On Wednesday, former Citigroup executives Chuck Prince and Bob Rubin, along with Tom Maheras, broke some major news by divulging that they had simply followed the lead of their consultants, primarily Oliver, Wyman, in taking their company deeply into CDO origination and trading.
Unfortunately, I missed that session, due to prior commitments that kept me away from a television. But I managed to listen/watch much of Thursday morning's FCIC session.
I'd say the Wall Street Journal article describing those proceedings got it mostly right. Chuck Prince came across as an apologetic buffoon, while Bob Rubin continued to evade and deny any responsibility, whatsoever, for the consequences of his recommendations as non-executive chairman of Citigroup.
Prince, a lawyer and ultimate 'survivor' of a long-running contest at Citibank and, then, Citigroup, to succeed to the CEO's office, basically said he just had Citigroup ape the other large commercial and investment banks. So much for any unique value-added from the multi-million dollar per year CEO of what was once the nation's largest commercial bank.
Reinforcing Prince's image as a highly-paid dunce was his revelation that he held on to all of the Citigroup stock which he had received as compensation over 30 years.
If you need to understand why Prince couldn't identify risk if it hit him in the ass, this fact, alone, tells you all you need to know. The guy was so clueless as to not even diversify his personal finances.
Rubin, as usual, was an entirely different kettle of fish. Aloof and cool, he steadfastly denied any significant role in Citigroup's demise. No apologies, no admissions of involvement. Nothing.
Mind you, he has, on prior occasions, admitted to having advised the board on the relative safety and lack of risk in plunging into exotic fixed income origination and trading. His prior day's revelation about the role that Oliver, Wyman played in his decision to advise the board to enter those businesses would certainly be seen by most observers as an admission of involvement.
Rubin, however, insists this is wrong. He is simply in total denial, and nothing that anyone says will cause him to acknowledge reality.
The Journal's article cites both Prince and Rubin as supporting more and heavier regulation in the financial services sector.
However, after hearing their testimony, why would anyone believe more regulation would have stopped these two executives from wrecking their institution?
They didn't do anything illegal. Prince even contended that he requested federal regulators to rein in other banks in the same risky businesses. It's pretty clear that the two call for more regulation because that seems to shift responsibility elsewhere, and allow them the excuse that they were merely complying with existing rules and regulations.
If they blew up their bank, well, it wasn't really their fault. It was inadequately devised and implemented regulations.
Of course, human beings will, again, be asked to implement any new regulatory regime. Why would you think the outcome will be different next time?
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment