This is a public smackdown many have been waiting for.

The House Oversight and Government Reform Committee is holding a hearing into the millions of dollars in compensation received by Angelo Mozilo of Countrywide Financial, the biggest mortgage lender in the country, Stan O'Neal, the former chief executive of Merrill Lynch, and Charles Prince, the former C.E.O. of Citigroup.

Countrywide and the two Wall Street banks -- and their shareholders -- were badly hit by the collapse of the subprime mortgage market.

Elizabeth Olson is blogging live from the hearing:

The hearing room is overflowing, with a line snaked into the corridor of people waiting for seats.

Representative Henry Waxman, the chairman of the committee, has opened the hearing: "There seem to be two different economic realities operating in our country today. And the rules of compensation in one world are completely different from those in the other."

He contrasted the situation of Circuit City employees who were laid off and then invited to reapply for the jobs at lower pay with its executives.

By any measure, executive pay is rising rapidly and dramatically, Waxman noted The C.E.O.'s of the 500 largest companies received an average of $15 million each in 2006 - a 38 percent rise in just one year. In 1980, C.E.O.'s were paid 40 times the average worker. Today they are paid 600 times more.

"I think there's merit to pay for performance," Waxman said. "But it seems like C.E.O.'s hit the lottery even when their companies collapse."

Despite the losses covered by Countrywide, which lost $1.6 billion in 2007, Merrill Lynch which lost $10 billion and Citigroup, which lost $10 billion, Waxman said their chiefs left with "extraordinary" compensation packages.

Mr. O'Neal left Merrill Lynch with a $161 million retirement package; Mr. Prince was awarded a $10 million bonus, $28 million in unvested stock options, and $1.5 million in annual perquisites when he left Citigroup; and Mr. Mozilo received over $120 million in compensation and sales of Countrywide stock.

"Each of these men achieved incredible success through hard work and ability," Waxmansaid. "And each was richly compensated when their companies prospered."

Waxman thanked them for "their many contributions to our country" and assured them that "the questions we ask today are not in any way intended to disparage their records."

""What we are trying to understand is fundamental to our nation's values. And it is also of central importance to the effective functioning of business and our economy."

"Are the extraordinary packages these C.E.O.'s received reasonable compensation? Or does the hundreds of millions of dollars they were given represent a complete disconnect from reality?"

"This isn't a hearing about ilegality or even ethical breaches. It's a hearing to examine how executives are compensated when thier companies fail."

But the ranking Republican on the committee, Representative Tom Davis, warned that the hearing was playing "at best, a derivative and potentially damaging role in the discussion of complex transactions, proprietary business decisions and marketplace dynamics."

The last thing union pension funds and other investors want is Congress second guessing and micro manging the people looking after their money."

While there is no dispute that the housing market is undergoing significant contraction, he said the debate over executive compensation "should not degenerate into a sanctimonious search for scapegoats."

"Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual - like an island tribe sacrificing a virgin to a grumbling volcano."

Elizabeth Olson

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