Admission by the Big Banks of Wall Street of their Mistakes

The representatives of some of the big banks of Wall Street admitted that some of their activities were “improper”. They pleaded that they could not gauge ahead the severity of the financial crisis and were sorry for the mistakes. They were speaking before a commission set up by the Congress to get to the roots of the financial crisis.

The CEOs of the four largest banks were given the lead by Lloyd Blankfein (Goldman Sachs) and Jamie Dimon (JP Morgan). They had to face harsh questioning regarding their part in the crisis that led to the government bailing them out with billions. It also led to unprecedented unemployment and foreclosures.

Recently President Obama has been talking tough regarding the bonuses of the banks. He was also keen about imposing new regulations by reshuffling the previous system. Obama was mulling over a plan to recover some of the money advanced as bailout. He wanted to impose levies on the banks. Speaking on behalf of White House Robrt Gibbs informed the reporters that the apology “would be the least of what anybody might expect.”

The chairperson of the panel Phil Angelides (Democrat), previously a treasurer in California State, said, “People are angry. They have a right to be.” The cold hearing room in Capitol Hill was packed with officials, media personnel, executives and aides.But the bankers were not drawn into pandering the increasing public anger regarding bonus and salary levels.

Dimon’s bank, JP Morgan has emerged fatter after the crisis. He said that the employees of his bank had already taken “significant cuts in compensation” in 2008. But the bank would continue to offer attractive pay to draw talent and retain the same.

In their opening remarks the bankers tried to divert the accusations made from their lobby by laying it on the lending operations, the weak regulation of the mortgage brokerage sector and the government efforts to somehow promote house ownership.

But Angelides hauled up Blankfein for packaging toxic assets as securities and peddling them to investors even while Goldman Sachs was netting gains by “shorting” the same securities. Risky loans were advanced to borrowers with poor credit that ultimately led to the housing crash.

In reply Blankfein said, “We are market makers: in most of these cases the person who came to us came to us for the exposure they wanted to have. These are professional investors who want this exposure. It sounds like selling a car with faulty brakes and then buying an insurance policy (on the driver.) I do think the behaviour is improper. We regret the consequence that people have lost money”

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