Chuck Prince, Bob Rubin Grilled by Financial Crisis Inquiry Commission; 'We Found Out Too Late'
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The senior advisor to Citigroup (NYSE: C) at the time of the firm’s subprime debacle, Robert Rubin, and former CEO Chuck Prince said Thursday that they did not find out until it was too late that the bank had $43 billion in high-risk securities among its assets.
Still, the Financial Crisis Inquiry Commission grilled the two former Citigroup execs about why they could not see the trouble coming and why they had not monitored the firm’s risky investments closer.
Rubin insisted that prior to the onset of the financial downturn at the end of '07, the high-risk securities were thought to have been safe and the investments were not discussed at frequent meetings of the firm’s management. Also around the end of that year, Citigroup was forced to acknowledge that it would lose $8-$11 billion in Q407 due to the holding of investments composed of repacked mortgage bonds.
Rubin and Prince said that they thought the bank was safe from default as they assumed other firms were investing similarly at the time. The execs also iterated that Citi had triple-AAA ratings from each of the credit rating agencies.
“We all bear responsibility for not recognizing this, and I deeply regret that,” Rubin said. “Those losses were a substantial cause of the bank’s financial problems and led to the assistance from the U.S. government.”
Citigroup received one of the biggest slices of government bailout money during the economic meltdown, a total of $45 billion in taxpayer dollars.
"Regrettably, we were not able to prevent the losses that occurred, but it was not a result of management or board inattention or lack of proper reporting of information,” Prince said.
The FCIC is examining Citigroup as a case study this week in an attempt to uncover the circumstances of the economic crisis as the firm was deeply involved in every stage of the process.
Still, the Financial Crisis Inquiry Commission grilled the two former Citigroup execs about why they could not see the trouble coming and why they had not monitored the firm’s risky investments closer.
Rubin insisted that prior to the onset of the financial downturn at the end of '07, the high-risk securities were thought to have been safe and the investments were not discussed at frequent meetings of the firm’s management. Also around the end of that year, Citigroup was forced to acknowledge that it would lose $8-$11 billion in Q407 due to the holding of investments composed of repacked mortgage bonds.
Rubin and Prince said that they thought the bank was safe from default as they assumed other firms were investing similarly at the time. The execs also iterated that Citi had triple-AAA ratings from each of the credit rating agencies.
“We all bear responsibility for not recognizing this, and I deeply regret that,” Rubin said. “Those losses were a substantial cause of the bank’s financial problems and led to the assistance from the U.S. government.”
Citigroup received one of the biggest slices of government bailout money during the economic meltdown, a total of $45 billion in taxpayer dollars.
"Regrettably, we were not able to prevent the losses that occurred, but it was not a result of management or board inattention or lack of proper reporting of information,” Prince said.
The FCIC is examining Citigroup as a case study this week in an attempt to uncover the circumstances of the economic crisis as the firm was deeply involved in every stage of the process.
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