WASHINGTON: US President Barack Obama was to announce on Thursday measures to help recover taxpayer money used to bail out banks, the White House confirmed on Wednesday, while calling for an apology from bank executives.
Obama’s spokesman Robert Gibbs told reporters some executives on Wall Street were acting as if nothing had changed since the financial crisis. Asked if Wall Street executives testifying on Capitol Hill on Wednesday owe the country an apology, Gibbs said it seemed to him an apology was the least the executives should offer.
Meanwhile, Goldman Sachs defended its role in creating securities at the center of the financial crisis under tough questioning from a US commission investigating the 2008 meltdown.
With US unemployment near a 26-year-high after the worst recession in decades, public fury is growing over the crisis, taxpayer bailouts and huge bonuses for bankers. The hearing took place as Obama, who has talked tough about bank bonuses and sought to strengthen regulations of the financial industry, prepared to unveil a plan for recouping some $120 billion in bailout funds by imposing a fee on banks.
Goldman Chief Executive Lloyd Blankfein faced questions focused on Goldman’s creation of subprime housing-backed derivatives, while at the same time shorting them, or betting they would lose value. “These are professional investors who want this exposure,” he said, interrupting at times Phil Angelides, chairman of the Financial Crisis Inquiry Commission. “Even today people are coming to us for exposure to these very instruments,” Blankfein said.
The animated exchange got the hearing off to a lively start and showed Angelides was willing to challenge the commission’s witnesses on complex financial issues. “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,” Angelides said.
The four CEOs facing the commission defended the lucrative pay practices and huge size of their businesses, but conceded that the financial system became over-leveraged before the crisis and said that regulatory change is needed.
Sworn in to testify were Blankfein, J.P. Morgan Chase CEO Jamie Dimon, Bank of America CEO Brian Moynihan and Morgan Stanley Chairman John Mack. They sat at a long table facing the 10-member commission in a hearing room on Capitol Hill.
Angelides told the executives his panel will hold hearings through the year and take testimony from hundreds of people.
“People are angry. They have a right to be,” he said, citing Wall Street’s bonuses and profits.
Due to report by Dec. 15, the panel created by Congress is modeled after the Pecora Commission, which investigated the Wall Street crash of 1929. Its findings helped lead to the formation of the US Securities and Exchange Commission and other key reforms. Whether the Angelides Commission has a similar impact is yet to be determined.
President Obama’s emergency spending measures last year saved up to 2 million US jobs, the White House said on Wednesday, but it warned that the outlook for the economy remained uncertain.
Obama, anxious to reduce double-digit US unemployment which has dented his popularity, has already called for additional government measures to boost jobs on top of the $787 billion stimulus package he signed in February 2009.
Christina Romer, head of Obama’s Council of Economic Advisers, said she expects positive job creation by the spring, but stressed that there was definitely a need for additional “targeted action” to aid employment.