Contrition missing after Wall Street crisis
As the United States sifts through the wreckage wrought by the financial crisis, investigators are finding one thing sorely lacking: real soul searching.
Wall Street's meltdown and ensuing taxpayer bailout has led to countless hearings about what happened, but no one is prepared to truly shoulder the blame.
"I don't hear a sense of responsibility and self-assessment. Self-examination is critical and I've seen an absence of it," said Phil Angelides, the head of the Financial Crisis Inquiry Commission.
Without real recognition of responsibility, financial regulatory reform will fall short, Angelides said at the Reuters Global Financial Regulatory Summit in Washington.
Angelides' commission has been digging into the causes of the crisis for almost a year and has grilled former Federal Reserve Chairman Alan Greenspan, as well as current and former executives from Goldman Sachs (GS.N), Citigroup (C.N), Morgan Stanley (MS.N), Fannie Mae and Freddie Mac.
Finger-pointing is rife. Greenspan said that Congress pushed the central bank on the housing boom. Charles Prince and Robert Rubin, who led Citigroup in the run-up to the crisis, have offered token apologies but said the bank's hefty losses were not their fault.
Former Fannie Mae Chief Executive Daniel Mudd said he was sorry, accepted responsibility for everything that happened on his watch, but then said his mortgage finance company's business model created an unmanageable situation.
Angelides said many of the witnesses called before his commission don't appear to make the connection between the betting and high leverage with the ultimate collapse.
"I'm struck by how the fingers seem to point away, generally, from the person testifying," he said.
Goldman Sachs Chief Executive Lloyd Blankfein, whose firm is at the center of a Securities and Exchange Commission civil fraud lawsuit, told a Senate hearing this week there will be a "big soul search" and review of business practices at his firm.
But Blankfein also said it was not Goldman's responsibility to tell customer how to trade or invest.
Federal Deposit Insurance Corp Chairman Sheila Bair told the Reuters summit that unless a bank's customers demand better behavior, there is not much that regulators can do.
"Hopefully this is opening the eyes of some who use these institutions to realize what is happening and what their incentives were and demand better," she said.
Some bankers now argue that because the government may end up breaking even on its $700 billion financial bailout that the cost of the crisis was fairly modest.
Angelides disagrees. "Let's take a step back here," he said. "The cost to the country and the globe has been enormous," as millions of Americans have lost jobs, homes and savings, and governments have had to funnel resources toward
crisis-fighting. "It requires some pretty deep soul-searching," he said.
Kenneth Feinberg, the Obama administration's pay czar, who has for the past year been dealing with compensation at the firms that received the biggest taxpayer bailouts, says he fails to see any contrition.
"I think it would be appropriate. But I don't see it. One thing I've learnt is the different perceptions of Wall Street and Main Street are vast. It's not a gap it's a chasm. And it is amazing to me that Wall Street generally doesn't get it," he said at the Reuters summit.
Greenspan's testimony appeared to strike a particular nerve with Angelides.
"He seemed to point to everyone, when in fact the Federal Reserve had fundamental responsibility for the safety and soundness of our financial system," Angelides said.
"Alan Greenspan said he had been 70 percent right and 30 percent wrong. Well the captain of the Titanic was 99 percent right and 1 percent wrong. It's the enormity of the mistake that matters."
[Source: By Kristina Cooke and Rachelle Younglai, Reuters, Washington, 29Apr10]
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