The House Committee on Oversight and Government Reform is interviewing several overpaid CEOs today to find out what the relationship is between outlandish executive pay and the subprime mortgage meltdown.
Among 10 witnesses scheduled to appear are CEOs from the mortgage industry, including Mr. Fake-tan Face-lift himself Angelo Mozilo, CEO of the nation's largest mortgage lender Countrywide. Bank of America, the nation's largest bank, agreed to purchase troubled Countrywide. That's not only a disaster in the making for real estate consumers, but Mozilo was about to jump out with a golden parachute worth $115 million. He graciously refused about $37.5 million.
But those are the kind of paydays that have Congress concerned. How can you run a company into the ground and get rewarded like that? To find out the committee has subpoenaed the chairmen of the compensation committees responsible for the huge paydays.
To it's credit, the committee is also hauling in some Wall Streeters, responsible for passing along bad mortgage packages overburdened with subprime mortgages to investors, including Merrill Lynch's CEO Stanley O'Neal.
After all, it was greedy investment banks that created the shaky mortgage bond investment packages (CDOs) by convincing investors that they were buying insured AAA to A packages. This artificially kept mortgage interest rates low for years, because the investors didn't have a clue, even against evidence of rising inflation.
When interest rates started to rise, many of these loans went bad in a hurry, because housing sales slowed down and homeowners with risky loans found themselves unable to dump their homes at the magnificent profit that they had hoped for.
As the defaults rose, the CDOs became worthless. Hello, mortgage crisis.
But back to outlandish CEO pay ... . According to the AFLCIO , the CEOs of Standard & Poor's top 500 companies received compensation of about $15 million apiece in 2006, a collective 38 percent pay raise over 2005. With the DOW losing 2000 points in 08 so far, they should do really well in 2009 their golden parachutes.
Let's hope the House committee does more than just ask questions.
And the public can do something about it, too. Stop investing in companies with overpaid CEOs. If you're willing to hold back against home sellers, hold back against corporate greed and maybe there will be a little more in your bank account to buy homes with.
