Top U.S. banks facing outrage of the Congress for their lavish style

The CEOs of the top eight banks in the U.S. are to defend their use of $165 billion in rescue funds before the Congress as the public expresses its anger against the financial institutions’ private jets and lavish pay. In October these banks represented in the House Financial Services Committee hearing received $125 billion under the $700 billion TARP scheme with Citigroup and Bank of America each got an additional $20 billion. The lawmakers are going to pounce upon the banks saying that the companies paid out bonuses at taxpayers’ expense without lending to consumers and businesses or seeking to alleviate foreclosures.

Thereby, most bankers will have to shun corporate liners for the trip to the capital as it was the case with the automakers. But reduced spending on travel expenses will unlikely soothe the Committee outraged by the industry that awarded $18.4 billion in bonuses last year as companies reported record losses. And while congressmen are indignant about their squander the bankers assure that they continued to make new loans, as much as $150 billion by JPMorgan Chase & Co. in the fourth quarter.

“Our lending volumes have been significant, particularly in light of the rapidly deteriorating economic environment,” JPMorgan Chase CEO Jamie Dimon said in his prepared testimony. 

Other companies also confirmed their extending the loans with Wells Fargo & Co. CEO John Stumpf reporting that the bank had $72 billion in new loans including $50 billion in mortgages. Morgan Stanley’s John Mack also added that the company had $10.6 billion in new commercial loans in the quarter, as the government injected $10 billion.

“This is going to be political theater where the congressmen get to express the populist outrage over executives that are highly compensated and companies that are used to a lavish business style,” said John Douglas, a partner who focuses on bank regulation at the law firm Paul, Hastings, Janofsky & Walker LLP in Atlanta.