Citigroup’s Mea Culpa Is Light on the Mea

By Michael Corkery

Love may be never having to say you’re sorry, but a financial crisis pretty much requires it.

[This post has been updated]

And so two former Citigroup officials, Chuck Prince and Robert Rubin, today offered their apologies when speaking before the Financial Crisis Inquiry Commission. Prince, who was CEO when the credit crunch struck in mid-2007, was the most explicit, stating in his opening remarks:

“I’m sorry the financial crisis has had such a devastating impact for our country. I’m sorry about the millions of people, average Americans, who lost their homes. And I’m sorry that our management team, starting with me, like so many others could not see the unprecedented market collapse that lay before us.”

Yet Prince stopped short of saying that any decisions he made at Citigroup were wrong-headed or excessively risky. His only admission is that he didn’t see the crisis coming–something most of the financial world, from bankers, to regulators to academics, have readily admitted. Still, one commissioner member said he respected Prince’s decision to step down after Citigroup’s massive mortgage losses were revealed in late 2007.

Rubin, who headed up the bank’s executive committee when the crisis began, said there were a lot of people who shared in the blame. When Chairman Phil Angelides asked point blank whether the former Treasury Secretary felt “responsibility for the collapse of Citi.”

“I think all of us bear–not just all of us at Citi–failed to see the potential for this serious crisis….I feel we all have a great deal to regret in that respect.”

Angelides then pressed further: “I am not so sure apologies are as important as an assessment of responsibility.” On that point, Rubin sought to clarify repeatedly that his role heading Citigroup’s executive committee didn’t make him privy to operational workings at the bank so he was unaware of the problems ahead of time.

Angelides didn’t buy it. He pointed out that the $15 million Rubin was being paid annually “certainly assumes you had responsibility.”

Still, both former Citigroupers went further than Alan Greenspan was willing to go in his testimony on Wednesday. The former Federal Reserve chief said the central bank’s monetary policy wasn’t a major contributor to the mortgage crisis because by the middle of the decade mortgage rates had become decoupled from the short-term interest rates set by the Fed. Instead, Greenspan blamed the crisis largely on Fannie Mae’ and Freddie Mac’s entry in the subprime mortgage market and the demand for mortgage securities by overseas investors.

Based on the public testimony that been accrued since the hearings began in January, this may have been the first no-fault credit crisis in economic history.