What Would You Ask Bank CEOs?

Posted by: Ben Steverman on March 26, 2009

President Barack Obama meets on Friday with the heads of the country’s largest banks. Chief executives of about a dozen banks, including Bank of America (BAC), JP Morgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS) and Citigroup (C), are expected to visit the White House.

Obama has been taking a lot of questions this week. On Sunday, he was on 60 Minutes. On Tuesday, he had a press conference, and today he took questions submitted over the web.

But what about those bank CEOs? Surely they deserve some public interrogation, too. Bank of America (BAC) chief executive Ken Lewis has taken some questions (as in this L.A. Times interview), and so have a few of the other heavyweights expected tomorrow.

But, what would you ask them? Assuming you could sneak into the Oval Office and ask each of them a direct question, what would it be?

For example, I’d want to know whether they believe the big year-end bonuses on Wall Street encouraged the risk-taking that got us into the crisis. If so, how are they changing compensation policies going forward?

How would you suggest Obama grill the bank chiefs?

Reader Comments

R Stager

March 27, 2009 8:57 AM

Obama should ask bank CEOs about the role government policy played in creating the subprime crisis.

The Mad Hedge Fund Trader, San Francisco, CA

March 27, 2009 12:10 PM

Why not try this? There is an easier, cheaper, and faster way to solve the banking crisis which no one is talking about on Capitol Hill. If collateralized debt obligations (CDO’s) are the problem, just get rid of them! Desecuritize them! Just convert them back into the underlying loans. There are $1.4 trillion in CDO’s outstanding backed by Alt-A and subprime loans in the form of 3,700 individual securitizations of perhaps 3.7 million loans. Over 68% of the loans backing these bonds are current. Mark to market rules are forcing the banks to carry this paper on their balance sheets at 50%-80% discounts. The problem is that mark to market is a meaningless accounting fiction when there is no market. If you break up these securities and place the underlying loans back on the banks’ balance sheets, the good mortgages can be valued at 100% of face, and those behind in their payments or in default can be discounted to maybe 70% because they are still secured by the value of the homes. This would boost the value of the entire asset class from the current 20-50 cents up to 90 cents on the dollar. Restored balance sheets would enable banks to resume lending. Of course it would be a massive admin job unwinding the rats’ nests behind some of these securities, but Heaven knows there is abundant subprime and Alt-A expertise available for hire these days. Just sift through the ashes of Lehman Brothers and Bear Stearns. It is a workable plan, and therefore is unlikely to ever see the light of day.

Robert Nguyen

March 27, 2009 1:36 PM

The President should ask them:
1) Why are they serving on other companies' boards right now? arn't they busy enough with their own companies' problem?
2) Why are they giving out bonus when their companies suffering huge loss? Shouldn't bonus only be given out when the company is making a profit?
3) Are they applying the same rules on themselve and their high level staff that they require their employees?
4) Why can't they narrow the gap between long term rate from the government vis a vis their rate that they are charging the consumers - from mortgage rates? to consumer credit cards?
5) What kind of businessman are they? If their intent is to goug their customers? How are they going to make a profit if there are no customers?

RR

March 27, 2009 3:18 PM

No need for me to ask them any questions because all aspects of this country's pre-arranged financial system has been structured to largely benefit those of a select few anyway. True Knowledge is power and we have to be able to see through the endless array of BS that's being used as a ploy to keep us from seeing through sea of lies and deceit.

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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