Three executives from major mortgage industry companies were on the hot seat Friday as the House Committee on Oversight and Government Reform looked into executive compensation at corporations involved in the subprime mortgage-market shakeout.

The committee, headed by Rep. Henry Waxman, questioned Angelo Mozilo of Countrywide Financial, Stanley O'Neal, former chief executive of Merrill Lynch & Co., and Charles Prince, former CEO of Citigroup, Inc.

It was Mr. Mozilo who received the brunt of the committee's questions. The founder of Countrywide received total compensation of about $250 million in the years 1998 to 2007 and another $406 million from the sale of his company's stock.

Mozilo is the only one of the three who is still employed. The other two lost their jobs last fall after their respective companies wrote off huge amounts of money from investments, largely in mortgage backed securities, in the subprime market. Mozilo will potentially be similarly unemployed once a proposed $4 billion acquisition by Bank of America is concluded, probably in the third quarter.

In his opening remarks, Rep. Waxman, Democrat of California said, "Most Americans live in a world where economic security is precarious and there are real economic consequences for failure. But our nation's top executives seem to live by a different set of rules. When companies fail to perform, should they give millions of dollars to their senior executives?"

Countrywide, Citigroup, and Merrill Lynch have reported recent write-downs of $1.6 billion, $20 billion, and $10 billion respectively.

The day before the hearing a report was released in which Congressional investigators found that the use of a flawed peer group and easy bonus targets helped inflate Mozilo's pay. He also had been entitled to a $37.5 million severance package, though he forfeited that in January, shortly after Congress requested that he testify.

The report says that two compensation consultants employed by Countrywide had urged the company to reduce Mr. Mozilo's compensation. One of them, Exequity LLP said that they were replaced by another consulting firm after making their recommendation.

Republicans on the committee questioned the need for the hearing, saying it falls outside the panel's primary role of investigating waste, fraud and abuse in the federal government. One, Rep. Tom Davis of Virginia said that the debate over executive compensation "should not degenerate into a sanctimonious search for scapegoats."

The three executives, for their part, defended their compensation, citing the performance of their companies and the companies' stock in the years they were in charge.

O'Neal said "My compensation and assets increased only when Merrill Lynch performed well for its shareholders and employees, and decreased when it did not."

Mozilo said that, while he prospered along with the company he started and built, that he is relinquishing $36.4 million in severance payments because of Countrywide's growing problems and said that rumors of an additional $115 million in compensation "grossly exaggerated."

O'Neal told lawmakers that compensation for Merrill's senior management was determined through a "rigorous and independent process" and was consistent with pay levels in the financial-services industry.

Prince told the committee that his former company "has worked hard to align management's interests with the interests of shareholders," but said that when the risk models that the company had used to value mortgage-back securities proved to be flawed he immediately submitted his resignation.

Independent of the hearing, a recent Internal Revenue Service ruling will probably encourage companies to eliminate guaranteed bonuses and equity awards in severance contracts.

In 2009 the IRS said it would eliminate any tax deductions for performance-based bonuses, restricted stock, or other incentives is their payout would automatically be triggered by an executive termination.