Citigroup heads face grilling over its lending
By Daniel Wagner |
April 7, 2010, Wednesday
|
Print Edition
Print Edition
A PANEL investigating the roots of the United States financial crisis will press current and former executives of Citigroup Inc at hearings this week about the bank's role in spreading trillions of dollars in risky mortgage debt through the banking system.
The hearings are the first by the Financial Crisis Inquiry Commission to focus on a single company. Witnesses include former Citi CEO Chuck Prince and former Chairman Robert Rubin, who was Treasury secretary during the Clinton administration.
The panel also will hear from former Federal Reserve Chairman Alan Greenspan, a former risk officer with failed subprime lender New Century Financial Corp, and former executives and regulators from government-backed mortgage giant Fannie Mae.
The three days of testimony are designed to provide a firsthand accounting of decisions that inflated a mortgage bubble and triggered the financial crisis.
Much of the tension at hearings today and tomorrow will come as the 10 bipartisan commissioners examine Citi's role in financing, packaging and selling risky mortgage loans.
Citi was a major subprime lender through its subsidiary CitiFinancial. The bank pooled those loans and loans purchased from other mortgage companies and sold the income streams to investors. As borrowers defaulted, Citi absorbed losses on mortgage-related investments it held on and off its books.
Mortgage troubles at Citi, defunct investment bank Bear Stearns and elsewhere exposed cracks in the financial system. In late 2007 and throughout 2008, those fissures grew into a full-fledged credit crisis that crippled the global economy.
Congress created the FCIC last year to examine the causes of that crisis. It is structured like the 9/11 panel that examined intelligence failures preceding the terrorist attacks of September 11, 2001.
Like that panel, the commission has authority to issue subpoenas to compel witnesses to testify or can force companies to turn over documents.
The hearings are the first by the Financial Crisis Inquiry Commission to focus on a single company. Witnesses include former Citi CEO Chuck Prince and former Chairman Robert Rubin, who was Treasury secretary during the Clinton administration.
The panel also will hear from former Federal Reserve Chairman Alan Greenspan, a former risk officer with failed subprime lender New Century Financial Corp, and former executives and regulators from government-backed mortgage giant Fannie Mae.
The three days of testimony are designed to provide a firsthand accounting of decisions that inflated a mortgage bubble and triggered the financial crisis.
Much of the tension at hearings today and tomorrow will come as the 10 bipartisan commissioners examine Citi's role in financing, packaging and selling risky mortgage loans.
Citi was a major subprime lender through its subsidiary CitiFinancial. The bank pooled those loans and loans purchased from other mortgage companies and sold the income streams to investors. As borrowers defaulted, Citi absorbed losses on mortgage-related investments it held on and off its books.
Mortgage troubles at Citi, defunct investment bank Bear Stearns and elsewhere exposed cracks in the financial system. In late 2007 and throughout 2008, those fissures grew into a full-fledged credit crisis that crippled the global economy.
Congress created the FCIC last year to examine the causes of that crisis. It is structured like the 9/11 panel that examined intelligence failures preceding the terrorist attacks of September 11, 2001.
Like that panel, the commission has authority to issue subpoenas to compel witnesses to testify or can force companies to turn over documents.
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