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REFILED-UPDATE 1-Ex-Citi CEO dogged by 'dancing' quote

Stocks

   

Thu Apr 8, 2010 5:23pm EDT

(Refiles to remove extra "the" in first paragraph)

* Citi couldn't be only bank to stop leveraged lending

* 2007 quote had "nothing to do" with mortgage crisis

(Adds byline, reactions from panel members)

By Maria Aspan

NEW YORK, April 8 (Reuters) - Charles "Chuck" Prince's infamous comment that his bank was "still dancing" even as the subprime crisis worsened came back to haunt him on Thursday.

The U.S. congressional panel investigating the origins of the worst U.S. financial crisis since the Great Depression pressed Prince about his comment, which has become emblematic of the failure of banks to come to grips with the gravity of the crisis.

The former Citigroup Inc (C.N) chief executive's explanation seemed to boil down to: it was a race to keep up with competitors who kept loosening lending standards and Citi could not afford to drop out.

"The quote itself related to the leveraged lending business, and I specifically asked the regulators if they would take action in regard to that," Prince told the Financial Crisis Inquiry Commission.

In July 2007, Prince told the Financial Times that global liquidity was enormous and only a significant disruptive event could create difficulty in the leveraged buyout market.

"As long as the music is playing, you've got to get up and dance," he said. "We're still dancing.

Prince told the commission that, at that time, "private equity firms were driving very hard bargains with the banks, and, at that point in time, the banks individually had no credibility to stop participating in this lending business.

"It was not credible for one institution to back away from this leveraged lending business," he said, looking tense and uncomfortable as the commission grilled him. "The regulators had an interest in tightening up lending standards."

DANCING AND OTHER PASTIMES

Some commissioners, seemingly perplexed by Prince's explanations, continued to hone in on the issue.

Vice Chairman Bill Thomas even came back with his own version of the "dancing" quote.

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Comments (3)
hugh_h wrote:

I enjoyed watching today (and yesterday). Hopefully the commission will bring in Barney Frank and Chris Dodd to discuss their involvement, because otherwise, it’s just a white-wash.

Maybe we could get Maxine Waters in there to tell how well the GSEs were doing, right up to the minute they tanked?

Woohoo! I’m makin’ popcorn!

Apr 08, 2010 6:29pm EDT  --  Report as abuse
hugh_h wrote:

See if this makes sense?
Everyone is writing, underwriting or selling loans.
You decide they’re too risky and unilaterally decide your company is going to stop.
Your stockholders kick you to the curb (because they CERTAINLY weren’t asking anyone to stop), hire somebody else, and the dance continues.
Bottom line: You can’t buy or sell what you can’t get rid of, and the GSEs were thrilled to buy every piece of junk anyone could produce. WHY IS THAT?

Apr 08, 2010 6:36pm EDT  --  Report as abuse
WEREFEAT wrote:

Absolutely marvelous. They apologize. See? Idiots all. No wonder they don’t respect you. Try to understand: they are criminals!!! They need to be tried and imprisoned!!! They signed the entire world up for generations of debt they invented themselves.

Apologized. Sure. Believe it.

Apr 08, 2010 7:07pm EDT  --  Report as abuse
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