Bank CEOs: We underestimated financial crisis
WASHINGTON - January 13, 2010 -- Wall Street executives said Wednesday they underestimated the severity of the 2008 financial crisis and made poor decisions, while also defending their bonus and compensation practices to a skeptical commission investigating what caused the collapse.
Americans are furious and "have a right to be" about the hefty bonuses banks paid out after getting billions of dollars in federal help, the commission's chairman told chief executives of four major banks.
As the hearings opened before the Financial Crisis Inquiry Commission, Phil Angelides pledged "a full and fair inquiry into what brought our financial system to its knees."
Brian Moynihan, chief executive and president of Bank of America, said compensation levels will be higher next year than they were in 2008, but not at levels before the financial meltdown.
"We understand the anger felt by many citizens," he said. "We are grateful for the taxpayer assistance we have received."
With Bank of America having repaid its bailout money, he said "the vast majority of our employees played no role in the economic crisis" and do not deserve to be penalized with lower compensation.
Jamie Dimon, chief executive of JPMorgan Chase & Co., said most of his employees took "significant cuts in compensation" in 2008. He said his company would continue to pay people in a "responsible and disciplined manner" to attract and retain top talent.
John Mack, chairman of Morgan Stanley, said the crisis was "a powerful wake-up call for this firm." He said he didn't take a bonus in 2009 and that his bank has overhauled its compensation practices to discourage "excessive risk-taking."
Angelides, a former Democratic treasurer of California, questioned Goldman Sachs' Lloyd Blankfein about packaging subprime mortgages into bond-like securities and selling them to investors even as Goldman Sachs was making its own bets that the securities would fail. Those were the mortgage that were extended to borrowers with poor credit records and helped cause the home-loan bust.
"I do think the behavior is improper. We regret the consequence that people have lost money in it," Blankfein said.
recession, washington, d.c., congress, business/finance
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