JEFFREY BROWN: Next: to the search for answers on what led to the financial crisis.
PHIL ANGELIDES, chairman, Financial Crisis Inquiry Commission: I don't know that you can have it two ways. You either were pulling the levers or asleep at the switch.
JEFFREY BROWN: It was a blunt confrontation today on Capitol Hill, as two titans of Wall Street were called on to explain their role in the near collapse and subsequent bailout of their one-time employer, Citigroup, during the financial banking crisis.
Former CEO Charles Prince and former board member and Treasury Secretary Robert Rubin apologized, but claimed to be unaware of the depths of Citi's problems, which would eventually lead to a $45 billion taxpayer bailout.
CHARLES PRINCE, former Citigroup CEO: I'm sorry that our management team, starting with me, like so many others, could not see the unprecedented market collapse that lay before us.
ROBERT RUBIN, Former U.S. treasury secretary: Almost all of us, including me, who were involved in the financial system -- that is to say, financial firms, regulators, rating agencies, analysts and commentators, missed -- the powerful combination of factors that led to this crisis and the serious possibility of a massive crisis. We all bear responsibility for not recognizing this, and I deeply regret that.
JEFFREY BROWN: Today's grilling came from members of the Financial Crisis Inquiry Commission, a bipartisan panel created by Congress to determine the multiple causes of the crisis and prepare a report by December 15.
And the session was one of three this week focused on risky mortgage lending. Yesterday, the committee questioned former Fed Chairman Alan Greenspan about his failure to crack down on abuses in the subprime lending market and take a stronger regulatory stance as financial institutions sank deeper and deeper into trouble.
Greenspan acknowledged some mistakes, but also blamed housing giants Fannie Mae and Freddie Mac for pushing risky loans, and said Congress shares blame as well.
ALAN GREENSPAN, former Federal Reserve chairman: If the Fed, as a regulator, tried to thwart what everyone perceived in, I would say, fairly broad consensus, that the trend was in the right direction, homeownership was rising, that was an unmitigated good, the Congress would have clamped down on us.
JEFFREY BROWN: Today, commission Chairman Phil Angelides and his colleagues honed in on the responsibility of Citigroup executives and the compensation they received, even as the bank was falling apart. He questioned Rubin to explain why he didn't know more about Citi's problems as a member of the board.
ROBERT RUBIN: The executive committee of the board which you just referred to my being chairman of was an administrative body. It didn't have a decision -- what it did was, it met between board meetings. Those meetings were very infrequent. And it wasn't a substantive part of the decision-making process of the institution.
PHIL ANGELIDES: And you are not a garden-variety board member. You are chairman of the executive committee. And you can characterize it, but to someone, I think, to most people, chairman of the executive committee of the board of directors implies leadership. Certainly, $15 million a year guarantees -- implies leadership and responsibility.
JEFFREY BROWN: Tomorrow, the committee will hear from former executives of housing finance giant Fannie Mae and the former regulators who supervised it.
And joining me now are the two men who head the commission, Chairman Phil Angelides, a Democrat and former state treasurer for California, and Vice Chair Bill Thomas, a Republican and former congressman from California who served for 28 years.
Welcome to both of you.
PHIL ANGELIDES: Good to be here.
JEFFREY BROWN: "Either you were pulling the levers or asleep at the switch." That's how you put it, Mr. Angelides. Were you satisfied with the answers you got?
PHIL ANGELIDES: Well, I will let the record speak for itself, that what we're trying to do here is determine what happened, what brought our financial system to its knees.
So, for the last two days, we have been scrubbing what happened at Citigroup. And, today, we met with the key executives. And I was struck by the extent to which they didn't know what was going on and didn't assume responsibility for what was going on.
JEFFREY BROWN: Were you struck by that, Mr. Thomas?
BILL THOMAS, Vice Chairman, Financial Crisis Inquiry Commission: No, not really. After 28 and six years as chairman of Ways and Means, I have had a number of people, including some of folk who came before us.
I think the point people have to realize is, it was a multiple-factor cause for this. And depending on which perspective you had, you thought, as you heard from these individuals, that they were the ones who were at fault.
It's going to take a very in-depth examination. We're in the middle of that process. And to draw any conclusions at this point, I think, is clearly premature.
JEFFREY BROWN: And, yet, you were pushing -- you in particular were pushing them pretty hard today on the compensation.
Now, that's an issue that you know Americans are up in arms in -- about, and you were asking about the notion of taking all that money, bonuses, et cetera, at a time when these banks were almost failing.
BILL THOMAS: It wasn't so much taking the money, because I believe that you can get reward. I'm a Republican. I believe in the free enterprise system, although that was awfully free and an awfully big amount.
But, also, I believe behavior has consequences. And what's most startling to me is, despite the tens of millions all these people made, not one dollar in clawback, not one dollar based upon abject failure and the near collapse of not only the economy, but a way of life, in terms of owning your own home.
I think behavior should have consequences, and it was clear there wasn't any downside to what they were doing.
JEFFREY BROWN: Well, so -- but -- and that was a big emphasis, as I listened to -- that behavior has consequences. But what does that translate to.
Mr. Prince, for example, resigned. What more should he do? Or what should Mr. Rubin do?
PHIL ANGELIDES: Well, so here's -- here's -- I'm not after apology. What I want to see, and I think what we're trying to find is, what happened?
And I do believe that, certainly in these institutions, it starts with an acknowledgment of error and responsibility, so the self-examination can begin. You know, this country's suffered terribly, 27 million people out of work, can't find full-time work. Two million people, families, have lost their homes.
And if we're going to avoid these mistakes, it really starts with an honest assessment of what's happened. And what we did here today, we heard about a lot of mistakes at Citigroup, big errors. Yet, we -- we hear that we did the best we could, when, in fact, I think what's required is a deep self-examination of what happened on Wall Street and what happened here in Washington.
JEFFREY BROWN: Is it your sense that that examination is taking place, absent you calling them in to discuss it or Congress calling them in at this point? Do you sense that this kind of examination, apologies and beyond, a sort of thinking about what happened and what should happen, is happening, is taking place?
BILL THOMAS: Well, as you indicated, Mr. Prince lost his job, and a number of other people have.
Again, it isn't out for retribution, but when you sit and listen to these people who were supposed to be -- quote, unquote -- "masters of the universe" and able to perceive and therefore make great amounts of money, they pointed the finger at everything under the sun: rating agencies, state mortgage regulators because they produced a lousy product that they couldn't turn into a source of money for themselves.
It went on and on and on. And it has with virtually every group that we have talked to, including some of those very famous people.
BILL THOMAS: It was always someone else. At some point, you would like to have them say -- and you heard it -- "Yes, it was my fault, and I'm sorry."
JEFFREY BROWN: No, I was just going to say, these are people...
BILL THOMAS: That works for a 3-year-old.
JEFFREY BROWN: These are people who are lion -- who have been lionized in the past.
BILL THOMAS: Yes.
JEFFREY BROWN: Alan Greenspan -- just in the last two days, you have heard from Robert Rubin, Alan Greenspan. We all probably remember that "TIME" magazine cover of the committee to save the world. That's two-thirds of the committee.
You're suggesting now what?
BILL THOMAS: We were created by Congress to do the very thing that Congress has a difficult time doing. And that is pull together, as best we're able, the facts that the American people would like to have to understand, first of all, what happened.
This isn't a commission to come up with solutions to assist Congress in the policy, so that it doesn't happen again. But, as you know, if you don't know the past, you may, in fact, be required to repeat the past. No one wants to repeat the past. And it starts with knowledge and understanding of what happened.
JEFFREY BROWN: Well, tell us more about -- well, I'm sorry. Go ahead.
PHIL ANGELIDES: Yes. I was going to say, and, as to your question, I don't believe there's the kind of examination that -- that is required. I mean, there is -- this has been a disaster for the country.
And, by the way, the crisis is not over. I mean, it's being lived by families and communities across this country everyday. And the fact is that our commission may be the last and best chance, the best forum for the American people to have the questions asked that they want to have asked and answered.
And that's our mission. And -- and we hope to do work, as 10 Americans from different walks of life that take a critical eye, look at how we came to the financial precipice, so, hopefully, we can learn the lessons of this tragedy.
JEFFREY BROWN: All of this, of course, is happening as Congress is in the midst of this debate over financial reform.
You spent many years there yourself. Now, is there a way for your work here to have an impact on that? You're -- as we said, you don't have a report until December 15.
BILL THOMAS: No, but the committees doing the work are committees with narrow jurisdiction.
This was a multifaceted problem, cross-disciplinary, or interdisciplinary, if you will, affecting the government regulators, affecting a product, housing to a very great extent, but other products, Wall Street.
No one committee in Congress can focus on all of the facts that need to be looked at. And, as you well know, based upon recent examples, it takes Congress, even when there's a strong desire to do something, an extremely long time.
A major bill with major changes in it has, as we used to call in the business, a bunch of trailer bills following it, because you never get it right the first time. So, I think it's timely. I think it's appropriate.
If we were charged with coming up with solutions, I wouldn't be here. And the chairman can speak for himself. We're simply going to try to get the facts. Will we get all the facts? Of course not. It's going to be an ongoing search. But we are going to compile, both through research, investigation, interviews, and the hearings that we are presenting, get a pretty good handle, in a relatively short time, as to what happened.
PHIL ANGELIDES: And let me add that, that -- that a piece of legislation doesn't constitute reform.
In the end, if things are going to change, it goes to what's considered acceptable behavior. And Mr. Thomas pointed out today how people view compensation.
We had regulators. We had regulatory boxes. And I think what's important is that we have a full understanding, so that we not only change the laws if we need to and as we need to; we change how regulators look at the marketplace, but also how people behave and participate and the standards by which people conduct themselves in the marketplace. That's a values and behavior change.
JEFFREY BROWN: OK.
BILL THOMAS: And a useful service will be to get Americans to understand this is not just a national problem; it's an international problem.
This is a very complex world. It is a very difficult one to deal with, and that you simply don't throw up your hands and say there isn't a way to deal with this, because, if we reach that point, then these people who can tell you almost run the world, and we saw what happened when they did.
JEFFREY BROWN: All right.
Bill Thomas and Phil Angelides, we will watch as the work goes on. Thank you very much.
PHIL ANGELIDES: Thank you so much.
BILL THOMAS: Thank you.