Citigroup executives apologize for not averting financial crisis
Friday, April 9, 2010
Two top Citigroup executives who guided the bank along its disastrous path toward massive losses and multiple government bailouts expressed regret Thursday during testimony before a panel investigating the financial crisis.
Former chief executive Charles O. Prince III and former director Robert Rubin, who served as Treasury secretary during the Clinton administration, offered different mea culpas during the nearly three-hour session on Capitol Hill.
Prince, who led Citigroup from 2003 through 2007, apologized for the billions of dollars in losses that brought the company to the brink of collapse and prompted the government to commit more than $45 billion in taxpayer money to rescue it.
"Let me start by saying I'm sorry," Prince told members of the Financial Crisis Inquiry Commission. "I'm sorry the financial crisis has 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, starting with me, like so many others, could not see the unprecedented market collapse that lay before us."
Rubin also expressed remorse that executives failed to recognize the collision course many financial companies were on in recent years. But he stopped short of accepting personal liability for the failures that led to Citigroup's demise, despite pointed questioning about his role.
In an opening statement, Rubin cited numerous factors -- including low interest rates, sharp increases in housing prices, misguided credit ratings and excessive risk-taking -- that contributed to the unprecedented crisis. But he framed the breakdown at Citigroup and other companies as a collective failure, in which "almost all of us . . . missed the powerful combination of forces at work and the serious possibility of a massive crisis. We all bear responsibility for not recognizing this, and I deeply regret that."
Throughout the hearing, panel members pressed the two men -- especially Rubin -- about how they could have remained blind to the growing problems at Citigroup. The commission's chairman, Phil Angelides, began a testy exchange in the closing moments of the hearing by asking Rubin point-blank: "Do you bear central responsibility for the near-collapse, but for the government, of Citigroup?"
Rubin offered a lengthy response, noting that he didn't oversee the firm's day-to-day operations and pointing out that Citigroup traders viewed the AAA securities at the heart of the crisis as posing only minimal risk.
"All of us in the industry who failed to see the potential for this serious crisis, and failed to see the multiple factors at work, bear responsibility," Rubin said, "and I think we all have a great deal to regret in that respect."
Clearly unsatisfied with Rubin's answers, Angelides responded at one point, "You were either pulling the levers or asleep at the switch."
The withering questions from Angelides and William Thomas, the bipartisan commission's Republican vice chairman, prompted Prince to come to Rubin's defense. "It is absolutely incorrect to suggest that Mr. Rubin had central responsibility, or any central responsibility, for what happened to Citigroup," he said toward the end of the hearing.
Thursday's inquiry highlighted how Rubin's public stature has fallen along with Citigroup's fortunes.