DealZone

Now that the government has yet again propped up the embattled insurer, Congress is hauling regulators over hot coals as they try to figure out what happened. Here are some highlights from testimony today:  

Senate Banking Committee Chairman Christopher Dodd:
“That we find ourselves in this situation at all, is in my mind, and in the minds of many of my constituents, quite frankly, sickening. …

“The lack of transparency and accountability in this process has been rather stunning. Throughout the entire fourth quarter last year, it was frankly never clear, who owned AIG, or who was in charge.” 

Federal Reserve Vice Chairman Donald Kohn:
“No one was minding the whole company and looking at how things interacted, and whether the whole company would, under some circumstances, put the financial system at risk.”

Acting Office of Thrift Supervision Director Scott Polakoff:
“It’s time for OTS to raise their hand and say we have some responsibility and accountability here.”

(Updated with references from Paul Kanjorski’s office)

Lined up to pay their dues, Wall Street CEOs met their congressional inquisitors on Capitol Hill, sparking bouts of righteous indignation peppered with cringe moments worthy of The Office.

Pennsylvania Democrat Paul Kanjorski implored the posterboys for an era of high finance gone bad to “please find a way to return that money before you leave town,” referring to hundreds of billions of dollars in taxpayer bailout funds that officials believe were poured into unwarranted bonus payments instead of being used to revive the business of lending to America. At least he said please.

The message was clear. Though they may never have been instructed to lend the funds when they got them, that’s what Congress wanted. Bankers need to get back to the business of lending. That’s what they were being bailed out for. Never mind that the business of lending, conducted with adequate credit checks, was not what they were doing before, and that prudence in a period of high inflation would preclude much new lending today.

It is amazing how the prospects of a grilling in Washington can make Wall Street’s CEOs behave. Until a little while ago, these were the masters of the masters of the universe. An elite group of highly paid stars who rarely showed signs of vulnerability, who rarely seemed to doubt their place at the top of the heap. But take a look at the testimonies they have prepared for today’s hearing at the House Committee on Financial Services and it looks like they have begun to embrace the new era, the new religion.

You would be forgiven in thinking they had all also hired the same speechwriter. They mostly stress they are prudent, frugal, humble, though not quite yet apologetic — it will be interesting if that changes once the grilling begins. Here are some of the themes:

Public anger towards Wall Street is justifiable:
“It is abundantly clear that we are here amidst broad public anger at our industry. In my 26 years at Goldman Sachs, I have never seen a wider gulf between the financial services industry and the public. Many people believe — and, in many cases, justifiably so — that Wall Street lost sight of its larger public obligations and allowed certain trends and practices to undermine the financial system’s stability.” — Lloyd Blankfein, CEO of Goldman Sachs Group.

First Bill Perkins likened the architects of the $700 billion U.S. bailout to communists. Now the Houston-based venture capitalist is going after the capitalists.

In his latest full-page ad in the New York Times, Perkins raises a question about the propriety of Goldman Sachs buying the majority of Constellation Energy’s London-based commodities business.

“Question #1: Does anyone else find it troubling that a government bailed out bank (Goldman Sachs) is buying a European Energy Speculation Outfit? It’s your money!!!”