Four of Wall Street’s top bankers yesterday admitted to a number of failures — but sought to defend pay in the industry — as a top committee on Capitol Hill accused them of acting like used-car salesmen.
The White House said that an apology from the industry was in order as the four testified at the opening session of the Financial Crisis Inquiry Commission (FCIC), set up last year by US Congress.
The quartet — Jamie Dimon, the JPMorgan Chase chief executive; Brian Moynihan, the new chief executive of Bank of America; John Mack, chairman of Morgan Stanley; and Lloyd Blankfein, chief executive of Goldman Sachs — faced aggressive questioning from the commission, in particular from its chairman, Phil Angelides.
The commission has been set up to investigate and report on the causes of the financial meltdown that led to the banks receiving billions of dollars in bailout money while, at the same time, causing the highest unemployment rate in quarter of a century.
The hearings are expected to fuel public anger over the bank bailouts is in the United States, not least because the big four are poised to announce hefty profits and bonuses when their earnings season kicks off later this week.
The bi-partisan ten-member panel started its first hearing on the eve of an expected plan from President Obama, who has talked tough about bank bonuses and sought to strengthen regulation in the financial industry, for recouping $120 billion in bailout funds by imposing a fee on banks.
Mr Angelides said that the American people were angry and “had a right to be”.
He said: “I see this commission as a proxy for the American people ... If we ignore history, we’re doomed to bail it out again.”
Mr Angelides, a Democrat and a former state treasurer of California, asked Mr Blankfein how Goldman justified betting on falls in the value of securities, mostly sub-prime, that it was selling at the same time to institutions and investors.
He added: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.”
Mr Blankfein artfully dodged the question, suggesting that sophisticated investors knew what they were getting into, adding: “These are professional investors who want this exposure.”
However, when Mr Blankfein tried to compare aspects of the financial crisis to an act of God, such as an earthquake, he was shot down.
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