November 13, 2008

The Senate Banking Committee grilled top bank executives Thursday as credit markets remain frozen and worries mount they are misusing bailout money. Lawmakers urged the executives, all from banks who have received money from the $700 billion bailout, to start lending more to consumers and businesses.

Sen. Chris Dodd, D-Conn., the committee chairman, told the executives Congress wants to see more progress in foreclosure mitigation, lending and in curbing excessive compensation. Dodd also said banks need to step up assistance to homeowners facing foreclosure and loosen up credit markets. The financial sector is slated to receive at least $250 billion per the package passed last month to help bolster balance sheets and resume lending. Officials from Bank of America (BAC), Wells Fargo (WFC), Goldman Sachs (GS), and JPMorgan Chase (JPM), testified on Capitol Hill.

Dodd, who stressed that transparency in the industry is crucial, expressed concern banks are hoarding the money and using it for internal gain. Sen. Charles Schumer, D.-N.Y., said that he would take action in conjunction with other lawmakers to ensure banks ramp up consumer lending moving forward. Executives from the four financial institutions vowed they wouldn't use the money to pay their executives and employees.

Gregory Palm, general counsel at Goldman Sachs, said that compensation would be down “significantly” this year throughout the firm, especially at senior levels. Both Democrats and Republicans have been critical of the way the Treasury Department implemented the bailout. Democrats are pushing for banks to lend more, while Republicans are seeking more transparency from the Treasury.