Citi Execs: We Are Sorry in General, But Not in Particular
This morning, the Financial Crisis Inquiry Commission heard from Robert Rubin and Charles Prince, the former heads of banking behemoth Citigroup.
Prince opened his remarks with regrets. “I’m sorry,” he said. “I’m sorry the financial crisis has had such a devastating impact for our country. I’m sorry about the millions of people, average Americans, who 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.” (The apologia deviated from Prince’s prepared statement, which read: “I can only say that I am deeply sorry that our management, starting with me, was not more prescient and that we did not foresee what lay before us.”)
Such candor was unexpected and, at least judging the faces of the commissioners, welcome. But hours of rationalization, blame shifting, and evasion followed during questioning that at times became heated. Indeed, while Rubin and Prince expressed regret in general, they refused to classify their own or any of Citigroup’s actions as anything other than mistakes made in the run-up to an unforeseeable bust.
The commissioners’ questions focused on mortgage-backed securities, the housing bubble, derivatives regulation, Citigroup’s losses and the problem of too big to fail. “I personally do not think Citi was too big to manage,” Prince said, a sentiment Rubin echoed. Prince said the “broad, multifaceted and diversified nature” of Citigroup’s investments and liabilities did not “materially contribut[e] to our losses.”
That statement jarred with Rubin’s testimony; he cited the interconnectedness of financial firms and financial products, which undercut diversification, as particularly destructive during the financial crisis. Asked why he did not recognize the extent of Citigroup’s liabilities until too late, the former Treasury Secretary defensively noted that Citigroup managed “trillions” of dollars every day and the best risk management the company could perform was to put the “right people” in place. He also called Citigroup’s risk management “robust and proactive.”
FCIC Chair Phil Angelides later pointedly asked Rubin, “Do you bear central responsibility for the near-collapse, but for the government, of Citigroup?” He replied that Citigroup’s board, which he led, was not “a substantive part of the decision-making process” at the firm. “All of us in the industry failed to see the potential for this serious crisis. We failed to see the multiple factors at work.”