CEOs Defend Use Of Bailout

The heads of some of the world’s biggest financial institutions were hauled in front of a congressional kangaroo court yesterday to defend their companies’ use of federal bailout money. The CEOs of Goldman Sachs, JP Morgan Chase, Citigroup, Bank of America, Morgan Stanley and Wells Fargo testified before Congress that the funds they received last November did not go to executive bonuses, lobbying or other frivolous activities.

The CEOs are in a pickle on this one. We’re in this mess largely because of relaxed lending standards encouraged (or in any cases required) by the same folks who now sit smugly in judgment of them. These institutions lost fortunes when housing prices tanked and the recipients of these loans, many of whom were woefully unqualified in the first place, subsequently defaulted. The banks needed immediate capital infusion to stem massive losses, and were only too happy to accept the government cheese.

Now, as any fiscally responsible person might do in the wake of such a credit bender, banks are becoming a little more discrete as to where and to whom they lend money. But they also find themselves being spanked like the bad little girls they are by Congress for – you guessed it – not making loans available to consumers and businesses that are woefully unqualified to receive them in the first place.

The problem isn’t unavailable credit – there’s plenty to be had at cheap rates – the problem is that Americans and businesses are busy trimming their balance sheets from the last credit smorgasbord and hunkering down for what could be a prolonged economic hibernation.

Living beyond our means is what led to the creation of this monster, and it appears the Feds are poised to pick up where the consumer left off.