Summary
The House Committee on Oversight & Government Reform will grill Angelo Mozilo, Countrywide's CEO, Charles Prince-former CEO of Citigroup and Stan O'Neal-former CEO of Merrill Lynch, when they testify on 3.7.08, as lawmakers examine if there is a link between "executive pay" and the U.S. mortgage crisis. The Committee is continuing its investigation into "executive pay" and the grossly extravagant "golden parachutes" some executives receive when they exit. All three executives made headlines in 2007 for their companies' bad debts on the U.S. housing market and for their own "pay for failure" parachutes. Prince left Citigroup with roughly $68 million; O'Neal collected $161 million when he stepped down from Merrill Lynch and Angelo Mozilo may collect as much as $115 million, if he stays at Countrywide or is fired after the BofA deal goes through. Executives' pay is drawing scrutiny from lawmakers at a time when homeowners across the country are at risk of losing their homes.
Analysis
Did bonuses and "pay for failure" packages contribute to the U.S. subprime meltdown? This is just one of many questions lawmakers will try to ascertain on 3.7.08, when they talk with former executives Stan O'Neal of Merrill Lynch, the Prince of Citigroup and Countrywide's founder and current CEO, Angelo Mozilo. Congress is investigating the perceived appalling bonuses and the huge "pay for failure" packages handed out during the subprime crisis and whether the bonuses and payouts could have contributed to the mortgage meltdown.
1. Mozilo, the Prince and O'Neal will take center stage on 3.7.08, in the "executive pay" debate and the lavish "pay for failure" packages each received and the potential $115 million payout Mozilo could receive whether he stays on or is fired after the Countrywide-BofA deal, despite major writedowns and profit losses at Merrill Lynch and Citigroup and the subprime debacle and what role if any Countrywide may have played in the fallout since the mortgage meltdown began last summer
2. 10 witnesses are scheduled to appear and Rep Henry Waxman (D-CA) will lead the hearing and the focus this time around will be the compensation and severance packages of O'Neal, the Prince and Mozilo and how the "pay for failure packages" was set and approved by their respective boards. Waxman will also question corporate directors who signed off on pay packages for O'Neal, the Prince and Mozilo
Takeaway: Investors may have lost a fortune with Wall Street's top banks writing off billions in trading losses related to the credit crunch which was sparked by defaults on subprime mortgages and a perfect storm could be brewing as subprime losses continue to mount and excessive "executive pay" could result in a continuing wave of shareholder class action suits as shareholders feel strongly that many chief executives are living according to a different set of rules from everyone else. Whether there is a link between "executive pay" and the U.S. mortgage crisis is a question that may remain unanswered even after executives O'Neal, the Prince and Mozilo testify on 3.7.08.
