Credit C.E.O. Comp Under Fire, VI

The partisan divide on the House committee examining the compensation of C.E.O.'s affected by the mortgage crisis is fairly stark:

Elizabeth Olson blogged the hearing:

"Something doesn't smell right," says Representative Elijah Cummings, Democrat of Maryland.

"Some members say you are being used as scapegoat -- you run the largest mortgage lender if you don't accept responsibility who does?"

"On one hand, we've got golden parachutes drifting over golf courses, but I see people every day who worry about where their children are going to do their homework."

Representative Paul Kanjorski, Democrat of Pennsylvania, tries to raise the bar.

"Is a trillion dollar compensation too much?," he asks Mozilo. (Hey! Don't give these guys any ideas!)

"It's a very difficult question," Mozilo says.

He notes that some of the lending patterns started to deteriorate during 2006.

Kanjorksi asks why the Treasury Department failed to see that trend.

Mozilo replies: "As Mr. Prince pointed out, these things happen over time. We investigated each of these mortgages to see what the problem was. There are people who are sincere about living in the houses ... generally these are speculators, or it didn't work out... a lot of it was fraud."

In questioning from Cummings, the Maryland Democrat, we get a rare sight: the usually brash and bullish Mozilo expressing regret.

Cummings reads out an internal memo by Mozilo that blames "left-wing" media for bad publicity and questions over executive pay.

"It was an emotional time," Mozilo explains. "The board had asked me to stay and sent me a proposal that was sharply different than what i expected. I apologize for that memo. It resulted in the board asking me to get my own consultant."

Cummings then asks why Mozilo insisted that that Countrywide pay the taxes on his wife's travel on the company jet?

"It sounds out of whack, because it is out of whack in today's world," Mozilo says. "But in 2006 things were different. I had to pay the considerable cost for my wife to come on the plane with me. I wouldn't write that memo today."

Waxman presses Finnegan on why the Merrill board allowed O'Neal to retire, instead of being fired.

"Your stock plunged 45 percent. If that's not reason for termination for cause, what is?"

Finnegan replies: "He lost his job. and he lost $120 million."

The exchanges were fairly predictable, with Democrats incredulous and Republicans offering support. Representative Chris Cannon, Republican of Utah, even tried to blame Gretchen Morgenson of the New York Times for Countrywide's woes.

"This is the first hearing ever to look at how C.E.O.'s are compensated," Waxman said. "And it appears there are no consequences for failure."

(For the earlier posts, please go here, here, here, here, and here.

Elizabeth Olson