The first public hearing of the Financial Crisis Inquiry Commission came yesterday as the Obama administration readies a plan to recoup taxpayer bailout funds through a special bank fee and lawmakers wrestle with changes to financial regulation.
With U.S. unemployment near a 26-year-high after the worst recession in decades, public fury is growing over the cost of U.S. taxpayer bailouts and huge bonuses for bankers, now that the banking industry has stabilized from the 2008 meltdown.
Phil Angelides, chairman of the commission and a former state treasurer of California, confronted the pugnacious, arm-waving Lloyd Blankfein, chief executive of Goldman Sachs, over his firm’s pre-meltdown practices.
Angelides compared Goldman’s practice of creating, then betting against, certain subprime mortgage-backed securities to “selling a car with faulty brakes and then buying an insurance policy on the buyer.”
Blankfein responded that there was still demand for those products, and later compared the crisis that engulfed world capital markets to being hit by a series of hurricanes.
Angelides shot back: “Mr. Blankfein, I want to say this. Having sat on the board of the California Earthquake Authority, acts of God will be exempt. These were acts of men and women.”
Testifying with Blankfein to the commission were JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Brian Moynihan and Morgan Stanley Chairman John Mack.
Today’s session will feature regulators and enforcement officials, including U.S. Attorney General Eric Holder, Securities and Exchange Commission Chairman Mary Schapiro and Sheila Bair, who chairs the Federal Deposit Insurance Corp.
As the bankers were grilled by the panel, White House spokesman Robert Gibbs told reporters that an apology from Wall Street leaders “would be the least of what anybody might expect.”
