Having taken on millionaire baseball players, Rep. Henry Waxman (D-Calif.) moved to a different lineup: a collection of fabulously rich capitalists gathered for one of his celebrated show trials.
And as luck would have it, dozens of reporters and cameramen showed up Friday to watch the titans of the financial industry defend their paychecks to the dogged chairman of the House Oversight and Government Reform Committee.
Called in to discuss their jaw-dropping pay packages — nine figures by one account — Charles Prince of Citibank, Stanley O’Neal of Merrill Lynch and Angelo Mozilo of Countrywide Financial Corp. found themselves at the mercy of a Congressman whose $154,000 salary is worthy of a good yes-man, if that.
“Most Americans live in a world where economic security is precarious and there are real economic consequences for failure, but our nation’s top executives [live] by a different set of rules,” Waxman said.
The weather grew rainy outside as the hearing began, but it was Waxman who showered indignation at the unfortunately named Prince of Citibank.
“Was it appropriate to give Mr. Prince a $10 million bonus when Citibank was losing $10 billion?” Waxman asked Nell Minow, editor of The Corporate Library. “From a shareholder’s perspective, I do not see how you can justify that,” Minow responded.
The putative topic of the hearing was to discuss the relationship between executive compensation packages and the credit crisis. But after the first panel of academics finished up, Waxman bored in on the handsome compensation earned from the subprime mortgage boom, even as their companies were in a tailspin. Golden parachutes, timely stock sales and generous severances grabbed his attention.
“I’m having a difficult time reconciling Mr. Mozilo’s sale of 5.8 million shares for $150 million between 2006 and 2007 while Countrywide’s stock was plummeting,” Waxman said. “Mr. Mozilo, you had good timing.”
Waxman pointed out that Countrywide’s board opted to buy back $2.5 billion worth of stock at the same time that Mozilo was selling his shares. Undeterred by the flashy suits and high dollar figures — he does, after all, represent Rodeo Drive — Waxman held nothing back when he continued on with Mozilo and Harley Snyder, chairman of Countrywide’s compensation committee.
“Here’s the problem I have with the stock sales: Mr. Mozilo and Mr. Snyder were doing two different things. You were telling your board to buy back while selling your own stock.”
In between lightning bolt questions, Waxman would spread a bit of sunshine on the panel of witnesses, calling them “classic American success stories.” The chairman, who himself grew up in the rough Los Angeles neighborhood of Watts, noted that Prince was the first in his family to go to college, and that Mozilo drew up his business plan for Countrywide sitting at his kitchen table. O’Neal, Waxman highlighted, is the grandson of a slave.
Still, Waxman pressed on, and Rep. Darrell Issa (R-Calif.), a formerly high-priced executive himself, courageously stepped in to defend the CEOs.
“This is a hearing in search of bad guys, [and] I just don’t see it,” said Issa, who founded a car alarm company that eventually earned him $200 million. “We’ve called you in today to find wrongdoing, and so far Mr. Chairman, I just don’t see it.”
Ranking member Rep. Tom Davis (R-Va.), imparting the wisdom that only a retiring Member can, noted that sometimes pay does not always match performance.
“A professional baseball player with a $17 million contract who hits only .200 in a season still gets paid,” he said. “Jennifer Lopez and Ben Affleck didn’t have to pay reparations to moviegoers after ‘Gigli.’”
Hmmmm. That might be a thought for the panel’s next hearing.