WASHINGTON (CN) – Two former Citibank executives apologized for the financial crisis on Thursday, but stopped short of accepting blame. “Let me start by saying I’m sorry,” former Citigroup CEO Chuck Prince told a federal committee examining the causes of the economic meltdown. “I’m sorry the financial crisis has had such a devastating impact for our country.”
In his testimony before the Financial Crisis Inquiry Commission, the 10-member bipartisan committee investigating the crisis, Prince continued, “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.”
Former Citigroup Board Chairman Robert Rubin was slightly less apologetic.
“We all bear responsibility for not recognizing this, and I deeply regret that,” Rubin said.
Rubin, who served as Treasury Secretary under President Clinton and was former chief of Goldman Sachs, said the financial crisis came from a variety of sources that created a perfect storm. Citigroup suffered $30 billion in losses from its investments in risky mortgage-related assets and received a $45 billion taxpayer bailout to stay afloat.
When Commissioner Douglas Holtz-Eakin questioned Rubin on his statement that “no one could have foreseen this type of crisis,” Rubin quickly clarified, “I didn’t say that no one could have foreseen. What I said was very few people foresaw the full combination–”
“They didn’t need to,” Holtz-Eakin interrupted. “They just needed to see the mortgage piece.”
“Well, I’m not so sure about that,” Rubin said. “I actually did worry about excesses in 2005 and 2006, but what I didn’t see, and virtually no one else saw, was that it wasn’t only those excesses, but so many other factors coming together and it’s that extraordinary combination that led to this crisis.”
Rubin said increased capital and margin requirements on derivatives are needed to end the problem of financial institutions being “too big to fail.”
“As long as you have normal conditions, I don’t think any of this would be a problem, but under stress conditions, you need a bigger cushion,” he said.
When asked if the bank’s internal risk assessment processes were adequate, both Prince and Rubin struggled to deliver a firm yes, repeatedly deferring to those within the company whose job it was to assess risk, such as Senior Risk Officer David Bushnell, as well as federal regulators.
“I had great confidence in David Bushnell,” Rubin said. When asked again if he thought the company’s internal risk policies were adequate, Rubin said, “They acted in good faith and did what they felt was appropriate.”
Prince shifted blame to federal regulators.
“The Fed saw everything,” Prince said. “If they thought the processes were inadequate, it would have been beneficial for them to bring it up at an earlier time.”
The commission heard Wednesday from former Federal Reserve Chairman Alan Greenspan, who defended his policies of keeping interest rates low and favoring deregulation.
Friday, the commission will hear from Fannie Mae executives.
Prince resigned from Citigroup in November 2007 and now works as a financial adviser at Albright Stonebridge Group, a Washington consulting firm. He claims to have lost most of his personal net worth due to the crisis.
Rubin left Citigroup in early 2009 and is currently chairman at the Council of Foreign Relations. As a senior adviser at Citigroup, Rubin earned more than $100 million.
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