Four top U.S. bank executives have defended their actions leading up to the 2008 global financial crisis, saying that despite warning signs, they could not have known the crisis was coming. The financial chiefs faced skeptical questions on Wednesday from members of a bipartisan commission created by Congress to determine the causes of the financial meltdown.
The Chairman of the Financial Crisis Inquiry Commission, Phil Angelides, summed up the impact of the 2008 global financial crisis in the United States, saying that nearly 26 million Americans are unemployed, underemployed because they cannot find full time work, or have given up looking for work. And he said more than 2 million families have lost their homes to mortgage foreclosures.
Angelides, a Democrat and former California state treasurer, said resentment of the big banks is running high throughout the country.
"People are angry," he said. "They have a right to be. The fact that Wall Street is enjoying record profits and bonuses in the wake of receiving trillions of dollars in government assistance, while so many families are struggling to stay afloat, has only heightened the sense of confusion."
Angelides focused many of his tough questions on the chief executive of the Goldman Sachs financial firm, Lloyd Blankfein. Blankfein acknowledged that the nation's financial system might have collapsed without bold action by the federal government.
"Without question, direct government support was critical in stabilizing the financial system, and we benefited from it," he said. "The system clearly needs to be structured so that in the future, private capital rather than government capital is used to stabilize troubled firms promptly before a crisis takes hold."
Blankfein said that after the shocks of recent months, there is a natural desire for drastic reform. But he cautioned that the United States should resist a response that is designed to protect the country from what he called a "100-year storm."
The Chairman and CEO of JP Morgan Chase, Jamie Dimon, told the commission that an inadequate regulatory system was another factor that contributed to the crisis.
"I want to be clear, I do not blame the regulators," he said. "While they obviously have a critical role to play, the responsibility for a company's actions rests solely on the company's management. But we should also look to see what could have been done better in the regulatory system. We have known their system is poorly organized with overlapping responsibilities."
Dimon added that in the future, no financial institution, including his own, should be too big to fail.
The executives defended their firm's pay practices and generous bonuses, saying that they are necessary to attract and keep valuable employees. Major banks have come under criticism from many in Congress for posting huge profits and awarding bonuses after receiving government assistance.
Meanwhile, White House spokesman Robert Gibbs announced that President Barack Obama will announce new measures on Thursday to recover taxpayer money used to bail out banks. Asked whether the bank executives testifying on Capitol Hill owed the country an apology, Gibbs said it seemed to him that an apology would be the least they could do.
The Chairman of the Financial Crisis Inquiry Commission, Phil Angelides, says resentment of the big banks is running high throughout the country.