Bank chiefs hauled before Congress to answer for financial crisis

Jan 14, 2010, 1:10 GMT

Washington - Wall Street's top bankers on Wednesday faced a confrontational congressional panel tasked with getting to the bottom of a financial crisis that plunged the world into a devastating recession.

But they offered few apologies for the misery unleashed over the last two years.

The executives from Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America characterized Wall Street's collapse as a crisis that was decades in the making. They did admit failing to heed warning signs.

Goldman Sachs chief executive Lloyd Blankfein described a 'systemic lack of skepticism' that allowed Wall Street to continue borrowing massive amounts of money at cheap interest rates, digging itself into deeper credit holes, until the music screeched to a halt with the collapse of Lehman Brothers in September 2008.

'Over the course of this crisis, we as an industry caused a lot of damage,' Bank of America chief Brian Moynihan conceded.

Blankfein was caught in a dramatic and heated opening exchange with Phil Angelides, a former California politician appointed to head the Financial Crisis Inquiry Commission, a bipartisan panel established by Congress to investigate the roots of the crisis.

'People are angry. They have a right to be,' Angelides said. 'The fact is that Wall Street is (getting) record profits and bonuses in the wake of receiving trillions of dollars in government assistance while so many families are struggling to stay afloat.'

The bankers' testimony came on the first of two days of hearings before the commission, which is expected to hold more sessions throughout the year. The panel has been compared to the Pecora hearings that investigated the causes of the Great Depression in the 1930s.

The crash forced the US government to bail out Wall Street to the tune of 700 billion dollars in October 2008, but that did not prevent dozens of smaller banks from declaring bankruptcy across the country.

The US fell into its worst economic downturn since the Great Depression and is still struggling with an unemployment rate of 10 per cent, the highest in more than 25 years.