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March 7, 2008

Mr. Mozilo, Mr. Prince and former Merrill Lynch & Co. Chairman and CEO E. Stanley O'Neal have come under fire from the panel for the compensation and retirement packages they received from their respective companies. Committee Chairman Henry Waxman (D., Calif.) has raised questions about whether the outsized compensation received by the executives during the current market turmoil was in the best interests of shareholders.

Mr. Waxman noted Friday that Mr. O'Neal received a $161 million retirement package when he left Merrill Lynch, Mr. Prince was awarded a $10 million bonus and $28 million in unvested stock options from Citigroup, and Mr. Mozilo has received more than $120 million in compensation and the sale of Countrywide stock.

That compensation was received while the three companies were reporting billions of dollars in losses and shares of their stock were seeing significant declines.

"Any reasonable relation between their compensation and the interests of their shareholders appears to have broken down," Mr. Waxman said in his opening statement. He asked, "How can a few executives do so well when their companies do so poorly?"

William Galvin, secretary of the commonwealth of Massachusetts, said Congress needs to "hold the promoters of these exploitative financial arrangements responsible."

"Many of these investment banks reaped enormous profits from the rampant mortgage lending and securitization .. and their executives have been handsomely rewarded," Mr. Galvin said in his testimony. "We, however, are now left sorting out the ongoing damage that is ripping through our financial system."

Mr. Mozilo, whose company is being acquired by Bank of American Corp., noted that he was giving up his severance package in order to ensure the deal goes through. "I voluntarily gave up these benefits because I did not want this issue to detract from, or in any way impede, the important task of completing the Bank of America transaction," he said.

http://www.smartmoney.com/breaking-news/smw/index.cfm?story=20080307120515

Press Release

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
TOM DAVIS, RANKING MEMBER

News Release
Executive Compensation II: CEO Pay and the Mortgage Crisis
Full Committee Hearing

March 7, 2008

But that debate should not degenerate into a sanctimonious search for scapegoats. If every corporate executive of every company involved in subprime lending and securities had worked for the minimum wage, or for nothing, the macro-economic trends and cyclical forces that drive booms, and cause busts, would still vex our economy today. Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual – like an island tribe sacrificing a virgin to a grumbling volcano. But in the end, it won’t answer the questions that need to be answered about corporate responsibility and economic stability.

http://republicans.oversight.house.gov/News/PRArticle.aspx?NewsID=325

Accurate estimates of the fall-out are certainly a moving target , but a recent paper estimates the financial and economic cost of the crisis, predicting total loan losses of $400 billion and a 1.3 percent lower GDP growth this year. This paper also contains a nice explanation of how the subprime crisis infected other financial markets and the channels through which it affects overall lending standards and economic activity.

http://psdblog.worldbank.org/psdblog/2008/03/the-subprime--1.html

Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual – like an island tribe sacrificing a virgin to a grumbling volcano.

- Rep. Tom Davis

Rolling...and Reeling
Heading toward this fall’s House races, Democrats are upbeat on the heels of their three recent special-election upsets. Republicans, meanwhile, are struggling to regroup.

by Richard E. Cohen

Sat. May 24, 2008

In the days immediately following the GOP defeat in Mississippi, speculation mounted that angry Republicans might, in fact, want to cut Cole loose and install a new chairman. House Minority Leader John Boehner, R-Ohio, brushed aside such talk during a May 18 appearance on ABC's This Week. "Tom and I had a very good meeting on Friday--frank and constructive and positive," Boehner said. "He's staying."

As he plods on, Cole concedes that "our brand is an enormous problem" for Republicans. "I support and admire President Bush," he said. "But his approval numbers are in the high 20s, we have an unpopular war and a softening economy, plus the scandals" involving the legal and ethical problems of several GOP lawmakers during the previous and current Congress.

"This makes it difficult to maintain donor morale at our committee and to paint a positive outlook for our members and candidates," Cole acknowledged, while adding optimistically, "but it creates an opportunity for rejuvenation. We will have a large freshman class next year that will provide new energy."

The Campaign Ahead

Given the unusual and uncertain dynamics of this year's race for the White House, the House campaign bosses understand they are mostly on their own. They cannot count on coattails from the top of the ticket or guarantees of a 50-state campaign.

Of course, congressional Democrats could benefit from the increased voter turnout that has marked their party's long-running nomination battle. But Van Hollen says he isn't taking anything for granted. "In many states, we can't piggyback on a presidential candidate," he said. "We don't want our incumbents or our challengers to have to rely on somebody else's get-out-the-vote operation."

Republicans hope that their presumptive nominee, Sen. John McCain of Arizona, will open doors to more voters, including independents, conservative Democrats, Hispanics, and Jews. In a May 14 conference call with reporters, Cole said that polls show McCain "running a lot better than a generic Republican," but he cautioned that GOP congressional candidates will not automatically reap the benefit. Those who are "bold and take tough positions will do well," Cole said. "We need to take a lesson from McCain."

Davis, meanwhile, said he believes that once both parties have selected their presidential nominees and start to compete with each other, "voters will start looking at the campaign differently."

http://www.nationaljournal.com/njmagazine/cs_20080524_4869.php

WASHINGTON (AP) -- In a stunning vote that illustrated President Bush's diminished standing, the Senate on Thursday ignored his veto threat and added tens of billions of dollars for veterans and the unemployed to his Iraq war spending bill.

A majority of Republicans broke ranks with Bush on a veto-proof 75-22 vote while adding more than $10 billion for various other domestic programs, including heating subsidies for the poor, wildfire fighting, road and bridge repair, and health research.

Senators voted 70-26 to approve $165 billion to fulfill Bush's request for military operations in Iraq and Afghanistan into next spring, when Bush's successor will set war policy.

Overall, the measure contains $212 billion over the coming two years -- $28 billion more than the administration sought -- plus about $50 billion more through 2017 for veterans' education benefits.

Bush has promised to veto the Iraq spending if it exceeds his request. He has enough GOP support in the House to sustain a veto.

But the spectacle of 25 Senate Republicans abandoning the White House and voting to extend jobless benefits by 13 weeks and boost the GI Bill to provide veterans enough money to pay for a four-year education at a public institution made it plain that Bush's influence is waning.

"He has no political capital left," said Sen. Robert Bennett, R-Utah.

"What influence?" said a triumphant Sen. Harry Reid of Nevada, the Democratic majority leader. Reid had been skeptical of adding dozens of items favored by the free-spending Appropriations Committee to Bush's war request.

A popular plan in both the House and Senate bills would block new Bush administration rules that would cut spending on Medicaid health care for the poor and disabled by $13 billion over the next five years. Governors in both parties pressed for the relief.

The White House had braced for defeat even as Democrats initially expressed skepticism they would prevail. Yet the magnitude of the defeat was startling.

"Our troops deserve better than having essential war time resources held hostage to billions in unrelated spending," White House spokesman Tony Fratto said. "Congress should pass a clean war funding bill when they return from Memorial Day recess."

Still, it seems clear that Bush will have to accept some Democratic additions.

"When it comes to Iraq, it appears that money is no object for President Bush," said the chairman of the Appropriations Committee, Sen. Robert Byrd, D-W West Virginia. "Yet when it comes to important priorities here at home, he turns into Ebeneezer Scrooge."

The White House has threatened to veto the bill because of several provisions, including the more than $700 billion shaved from missile defense efforts.

Meanwhile, the House passed a bill authorizing $601.4 billion in defense spending for next year and raising troop pay by 3.9 percent. The legislation would trim money for missile defense and some modernization projects while boosting spending on heavily armored vehicles. Prior to the 384-23 vote, the House approved two Democratic amendments that would prohibit the military from using contractors to interrogate detainees and require interrogations be videotaped.

The White House has already threatened to veto the bill because of several other provisions, including the more than $700 billion shaved from missile defense efforts.

http://www.cnn.com/2008/POLITICS/05/23/iraq.funding.ap/index.html