Bank CEOs Taking Commercial Flights, Amtrak To DC Testimony
February 06 2009 - 11:46AM
Dow Jones News
Take a good look at the guy crammed into the middle seat next to
you on a trip to Washington next week: It might just be Goldman
Sachs Group Inc. (GS) Chairman and Chief Executive Lloyd
Blankfein.
Or it could be Citigroup Inc.'s (C) Vikram Pandit, JPMorgan
Chase & Co.'s (JPM) Jamie Dimon, Morgan Stanley's (MS) John
Mack, or Bank of America Corp.'s (BAC) Kenneth Lewis. The CEOs of
the nation's eight biggest financial institutions are ditching
their fleet of private jets and taking public transportation to
testify before Congress on Wednesday.
Their decisions to take a commercial flight or Amtrak service
come amid a public outcry about the excesses of Wall Street and
exorbitant CEO pay packages. The banks, whose CEOs have so far
accepted $165 billion in bailout money, are also looking to avoid
the kind of public smackdown given to the heads of the Big Three
Detroit auto makers when they gave testimony last year.
General Motors Corp.'s (GM) Richard Wagoner, Ford Motor Co.'s
(F) Alan Mulally and Chrysler LLC's Robert Nardelli found
themselves in a public relations disaster after flying corporate
jets to Washington for bailout money. They returned a few weeks
later in hybrid cars to plead for $34 billion of federal loans.
The auto executives' private-jet and 526-mile car trips to the
Capitol became fodder for late-night television comedians. That's
exactly what the banking executives want to avoid, especially since
President Barack Obama has instituted executive pay limits for
financial firms seeking new government aid, and is set to outline
his economic bailout plan on Monday.
The bank CEOs are scheduled to appear before the House Financial
Services committee, which is overseeing the Wall Street bailout.
Also taking public transport to the Capitol next week are John
Stumpf of Wells Fargo & Co. (WFC), Ronald Logue of State Street
Corp. (STT) and Robert Kelly of Bank of New York Mellon Corp. (BK).
Representatives of all eight firms confirmed that their CEOs would
be traveling to Washington by commercial train or plane.
The financial crisis that drove banks to seek taxpayer money has
called attention to some of the expenses their executives
incur.
And there's been no shortage of news about the use of their
private jets, which has been justified in the past because it
provides for better security and more efficient use of the
executives' time.
Citigroup, which has racked up $45 billion in direct government
investments, canceled a deal to take delivery of a new $42 million
Dassault Falcon 7X jet. BofA, which received $45 billion in
government capital, announced it would sell three aircraft and a
helicopter used by the recently acquired Merrill Lynch.
The cost of operating these private jet fleets is difficult to
estimate. However, some firms - like Goldman Sachs - opt to
participate in a jet-lease program instead of owning them.
NetJets Inc., owned by Warren Buffett's Berkshire Hathaway Inc.
(BRKA, BRKB), sells fractional ownership shares of private planes
for a minimum of $406,250. Private flight firm Marquis Jets charges
customers $4,600 an hour.
That's a far cry from shuttle services that run about once an
hour during the weekdays. A ticket on US Airways (LCC) service
between New York's LaGuardia Airport and Washington's Reagan
National Airport, purchased a week ahead of time, runs about $220
roundtrip.
The flights, which include complimentary soft drinks and
breakfast snacks, also have a 12-seat first-class section. Tickets
for those start at about $1,000 roundtrip.
For those CEOs taking Amtrak out of New York's Penn Station,
tickets on a regional train to Washington costs about $72 one way.
A seat on the faster Acela express trains, which makes the trek in
about three hours, is $177 one way.
- By Joe Bel Bruno, Dow Jones Newswires; 201-938-4047;
joe.belbruno@dowjones.com