By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) -- Former Citigroup Inc. chief executive Chuck Prince on Thursday told an exasperated financial-crisis inquiry panel he was sorry that his management team could not have foreseen the "unprecedented market collapse" that unfolded in 2008.
"What I've been struck by, in documents and testimony, is how much folks in the organization didn't know what was going on," said Phil Angelides, chief of the Financial Crisis Inquiry Commission, after the portion of the hearing dealing with Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 4.58, -0.07, -1.51%) wrapped up. Read "Prince and Rubin tackle 'too big to manage'"
"And I am struck by how much the two of you did not know what was going on," he told Prince and Robert Rubin, former chairman of Citigroup's executive committee and Treasury secretary in the Clinton administration. "You were in the suite of executive offices."
Reuters
Charles Prince, left, and Robert Rubin, former Citigroup executives in their appearance before the Financial Crisis Inquiry Commission.
"Let me start by saying I'm sorry," Prince told the commission hearing on Capitol Hill.
"I'm sorry the financial crisis had such a devastating impact on our country. I'm sorry for the millions of people, average Americans who have lost their homes and I'm sorry that our management team, like so many others, could not see the unprecedented market collapse that lay before us," he said in a prepared statement.
Prince resigned as CEO in November 2007, as up to $11 billion in write-offs came to light. See MarketWatch's 2007 chronology as the crisis enveloped Citigroup.
Citigroup received a $45 billion federal bailout in two installments late in 2008 under the Troubled Asset Relief Program. Citigroup still owes $25 billion to the U.S. government, which owns a 27% share stake.
Defending their tenure
Greenspan defends his tenure at the Fed
Former Federal Reserve Chairman Alan Greenspan denied that the U.S. central bank helped inflate housing prices and isn't to blame for the subprime fiasco. Courtesy of Reuters.
Both Prince and Rubin said the crisis resulted from a confluence of factors, including a long period of low interest rates, a spike in housing prices, increases in consumer debt, and a subsequent "precipitous" drop in housing prices.
Regulators should limit bank leverage and hike capital and margin requirements, they argued.
However, commission members expressed outrage that the pair blamed others -- such as credit raters and regulators -- for the failures and didn't do their own analysis to identify problems with mortgage securities.
Citigroup packaged and sold these pooled securities -- considered a key contributor to the financial crisis when many of the underlying mortgages failed -- in the U.S. and abroad.
The securities contained subprime mortgages -- higher-risk home loans in which borrowers often weren't properly screened -- and received unrealistically rosy AAA ratings from credit-rating agencies.
Due diligence and blame
Members of the inquiry commission pointed to several reports brought to the attention of both Rubin and Prince regarding mortgage securities.
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