 

Mr. Blankfein, your economists are in between. They estimate 

they are overvalued by $1.1 trillion. A total loss of $2.1 trillion, 

74 

about $1 trillion of that has been written down at that point, and 

I have heard that described as the consensus estimate. So there appears to be a problem out there. 

If there are banks that are in fact insolvent, can you think of any 

reason, based upon economics or ethics, that loss should be borne 

by taxpayers instead of by shareholders and unsecured creditors, as 

is usually the case when a corporation becomes insolvent? 

Mr. Blankfein? 

Mr. BLANKFEIN. Well, I think the point here is that, when you 

talk about a health or solvency issue, you are talking about marking them to what level. 

Mr. MILLER. My question is, who should bear the loss? If they 

are insolvent, who should bear that loss? Is there any reason based 

upon ethics or economics or any other rationale that the loss should 

be borne by taxpayers, not by shareholders and unsecured creditors? 

Mr. BLANKFEIN. Again, it is a political decision. But I just want 

to definitionally say again, we are a mark-to-market firm. 

Mr. MILLER. That is not my question. 

Mr. BLANKFEIN. I think that people would quibble about what 

the real mark of that should be. In other words, if they stayed on 

the balance sheet, those marks might not be ever taken. 

Mr. MILLER. Mr. Dimon, do you have an answer to the question 

I asked? 

Mr. DIMON. I think the shareholders should pay for the losses, 

if possible. 

Mr. MILLER. Mr. Kelley, shareholders and unsecured creditors or 

taxpayers? 

Mr. KELLY. Shareholders. 

Mr. KELLY. Mr. Lewis? 

Mr. LEWIS. Shareholders. 

Mr. KELLY. Mr. Logue? 

Mr. LOGUE. Shareholders. 

Mr. KELLY. Mr. Mack? 

Mr. MACK. It should be shareholders and unsecured creditors, 

but I also think you need to look at, is there a chain reaction? If 

there is no chain reaction, no danger to the system, shareholders 

should be wiped out along with unsecured creditors. 

Mr. MILLER. Mr. Pandit? 

Mr. PANDIT. I would want to make sure that we seriously look 

at whether their insolvency is a result of credit or whether liquidity. These are fundamental issues. And if it is on the basis of credit, I think the answer is what Mr. Mack just talked about, you 

should let the shareholders take it, unless there is a systemic issue. 

Mr. MILLER. Mr. Stumpf? 

Mr. STUMPF. I agree with my colleagues. 

Mr. MILLER. Now, obviously, everyone has spoken of a problem 

with confidence in the industry, and Chairman Bernanke yesterday 

compared the proposal for a stress test to the bank holiday in 1933 

in the New Deal, a comparison that occurred to me as well. 

Do your current safety and soundness regulators have the capacity, the sophistication, the expertise, to do a credible stress test, or 

what do we need to do to make sure that any stress test is credible 

75 

and we know that any bank that gets a clean bill of health is in 

fact safe and sound? 

Mr. BLANKFEIN. I believe they are capable. I have only had a 3- 

month relationship with my new regulator. 

The CHAIRMAN. We will have to take the rest of the answers in 

writing. 

The gentleman from Texas. 

Mr. GREEN. Thank you, Mr. Chairman, and I thank the witnesses for appearing. 

The CHAIRMAN. Believe it or not, you are at this point, the only 

Texan in the room. 

Mr. GREEN. That is a rare, rare occasion when I am the only 

Texan in the room. It is an honor— 

The CHAIRMAN. I take it back. Mr. Hinojosa is here. I am wrong. 

Mr. GREEN. Thank you. 

The American people are exceedingly angry, and I have the opportunity of hearing and visiting with many of these angry people. 

And if they are angry about one thing, it is a lack of intelligence 

as to what happened to the money. They really want to know what 

happened to the money, and I am not sure, that after today, they 

will have any less anger. My suspicion is, when I visit with my constituents, they will still tell me they are concerned as they have 

great consternation about what happened to the money. 

To this end, I would like to know from you, first, is it possible 

to ascertain the amount of increase in new lending attributable to 

TARP? Is it possible to ascertain the amount of new lending attributable to TARP? And if you think that it is, we will do this en 

masse, will you kindly raise your hands? Can your accountants, the 

people to whom you pay large amounts of money, ascertaining the 

amount of new lending attributable to TARP. If so, kindly raise 

your hand. 

New money. All right, let’s see. I will show that all of the hands 

have been raised saving—ok, saving, Mr.—with Goldman Sachs. 

The CHAIRMAN. They are not in the lending business. 

Mr. Mack and Mr. Blankfein are not in the lending business. 

Mr. GREEN. If you are not in the lending business, raise your 

hand, please. 

Mr. BLANKFEIN. We are not in the consumer lending business. 

Mr. BACHUS. This is going to be a good Saturday Night Live skit. 

Mr. GREEN. Bad question, good answers. How about that. So 

here is where we are. If you are lending money to consumers, can 

you ascertain the amount of new consumer lending attributable to 

TARP? If so, raise your hand. And you are lending money to consumers. 

If you are lending money to consumers and you cannot, would 

you kindly raise your hands. Anybody. Can you tell me why you 

cannot, sir? 

Mr. STUMPF. Yes. We are lending. Our consumer loans are up. 

In fact, we were lending through this whole crisis. 

Mr. GREEN. Without telling me they are up, can you tell me why 

you can’t ascertain? 

Mr. STUMPF. Because it is all part of the same capital pool. I 

don’t segregate a certain amount of capital against one loan. So 

76 

when we financed $1.5 billion worth of auto loans in the month of 

December, I can’t tell you where that money— 

Mr. GREEN. Let me ask this. Can you ascertain the total amount 

of increase in new lending? 

Mr. STUMPF. Yes, we can do that. Yes, absolutely. 

Mr. GREEN. So all of you who are in the business of lending to 

consumers, you can do one of two things. You can either tell us the 

amount of lending attributable to TARP at new lending, or you can 

tell me the amount of new lending that you have. 

Mr. STUMPF. Absolutely. 

Mr. GREEN. Mr. Chairman, I beg that I be allowed to pass the 

document that was entered into the record earlier, the bill that I 

have introduced along with—in fact, I shouldn’t say along with, the 

bill was actually introduced by Congressman LaTourette, and I am 

a proud cosponsor; that is H.R. 387. 

Thank you, Mr. Chairman. The reason I would like for you to 

have this is because this piece of legislation would mandate exactly 

what I have just talked to you about. Either you would tell us in 

your quarterly report the amount of new lending attributable to 

TARP, or the increase in your new lending. Is there anyone who 

can find any reason why we should not have you as lenders do 

this? Anyone? 

Let the record reflect that there are no hands up. So let me reverse the question quickly? 

Yes, sir? 

Mr. MACK. Congressman, we do that to the Federal Reserve in 

our TARP filing. It shows all categories. 

Mr. GREEN. So it is not a problem for you, is what you are saying. 

Mr. MACK. It is not a problem at all. I think it is being done. 

Mr. GREEN. If you can do this and you see no problem with it, 

kindly raise your hand. I want the record to be clear. 

All right, for the record, all can. I thank you. Mr. Chairman, I 

yield back. 

Mr. BACHUS. Could I ask a question? Do you factor in the deterioration in the economy and the drop in demand for credit? I don’t 

know how you factor in all those. 

The CHAIRMAN. Let me say I think that is a reasonable question 

for us to ask each other. 

I did want to clarify one point. When we talk about consumer 

loans, that is your business. We are talking about retail loans. Just 

to be clear, we are not just talking about credit cards or automobiles. If it is for the inventory for a business, that is also covered. I want to be clear on that. 

The gentleman from Missouri. 

Mr. CLEAVER. Thank you, Mr. Chairman. I have about seven 

pages of questions that were sent to me from my districts. I represent Kansas City, Missouri, and Independence, Missouri. 

‘‘How dare you!’’—Judy from Kansas City. 

‘‘Why are you squeezing us dry with fees and increasing credit 

card rates but lining your own pockets?’’—Alice from Raymore. 

‘‘Since you are the experts with the big pay, why did you screw 

up?’’—Ben. 

‘‘How big is your yacht?’’—Michelle. 

77 

‘‘Do you really believe that you are that smart?’’ 

I read those only because I think everybody has already conveyed 

to you that people are angry. I don’t think I need to reinforce it, 

but I do think I do need to reinforce it. 

What I want to talk to you about is not that. I want to talk to 

you, Mr. Blankfein, first of all. Do you believe that warehouse lending is safe and profitable? 

Mr. BLANKFEIN. I am sorry, warehouse lending? Against a physical warehouse? 

The CHAIRMAN. No. Any one of the retail bank people, they know 

what we mean by warehouse lending and probably ought to take 

that. 

Mr. CLEAVER. Well, some Wall Street banks are involved in 

warehouse lending. Warehouse lending is when you issue a line of 

credit to an originator, usually it is for about 30 days, and then 

they, of course, sell the mortgage somewhere else. 

Mr. STUMPF. We are familiar with the business. We do very little 

of it, if any, anymore, primarily because we would rather make 

loans, our home loans, ourselves. We have a set of auditors. We 

have a set of principles, values, so we make sure the mortgage is 

for the benefit of the customer. They understand the terms and 

conditions. It helps them and so forth. So it is hard to control when 

you are a warehouse lender. 

Mr. CLEAVER. So most of you don’t do warehouse lending, which 

is one of the problems. That is one of the problems. If a mortgage 

company in my district is making loans, or trying to make loans, 

and the liquidity is not available, and it has been constrained a 

great deal recently, it is difficult for them to originate the loans because they don’t have access to the capital, and with more and 

more people avoiding warehouse lending, it is hurting local mortgage companies. Wouldn’t you agree? 

Mr. STUMPF. We have been out of the warehouse lending business for 5 or 6 or 7 years, and the reason we got out is because 

we saw them doing crazy things that we wouldn’t do ourselves, so 

why do we want to be a part of that? It was too risky for us. 

The CHAIRMAN. Will the gentleman yield, and I will give him 

some extra time, because he is on to a central issue that I have 

heard a lot of complaints from my colleagues about. And one of 

them is, it is one thing to say we are not going to take on any new 

warehouse lending, but we have been told there are people who 

had accumulated an inventory based on their ability to do warehouse lending, and they were cut off in the middle. So there is a 

considerable degree, we have heard this from several members, 

there are people who had a warehouse lending relationship and 

had made certain commitments on the assumption that they would 

have that capacity, and it was cut off before they could sort of wind 

down the business in a reasonable way. 

I wonder if there is anybody familiar with that issue, because 

that is a particular form of it that I have heard a lot of complaints 

about, from builders. 

Mr. STUMPF. I am not an expert in warehouse in mortgage lending, but there are two kinds. One we actually finance, you give 

them a line of credit. Another one is where they do their own mortVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
78 

gages, and you buy them, and then you process them. I don’t know 

which one it is. 

The CHAIRMAN. The one where I think we have had the problem, 

there were developers, people who had accumulated property, and 

then they were counting on the line of credit to be able to finance 

these purchases and were shut down in the middle. That is the 

specific complaint that I have heard. I don’t know about the gentleman from Missouri. 

Mr. CLEAVER. Yes, that is precisely it. And one Wall Street in- vestment bank at one point not long ago had a $250 million line 

of credit just for one originator. So all that has dried up. How in 

the world are we going to deal with the housing crisis, the home 

builders and the Realtors, if warehouse lending is being evaporated? You are the only one that participates in it, and yours is at 

a minimum. I needed to just say that, because it is a problem in 

every community, and my community is no less being hit. 

The final issue I want to raise is that I am woefully unimpressed 

with the diversity of this panel, of not only the panel but the folks 

who sit behind you. I don’t know how many rows deep we would 

have to go to have some diversity. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Let me say, and I appreciate the gentleman raising that, I would ask that you give us in writing a response, because the gentleman raises a very important question. I will tell 

you, we hear a lot of this from our colleagues. It is the cutting off 

of the warehouse lending relationship in the middle of the movie, 

when there is inventory of some kind that was going to be financed 

by the warehouse lending and is cut off. 

I would ask you to talk to your people and give us answers in 

writing, and I would hope the answer would be that, well, yes, that 

is a problem, and even if we don’t want to take open any new commitments, we will allow for the orderly unwinding of the existing 

commitments. I think that is the focal point we have heard. 

The gentlewoman from Ohio is going to do special orders. We will 

be able to finish everybody, because we will stay until 5 p.m., so 

ould anybody object if I took the gentlewoman from Ohio for 5 minutes? 

Ms. Kilroy. 

Ms. KILROY. Thank you, Chairman Frank. 

Mr. Lewis, you went on record recently with CNBC’s Maria 

Bartiromo stating very publicly that the Bank of America will fully 

refund the taxpayers, and that you expect, ‘‘that this company is 

going to be a thing of beauty as we get to the other side of this 

and it will be the envy of the financial services industry in terms 

of market share.’’ 

Do you stand by that statement? 

Mr. LEWIS. Yes. 

Ms. KILROY. So we can fully expect that the $45 billion in TARP 

funds will be repaid? 

Mr. LEWIS. Plus the $3.8 billion in interest a year. 

Ms. KILROY. You stated as well that categorically, Bank of America will not need additional government funding. Is that correct? 

Mr. LEWIS. Correct. 

Ms. KILROY. So that means no further TARP funds? 

79 

Mr. LEWIS. Correct. 

Ms. KILROY. That means no loan guarantees? 

Mr. LEWIS. Correct. 

Mr. KILROY. That also means no purchase of bad loans or toxic 

assets by an aggregator bank? 

Mr. LEWIS. Pardon me, I don’t know because I haven’t seen the 

program, but that would be something that would be at a market 

or would be available to everyone, I would presume. 

Ms. KILROY. Well, these other funds may be available to everyone as well. Purchase of a toxic asset at less than a fair value, that 

would be government funding to the bank, would it not? 

Mr. LEWIS. If it were less than fair value, and that is the issue 

that people are dealing with, and that is why it is so complicated. 

Ms. KILROY. I am pleased to see that you have this commitment 

to repaying the very angry and worried taxpayers that you have 

heard about, and you certainly have set a standard here for your 

colleagues today in setting the bar. So I would like to ask each of 

you to go on record before this committee and before the public to 

answer the question, can each of you assure me that you will also 

be fully paying back the government funds, the taxpayer funds, 

and that you will not be back to the government again asking for 

money that many of us and many of our anxious and worried and 

angry Americans feel is corporate welfare? Or do you expect your 

institutions to also be things of beauty when all is said and done? 

Mr. BLANKFEIN. That is my expectation. 

Ms. KILROY. That you will be able to pay us back. 

Mr. BLANKFEIN. It is my absolute—my expectation. 

The CHAIRMAN. You are not under oath, guys, so— 

Ms. KILROY. Is it your expectation also that you will not need 

any additional infusions of government funding? 

Mr. BLANKFEIN. We are users of the FDIC program, but it is not 

our expectation to have to sell assets at a higher-than-market 

value. 

Mr. DIMON. We categorically expect to pay back the TARP funds. 

Ms. KILROY. And do you anticipate requests for additional TARP 

funds before we get to the end of this, to the thing-of-beauty stage? 

Mr. DIMON. If it is, it won’t be me. 

Ms. KILROY. Mr. Kelly. 

Mr. KELLY. We also expect to be able to pay back the TARP 

funds hopefully within 3 years and hopefully gain even sooner than 

that. And we will not need additional funding. That is not our expectation. 

Ms. KILROY. You will not need additional funding. Thank you. 

Mr. Lewis—excuse me, Mr. Logue. 

Mr. LOGUE. We expect to pay back the TARP funding as well, 

and we would expect that we will not need any other funding. 

Mr. MACK. I will pay back the TARP funds, but we do use the 

FDIC guarantee in erasing debt. 

Mr. PANDIT. We will pay back the government TARP funds. I 

don’t know what the rest of the program is going to be used for. 

If you come to us and say, do it this way, and by the way that increases loans that are made and it is also good for our shareholders, how are we going to turn that down? 

80 

Mr. STUMPF. We will pay back the funds at the stated interest 

rate. And we stated we will not, as we are positioned today, need 

any more TARP funds. 

But I also agree with Mr. Pandit. I don’t know what plans will 

be for the future. I don’t know what is in store. But the way we 

see it today, we can pay it back, and we need no more funds. 

Ms. KILROY. So you may anticipate the government purchase of 

bad loans or toxic assets. 

Mr. STUMPF. I don’t know what the Geitner plan will look like. 

I don’t know what is coming down. But our plan is what we see 

today, what we know today, we need no more funds. 

Ms. KILROY. Thank you. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman from Minnesota. 

Mr. ELLISON. I would like to ask a question of the gentleman 

from Bank of America. Have any of the TARP funds you have been 

given so far been used to lobby? 

Mr. LEWIS. No. 

Mr. ELLISON. Are you familiar with a posting that was in the 

Huffington Post that would seem to indicate that there was a Financial Services Roundtable conversation in which someone from 

your office indicated that the Employee Free Choice Act should be 

rapidly opposed by the members of the Financial Services Roundtable? 

Mr. LEWIS. I don’t go to the Financial Services Roundtable, so I 

would not know. 

Mr. ELLISON. Do you agree with me in principle that any company that gets TARP funds, those funds should be used to either 

recapitalize the bank or to otherwise promote solvency within the 

bank and promote lending and not to try to impact or try to defeat 

any measures in Congress to promote union organizing? 

Mr. LEWIS. For use of the TARP funds, yes. 

Mr. ELLISON. Okay. And so can I take it, can I have your insurance that no TARP funds have been devoted to lobbying? 

Mr. LEWIS. Correct. 

Mr. ELLISON. Do you think it is appropriate while in receipt of 

TARP funds to be trying to defeat measures such as the Employee 

Free Choice Act? 

Mr. LEWIS. I think doing what is in the best interest of your company is always the best thing to do. So I wouldn’t point to any one 

thing and say, just because you have TARP funds, you can’t do 

something. 

Mr. ELLISON. But, as has been pointed out already, money is fungible. What you don’t use one place you can switch and use other 

monies for that while you are using TARP funds. Wouldn’t you 

agree that your company needs to be using those funds for their 

intended purpose— 

Mr. LEWIS. Yes. 

Mr. ELLISON. —and not trying to defeat union organizing? 

Mr. LEWIS. And $45 billion is in the context of $230 billion in equity. So you have to think of it in the context of a much larger 

number. 

Mr. ELLISON. Right. Well, I just wanted to put into the record, 

have unanimous consent to have entered into the record, this letter 

81 

from Change to Win to Mr. Steve Bartlett, who was with the Financial Services Roundtable. In it, he describes a conversation in 

which several companies which received TARP funds were having 

some fairly frank conversations about lobbying. I find it pretty disturbing, and I would like you to respond to this letter, if you would, 

sir, because it specifically mentions your company. 

The CHAIRMAN. We have general leave, so it will be made a part 

of the record. 

Mr. ELLISON. I would also like to give voice to the people in my 

district who sent me a number of questions to ask all of you. I will 

just give you a sense of how these questions go. 

One is, aren’t bonuses to award productivity, not failure? That is 

Ann J. from Minneapolis. Whatever happened to banks being risk 

averse? That is Pat B. from Minneapolis. And it goes on and on 

and on. 

I just wanted to give voice to it because it is true that there is 

a general concern about the state of our financial services industry. 

And to the degree that we give you a benefit that our constituents 

think you shouldn’t have, we run afoul of them. So I hope you bear 

that in mind as you go about the use of your TARP funds. 

I also want to have something put into the record, and I do recognize there is general leave to have things put into the record. It 

is an article written by Adam Levitin, who talks about how 

securitization of credit card debt has contributed to the financial 

malaise that we find ourselves in. So I will have that in there as 

well. 

Mr. Pandit, I would like to ask you a question about solvency at 

Citi, and I would like to have the—actually, both the gentlemen 

from Bank of America and Citi, both these questions might apply 

to you. Could you share with me what you feel the solvency of your 

firm is at this time? 

How about you, sir? 

Mr. PANDIT. Congressman, our Tier 1 capital ratio is 12 percent. 

That is an enormously high capital ratio, well above whatever the 

regulators consider to be well-capitalized banks; and that is the 

risk capital that supports all our depositors, all our creditors, all 

our bondholders. That is a very, very strong ratio. We feel well-capitalized as a company. 

Mr. BACHUS. Will the gentleman yield just for one minute? 

Mr. ELLISON. Yes, I will yield. 

Mr. BACHUS. In the questioning before that—and I know the gentleman is thoughtful. We very much as a body respect the freedom 

of association and the freedom of speech. And I know the gentleman— 

Mr. ELLISON. Reclaiming my time, if the gentleman wants to— 

The CHAIRMAN. That is really a debate on the gentleman’s issue. 

Mr. ELLISON. If he wants to debate the issue, he can get his own 

time for that. 

Mr. BACHUS. I apologize. But I am just saying I didn’t want them 

to get the wrong—and I know you didn’t— 

The CHAIRMAN. Let us— 

Mr. ELLISON. I hope that does not come out of my time. 

The CHAIRMAN. No, it does not. 

82 

Mr. ELLISON. From Bank of America, what is your Tier 1 capital 

ratio? 

Mr. LEWIS. It is about 10.6. And, remember, we made money in 

2007, we made money in 2008, about, in the total of those 2 years, 

$19 billion. We did not lose money like some banks across the 

world did. And so to ask me that question is amazing. 

Mr. ELLISON. Well, I mean, I have asked the question. You have 

answered it. 

Tell me, how has Merrill Lynch—the acquisition of Merrill impacted your Tier 1 capital ratio? 

Mr. LEWIS. That was the reason that we took the injection to do 

the deal, and so it actually helped it, because we filled the hole 

that was caused by the loss. 

Mr. ELLISON. And what about Countrywide? How does that impact your— 

Mr. LEWIS. Countrywide is not big enough to affect us in any big 

way. 

The CHAIRMAN. Can I just say, when you say ‘‘the injection’’ that 

is the second TARP funding, not the first, but the second injection. 

Mr. LEWIS. The second. 

The CHAIRMAN. Go ahead. 

Mr. ELLISON. Now, there has been wide speculation that some of 

our larger banks around the Nation may end up being nationalized. 

Do you feel that your bank should be considered one of those banks 

at risk? 

Mr. LEWIS. Are you talking to me? 

Mr. ELLISON. Yes. 

Mr. LEWIS. Absolutely not. I don’t know why you would ask the 

question. 

Mr. ELLISON. And I am curious about Citi as well. Is there any 

worry that—will we be here in a few months talking about the demise of Citigroup? 

The CHAIRMAN. This answer will end your time. The gentleman 

got extra time. 

Mr. PANDIT. Congressman, I intend to make sure that is not the 

case. 

The CHAIRMAN. The gentleman from Ohio. 

Mr. WILSON. Thank you, Mr. Chairman. 

Gentlemen, I have a question for all of you. If I came to you as 

the owner of a failing business and I asked for a loan to take my 

staff on a spa trip to Las Vegas, would any of you grant that loan? 

Mr. BLANKFEIN. No. 

Mr. DIMON. No. 

Mr. KELLY. No. 

Mr. LEWIS. No. 

Mr. LOGUE. No. 

Mr. MACK. No. 

Mr. PANDIT. No. 

Mr. STUMPF. No. 

Mr. WILSON. Thank you. I didn’t think so. 

But help me explain to the people back home what has happened 

with their tax money that went out in the first part of this TARP 

which my understanding is all of you are recipients of it. 

83 

The CHAIRMAN. I would just say to the members that this is not 

a day in which you are going get a lot of volunteers. So if you want 

to get an answer, you probably want to pick somebody. 

Mr. WILSON. Okay. Maybe I can rephrase my question, Mr. 

Chairman. 

There are a lot of people in Ohio who are really upset about the 

way things have been handled, the arrogance, the way things have 

been done, what has happened, the PNC purchase of National Citi 

with TARP funds, on down the line. It could go on and on. But 

what have we done to restore the confidence in the financial community that is going to help small businesses like I represent in 

Ohio to be able to get their line of credit to be able to buy goods 

for the spring and for the summer selling season? What has been 

done with the TARP money? 

Mr. Dimon, could I address that question to you? 

Mr. DIMON. I think we put in the record a lot of what has been 

done with the TARP money. We have lent in the last 90 days I believe it was $250 billion; $90 billion to corporations, $50 billion to 

consumers, net and increased credit lines; $50 billion in interbank 

markets; $60 billion in the purchase of MBS or asset-backed securities. I do believe—and it is an estimate. I do believe that probably 

$75 billion of that would not have happened without the TARP 

money. 

We are also a very large small-business lender in Ohio. And I 

don’t remember exactly the numbers, but I believe year over year, 

small business loans are up in the Nation. I don’t have Ohio’s numbers. Government, not-for-profit, hospitals, university lending is up 

year over year. And we will be happy to make all that part of the 

record. 

We are still lending in Ohio and other parts of the country and 

try to do exactly what you want us to do with the TARP money, 

which is to fulfill our obligations in regards to this country and the 

communities we serve, which is to help in every single way possible. 

Mr. WILSON. A follow-up question on that, Mr. Chairman, is, do 

you think the TARP money is starting to work as it is intended? 

Mr. DIMON. I think the question that neither I nor anyone will 

ever be able to answer is what would have happened had it not 

been injected when and how it was injected. We will never know. 

We will debate it the rest of our lives. 

I personally don’t spend much time guessing about things like 

that. It could have gotten much worse. So it may very well have 

created a situation where it stabilized things so that we can move 

forward, as opposed to having a lot more problems. And I just don’t 

know. 

Mr. WILSON. Thank you. Thank you, Mr. Dimon. 

Another question I have—and I will address it to Mr. Lewis, if 

I may—banks versus—banks who took TARP versus banks who did 

not, why do some banks turn their back and say I don’t want any 

more TARP funds—I don’t want any TARP funds. I don’t want to 

live with the problems of government money, of taxpayers’ money. 

What is the rationale there? Could you help me with that? 

Mr. LEWIS. Yes. The reason is they don’t want the government 

involved in their business. It is as simple as that. 

84 

Mr. WILSON. Well, thank you. I am glad it was a simple answer 

to a simple question. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. I thank the gentleman. 

Mr. Dimon saying we will never know did remind me, and I 

think we all ought to keep this in mind when we are trying to be 

absolute about past judgments. In the Knickerbocker’s History, 

Washington Irving says—he describes a boat crash. And he said 

the boat went around the bend, and a wind came up and blew it 

on the rocks, and we will never know what happened because there 

were too many survivors. And I think that is part of our problem. 

The gentleman from Colorado. 

Mr. PERLMUTTER. Thanks, Mr. Chairman. Just a couple of questions, and thank you all for your testimony today. 

We have been dealing with a lot of sort of dire circumstances. We 

have had a chance to have Mr. Bernanke come and testify in September when things were really on the precipice, again in November and then yesterday, and I am hoping that we have turned the 

corner on stabilizing the financial markets. We still have to restore 

confidence in the markets and rejuvenate the economy to avoid the 

job losses that Mr. Stumpf was talking about, and I think we are 

on track to do those things. 

But I want to come back to how we got here. And I look back 

to the sort of bankers that I can sort of reach back to, Dick Van 

Dyke and Mary Poppins. No offense. But, you know, a stable guy 

who had certain things. Jimmy Stewart and then whoever Mr. Potter was. And I don’t know if there was a Barrymore or somebody. 

But what I am concerned about—and Mr. Dimon heard me say 

this one time—is the size and the scope of your institutions is so 

far-reaching globally and just in terms of the products that you 

handle. And I just—I am concerned about the effect on the system. 

That, in some instances, your institutions are bigger than the FDIC 

insurance we have in place, or the Federal Reserve had $800 billion at some point last year to assist the market. I mean, is there 

a point where you are too big and that the system itself is in jeopardy? 

Mr. Mack, do you have any opinions on that? 

Mr. MACK. I can only speak to our firm. We are not too big, and 

we still plan to grow, so we don’t find that as an issue for ourselves. 

Also, as I sat here and listened, 2 years ago we owned a credit 

card business. We didn’t think it was one of our core competencies, 

and we spun that off. So we have grown, but, at the same time, 

we have gotten rid of businesses that do not fit. 

Mr. PERLMUTTER. Let me switch it a little bit. Do you think that 

you can get too far-flung in the types of businesses under your umbrella? Whether they might be insurance or, you know, own real 

estate, I don’t know. 

Mr. MACK. Yes. And I think that is an issue. Especially as we 

grow our businesses not only here in the United States and develop 

new products or globally, that is an issue. That is something we 

look at. We look at it through our audit committee. We look at it 

through our chief risk officer. We look at it through our strategy 

and planning. That is an issue. 

85 

Mr. PERLMUTTER. Do you think the regulators in this arena have 

been focused enough on the breadth of business that you might 

have? Or, Mr. Dimon, if you have an opinion or Mr. Stumpf. Mr. 

Dimon, if you would. 

Mr. DIMON. I think if I was in your seat I would want large, successful American corporations that do business around the world, 

some of which by their nature have to be big because they are 

large—they have huge data center systems, diversified credit exposure, etc.—and I have never seen in my experience that large itself 

is the bad thing. I have seen bad large companies and bad small 

companies. I have seen good large companies and good small companies. And the United States military, which is a magnificent organization, isn’t bad because it is large. You want it to be large and 

use the benefit of its size for the state of the government. So I always separate is it good or bad and do you have the systems and 

people to handle the size and/or the complexity. 

Mr. PERLMUTTER. Let me narrow it just a little bit. 

Back in September, when the Treasury Secretary and the Chairman of the Federal Reserve came to us, I mean really in an urgent, 

emergent fashion, they said, this is the banking system. It is different than everything else. You have to help. If you don’t, we will 

have trouble in everything else. 

Is the banking system different than just a corporation, in your 

opinion? 

Mr. DIMON. Are you asking me? 

Mr. PERLMUTTER. Yes. 

Mr. DIMON. Well, yes, I think you have special obligations and 

you do have risks. You have to serve the countries and the communities you operate in. So I think it is special to that extent. And 

I think it is special to the extent that you not uniquely—there are 

probably other ones which I have not thought about—but uniquely 

could cause systematic risk, and that should be eliminated. You 

don’t want that to be the case. There are ways to handle that. 

Mr. PERLMUTTER. Thank you. 

The CHAIRMAN. The gentlewoman from Illinois. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Based on all of your testimony today, it sounds like your institutions are doing okay. So why are we here? And I think one of the 

things that we need help in is, how can you help restore investor 

and consumer confidence? I don’t know who wants to address that. 

Any volunteers? How can you help to restore investor and consumer confidence? 

Mr. Dimon, how about you? 

Mr. DIMON. You are being unfair now. 

Mrs. BIGGERT. You are the name I know. 

Mr. DIMON. I think that every person at this table is doing everything they can with all their brains and might to fix this situation. 

I also think that Congress is doing that, the Secretary of Treasury, 

the Administration. And I think all of us, working really hard, we 

will beat this thing. 

And we are still, I would say, bruised and battered but still 

standing and fighting. We have a ways to go. But, if we do it right, 

this country will do what it has always done. It will learn, it will 

86 

reform, and it will move on. I am completely comfortable that will 

be the case this time, too. 

Mrs. BIGGERT. Mr. Stumpf. 

Mr. STUMPF. I will also add a couple of things to that. 

We have talked about mark-to-market accounting before, which 

has really destroyed capital in this industry. We think things have 

intrinsic value that are very different from the market clearing 

value, and we have to write those things down. Also, the way we 

do reserves for loans in our industry. We reserve at the time when 

we are least able to afford to do it. It is procyclical. That is not particularly helpful. 

One thing that the chairman is actually helping on is this FHA 

foreclosure issue. We have a very difficult time. Ten percent of all 

the loans we service are FHA and VA loans. They are almost impossible to restructure. And again called the 601 program. So there 

are a number of things like that will be helpful. 

But I think at the end of the day serving more customers, helping them and partnering with you and Congress to create jobs in 

the public sector and private sector, neither of us can do this alone, 

is the real key. 

Mrs. BIGGERT. Well, if you were in my shoes and you were sitting 

up here, and your customers were as angry as some of my constituents, what would you tell them? What would you do if you were 

here? What would you do to help them restore their confidence? 

We want to do the right thing, and so far we have tried so many 

things, and it really hasn’t worked. Are we doing too much? Should 

it be more of the free market? Are we doing too little? 

If you have just one or two things that you think that the Congress should add to our repertoire to see if we can solve this problem. I know you have been here a long time. 

Mr. LEWIS. Well, I will begin. I don’t know if I know all the answers. Obviously, I don’t. 

But you are soon to pass the stimulus package. There is some 

quick hits which will help immensely. The modification on mortgages is incredibly important to get that in the TARP package. And 

then, thirdly, we have to keep mortgage rates down so that we can 

continue to have refis, which are, in essence, a kind of a tax break. 

I think over time with those three things you are going to have 

an impact on the economy. 

Mrs. BIGGERT. How many of you think we should do away with 

the mark-to-market? 

Anybody else? Just one? That is interesting. 

Mr. STUMPF. I should say don’t do away with it. When markets 

are not functioning, it is no longer mark-to-market. It is mark-tocraziness. We ought to look to a different mark-to-cash flow then 

when those markets are not functioning. There is nothing wrong 

with the mark-to-market per se. 

Mr. LEWIS. I would agree. Extraordinary times like this, there 

should be another alternative. 

Mrs. BIGGERT. You know, I hear from so many customers of 

yours that they can’t get to the lender. Or, if they do, they talk to 

somebody, then they get somebody else, and it goes around in a circle. I would hope that you would make sure that these people really get answers to their questions and see what you can do to help 

87 

them. But it sounds like—are things improving? Do you see any 

ray of sunshine that we are going to solve this? 

Mr. BLANKFEIN. The credit markets have been improving steadily. 

Mrs. BIGGERT. Thank you. 

The CHAIRMAN. Your time has expired. 

But if I can get the indulgence, I was distracted. I distracted myself. Nobody’s fault. 

Mr. Stumpf, you talked about the FHA/VA issue. Would you give 

me that one again? 

Mr. STUMPF. About 10 percent of the loans that we service are 

FHA and VA, and these are sometimes for new home buyers and 

so forth. The way the loan works, we make a loan, the government 

guarantees it, they get a guarantee fee, and the asset goes into a 

Ginnie Mae pool. And whatever the customer pays us a month is 

indifferent. We have to pay the pool for the full amount of the 

mortgage, and we can’t restructure. 

The CHAIRMAN. I would ask you to— 

Mr. STUMPF. It has been very helpful. 

The CHAIRMAN. I will say this. With regard to the bankruptcy, 

which I know many of you don’t like, but we did do a separate 

piece to that so that in cases of FHA or VA the government would 

take the hit and not the owner. 

Mr. STUMPF. I understand. 

The CHAIRMAN. But we should be able to work it out short of 

that. Please be in touch with our staff, and we obviously want to 

be helpful— 

Mr. STUMPF. You have been wonderful in that. 

The CHAIRMAN. —and unravel all that. Thank you. 

The gentleman from Indiana. 

Mr. DONNELLY. Thank you, Mr. Chairman. 

I have the privilege of representing Elkhart, Indiana, which is 

where President Obama went about 2 days ago. And what has happened there is that the credit has completely disappeared so they 

can’t do floor plan financing and that consumers can’t buy the recreational vehicles that are made; and, consequently, unemployment 

has gone up to 15.3 percent. 

And I know—I heard Mr. Lewis—I know you don’t want us in 

the banking business; and, believe me, we don’t want to be in the 

banking business. But until we get to the other side—when the 

folks in Elkhart and the rest of my district come back home from 

work, and they are not sure if the place is going to be open the 

next week, with the factory they are working, and some of their 

money comes out of their paycheck for TARP, they just want to 

know that there is going to be good judgments made with it. 

And I know some of the stuff you want to tear your hair out 

when you read it as much as we do. But what we need you to do— 

and I know that you want to achieve this as well—is that our great 

generals like Omar Bradley and them, they always made sure that 

the troops were bedded down and that everybody was fed before 

they were fed. 

Mr. Stumpf is the one who talked about a culture of values and 

leadership. And we really need you guys. I know that is your goal, 

88 

too, to do the same thing. So that when you see some of this crazy 

stuff— 

I mean, look at it from my perspective back home in Indiana. If 

you look at it from that instead of Wall Street and you look at 

something and you go, this would be crazy to the folks back home 

in Indiana, please don’t do it. Because when that happens it makes 

it much tougher to try to get them to understand why the second 

part of TARP is needed. 

So you are absolutely critical to the success of this country. If 

things don’t work with your banks, it is going to be awfully tough. 

So we are in this together, and we are counting on your good judgment as we move forward. And I hope I am looking at three, six, 

eight or more Bradleys over on the other side of the table. 

The other thing I want to ask you is this. And, Mr. Stumpf, 

again you said we want to work with companies if we possibly can. 

I have small businesses back home. That is the heart and soul 

of my district. They have lines of credit, and they are based on hitting certain profit numbers, inventory numbers, all of those things, 

and it is tough right now, and some of those numbers may be a 

little bit off. And they have come to me and said, ‘‘Hey, Joe my 

number is off; they are going to call the line.’’ They have made 

every payment, but their ratios are off now. 

Does it make sense to try to work with those companies? I mean, 

that is one of the toughest things we have back home, is good companies, still profitable, but their ratios are off a little. Can’t we 

work with them? 

Mr. STUMPF. I think the answer is absolutely yes. And I think 

I believe in our company’s case we have stuck by our customers 

during the difficult times. 

Every situation is different. Not every customer is created the 

same, not everyone has the same possibilities and opportunities 

and so forth, but to the extent that we can and balance it off with 

safety and soundness for all of our customers and for our stockholders that is where the secret sauce is. 

Mr. DONNELLY. We heard Mr. Hensarling. We don’t want to 

make loans to people who can’t pay them. But to people who can 

and are going through a tough time now, just like your banks have, 

they want to come out the other side just as well. They will sell 

their car to make the payment to the bank. And so I would encourage all of you to stick with them and to try to work with them. 

The other thing that we found back home is what you talked 

about, that some of the companies, nonbank, that used to be there 

are no longer there. Financing for RVs was primarily done by GE 

Financial and Textron and Key Bank. All three are gone. I mean, 

not gone technically gone, but they have pulled out of the market. 

So you have companies that have worked nonstop and they look 

up and all the companies they have worked with have said, we are 

not into this anymore; you know, this doesn’t interest us. That 

makes it extraordinarily difficult to conduct your business. 

So I just wonder if you have any ideas on how to fill that hole 

for those financial companies who are not around anymore. Mr. 

Lewis, I will ask you first. 

89 

Mr. LEWIS. I don’t know a lot about the RV business, but we are 

looking for opportunities, and if they are good ones, then our point 

is make every good loan we can make. 

Mr. DONNELLY. So there is money out there to be loaned then. 

Mr. LEWIS. This not a question of liquidity. At least our company 

has never been this liquid in our history. This is about an issue of 

demand and the economy. 

Mr. DONNELLY. I will bring you the demand, sir. Thank you. 

The CHAIRMAN. Thank you. 

I want to go back to Mr. Stumpf, because you were more right 

than I was, apparently, at the initiative that you brought to us. We 

have language in the bill that we voted out last Wednesday of this 

committee which we hope to get passed at some point which deals 

with that FHA/VA problem. So we do think, thanks to your good 

staff and mine, that we were able, working together, there was bipartisan agreement on that piece of it. There may be some objection—but as it came out of here that is in our whole service of 

piece, and that has been done. 

Mr. STUMPF. Thank you. You have been very helpful. I appreciate it. 

The CHAIRMAN. The gentleman from Illinois. 

Mr. FOSTER. Let’s see, I have a couple of questions. 

The first ones have to do with stress testing going forward and 

the conditions under which you may or may not stay solvent and 

may or may not continue to exist. If you take the slightly, hopefully, significantly pessimistic but realistic assumptions of maybe 

11 percent unemployment, 25 percent further decline in real estate 

prices and comparable problems in the commercial real estate, 

which a lot of people tell me are not that unrealistic, without being 

specific could one of you give an estimate of how many of the eight 

of you would still survive without a Federal cash infusion under 

those sort of pessimistic but realistic conditions? 

Mr. MACK. We would survive. I mean, we have a very high Tier 1 ratio. We have reduced our balance sheet dramatically from $1.1 

trillion to a little less than $600 billion. We have taken our leverage from 32 times down to about 121⁄2 times. It would be very painful and very upsetting if those numbers come true as you are saying, but we would make it. 

Mr. FOSTER. Do you regard those as unrealistic numbers, things 

that are very unlikely to happen or not? 

Mr. MACK. Well, I think some of those things can happen, especially in the commercial market you were talking about. I think we 

have not seen how difficult that can be, and it is just beginning. 

I do not think it will be at the same level or intensity of a downslide that we saw in residential, but there is a lot of pain to come 

in the commercial market. 

Mr. FOSTER. Then maybe I will try putting you on the spot. If 

you would give an estimate for how many of the eight would survive—without pointing. Don’t look or point but just make a guess. 

Mr. MACK. I am not going to guess at that, Congressman. 

Mr. FOSTER. Is anyone feeling more brave? You are shaking your 

heads. You won’t do it. 

Mr. BLANKFEIN. I can speak for ourselves. We would survive. But 

the nature of uncertainty and given enough time and the unpreVerDate Nov 24 2008 17:06 Jun 19, 2009 Jkt 048675 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 K:\DOCS\48675.TXT TERRIE
90 

dictability of markets, look where we are and look how we wouldn’t 

have foreseen it. So you have to prepare that anything can happen, 

even things worse than that. And then we have to build in expectations, and that is the world we are in. 

On the other hand, at this point, given expectations are so low, 

it is worth pointing out the same way we have been in a bubble 

that is to the upside, we could very easily have been in a downward bubble. At this point, there is 100 percent of the world that 

is 100 percent pessimistic; and that may not turn out to be the 

case, either. 

Mr. FOSTER. Well, do you routinely game out situations like I described to say what is our survival strategy under these things? 

Mr. BLANKFEIN. Yes. 

Mr. FOSTER. Everyone is nodding. 

Mr. DIMON. What are your numbers again? 

Mr. FOSTER. 11 percent unemployment, 25 percent further decline in real estate, and comparable problems in commercial real 

estate. 

Mr. BLANKFEIN. That and beyond. 

Mr. FOSTER. And beyond. Okay, so you actually think about 

downside things. 

Mr. BLANKFEIN. We do the math, and our regulators observe us 

doing the math. 

Mr. FOSTER. And have you in the past gamed out a 25 percent 

drop in real estate prices or was that just off your planning horizons? 

Mr. BLANKFEIN. I am just not that conscious of it. But our plan, 

for example, in equity assumed a 50 percent drop in the equity 

market. 

Mr. FOSTER. As of a year ago, you were thinking in those terms? 

Mr. BLANKFEIN. Absolutely. We look in terms of standard deviations and percentage moves, and, yes, they would be very extreme. 

Mr. LEWIS. We had 30 percent decline in real estate prices about 

a year ago. 

Mr. FOSTER. So you saw this thing coming and were relatively 

quiet about it for quite a while. 

Mr. LEWIS. No. 

Mr. FOSTER. You gamed out a survival strategy. 

Mr. LEWIS. Right. 

Mr. FOSTER. That is different. 

The other question I have has to do with alignment of incentives. 

And my attitude on that is I was a small businessman for many 

years, and it is now rather successful. But for about 20 years, I carried an unlimited personal guarantee in order to get the operating 

loan. And so that means if our company went under, I lost my 

house and everything else. You gentlemen are not in that situation. 

And I was wondering, well, first off, have you ever heard of a 

compensation scheme that you think couldn’t be circumvented is 

one question. When these things get suggested, I think the immediate thing—I know that—I certainly say, hey, you could game it 

this way or that way or the other way. Are you personally optimistic that if we chose to somehow limit compensation schemes 

that a way wouldn’t immediately be found around it? 

91 

Mr. BLANKFEIN. Well, our goal isn’t—the goal is we are the leaders of our firm. Our legacy is how well our firms do. We want to 

keep the alignment of our people with the fortunes of the firm. And 

we have suggestions for how to do this, especially as you climb up 

the letterhead and you get to the more senior people, paying people 

in relationship to how the whole company does and making them 

keep that payment, the bulk, in stock. 

Mr. FOSTER. But do you believe that has been done so far in the 

industry? I mean, I think there seems to be almost a consensus 

that there is a misalignment of incentives issue that is largely— 

Okay. I will give you follow-up written questions, actually. 

The CHAIRMAN. The gentleman will do written questions. 

I was very pleased with the gentleman’s question about survival 

and your answers. But I am afraid that some time later in the 

evening, I am going to be seized by the image of the eight of you 

standing up singing, ‘‘I will survive,’’ and I hope that I am not. 

The gentleman from Indiana. 

Mr. CARSON. To add on to my colleague’s point, as you know, this 

committee will address the issue of moral hazard and regulatory 

reform in the coming months. Some of the reform provisions mentioned by Chairman Frank for this legislation are critically important in my view because of the incentivized high-risk behavior 

within this particular industry that helped fuel the market downturn, as we know. 

While we looked for your companies to exhibit tremendous leadership in this crisis, to Congressman Donnelly’s point, we heard reports of bonuses and acquisitions and sponsorships and so forth. As 

you all know, the public—to Donnelly’s point—I am from Indiana 

as well—the public doesn’t believe that you guys have learned from 

your errors. And before you answer, keep in mind that over 

100,000 Hoosiers lost their jobs last year, and much of the TARP 

assistance will be paid for in part by my constituents. 

Now, the question for me becomes I want to know how—what 

specifically will your companies do to better monitor internal risk 

assessments and reform your compensation policies? 

Mr. MACK. Well, Congressman, in our case, on the risk assessment, we have just completed a risk assessment with an outside 

consultant working with our audit committee. We have enhanced 

our credit risk controls and market risk controls. I think we have 

added an additional 67 people since about 6 months ago. So we are 

very focused in looking at risk, how we manage risk, how do we 

learn from mistakes we have made. 

On compensation, the thing that we have introduced is a 

clawback. One of the things that has frustrated me is that oftentimes you come to year end, you pay someone on record revenues 

for their area, only to find out 3 months later or 6 months later 

that position ends up losing money. So we have a 3-year clawback. 

And I think as we look at our business all of us are going to try 

to figure out how do you continue to tie performance compensation 

to the overall firm and making sure that people are vested in the 

firm on a long-term basis, not year to year. I think that is the goal 

of all of us to do that. 

Mr. CARSON. Thank you, sir. 

The CHAIRMAN. The gentlewoman from California. 

92 

Ms. SPEIER. Thank you, Mr. Chairman. 

Thank you, gentlemen, for your testimony today. 

Mr. Blankfein, there is a question I wanted to ask you for 

months. In September, when Secretary Paulson and Chairman 

Bernanke met that weekend and made the decision to save AIG 

and to allow Lehman Brothers to fail, and I think Bank of America 

picked up Merrill at that point, there was reference made to the 

fact that you were there. And there were subsequent discussions as 

to whether or not Goldman Sachs was a counterparty. And, if so, 

I would like to know how much money you received back from AIG 

for credit swaps. 

Mr. BLANKFEIN. First of all, AIG was a big counterparty. Many 

firms were a counterparty. 

I said—in response to another question, I pointed out that we 

had no credit exposure to AIG because we had a collateral arrangement and credit mitigant bonds. So we had no exposure to AIG. 

As far as participating in meetings at the Fed, we are a very big 

advisory firm, we have particular expertise in financial institutions, and we were called by the New York Fed to lend assistance 

to try to look for a private market solution for AIG. This is following the Lehman Brothers weekend. 

Ms. SPEIER. All right. Thank you. 

The Congressional Oversight Panel has put out a chart that suggests that, for most of you, the taxpayers are now subsidizing you, 

that the value of the contract that was let is one now that is underwater. In fact, $78 billion worth of a subsidy. 

The question I have and I think the question a lot of my constituents have—in fact, I have gotten plenty of questions to ask you 

today, much like many of my colleagues—is if I am subsidizing 

you—I, the taxpayer—am subsidizing you to the tune of $78 billion 

because what we have loaned you is now not valued at the same 

amount, why is it I have to pay an interest rate for my credit cards 

at 18 or 20 percent? Why is it you can get money for 5 percent from 

TARP, and I am paying 18 percent, and I am subsidizing your business? 

So my question to you, each of you, is are you willing to reduce 

the credit card rates that you charge your customers as being a 

TARP participant? 

Mr. BLANKFEIN. We are not in the credit card business. 

Ms. SPEIER. Mr. Dimon. 

Mr. DIMON. Every business has its own financial dynamics. 

Ms. SPEIER. I am just asking the question, yes or no. 

Mr. DIMON. The answer would be no. 

Ms. SPEIER. Okay. Mr. Kelly, you are probably not in the business, correct? 

Mr. KELLY. We are not, no. 

Ms. SPEIER. Mr. Lewis. 

Mr. LEWIS. No. 

Ms. SPEIER. Mr. Logue. 

Mr. LOGUE. No, we are not in the business. 

Ms. SPEIER. Mr. Mack. 

Mr. MACK. We are not in the business. 

Ms. SPEIER. Mr. Pandit. 

Mr. PANDIT. Case by case. 

93 

Ms. SPEIER. Mr. Stumpf. 

Mr. STUMPF. No. 

Ms. SPEIER. So what is the interest rate you are charging, for 

those of you in the business on credit cards? 

Mr. LEWIS. It is a range. It is a range of 9 or 10 percent to 20- 

something percent. 

Ms. SPEIER. To what, 27 pecent? 

Mr. LEWIS. 20-something percent. 

Ms. SPEIER. 20-something percent. 

Do any of you believe that we should have a law in America that 

has a usury rate? Do you think there is ever a rate that is usurious, that is obscene, that shouldn’t be charged, 36 percent usurious? Could you answer that? 

Mr. DIMON. I think there should be a usurious rate, yes; and I 

believe there are by State. I mean, you can decide. I think it is a 

different number in different businesses, but I think there should 

be a usurious rate, yes. 

Ms. SPEIER. There is a GAO report that just came out in December of 2008, and it talked about the number of the biggest financial 

institutions both in size and in their bailout receipts and that they 

maintain revenues in offshore tax haven countries where there are 

no or nominal taxes and minimal, if any, reporting. According to 

the Department of the Treasury reports, the U.S. Government loses 

$100 billion a year in tax revenue from these tax dodges from all 

sources, including these firms. 

For instance, Citigroup claims 427 different overseas locations or 

tax jurisdictions, 90 in the Cayman Islands alone. And, by the way, 

you are receiving a 38 percent subsidy from the taxpayers right 

now. 

Morgan Stanley has 273 locations of which 158 or well more than 

half are in the Cayman Islands. Again, Morgan Stanley has about 

an 18 percent subsidy from the taxpayers right now. 

Are you willing to bring those offshore tax havens home to America? 

Mr. MACK. Congresswoman, I would have to give you the exact 

details and come back to you. I think a number of those are either 

partnerships or vehicles we have made structured for clients or 

structured for an offshore business. I cannot give you the complete 

answer, but I will give you the answer when I return. 

Ms. SPEIER. Thank you. 

The CHAIRMAN. The gentleman from Florida. 

Mr. GRAYSON. Thank you, Mr. Chairman. 

Gentlemen, I received over 500 e-mails from my constituents concerning this hearing. Let me read two of them to you. 

Barbara Ruffo of Winter Garden writes, ‘‘One executive bonus 

could build one school. Imagine what all that bonus money could 

do.’’ 

Frank Kruszewski of Orlando writes, ‘‘Put them all in jail, which 

is where I would be if I robbed a financial institution.’’ 

I would like to go back to Mr. Green’s earlier question about 

where all the money went, and I would like to focus specifically on 

a deal the government made several months ago with Citigroup. I 

provided a copy of the Section 129 report on that deal, which, of 

course, you already have, to Mr. Pandit at lunchtime. So you have 

94 

had several hours to examine the details of the deal itself. Let us 

talk about where all the money went. 

Mr. Pandit, that was a $306 billion deal, correct? 

Mr. PANDIT. $301 billion, Congressman. 

Mr. GRAYSON. Well, let us take a look at page 3 under heading 

number 2. Treasury and the FDIC also have agreed to share with 

Citigroup losses on a designated pool of up to $306 billion in primarily mortgage-related assets. What is the difference here? 301? 

306? 

Mr. PANDIT. 301 is the number, Congressman. 

Mr. GRAYSON. Well, you know, a billion here a billion there. Soon 

you are talking real money, Mr. Pandit. 

Mr. PANDIT. I understand. I just want to make sure that we are 

speaking of the same number. 

Mr. GRAYSON. All right. Now, in this deal, Citibank took the first 

$29 billion in losses, and then the taxpayers take 90 percent of the 

remainder, is that correct? 

Mr. PANDIT. The first $30 billion of the losses and then Citigroup 

takes the remaining 10 percent. 

Mr. GRAYSON. Well, further down in that paragraph, which we 

have extra copies of if anybody wants to see it, it says, under the 

terms of the guarantee arrangements, Citigroup will first bear responsibility for any losses on these assets that exceed the company’s current reserves and marks up to a maximum of $29 billion. 

Do you see that? 

Mr. PANDIT. I do. The number is $30 billion, Congressman. 

Mr. GRAYSON. Are you saying the number 29 is the number 30? 

Mr. PANDIT. The only thing I will say to you is that this was put 

out—I don’t know when this was put out. But what I do know is 

we finalized the terms of this thing with the Federal Reserve Bank 

and the government I think about a month ago, and some of those 

things did change. I just wanted to bring that to your attention. 

Mr. GRAYSON. Well, the bottom line—you can correct me if I’m 

wrong, Mr. Pandit—that the government has assumed liabilities 

here for this designated pool that amount to $250 billion more or 

less, isn’t that correct? 

Mr. PANDIT. Congressman, we bought insurance from the U.S. 

Government. We paid a little bit more than $7 billion for buying 

insurance. That allowed us to take the first $30 billion of losses 

and then 10 percent of losses after that. 

Mr. GRAYSON. You call it insurance, but that word does not appear anywhere in this document, does it? 

Mr. PANDIT. You did give this to me at lunch. I have to apologize. 

I didn’t get the time to read it that carefully, but it was insurance. 

Mr. GRAYSON. So the government gets $7 billion in preferred 

stock, and the government is on the hook for $250 billion in losses, 

is that correct? 

Mr. PANDIT. We are on the hook first for the losses we talked 

about; and the $7 billion of insurance is for losses beyond that, not 

unlike every other insurance contract. Whether you buy insurance 

on your house, your car, you know, you pay insurance premiums. 

You are on the hook for your deductible, and then, of course, the 

insurance company is liable for the value beyond that. 

95 

Mr. GRAYSON. You tell me, Mr. Pandit, where I can get a deal like this, where I can get $250 billion in insurance, as you put it, 

for toxic assets that barely have a bid in the marketplace and only 

pay $7 billion for that. You tell me where I can get a deal like that. 

Mr. PANDIT. Congressman, the only thing I will say to you is that 

these aren’t necessarily toxic assets at all. The government has 

gone through these assets very carefully. They have gone through 

what the expected losses might be on this. They did their work. 

And I think that is an important aspect that is not in this document. 

Mr. GRAYSON. Well, if it turns out that they are not truly toxic 

and there is an upside, who gets the upside? 

Mr. PANDIT. The losses and the profits are netted on this pool, 

off assets, and if there are profits beyond that, they are Citi’s profits. 

Mr. GRAYSON. Right. So you get 100 percent of the upside and 

the government gets 90 percent of the downside, correct? 

Mr. PANDIT. That is what the insurance contract is designed to 

do. 

Mr. GRAYSON. Have you heard the phrase, Mr. Pandit, ‘‘Heads, 

I win; tails, you lose?’’ 

Mr. PANDIT. I appreciate that, Congressman. I don’t think it applies here. 

Mr. GRAYSON. Is this on your balance sheet, this arrangement? 

Mr. PANDIT. Yes, it is, Congressman. 

Mr. GRAYSON. Do you know if it is on the Federal Reserve’s bal- ance sheet they are responsible for $234 billion of losses? Do you 

know if the Federal Reserve put it on its balance sheet? 

Mr. PANDIT. Congressman, I couldn’t tell you. I think there is— 

some of this is with the FDIC. Some of this is with the Treasury. 

Some of this is with the Federal Reserve. I don’t know the exact 

details. I will be happy to get back to you. 

The CHAIRMAN. The gentleman’s time has expired. 

The gentleman from Connecticut. 

Mr. HIMES. Thank you, Mr. Chairman, and thank you to all of 

you for appearing before this committee today. 

You are on the hot seat today and rightly so. And I am pleased 

that many of you to a lesser or a greater extent have acknowledged 

that your institutions took risks that might be charitably characterized as imprudent. But, of course, you are a part of the problem. 

We find ourselves where we are today as a result of a willing 

suspension of disbelief by lenders and borrowers around the world 

and as a result of a massive failure of our regulatory apparatus. 

I am not sure we can legislate against a willing suspension of disbelief, and we will see whether we can recraft a regulatory structure that makes sure we never find ourselves here again. 

So that brings me back to the question of risk and really the 

heart of two questions that I have. We will get less involved I think 

to the extent that risk resides with those who take that risk, to the 

extent that you all and your organizations eat your own cooking. 

And I get really interested in ways that we can make sure that is 

true. 

I have heard a lot about compensation. I will just ask this question because I want to get on to a different question. Are any of 

96 

you unwilling to affirmatively commit to this committee that you 

will research, consider, and implement compensation structures 

that reward your people for good, long-term value creation and that 

guard against taking excessive risk? 

Let the record show that nobody is raising their hand. 

Mr. MACK. We will. 

Mr. HIMES. Mr. Mack. 

Mr. MACK. Yes. 

Mr. HIMES. Okay. Thank you. 

On to another topic I am very interested in. In the spirit of eating your own cooking, mortgage brokers issuing more underwriting, 

issuing mortgages and then bearing no risk, people underwriting 

IPOs that 2 years later crater securitizations, that find their way 

through a long chain of ownership but the original underwriters 

bear no consequence for their ultimate failure. 

My question—and let me start with Mr. Pandit, as a very large 

issuer of securities and lender. What if we started thinking about 

asking issuers of securities, whether we are talking about underwriters of IPOs or mortgage brokers issuing mortgages, to retain 

a very small top loss position, an equity position, if you will. And 

I know that will cut liquidity in lots of markets, and I know that 

will put a burden on your capital. But I am okay with that as a 

matter of principle, given where we are. As an idea, good, bad, 

should we pursue it? 

Mr. PANDIT. Congressman, there are established markets with 

established standards and established protocols; and then there are 

markets that are newer. 

You talk about the mortgage market. Owning part of what you 

originate is one solution. There are lots of other solutions. Those 

solutions could be around regulation. It could be around standards 

that you impose on origination. I think we should look at the whole 

package and then come to a decision, but we do need to do something to change the structure that was in place. 

Mr. HIMES. Thank you. 

And let me open this up. Is there any good reason why we 

shouldn’t—and by ‘‘good reason,’’ I mean a reason that would put 

taxpayers at risk in the future—look at structures which, if you put 

together a massive securitization, fine, sell 98 percent of it, retain 

2 percent; if you underwrite an IPO, fine, sell 98 percent of it, retain 2 percent. Is there a good counterargument against that kind 

of thinking? 

Mr. MACK. Well, if you were in a market—let us go back to the 

Internet boom that we had in the mid-1990’s all the way up into 

2000, 2001. The volume of new issues that came from banks and 

Wall Street would have been so large that I think you would put 

a burden on balance sheets if you had that 2 percent retention. 

Clearly, in a market when volume is very low, that would not be 

an issue. Oftentimes I think the focus should be much more on the 

diligence, the due diligence that is done other than retaining it. 

And also there are today, I think SEC, when we price a new issue, 

we have to distribute it. If we hold it back, we can hold it back, 

but it is for sale and not to be retained on a permanent basis. 

Mr. HIMES. Thank you, Mr. Mack. That is a fair point. But I 

think your Internet example is a good one. I might suggest—and 

97 

I would ask if you agree—that perhaps, given what happened to 

the Internet underwritings, perhaps that is not the best example. 

Perhaps if there had been a retention of some top loss position, volume would have been down, but perhaps risk would have been reduced. 

Mr. MACK. Well, in many of the companies that we underwrite, 

and not only are we doing the equity deal but we have loans to 

them, we are very much involved. This is not price an issue and 

walk away from it. 

So I would say there are better ways. I think Mr. Pandit was 

right. I think you need to look at a number of ways in how to ensure that when we do underwritings we are bringing you something that has really been scrubbed down, is a viable business or 

concept. There is no simple way of doing it. But I think we need 

to look at the whole package and how can we do it better. 

Mr. HIMES. Thank you. 

Mrs. MALONEY. [presiding] The gentleman’s time has expired. 

Mr. BACHUS. Madam Chairwoman, it is my understanding that 

we are going to cut this hearing off at 5 o’clock. Is that correct? 

Mrs. MALONEY. That is correct. And we have two more gentleman who wish to question—three. 

The Chair recognizes Mr. Peters for 5 minutes. 

Mr. PETERS. Thank you, Madam Chairwoman. 

I have a question. I don’t want to belabor this, because you have 

all heard from many Members of Congress already talking about 

the inability to get credit in their respective districts all across the 

country. 

But I represent the State of Michigan, and I am going to follow 

up a little bit on a colleague of mine who talked about this problem 

that I am hearing constantly from my constituents, is that we understand that credit is tight all over the country, but there is a 

feeling from people in Michigan—and Michigan, in particular, because we lead the country now in the unemployment rate, as well 

as the problems with the auto industry—that loans, in particular 

from money center banks, are simply not available to small businesses. And the businesses that could get credit in the past, even 

if they can get it, it is at prices that simply just make it 

unaffordable. 

I don’t expect detailed answers now, but I know, Mr. Dimon, Mr. 

Lewis, you have substantial operations in Michigan. Maybe first 

off, is there a basis for that, that your lending operations in Michigan are less than other States? And would you be willing to provide 

me with actual numbers that would let me go back to my constituents and say that Michigan is not being singled out, Michigan is 

not a State that is a more difficult place to do business, therefore 

leading to the spiral downward that we are experiencing in our 

State? 

Mr. LEWIS. Well, first, absolutely, redlining or whatever you 

want to call it, it is not the case. We want to make every good loan 

anywhere we can make it. Obviously, if you lead the Nation in unemployment, then we will be lending less there than we would 

somewhere that had a better employment rate. But our attitude toward Michigan is no different than any other State. We want to 

make every good loan we can. 

98 

Mr. DIMON. Yes, I agree with Mr. Lewis. We look at loan by loan, 

industry by industry. There is no redlining of a State. We do a lot 

of business in Michigan, and we have a deep appreciation of how 

difficult it has been there. And we also have enormous exposure to 

the car companies, the auto companies, auto finance in Michigan 

today. 

Mr. PETERS. Well, I want to follow up on that. And I appreciate 

both your comments, but is it possible to get numbers so I can just 

get a sense of how the loan volume is different in Michigan than 

other States? Would you both be willing to provide that information? 

Mr. DIMON. I would be happy to do that, yes. 

Mr. LEWIS. Yes. 

Mr. PETERS. Mr. Lewis, as well. We will follow up on that. 

I want to get back to the auto industry, because obviously we 

have a very strong concern in the auto industry. And, surely, the 

impact of the credit crisis has hit the auto industry more than most 

industries, and the repercussions could be dramatic, not just in 

Michigan, but all over the country. Millions of jobs are at stake. 

But also, if you look at the recovery of the economy, there isn’t 

anything that is more powerful a stimulus in the economy than to 

get people buying automobiles, get the auto industry going. It has 

picked this country out of many recessions in the past, has the potential to do that again if managed well. 

And you know that right now we are in a very precarious situation. In fact, the auto companies will come back to this committee 

on February 17th with their viability plans, and a part of those 

plans have to be plans that they have made with the stakeholders, 

both labor as well as the creditors. 

How many of you are creditors to the auto industry, have substantial loans or substantial debt instruments of some form or another? 

Basically all of you, except Mr. Stumpf. Everybody has it. Well, 

then, how many of you have received proposals from the auto companies? 

Mr. MACK. When you say proposals, requests? 

Mr. PETERS. Proposals from the auto companies to restructure 

that debt, which, as you know, is a condition that has placed on 

it to have substantial concessions from debt holders to renegotiate 

that debt. How many of you have already received specific proposals from the auto companies? 

Mr. MACK. Congressman, I would have to check. We have a very 

active dialogue with the auto industry. And I will check when I am 

back and let you know exactly. 

Mr. PETERS. I would appreciate that. 

Mr. LEWIS. We are actually advising one of the companies on 

doing that. So we are in the middle of the execution of that, of the 

conversion from debt to equity. 

Mr. PETERS. You are currently in negotiations? 

Mr. LEWIS. We are currently executing on the game plan that we 

advised on. 

Mr. PETERS. Oh, okay. So you are really, definitely down the 

road. Given that we have 6 days left before this plan, so you feel 

pretty good at where you are, Mr. Lewis? 

99 

Mr. LEWIS. We feel the pressure. 

Mr. PETERS. You feel the pressure. 

Any other gentleman as to where we are on that? 

Mr. DIMON. We have had conversations with some of the companies, but I am not up to date on them. 

Mr. BLANKFEIN. The same. 

Mr. PETERS. Because it is critical. And there is a sense, in some 

meetings that we have had, that some of the creditors to the auto 

industry may believe that bankruptcy is a better option. That is 

something that I have very strong feelings about, that bankruptcy 

is not an option for the auto industry, given the warranty situation 

and also given the cascade effect that could occur for auto suppliers 

and hundreds of thousands of jobs around the country. 

I want to get a sense, of those of you debtors to the auto companies, what is your sense? Are they better in bankruptcy? Or are 

you willing to step up to the plate and say, no, we will take considerable haircuts in order to save this industry, save these jobs, and 

get the American economy moving forward? 

Mr. Dimon? 

Mr. DIMON. Yes, I don’t think it is an either/or. Okay? I think 

that all the things that need to be done need to be done whether 

it is in bankruptcy or not in bankruptcy. And I assure you, at the 

end of the day, it will cost us money; we will not make money on 

it. 

Mr. BLANKFEIN. And there will be haircuts in either case. 

Mr. DIMON. In either case, there will be haircuts, yes. 

Mr. PETERS. Is one worse than the other? 

Mr. DIMON. It depends on how they get structured. 

Mr. PETERS. Okay. It is difficult to get financing in bankruptcy. 

It is going to be very difficult for these. 

Mrs. MALONEY. The gentleman’s time has expired. 

Mr. PETERS. Oh, sorry. Thank you. 

Thank you, gentlemen. 

Mrs. MALONEY. Congressman Klein is recognized for 5 minutes. 

Mr. KLEIN. Thank you very much, Madam Chairwoman. 

And, gentlemen, it has been a long day. We understand that. It 

has obviously been a long number of weeks and months for the 

American people, which is why we are all collectively trying to get 

this right. And we appreciate the effort to get it right. 

As I was listening to your presentations this morning and reading some of the background material, if I sort of got the impression, 

the impression was that we are doing our part, we are trying. Some 

statistics show there is some lending going on. 

And I would certainly recognize and acknowledge right up front 

that you are all in different positions. Some of you are probably 

doing more than others. Some are deeper in a debt problem than 

others. 

But what is clear to me, and I think what you have heard over 

and over again today, is, throughout the United States, when we 

speak to people at the local level, it is not translating through. It 

is not translating through in the form of access to credit for businesses. It is not translating through in access to credit for consumers. 

100 

I am from Florida, from south Florida, and I will tell you in a 

very dramatic way that there are some community banks that are 

certainly trying to do their best. There are some regional banks 

that are trying to help out with syndicates for lending and refinancing. But a whole lot of concern about the next round of problems is going to be real estate financing, shopping centers, office 

buildings, lots of things that either are getting called right now on 

technical defaults or their terms are up and they are being told you 

either have to put another $20 million into this thing or $1 million 

or $500,000 into this or we are not even going to take up the loan 

or consider it. Other situations—and I know many of these borrowers. They are very credit-worthy people. They are being given 

packages that just don’t make any economic sense. 

So I am expressing this because there is great concern in the 

greater economy once again. We have, already, problems with residential loans. We are now moving to the next round of understanding credit card debt. We are now talking about commercial 

loans and how this plays out. 

So there is this great concern, and I don’t know what the answer 

is. And I am hearing that, yes, you are doing more. And I am 

speaking to our community bankers, and they are trying. And I am 

hearing about the tension between the FDIC and mark-to-market 

issues and things like that. I am not hearing solutions. And I don’t 

know where to take this conversation today to come up with some 

solutions. 

I also want to express—and I know some of you have said the 

idea of, well, we will give the money back. Maybe we didn’t want 

it in the first place; we will give it back. Some of you expressed 

that. 

And I just want to point out that it is not just the TARP money. 

Many of had received great benefits with the Federal Reserve taking certain emergency actions. And those have been a bolstering on 

behalf of the United States and the taxpayers of the United States. 

So it is not just a question of we will write a check and then we 

are free of the concerns of the Federal Government. As taxpayers, 

we are all concerned about where this goes. 

So maybe to start out with Mr. Lewis, or if a couple of you just 

want to comment, where do we go with the connection, the translation of, yes, we are lending, but nobody seems to be feeling it in 

the smaller-scale businesses and the residential consumers, as well 

as even the larger commercial transactions that may be occurring, 

certainly in Florida. And I appreciate the gentleman from Michigan 

and other places around the country. 

Maybe, Mr. Lewis, if you can start. 

Mr. LEWIS. Well, we seem to be looking for a very short-term 

quick fix. And all of us, I promise you, would like it. And the last 

19 months has been unpleasant for the economy and the American 

people. And I think a number of things have to happen before we 

start to see us getting out of this. 

And, as I mentioned, we have to be very focused on foreclosures. 

We have to get the housing prices to settle. We have to keep rates 

down on mortgages to keep the refi boom going. And we have to 

have this stimulus kick in to get the economy going and to create 

101 

more demand and to get those marginal borrowers in better shape 

so that banks can lend to them. 

Mr. KLEIN. Do you believe that this is more a question of that 

there really aren’t enough borrowers out there that are credit-worthy? Because I am hearing from many of them, ‘‘We have a very 

strong balance sheet. I have had a relationship, banking relationship, with these lenders for many, many years. Things really 

haven’t changed that much for me. But I am getting term sheets 

that come back that are just off the charts, and I can’t do the deal, 

and it doesn’t make any economic sense to do the deal.’’ 

Mr. LEWIS. Yes, I can’t say that we could test and be perfect in 

every case. But, obviously, with our desire to make loans, we are 

trying to be as accommodative as we can. Usually when we hear 

the individual situation, there is something around loan-to-value, 

something in that area, that causes it not quite to be just the FICO 

score, for instance, on an individual. 

But, again, the industry, at least in the big banks, are probably 

as liquid they we have ever been. We want to lend money, we have 

the capital, and so there is no reason to not make a good loan. 

Mrs. MALONEY. The gentleman’s time has expired. Congressman 

Maffei is recognized for 5 minutes. 

Mr. MAFFEI. Congratulations, gentlemen, you have reached the 

last questioner. 

I appreciate what all of you are saying. I do want to say that, 

you know, look, as a policy-maker, I am not sure if any of us care 

particularly about any of your individual institutions, but we want 

the system to go well. And, like my colleague from Florida and my 

colleague from Michigan, we have seen an awful lot of problems 

with the rubber hitting the road. 

I do want to say that I think some of the questioning that you 

have gotten that has been a little bit leading has sort of been unfair. Many of you are reformers in your field, frankly, and you have 

been, to some extent, held responsible for the sins of your corporate 

fathers. And I don’t want to do that. 

But I am sure you can hear the frustration, and I am going to 

jump on the bandwagon in the same way, because, just like in Florida and Michigan and it seems many other parts of the country, 

people in my district are not seeing the benefits of the TARP program. If anything, they are having as difficult a time getting loans 

for everything from homes, small businesses. One bank not represented here I believe has probably frozen almost all the home equity lines of credit. And my district, my city, Syracuse, currently 

is, according to Forbes magazine, the second-best real estate market in the country. Our property isn’t losing value because we 

never had the bubble so our bubble never burst. 

So I do want to ask you again—and I will start with Mr. Dimon, 

because you do have facilities in my district. But do you have any 

suggestions for either the Administration or us, in terms of how do 

we craft a TARP program that will lead to more loans on the bottom? 

I know the Federal Reserve says that you are loaning more. I am 

not saying it is necessarily your fault or anything. This is not normative. But what can we do to get more loans? You know, we are 

giving money to Wall Street; we need more loans on Main Street. 

102 

Mr. DIMON. All right. So I will just start by saying you know we 

are continuing that project at Syracuse University and the technology center, and we are not stopping that because of this crisis 

or anything like that. That will lead to jobs and education in your 

wonderful city. 

Mr. MAFFEI. I am very excited about that, and I do think that 

it is exactly what we need in terms of the stimulus. 

Mr. DIMON. So I think something we mentioned before is that a 

lot of non-banks did pull out of the system. So we have this little 

dichotomy where it wasn’t all banks who pulled. There was a little 

confusion on what TARP was going to do. 

I do believe, if we finish the stimulus package, if we finish the 

TALF, if Secretary Geithner finishes properly the mortgage financing, we finish the mortgage modification, we get some of these 

other programs in place, deeply understood, verify banks’ balance 

sheets and capital—because I think that is the purpose of the 

stress test—and if we do it in a coherent, consistent, coordinated, 

intelligent way, it will work. 

It will not work if we don’t deal with all these issues and it is 

not coherent, it is not consistent, it is not well thought through, it 

is not synchronized. It will not work that way. And we have been 

suffering a little bit with that in the last 6 months or so. 

Mr. MAFFEI. Mr. Lewis, you also have a lot of banks in my district. Do you have that same— 

Mr. LEWIS. I agree with Mr. Dimon. 

Mr. MAFFEI. Okay. 

Mr. Pandit, Citi, the same thing, we have projects in my district 

that, frankly, seem as viable now as they were before, but they are 

having more and more trouble keeping their loan status. And some 

of those are Citi loans. 

Mr. PANDIT. Banks are not the only institutions that have been 

lending money in the past. There have been finance companies, 

and also there has been funding that has been provided, loans that 

have been provided through securitizations. 

Mr. MAFFEI. No, I understand that. But how can we make up for 

the lack of the securitization market? In other words, how can our 

TARP funds help you make up for some of that? I am not saying 

that—right, the problem isn’t you, necessarily, but it is a problem. 

Mr. PANDIT. The finance companies are finding it difficult to fund 

themselves in order to turn around and make loans. The 

securitization market is basically not there in the form that it was 

before. And I will speak for ourselves too: If we had more funding, 

we would go around and make more loans. 

And the reality is the funding markets are very tight. Everything 

we borrow, we put out. Every deposit we get, we make a loan on. 

TARP capital we put out. If we had more availability of funding, 

we would make more loans too. 

Mr. MAFFEI. But would those loans reach, sort of, the street 

level? I mean, isn’t it easier to do the bigger loans than the smaller 

loans? You know, a small family or a student in college, that is 

where I am missing it. 

Mr. PANDIT. And we see a lot of demand out there. Even through 

discipline and all other rigors, there is still a lot of demand out 

103 

there. There is a shortage of funding in the marketplace to make 

loans. 

Mr. MAFFEI. Gentlemen, thank you very much. 

I yield back the balance of my time. 

Mrs. MALONEY. Thank you very much for your testimony. 

This hearing is adjourned. 

[Whereupon, at 5:02 p.m., the hearing was adjourned.] 

(105) 

A P P E N D I X 

February 11, 2009 

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