Congress takes bank executives to task over bonuses, lending

— -- Lawmakers grilled the CEOs of the top eight U.S. banks Wednesday with questions on why fat bonuses were paid and lending hadn't improved despite the banks having taken $165 billion of taxpayer money since October.

"Why do you need to be bribed to have your interests aligned with the people who are paying your salary?" said Rep. Barney Frank, D-Mass., chairman of the House Committee on Financial Services. "Why do you need bonuses? Can't we just give you good salaries?"

Frank and other lawmakers called on the bankers to commit that they will stall all foreclosures for at least the next three weeks as Treasury Secretary Timothy Geithner hammers out a plan on how to address the issue. Citigroup and Bank of America agreed.

Aware of the increased public ire, the bankers were contrite. Vikram Pandit, CEO of Citigroup, which has taken $45 billion of government money, said, "I will take a $1 salary and no bonus until we return to profitability."

After being publicly chastised by President Obama for canceling the purchase of a $50 million corporate jet only after being pressured, Pandit took a commercial flight to Washington. In fact, all eight took public transportation, with JPMorgan Chase CEO James Dimon and BofA CEO Kenneth Lewis riding Amtrak trains.

Even as the bankers were testifying, angry lawmakers were calling for their heads at another hearing. Members of the Senate Banking Committee quizzed Geithner on whether he would be willing to remove CEOs of troubled banks receiving federal aid. Geithner said management at some failed institutions had already been replaced and he would be willing to force out CEOs "where we think that it's necessary to get better outcomes and protect the taxpayer."

It didn't help the mood that the bankers testified just a day after New York Attorney General Andrew Cuomo said in a letter to Frank that Merrill Lynch paid bonuses of more than $1 million each to 696 employees in December, with four of the highest-paid employees getting a total of $121 million. The bonuses were paid just days before BofA completed its purchase of Merrill. "This amounts to looting the company prior to the merger," said Rep. Spencer Bachus, R-Ala.