Despite losses in the billions of dollars in risky home loans, those who run the companies responsible for so-called subprime loans reported huge earnings last year. Lawmakers on Capitol Hill questioned the chief executive officers, or CEOs, of some of the largest mortgage lending firms. Lawmakers wanted to know how the executives managed to personally earn millions of dollars while their companies lost billions. VOA's Mil Arcega reports.
At a U.S. House oversight hearing Friday (March 7th), Chairman Henry Waxman, chastised CEO's (chief executive officers) from the nation's largest subprime lenders.
Waxman says the executives collected millions of dollars in compensation while their companies lost billions, “I think there's merit to pay for performance, but it seems like CEO's hit the lottery when their companies collapsed," he said.
Among the CEO's appearing before the panel - Stanley O'Neal - formerly of Merril Lynch. He received a $160 - million retirement package. Charles Prince was awarded nearly $40 million when he quit Citigroup. And Countrywide Financial Corporation's Angelo Mozilo sold his stock for $120 million in profit. The companies they represent lost tens of billions of dollars last year as a result of the mortgage crisis.
Waxman asked, "The obvious question is how can a few executives do so well when their companies are doing so poorly?"
The executives defended their pay packages, saying their earnings were competitive in the marketplace.
Countrywide founder, Angelo Mozilo remains one of the company's largest shareholders with about six and a half million shares. But he says his holdings have declined substantially. He says, "In short as our company did well, I did well as did our shareholders. But when our company did not do well in 2007, my direct compensation and the value of my holdings declined materially, which is as it should be."
But some homeowners accuse the CEOs of making money on the backs of families. Like many, Rachel Kahny says she fell behind in her payments.
"The money they're putting in their pockets is food they're taking out of my children's mouths. And that is not right. They should be held accountable for that," Kahny said.
Some lawmakers urged the Senate to adopt tougher guidelines on how much CEO's can earn. But others on the panel criticized the proceedings. Virginia Congressman Tom Davis called the hearing a "sanctimonious search for scapegoats".