With outrage among politicians and the public over pay practices at bailed-out financial firms reaching a peak, the nation's top bankers are testifying today at the inaugural hearing of the Financial Crisis Inquiry Commission.
Critics are stewing over recent reports that banks will once again be awarding massive sums of cash and stock to their top staff. The financial crisis had an array of causes but chief among them, many argue, were compensation practices that encouraged excessive risk-taking by some of the country's most powerful financial institutions.
"I did not run for office to be helping out a bunch of fat cat bankers on Wall Street," President Obama told journalists last month.
The commission, a bipartisan panel, was appointed by Congress and charged with investigating the worst financial turmoil to hit the country since the Great Depression.
"People are angry and they have a right to be," said Phil Angelides, the chairman of the Financial Crisis Inquiry Commission, at the start of the hearing, which began at 9 a.m.. "The fact is that Wall Street is enjoying record profits and bonuses in the wake of receiving trillions of dollars in government assistance while so many families are struggling to stay afloat."
During the first nine months of 2009, the country's six largest banks set aside $112 billion for compensation, according to a November report by the New York state comptroller's office. Some are on track to exceed the compensation levels of 2007, before the worst of the financial crisis hit.
Leaders for four of the banks are scheduled to testify today: Goldman Sachs CEO Lloyd Blankfein, JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Brian T. Moynihan and former Morgan Stanley CEO John Mack, who remains chairman of the firm.
Perhaps the bank heavyweight who has seen the most backlash over his firm's compensation plans is Blankfein, who himself spoke out against compensation excesses at a banking conference in September.
"There is little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year," he said.
Goldman Sachs, however, likely did not conclude 2009 with a loss -- the bank beat analysts' expectations by reporting third-quarter earnings of more than $3 billion in October -- and its compensation kitty shows it: the bank reserved $16.7 billion for compensation during the first nine months of 2009, putting it on track to pay its employees an average of $700,000 each.
But Goldman and its peers have announced steps to change their compensation practices.
"Every institution is using one or some combination of (techniques) to eliminate excessive risk-taking for compensation and focus on the long term and that aligns the interest of the institution with the interest of the employee with the interest of the consumer -- they're all inextricably linked," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, told ABC News.
Last month, Goldman announced that for at least 30 Goldman managers, compensation won't be in cash: the bank said they will instead be awarded stock that can't be sold for five years. That stock can be "clawed back" -- taken back by the firm -- if it is determined that the executive took excessive risks.