Senior US banking executives admitted making costly mistakes in the lead-up to the global financial crisis (GFC) as they came under intense scrutiny at an inquiry designed to establish the cause of the economic disaster.
A congressionally mandated 10-member commission, which has been compared to the panel that studied the September 11, 2001 terror attacks on the United States, began its first hearings on the crisis overnight.
Morgan Stanley chairman John Mack said that, in retrospect, many firms were “too highly leveraged, took on too much risk and did not have sufficient resources to manage those risks effectively in a rapidly changing environment.”
“While we were able to withstand the crisis and I believe emerge as a stronger institution, we, like many others, made mistakes,” admitted Jamie Dimon, chairman and chief executive of JPMorgan Chase.
Goldman Sachs chairman and chief executive Lloyd Blankfein said “accumulation of risk” was “the biggest problem” that financial institutions faced ahead of the crisis.
Upon hearing these submissions, commission chief Phil Angelides appeared to show displeasure over the way risks were managed.
“Well, I’m just going to be blunt with you,” he said. “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars. It doesn’t seem to me that’s a practice that inspires confidence.”