Yesterday, former Citigroup (C) CEO Chuck Prince testified in front of Congress and basically invoked the Jeff Skilling defence.Here’s the nut of it (via NewDeal2.0)
“I can only say that I am deeply sorry that our management — starting with me — was not more prescient, and that we did not foresee what lay before us.” He later said, “I’m sorry the financial crisis has had such a devastating impact for our country. I’m sorry about the millions of people, average Americans, who lost their homes.”
First, we’ll note that nobody bought the defence when it came from Jeff Skilling — not that anyone is accusing Chuck Prince of a crime — so we doubt this line will to much to resuscitate Prince’s reputation.
But beyond that, it’s just not true that he didn’t have some sense of the trouble that was ahead.
Chuck Prince on Monday dismissed fears that the music was about to stop for the cheap credit-fuelled buy-out boom, saying Citigroup was “still dancing”.
The Citigroup chief executive told the Financial Times that the party would end at some point but there was so much liquidity it would not be disrupted by the turmoil in the US subprime mortgage market.
So he knew the party would end, but instead, he chose to keep “dancing.” Ugh.
Here’s more. We suggest you suppress your gag reflex:
“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,” he said in an interview with the FT in Japan.
His comments come amid growing fears that problems in the US subprime mortgage market, rising interest rates and concerns about loose lending standards could lead to a downturn in the leveraged finance market.
Chuck Prince was prescient. That’s what’s scandalous here.
Felix Salmon put it succinctly yesterday:
The tragedy of Chuck Prince is that he was smart enough to understand how screwed up his incentives were, while at the same time being so weak that he felt powerless to do anything about it, beyond bleating pathetically to his regulators. The tragedy of Bob Rubin is that he stood loyally by Prince’s side the entire time, supporting him wholeheartedly in his milquetoast pusillanimity. And indeed remained loyal to Prince even through the FCIC hearings this morning.
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