The Fools on the Hill
The CEOs of the major banks may not have looked like captains of the universe yesterday, but the House committee was a major embarrassment as well. Charlie Gasparino asks: Does anyone actually want to solve this crisis?
The CEOs of the major banks may not have looked like captains of the universe yesterday, but the House committee was a major embarrassment as well. Charlie Gasparino asks: Does anyone actually want to solve this crisis? Plus, watch the best moments of the CEO smackdown.
Three cheers for Congresswoman Maxine Waters. The California Democrat at least kept yesterday’s House Financial Services Committee hearings on the government's bailout of the nation's big banks interesting. She sarcastically referred to the group of CEOs seated before her—which included Lloyd Blankfein of Goldman Sachs, John Mack of Morgan Stanley, Vikram Pandit of Citigroup, Jamie Dimon of JP Morgan Chase, and Bank of America chief Ken Lewis— as "our captains of the universe." Well, most of these captains were about to go down with their ships. Waters let them have it. Later, after getting a smartass remark from Lewis, she demanded to know if he and his buddies were raising credit-card rates. And then she and Lewis went at it again, causing Lewis to remark that he couldn’t understand what she was talking about.
Frank did little yesterday to advance the quest for a solution to this credit crisis—particularly after Treasury Secretary Tim Geithner's half-assed performance the day before.
And that was about it for drama, because the "inquisition" or the "anal exam" Wall Street was waiting for (and members of the media were praying for) really never arrived. Oh sure, there were some more tense moments—grandstanding about bonuses, long-winded speeches about greed, and comments about the need for diversity in the senior ranks at the major firms.
But for the most part, yesterday's hearing was a listless affair, not just devoid of fireworks, but also devoid of any substantive discussion about the financial crisis that is squeezing the nation dry. And that's a shame, because if anyone knows better, it’s Barney Frank, the committee chairman. Talk to anyone on Wall Street and they'll tell you that the irascible congressman from Massachusetts is also one of the smartest men on the planet when it comes to the banking business. And yet, Frank did little yesterday to advance the quest for a solution to this credit crisis—particularly after Treasury Secretary Tim Geithner's half-assed performance the day before—or at the very least to goad the Wall Street executives with some class-warfare rhetoric as Maxine Waters did.
And time is running out to find a solution. How do I know this? I speak to people in the financial industry all the time. They tell me that if you think things are bad now, they can get a hell of a lot worse. We all know there's trillions of dollars of toxic real-estate assets on the balance sheets of the major banks. If the economy continues to stumble, that toxicity will spread to credit cards and auto loans. And many mortgage bonds, already poisoned, will turn even more toxic.
I know how much people love beating up on the Wall Street CEOs who were hauled in front of the committee yesterday. And they deserve it. Several mentioned they didn't know the economy was on shaky footing until the third quarter of 2007. Well guess what? Most of the smart money knew that the housing market—the pillar of our economy—was about to explode at the end of 2006. That's why so many hedge funds began shorting any stock connected to the housing market. Failing to see the demise of the housing market when you're supposed to have access to the best minds and analytical models on the planet is yet another reason not to trust Wall Street—they can’t even see a recession when its staring them in the face.
But let’s not let our elected officials off the hook either. Frank’s committee is supposed to be in charge of oversight. Where were these guys when the real-estate bubble reached dizzying heights? And now that the bubble has exploded, damaging not just housing prices, but the banking system and the national economy, what are they doing to fix the problem? Even more troubling, did you get any sense of urgency to come up with a solution?
Answer those questions and you'll understand why I like Maxine Waters so much: She came to play.
Charles Gasparino appears as a daily member of CNBC's ensemble. He is also a columnist for Trader Monthly Magazine, and a freelance writer for the New York Post, Forbes and other publications.