(We'll be running a live blog of the testimony at the Financial Crisis Inquiry Commission's latest round of hearings in Washington, D.C. Former Federal Reserve Chairman Alan Greenspan spoke yesterday - check out our coverage here. Today will feature former Citigroup CEO Charles Prince and former Citigroup chairman and ex-Treasury Secretary Bob Rubin. Check back here for regular updates and video.)
UPDATE: 10:10 AM - Did Citi Execs Conceal How Much Subprime Exposure They Had? - Ryan McCarthy
Commission chairman Phil Angelides grilled Rubin and Prince about Citigroup's holdings of toxic securities related to the subprime market. In the below clip, Angelides asks them why the banking behemoth gave conflicting information on the same day to the public and to its own board of directors about its exposure to subprime mortgages.
On October 13, 2008, analysts and the public were told that Citi had $13 billion in subprime exposure -- but Citi's board and audit committee were told that the bank's exposure was more than $50 billion, Angelides said.
Prince's response, if you can call it that, was essentially non-committal and evasive.
WATCH the exchange:
9:20 A.M. - Former Citigroup CEO: 'I'm Sorry' - Shahien Nasiripour
The man who led Citigroup down a path of excessive risk-taking that led to eventual losses totaling in the tens of billions and necessitating a taxpayer bailout, began his testimony Thursday before the panel investigating the roots of the financial crisis with a simple: "I'm sorry."
Charles Prince, who led the Too Big To Fail firm from 2004 to 2007, apologized for his role in allowing Citi to take such huge losses that it needed taxpayer assistance.
"[O]n Nov. 4, 2007, Citi announced an estimated $8 billion to $11 billion in write-downs related to subprime-related holdings. That same day, I resigned as CEO," Prince told the panel, according to his prepared remarks.
"I can only say that I am deeply sorry that our management -- starting with me -- was not more prescient and that we did not foresee what lay before us," he said.
But ultimately, it wasn't entirely Citi's fault, Prince argued. Rather, it was a confluence of events that included poor risk management across the industry, investors chasing ever higher returns, government policy that encouraged homeownership, artificially-high ratings from the credit rating agencies, and then the subsequent negating of those ratings when mortgage delinquencies and defaults began to rise, Prince argued.
Plus, Prince said -- the securities that Citi held were supposed to be incredibly safe. How could the firm have known those securities would one day experience losses?
"[I]t is hard for me to fault the traders who made the decisions to retain these positions on Citi's books," he said.
In short, who could have forecast that "$40 billion of AAA+-rated paper" would have had such a tremendous impact on a bank with a $2 trillion balance sheet?
But some investors knew better. Indeed, some made billions by betting against firms like Citigroup.
In a candid admission, Prince said that neither his chief risk officer nor any senior bankers or traders understood that those securities could have "any material risk of loss" until October 2007.
That said, Prince still firmly believes that Citi is not "too big to manage."
Read Robert Rubin's remarks here or read Prince's prepared remarks below: