Appearing before the Financial Crisis Inquiry Commission are Lloyd Blankfein,… (Jay Mallin / Bloomberg)
January 14, 2010|By Jim Puzzanghera Reporting from Washington — They admitted making mistakes and they regretted the economic devastation their decisions wrought, but the heads of four major financial firms wouldn't take direct blame for the massive meltdown in some tough questioning today by a government panel investigating the causes of the financial crisis.
"We did eat our own cooking, and we choked on it," John Mack, chairman of Morgan Stanley, said about the large bets his industry made on the continued rise in housing prices.
The high-profile appearance Wednesday of Mack and other Wall Street titans at the first public hearing of the Financial Crisis Inquiry Commission came as President Obama prepared to announce Thursday a new levy on banks to help recoup expected losses from the $700-billion bailout fund.
The White House move to assess what it is calling the "financial crisis responsibility fee" reflects the public anger aboutthe return of big profits and large bonuses to the financial industry while average Americans continue to struggle.
That outrage also has prompted Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, to schedule hearings this month on excessive executive compensation and on possibly increasing taxes on large bonuses.
"The question of compensation for people in the financial industry is a legitimate cause of concern in the country as a whole, and we are going to address it," Frank told reporters Wednesday.
"There may be, in some of these financial institutions, people capable of playing Major League Baseball. I'm not aware of any," he said. "But absent that, I don't know where they would go to get comparable forms of compensation."
The Wall Street executives largely defended their compensation practices and deflected suggestions they triggered the crisis. They described themselves as among the many players, from major financial firms to average consumers, who took on too much risk during the boom of the last decade, believing the good times would not end.
"Somehow we just missed that home prices don't go up forever," Jamie Dimon, chief executive of JPMorgan Chase & Co., told the panel in admitting his company never tested its exposure to a 40% drop in home prices even though it tested almost every other market scenario.
