(Adds Bass comments)
WASHINGTON, Jan 13 The top executives of
Goldman Sachs, JPMorgan, Morgan Stanley and Bank of America
testified Wednesday at a Financial Crisis Inquiry Commission
Also questioned were financial services executives from
Calyon Securities, Hayman Advisors and Peter J. Solomon Co.
The 10-member commission, created by Congress to examine
the causes of the 2008 financial meltdown, is holding a two-day
public hearing this week. Following are quotes from the first
COMMISSION CHAIRMAN, FORMER CALIFORNIA STATE TREASURER
"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," he said of Goldman's practice of selling
subprime mortgages while betting against the securities.
"Some already speak of the financial crisis in the past
tense. The truth is, it is still here."
"People are angry. They have a right to be... I see this
commission as a proxy for the American people... If we ignore
history, we're doomed to bail it out again."
COMMISSION VICE-CHAIRMAN, FORMER CHAIRMAN OF HOUSE WAYS AND
"It's most appropriate to tell anyone who's listening,
watching or hopefully will read anything about this hearing
today, that the opportunity to submit written questions to who
it is that you wish that question to be submitted is an
opportunity that ought to be available to all Americans."
CHIEF EXECUTIVE OF GOLDMAN SACHS (GS.N)
Goldman "got caught up in and participated in and therefore
contributed to elements of froth in the market."
"We talked ourself into ... complacency which we should not
have gotten ourselves into, and which, after these events, will
not happen again in my lifetime as far as I'm concerned."
"Rationalizations ... were made to justify that the
downward pricing of risk was justified."
"We rationalized because a firm's interest in preserving
and growing its market share, as a competitor, is sometimes
blinding -- especially when exuberance is at its peak."
"I think we have a very, very tough regulator," he said of
the bank's current regulation by the Federal Reserve.
CHIEF EXECUTIVE OFFICER OF JPMORGAN CHASE (JPM.N)
"We did make mistakes, there are a number of things we
could have done better."
"To be sure, there are a number of things we could have
done better: the underwriting standards in our mortgage
business, for example, should have been higher, and we wish we
had done an even better job in managing our leveraged lending
and mortgage-backed securities exposures."
"But let me be clear: No institution, including our own,
should be too big to fail."
"The solution is not to cap the size of financial firms."
CHAIRMAN OF MORGAN STANLEY (MS.N)
"We did eat our own cooking and we choked on it," he said
of the company's mortgage investments.
"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
"There is no question that we did not put enough resources
into our risk management system."
CHIEF EXECUTIVE OF BANK OF AMERICA (BAC.N)
"Interconnectedness," not bigness, led to need for taxpayer
"We need to consider the downside of debilitating large
financial firms by requiring them to shed economies of scale or
permitting them to service only part of a corporate customer's
MANAGING PARTNER AT HAYMAN ADVISORS
"Capitalism without bankruptcy is like Christianity without
hell... There is a role for leverage and for aggressive risk
taking in the economy, but that role should be played by firms
that are open and susceptible to the risk of insolvency.
"Retail banking has essentially become a public utility,
and should be regulated as one -- with the limits as well as
the associated guarantees.
"One of the options to prevent this (becoming too big to
fail) is a hard and fast balance sheet cap that is not gamed by
risk weighting. At a certain nominal gross balance sheet size,
a firm is deemed too big to fail and subject to new limits on
risk taking and asset concentration. As a firm approaches this
balance sheet size, it would be ... warned that continued
growth would put it into a new and tightly controlled
regulatory regime that would force it to divest certain assets
and unwind certain positions."
Testimony from the hearing was posted at the commission's
web site at: www.fcic.gov
(Reporting by Kim Dixon; Editing by Julie Vorman)