Financial Regulatory Forum

By Kevin Drawbaugh

WASHINGTON, Jan 13 (Reuters) – Top executives of Wall Street’s biggest banks acknowledged broad failures as they testified to a U.S. commission looking into the financial crisis, while the White House said an industry apology was in order.

With U.S. unemployment near a 26-year-high after the worst recession in decades, public fury is growing over the cost of taxpayer bailouts and huge bonuses for bankers, now that the industry has rebounded from the 2008 meltdown.

The top executives acknowledged mistakes in managing risk but defended their pay packages and called for modest regulatory changes.

Goldman Sachs CEO Lloyd Blankfein was compelled to defend his firm’s role in creating subprime mortgage-backed securities at the center of the financial crisis, while at the same time shorting them, or betting they would lose value.

Blankfein said professional investors were still demanding these products, but the chairman of the Financial Crisis Inquiry Commission was skeptical.

CHARLOTTE, North Carolina, Jan 13 (Reuters) – Bank of America Corp Chief Executive Brian Moynihan said on Wednesday banking regulation needs to focus more closely on limiting “contagion risk” between financial firms, rather than breaking up the biggest U.S. banks.

Moynihan called for broader changes in banking industry regulation — from accounting rules to leverage and capital requirements — to shore up a system that he said created a mix of combustible elements during the crisis.

“That starts with recognizing that ‘interconnectedness’ and not ‘bigness’ is what led to the need for taxpayer bailouts,” Moynihan said in testimony prepared for his appearance before the Financial Crisis Inquiry Commission, a 10-member panel formed by the U.S. Congress to examine the causes of the financial meltdown.