Financial Crisis Inquiry Commission: Top bankers contrite, sort of

At the first hearing of the Financial Crisis Inquiry Commission on Wednesday, top Wall Street executives acknowledge banks' role in the 2008 financial crisis but defend fat paychecks for employees.

By , Staff writer

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    Bank executives (l.-r.): Goldman Sachs chief executive Lloyd Blankfein, JPMorgan Chase Chief Executive Jamie Dimon, Morgan Stanley Chairman John Mack and Bank of America chief executive Brian Moynihan face questioning on the first day of Financial Crisis Inquiry Commission hearings on Capitol Hill in Washington, Wednesday.
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As Financial Crisis Inquiry Commission hearings opened on Wednesday, the message delivered by Wall Street executives to panel members might be summed up as this: "Gee, we're sorry that we maybe contributed to last year's financial meltdown. But what's all this about bankers making too much money?"

The Financial Crisis Inquiry Commission is a bipartisan 10-member committee that's been handed the job of recording what went wrong prior to the near-collapse of the world financial systems in 2008.

Congress has ordered the commission to work through some 22 different topics dealing with the meltdown, from the effects of monetary policy to the possible problems of Wall Street pay.

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At the commission's first hearing on Wednesday, leaders of some of America's biggest banks were generally contrite about their role in the 2008 events.

"Over the course of the crisis we as an industry caused a lot of damage," said Brian Moynihan, chief executive of Bank of America.

Generally speaking, though, they were contrite only to a point.

Testy exchange over 'shorting' securities

In Wednesday morning's testiest exchange, commission chairman Phil Angelides, a Democrat and former California state treasurer, pressed Lloyd Blankfein, head of Goldman Sachs, about one particular financial practice.

Why did Goldman take bad financial assets, package them together into bond-like securities, and sell them to investors – while at the same time "shorting" those securities, or making investment bets that they would fail?

Mr. Blankfein said the behavior was improper, but he hedged on fault, saying, "These are professional investors who wanted [these securities].... I felt good about it."

Mr. Angelides struck back that Goldman was really double-dealing.

"It seems like you were selling a car with faulty brakes and then buying an insurance policy on that car," said Angelides.

In defense of banking pay scales

During testimony, all the bank chiefs were supportive of Wall Street's basic pay structure, saying they needed to compensate key employees or risk losing important talent.

Asked whether financial industries gobble up too much of the nation's overall business profits, Jamie Dimon, chief executive of JP Morgan Chase, said that trend might reverse at some point.

But in a somewhat dimissive manner, he added that "my brother has a PhD in physics and he would never pretend to get involved in something as mundane as trading. Different strokes for different folks."

Material from Associated Press was used in this report.

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