Oversight Hearing on CEO Pay and the Mortgage Crisis
March 7th, 2008 by Jesse LeeThe Oversight Committee is currently holding a hearing, “Executive Compensation II: CEO Pay and the Mortgage Crisis.” The hearing is to examine the compensation and retirement packages granted to the CEOs of three corporations deeply involved in the current mortgage crisis. See highlights of the previous, related hearing, “Executive Pay and Compensation Consultants.”
Watch the hearing live via committee webcast on C Span.
Chairman Henry Waxman gives opening remarks.
Chairman Waxman: “Three companies that gambled heavily on the subprime bet are Countrywide Financial Corporation, Merrill Lynch, and Citigroup. I want to thank the chairs of their compensation committees and their CEOs for being here today and for their cooperation. All three companies have suffered enormous losses. Countrywide lost $1.6 billion in 2007 and its stock lost 80% of its value. Merrill Lynch lost $10 billion and its stock lost 45% of its value. Citigroup also lost $10 billion and its stock lost 48% of its value. In light of that terrible performance, the CEOs of Merrill Lynch and Citigroup resigned last year. Mr. Mozilo, the CEO of Countrywide, is also making plans to step down if Countrywide is acquired by Bank of America. But the pay they received from their companies and their stock sales was extraordinary. Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down.” |
Dr. Anthony Yezer, Professor of Economics at George Washington University, gives opening testimony:
Dr. Yezer: “Let’s not forget that we also have a government sector that hasn’t done so well. If you look the delinquency and default on FHA, it is not a pretty story. And we are actually paying for that publicly. Let’s see, management of FHA — I guess we will blame it on Mr. Bush… excuse me, President Bush — blame it on him. In addition when you look at these numbers for FHA, FHA compared to subprime is much worse than the numbers show — because subprime mortgages, the best ones, repay quickly. So actually the performance of FHA compared to subprime should be much better than subprime, and it is not that much better.” |
Chairman Henry Waxman questions Angelo R. Mozilo, Founder and CEO, Countrywide Financial Corporation and other as well as the CEOs:
Chairman Waxman: “Well, I think the reason Mr. Parsons indicated [that selling your personal stock while the company was buying back stock] might not look good, is the whole example of what happened with Enron. Because with Enron, the executives were selling the stock and they often have knowledge that no one else would have, and I think all of this is still being investigated, but the appearance is not a good appearance if you’re telling your shareholders it’s a good investment to buy the stock for the corporation at the same time you’re selling the stock to benefit yourself at that higher price.” Mozilo: “I think again most of these institutions made the decision where the buyers sell the stock based on the information we provided. I never asked anybody to buy the stock, nor did I ask anybody to sell the stock. We presented our performance, we had a 30-year performance of no losses.” Chairman Waxman: “Well, my time here has expired, but I must say that your timing was awfully good for yourself but not particularly for some of the other shareholders.” |