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Facing the music

Steve Dinneen
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THE leaders of Wall Street’s biggest banks yesterday admitted they had made mistakes as they were grilled on the causes of the financial meltdown.

Chief executives from Goldman Sachs, JPMorgan Chase, Bank of America (BoA) and Morgan Stanley all gave evidence to the Financial Crisis Inquiry Commission in the first of a series of public hearings.

Morgan Stanley chairman John Mack summed up the mood with the memorable phrase: “It has been a powerful wake-up call. We did eat our cooking and we choked on it.”

The often heated encounter saw Bank of America chief executive Brian Moynihan, whose bank has repaid with interest the $45bn (£27.6bn) it borrowed from the government, defend the bumper bonuses BoA is due to announce next Wednesday.

He said: “The vast majority of our employees played no role in the economic crisis.

“Our remaining employees are an important part of our future. We need to pay them adequately to keep them.”

JPMorgan Chase chief executive Jamie Dimon took a softer line, saying: “Many have questioned the extent to which compensation practices at financial institutions incentivised excessive risk taking. I think some of those concerns are quite legitimate.”

John Mack pointed out that 2009 will be the third year in a row he has not collected a bonus.

While admitting their shortcomings, the bankers warned against the introduction of tough new regulations which have been mooted.

A new Wall St levy will tax banks’ liabilities and calls have been made to reinstate the pre-1999 Glass-Steagall Act that forced the separation of investment and retail banks.

Goldman Sachs chairman and chief executive Lloyd Blankfein said: “Taking risk completely out of the system will be at the cost of economic growth. We know from economic history that innovation – and the new industries and new jobs that result from it – require risk taking.”

Congress set up the Financial Crisis Inquiry Commission to examine the causes of the crisis. The 10-member bipartisan panel will present a report to President Barack Obama by the end of the year.