Leaders of the country's biggest banks defended themselves against accusations of greed, saying they have used all of the $165 billion worth of taxpayer funds granted to their institutions appropriately.
"These guys are just beyond tone deaf because there is populist anger out there," says Ben Heineman, a senior fellow at Harvard University's Law School and Kennedy School of Government, referring to the CEOs. However, a large part of the public disgust stems from mischaracterizations and a confluence of news stories that tie unrelated things together. Beneath the circus of congressional hearings and the distractions on television, there are a few core truths about the banking industry. First, it will not hoard capital to hurt economic development -- banks make money by lending it. Second, they have a history of wining and dining potential clients at lavish events which seem expensive, but also attract new business, to make more money. Third, CEOs of these companies are wooed with huge pay packages in cash and stock, which often include stipulations to boost the upside and protect them from any downside. One can argue that no CEO whose company receives a government bailout should be handsomely compensated, but many of those pay packages were negotiated before the capital injections and can't easily be altered. There are also lower-level managers and executives in the bonus pool whose businesses performed well last year despite the economic malaise. Completely cutting incentives leaves little reason for top talent to remain and help the banking sector revive. "If you pay below fair market compensation , you get below fair market value, period," says Kevin Nussbaum, a consultant with CBIZ Human Capital Services. "You can't lose your A-level talent in times of crisis."