Congress To Subprime CEOs: How Come You Got Paid Millions To Wreck The Economy? Hm?

Congress got to ask the subprime CEOs what everyone else is thinking: Why did you get millions and millions of dollars to fail so spectacularly?

From ABC News:

“There seem to be two different economic realities operating in our country today. And the rules of compensation in one world are completely different from those in the other,” said Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform. “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 seem to live by a different set of rules.”

In 1980, chief executives in the United States were paid 40 times what the average worker made. They now make 600 times the average worker’s salary, Waxman said.

“I think there’s merit to pay for performance,” Waxman said. “But it seems like CEOs hit the lottery even when their companies collapse.”

The panel included a who’s who of failures: Countrywide Financial Corp. chairman and chief executive officer Angelo Mozilo, former Merrill Lynch CEO E. Stanley O’Neal, and Charles Prince, former chairman and CEO of Citigroup. If you were expecting these guys to take personal responsibility for the subprime meltdown, you’d be wrong.

Instead, the CEOs talked about tough economic conditions and about how they helped many Americans who might not otherwise have been able to afford homes.

Mozilo just can’t seem to figure out why people are always blaming the poor adjustable rate mortgages:

“Much blame has been leveled lately at the variety of products, such as adjustable rate mortgages,” Mozilo said. “Before the onset of the current housing crisis, these products were widely offered by industry because they made homes more affordable for more people and helped homeowners consolidate other, more expensive debt.

“In fact,” he continued, “adjustable rate mortgages had been popular with both borrowers and lenders for many years. From my perspective, then, the issue is not so much the products, but the housing market.”

O’Neal gave an acceptance speech:

“Whatever I have achieved in life has been the result of the unique combination of luck, hard work and opportunity that can only exist in this country.”

ABC News says that over a five-year period, these three CEOs received more than $460 million in compensation. Mozilo says he’ll give up $37 million of his $115 million parachute in order to be less “distracting.”

Subprime CEOs Explain Why They Made Millions While Americans Lost Homes [ABC News] (Thanks, Natalia!)

PREVIOUSLY:Interview With An Anonymous Hedge Fund Manager
BREAKING: Bank Of America Buys Countrywide, CEO Gets Up To $115 Million Parachute
Citibank CEO Resigns, Additional $11 Billion In Subprime Damage Predicted
Merrill Lynch CEO Forced To Resign After Disastrous Third Quarter?
Merrill Lynch: We Just Lost $9.8 Billion


Edit Your Comment

  1. freshyill says:

    Epic fail!

  2. emona says:

    @freshyill: The very DEFINITION of epic fail.

  3. soulman901 says:

    Congress has “Subprime Face”

  4. dweebster says:

    Don’t slap their hands too hard, congressmen. They need that hand to write you some more bribes..err…umm. “campaign contributions.”

  5. rolla says:

    wow, 37 million…guess he cant buy that 8th home for his wife now.

  6. BugMeNot2 says:

    Because they’re rich white guys in suits.

  7. cmdr.sass says:

    For these guys, more like epic win!

  8. noi56u says:

    115-37 = 78 million. I’m still distracted.

  9. trujunglist says:

    Love this:

    “Whatever I have achieved in life has been the result of the unique combination of luck, hard work and opportunity that can only exist in this country.”

    “I totally fucked up, but since I’m incredibly rich and have friends in the right places, I can totally get away with it! God bless America!”

  10. A.W.E.S.O.M.-O says:

    The funny thing is, companies justify this kind of excess by telling everyone that they need to have competitive salaries to attract top-tier talent. I say let them pass you by when the “top talent” can’t even perform better than if they had stuffed all the bank’s money under a mattress.

    Biggest scam outside of hedge fund managers’ tax rates.

  11. dualityshift says:

    That’s the best comment all week.

  12. SarcasticDwarf says:

    The sad part is all this is just publicity for those congressmen. It is not about fixing the economy or finding anyone to blame, it is about making them look like they are doing something important (much as with the MLB thing).

  13. greensmurf says:

    Nothing wrong with ARM loans, but and here is the kicker, You have to read and understand the loan before you sign on the dotten line.
    Most of the people in trouble didnt invest the proper time into buying a home, instead they listened to the honey coated workds of the broker and signed their name on the dotted line as they watched the movie Dumb and Dumber.
    Then they withdrew from the homeside ATM machine and started to cry victim, I was predatoried on.

    The salaries of these CEO’s are freaking insaine though

  14. Mills says:

    I’d give anything to hear one of those guys say, “Well, I need my huge bonus because I failed so spectacularly that I will never get another job anywhere ever again, not even serving hamburgers.”

    Sadly, it would just be another lie.

  15. uberbucket says:

    I promise not to lie on my mortgage applications anymore, can I have a years worth of free rent please?

  16. number six says:

    But, but, but, it’s capitalism at work! The free hand of the market! Deregulation helps everyone, because the best and brightest succeed, right? American workers making 600 times less than these CEOs just need to stop being so damn lazy and abusing my tax dollars!

  17. char says:

    While looking at an individuals hardship, blame mostly falls on the person who over extended the house that they could afford.

    For the losses sustained by the banks, by the lenders, and by the economy, we have no one to blame but these guys who created this bubble. These are the people that created a situation where the benefits of walking away from a home loan are greater than sticking it out. These are the people that hid the risks of loan, and spread the shit throughout the entire economy.

    When it comes to the fucking over of banking in this country look no farther than those empty suits.

  18. Anonymous says:

    @dweebster: Campaign contributions, on the federal level, are capped at $2200 per person. They are also a matter of public record. You can look up exactly who has been giving what to whom at the Federal Election Commission’s website. []

  19. DeepFriar says:

    I’m not sure what part of this whole thing I dislike most:

    – overcompensating corporate executives

    – lack of accountability by afformentioned execs

    – bogus congressional “oversite”

  20. hi says:

    Whatever I have not achieved in life has been the result of the unique combination of bad luck, laziness and the limited opportunities that can only exist in this country.

  21. Bladefist says:

    I’m not sure why congress is commenting on this. I thought the housing market for the most part of the private sector. I’m sure Congress can come in and fix all our problems. they always do :)

  22. backbroken says:

    Can we rewrite this headline?

    “Voters to Congress: How come you got paid millions to wreck the economy?”

    The ultimate pot/kettle/black.

  23. pal003 says:

    “ABC News says that over a five-year period, these three CEOs received more than $460 million in compensation.”

    But those Insider transactions of stock sales are in the $$$ BILLIONS – all cashed in while these CEOs knew the mortgages were tanking. So yeah – that $37 million drop-in-the bucket is soooo distracting me.

  24. m4ximusprim3 says:

    @s0crates82: You’re right, we’ve created an infallible system. Glad we can all go home now.

    Stop being naive.

  25. mac-phisto says:

    @s0crates82: ever hear of bundlers? PACs? 527 groups?

  26. jtheletter says:

    The answer quoted was a total misdirection, and excellently played apparently. The banks and investments did not fail simply because people were overextended on risky mortgage offerings, though of course that is part of the root cause. Instead, it was these very CEOs and the company officers they oversee and direct who repackaged extremely risky mortgages into securities and then did a little mathematical magic to turn them into AAA graded investments. The companies who gave the AAA rating are culpable here as well of course. They knew that simply putting a huge pile of garbage together and saying “only some will fail” was not a true mitigation of risk. It is those derivative investment instruments that caused huge write-downs in the credit market, not simply people buying mortgages that put them underwater. Thoughts?

  27. AMetamorphosis says:

    @ BugMeNot2:

    Re: ” Because they’re rich white guys in suits. “

    These kind of racist comments add nothing to this discussion.

    It would be the equivilent of me saying the mortgage crisis was caused by:

    Fat black welfare receiving women eatin’ chikin & poppin’ out babies all day …

  28. etc says:

    Ummm, this is pretty audacious.

    I think the headline should also read…

    People to congress: how come you got paid millions to wreck the economy?

    They are just as complacent as the rest…so is the reserve.

  29. dweebster says:

    @s0crates82: I was referring more to corporate contributions, which, through loopholes you can drive a truck through, are able to exceed that amount quite handily.

    Even the *person* testifying probably has a wife, some kids, nephews, grandchildren, secretaries and other subordinates, etc to multiply that “$2200.00 per person” quite handily until it’s “real money” to even you (and them). Not to mention “speaker fees” and “book deals” and all sorts of wiggle room around the edges of ethics.

    Don’t worry – they’ll find some welfare queen with a Cadillac and mansion to blame this whole mess on. Free market self-regulation is still the shining example of wealth creation that Lord Reagan said it was.

  30. dweebster says:

    @etc: you gotta dance with the ones that brung you. Banks are where they keep the money…

  31. dweebster says:

    @jtheletter: Now you’re just talking gibberish. This self-regulating mortgage model is as rock-solid as my Enron stock.

  32. Zephyr7 says:

    Looks like they got them all nicely lined up there… time to call in the firing squad.

  33. TechnoDestructo says:

    This is not a question I want Congress asking. This is not a bandwagon I want them jumping (back) on.

    If you set your friends’ salaries, and they set yours, you’d be paid millions of dollars to fail, too.

  34. Jim says:

    “…they helped many Americans who might not otherwise have been able to afford homes.”

    Lots of those Americans who wouldn’t have otherwise been able to afford homes, still couldn’t (or can’t) afford homes.

    Very noble to give up 37 million, but why don’t you let some of these people you “helped” come stay at your place for a while after they lose their homes?

  35. whydidnt says:

    The current executive pay structure is so out of whack with reality that it will probably be one of the reasons we end up with a more socialist economy and ends up getting regulated at some point – and it pains me to say the above.

    Most of these CEO’s get paid millions of dollars up front when they accept the job and then are paid even more if the company stock goes up, even by a little. The problem is it’s a one way street, stock goes up and they get millions of dollars. Stock goes down and they don’t have to give back any of those millions, they still earn a nice fat salary. This pay structure and the stock market’s strange love affair with short term earnings cycles has removed much of the incentive for corporations to make solid long term decisions. It seems almost every decision is made based upon how it impacts this quarter’s numbers. The fallout you see in the mortgage industry certainly bears this out, but it’s not limited to this industry.

  36. Buran says:

    I’m all for fixing this in the future, but I hate to say it but I don’t think current agreements should be voided. If that happens, what’s to stop them from doing the same to us?

  37. TechnoDestructo says:


    The people who would be hiring them are all their buddies or their buddies’ buddies, and are all having their compensation set by their buddies or their buddies’ buddies.

  38. TechnoDestructo says:


    I take it you’ve never had a credit card? They DO do that to us.

  39. MelL says:

    And yet some ‘expert’ somewhere will say the market should be allowed to correct the situation. Yeah, right, don’t hold your breath on that one.

  40. less_is_best says:


  41. bohemian says:

    “…they helped many Americans who might not otherwise have been able to afford homes.”

    There are some wonderful programs based out of HUD and the FHA to help people get into affordable homes. I hate when banks did something creepy and tried to pass it off as if they were some sort of altruistic group.

  42. mexifelio says:

    Apartment Complexes REJOICE!

  43. selectman says:

    @TechnoDestructo: Excellent point! People often talk about “slippery slopes” regarding this stuff, which engenders lots of eye rolling…but that’s a great example of corporations “having it both ways”.

    E.g., we can change contract terms at any time, but we will charge you early termination fees, force you to opt-out of arbitration, etc. It’s an extremely asymmetrical relationship.

  44. backbroken says:

    @MelL: And that expert will be John Stossel!!

  45. AMetamorphosis says:

    The people that bought these properties and are now losing them really never could afford them to begin with …

    Looks like its time for me to resume buying retal properties again …

  46. TheUncleBob says:

    So when will all the individuals who took out mortgages they knew (or reasonably should have expected to know) that they couldn’t pay back be hauled before congress had have to answer for their part in “wrecking the economy”?

  47. artki says:

    Epic Fail for sure but…

    What business is it of Congress to ask a private corporation how much it pays ANY of it’s employees?

  48. NoWin says:


    Ahhhhh, a few are black, my dear commentator….so look before you leap.

  49. CumaeanSibyl says:

    @whydidnt: I’ve said it before and I’ve said it again: I’d like to have limited government oversight, and I’d like to rely on market self-correction, but obviously we just can’t have nice things in this country.

    You’d think these people wanted their corporations nationalized, or something.

  50. Applekid ┬──┬ ノ( ゜-゜ノ) says:

    @artki: The business is obvious since the Federal Reserve basically bails them out by slashing interest rates and prints more money.

  51. rhombopteryx says:

    How come you get paid more millions and you wreck the economy?

    Seriously, who’s had the power to do something about it for, oh, 232 years and just made things worse?

    At the first whiff of campaign cash Congress rolled back most every financial regulation since the Depression, (cough Gramm-Leach-Bliley) preempted stronger state laws that protected consumers, (cough OFHEO and OCC) relaxed capital and lending requirements, and reduced transparency obligations. El Jefe GWB is catching lotsa well-earned crep for doing diddley about this, but Congress passed the laws that opened the doors up to this deception and mess in the first place. Congress isn’t grandstanding (well, maybe they are) they’re scape-goating.

  52. mac-phisto says:

    the picture says it all:
    step 1: hand up
    step 2: hand out
    step 3: profit!!

  53. disavow says:

    @artki: Ideally, the object is to decide whether corporate governance rules are doing their job. Shareholders should have some influence over executive compensation and whatnot, but the fools at the SEC recently decided just the opposite, so that boards of directors have the ultimate say. Instead of, you know, the people who actually own the company.

    So I’d hope the hearings would aim at revising governance rules to give shareholders greater sway. But they’ll probably just amount to grandstanding.

  54. mikelotus says:

    government oversight should be making sure that the owners of the company, that is the shareholders, have the ability to assure that pay and accountability and independent directors are what they should be. Right now Cox and the SEC is trying to assure that does not happen. I expect that might change under the next (Democrat is a given) administration. Heck, it might even change under McCain not that he knows anything about economics. Accountability to the shareholders. That is all the government regulations we need to change this.

  55. rhombopteryx says:

    Exactly – pointing the “finger of blame” – ooooohhh. How’s that fix stuff?
    Thing is, do we want what Congress has been offering for solutions lately? Maybe for Congress sitting in the bottom of a hole pointing fingers is better than sitting in the bottom of a hole making shovels.

  56. modenastradale says:

    @TheUncleBob: Perhaps that’ll happen when: (1) a small, select group of homeowners have enormous influence over the national financial and labor markets; (2) these individual homeowners are paid hundres of millions of dollars apiece to breach their fiduciary duties to investors and employees; and (3) they become part of a growing national debate about inequality and the abuse of power and privilege.

  57. eury says:

    The government loses money every year and has played a major role in this current financial crisis.

    They seem to receive their pay without regard for their performance.

    So what are they trying to prove?

  58. Anonymous says:

    Now ask the oil companies something similar

  59. Orv says:

    This is the typical pendulum-swing of American politics. People with ideas about market reform and deregulation come into power, remove what they see as unnecessary constraints on business, and then some big scandal happens when consumers get screwed over.

    Energy markets deregulated -> Enron games the system to drive up power rates

    Mortgage markets deregulated -> Subprime crisis, housing price bubble followed by a crash

    Airlines deregulated -> People sitting on the tarmac for hours without food or toilets, Southwest can’t be bothered to inspect its airplanes, etc.

  60. TechnoDestructo says:


    If they keep up their current “fuck you, customers, give us your money” behavior for a few more decades, maybe they’ll learn about another kind of asymmetry. (Asymmetric warfare)

  61. DoctorMD says:

    Capitalism: charge more for something than it is worth and pocket the difference.

    That is why I only buy from businesses with crappy stock prices and losing money. I know the service/product costs more than I paid for it. HA HA

  62. RobinB says:

    This all makes me sick. I work for a small savings bank as part of a
    2-person, non-commissioned mortgage department. Any of our loans which
    are ARMs have “recast” feature for borrowers to modify their loans
    before the reset dates. Looks like if I had chosen a big company making
    unfair loans I would have made soooo much more money over the years.

  63. missdona says:

    @NoWin: Yep. Stan O’Neal is the black guy.

  64. bluewyvern says:

    It’s not all just back-slapping. Competition for talent is a real factor.

    Let’s say, say, Citi’s board had decided to hold their CEO responsible for the $9.8 billion loss and run him out of town on a rail, stripping away all his unvested options and severance goodies. Now they need a new CEO. Who’s going to want to accept Citi’s offer, when they know that any confluence of adverse factors could lead to THEM being ousted in a similarly disagreeable manner? No, they’re going to be shopping around the other options, looking to replace one of those other ex-CEOs who got to leave in comfort with the moneybags on the corporate jet.

    The truth is that there aren’t THAT many people with the talent and qualifications to fill these positions, and when you’re at that level, you have a whole lot of leverage. Call it a supply issue if you want — if potential financial CEOs were as numerous as potential office drones, their jobs would be just as precarious as ours, but they’re not.

  65. WraithSama says:

    I’m not really sure why these guys don’t just intentionally wreck the company the day after they become CEO. Collect your sign-on bonus, collect your golden parachute severance the next day, *bam*, set for life and only 1 day on the job.

    Sadly, that might just be the most sage advice I’ve ever given.

  66. bluewyvern says:

    @WraithSama: Well. Termination for bad faith or intentional misconduct generally precludes the golden parachute. Sure, you might collect a one-time signing bonus, in exchange for throwing away your life of accomplishment (presumably you had to do something right, likely for decades, to be offered this opportunity) and any chance for future employment. The CEOs in question here are being scrutinized for poor performance, but there’s no suggestion of bad faith.

    Yes, it’s easy and fun and cathartic to yell “CEOS ARE RICH AND SCHEMING EVIL BASTARDS! BOO!”, but try to examine things with a little more nuance. Very few people actually wake up in the morning, rub their hands together, and go, “Muahaha, I’m going to be so evil today.”

  67. mac-phisto says:

    @RobinB: look at the bright side….you still have a job.

  68. WraithSama says:


    I was being facetious.

  69. bluewyvern says:

    @WraithSama: I know, I didn’t think you were actually suggesting that people might do that. I was trying to address the attitude behind the facetiousness, which is bitterness at the idea that these guys can get away with anything, and do…I’m just saying there might be more to it than reckless exercise of privilege.

  70. ashabanapal says:

    @TheUncleBob: Are we really going to ask for equal accountability from the people who didn’t or couldn’t pay their mortagages? Just think about that for a second. But even that is beside the real point here. How do the lenders not bear the the responsibility for securing their loans? Loan applicants are not necessarily financially savvy, lenders necessarily are. These products they created were designed to do nothing more than generate the most income possible for the lenders. That’s their job. To then turn around and tell the American people through congress that they were floating bad mortgages out of some altruistic desire to help more people own homes is a slap in the face. To think that CEOs who are paid hundreds of millions of dollars primarily to direct policy are not responsible for the results of policies they created or approved is absurd. Their schemes tank and they get more millions thrown at them to go away while the thousands under them are lucky to receive enough compensation to carry them through a job search in an industry in turmoil and millions more have wrecked credit and lives in turmoil. But I guess that’s their fault for applying the principles taught to them by the dealings of these subprime lenders. Welcome to the American Dream going *poof* yet again, ladies and gentlemen.

  71. BobbyMills says:

    Ok, I think most of you are not getting the full picture as to why these CEOs have been paid this much and there companies are in the shitter. Their own boards create how much the CEOs get paid, and for these 3, they have deferred pay for years and have made arrangements on when to get it. So stop yelling about ‘epic fail’ and learn about each companies pay structure. These guys aren’t getting paid this much every year. Jeez.

    Read this for knowledge: []

  72. mmmmna says:

    Silly me… I thought dubya was partly to blame.

  73. bustit22 says:

    I’m pretty sure it’s none of the government’s business how much someone gets paid.