After Bailout Grilling, Policy Marinating Begins
Of all the cameras covering Capitol Hill hearings this week, it’s a wonder that not one of them belonged to the Food Network.
Congressional Democrats—and some Republicans—did so much filleting and grilling of Wall Street executives at two meetings of the House Oversight and Government Reform Committee on October 6 and 7 that I expected Emeril Lagasse to stride up to the dais and explain how best to serve hapless millionaires.
The oversight panel’s exercise was illuminating and cathartic. The committee is known for obtaining thousands of pages of documents from its quarry in advance of their public floggings. Chairman Henry Waxman, D-California, did not disappoint.
On Monday, October 6, he pressed Lehman Brothers chairman and CEO Richard Fuld Jr. on why the investment firm’s compensation committee had recommended $20 million in “special payments” to departing executives four days before Lehman declared bankruptcy.
On Tuesday, October 7, Waxman revealed that the compensation committee of the giant insurer AIG gave CEO Martin Sullivan a bonus of more than $5 million for 2007, a year in which AIG lost $5 billion in the final quarter. This is a firm that received an $85 billion federal bailout in September and another $34 billion from Washington this week.
These egregious examples of excessive Wall Street pay will no doubt inspire Congress to press for executive compensation reform next year that goes beyond the strictures placed on firms that sell their toxic mortgage-based assets to the government.
But the oversight committee won’t be doing the legislating because it does not write bills. Elsewhere on Capitol Hill on Tuesday, it was possible to see the beginnings of a legislative response to the economic downturn caused by collapsing financial markets.
At a hearing of the House Education and Labor Committee that afternoon, there was more marinating than grilling on the topic of retirement security.
The thoughtful, lively discussion included only one Republican. Attendance in general was down at the hearings because Congress is in recess. And Republicans are sensitive about the hearing series becoming political theater.
But the members who were present heard Peter Orszag, director of the Congressional Budget Office, deliver some sobering news. He said that pension funds—public and private—lost roughly $1 trillion, or 10 percent of their assets, between the second quarter of 2007 and the second quarter of 2008.
Rep. Yvette Clarke, D-New York, said that her Brooklyn constituents are “reeling from what is happening to them. They are in a state of shock.”
Their dwindling 401(k) accounts may make them rethink their retirement plans.
“One dimension of the response may be in longer working lives and later retirements,” Orszag said.
Another witness, Teresa Ghilarducci, a professor of economic policy analysis at the New School for Social Research in New York, offered an idea to help people who have seen their 401(k) savings evaporate. She proposes a federal program that would swap toxic 401(k) assets for government bonds.
Labor committee Chairman George Miller, D-California, doubted the ability of 401(k) accounts to bounce back from the recent pounding they’ve taken.
“My sense is that this is somehow different,” he said. “I don’t know how you get well tomorrow the same way you did yesterday. This starts to look very catastrophic for middle-class families.”
The hearing was a preview of how Congress will review retirement policies next year, giving larger Democratic majorities a chance to make their imprint.
Rep. Robert Andrews, D-New Jersey and a labor subcommittee chairman, said that a new balance must be found between a dynamic economy and a strong safety net. He said President Theodore Roosevelt did it with antitrust regulations; President Franklin D. Roosevelt with the New Deal; and President Lyndon Johnson with the Great Society.
“It’s our time to answer that question now,” Andrews said.














