Panel Criticizes Oversight of Citi by 2 Executives

Charles O. Prince III, Citigroup’s former chairman and chief executive, abased himself before the federal panel investigating the causes of the crisis, apologizing repeatedly for the billions of dollars in losses at an institution that ended up the recipient of $45 billion of taxpayer aid.

But Robert E. Rubin, the former Treasury secretary, faced withering questions from the panel, the Financial Crisis Inquiry Commission, for his spare expressions of remorse. Repeatedly playing down his role as chairman of the executive committee of Citigroup’s board, he was met with anger and disbelief.

“You were either pulling the levers or asleep at the switch,” Philip N. Angelides, the committee’s chairman, told him.

After three hours of testimony, Mr. Prince emerged as dignified though blameworthy. Mr. Rubin, the consummate wise man of Washington and Wall Street, looked demoralized.

In the second of three days of hearings this week, commission members dug into myriad reasons behind Citigroup’s collapse. They depicted a company so troubled that its crisis meetings were called “Def-Con calls” and so callous to risks that its regulators were confounded.

But the bulk of the hearing was spent assessing the men’s responsibility for a company that has come to represent the concept of “too big to fail.”

Mr. Prince tried to get ahead of the criticism by departing from his prepared statement to offer an abject apology.

“I’m sorry the financial crisis has had such a devastating impact for our country,” Mr. Prince said. “I’m sorry about the millions of people, average Americans, who lost their homes. And I’m sorry that our management teams, starting with me, like so many others could not see the unprecedented market collapse that lay before us.”

His unusually blunt statement of remorse seemed to take some of the oxygen out of a series of hearings more accustomed to corporate legalese.

Mr. Rubin stopped short of accepting personal responsibility. He grudgingly conceded that a few savvy investors saw the crisis coming, asserting that nearly everyone in the financial services industry had failed to see a dozen powerful forces — from excessive debt levels to trade imbalance — come together in a perfect storm.

“We all bear responsibility for not recognizing this, and I deeply regret that,” Mr. Rubin said.

Mr. Rubin’s stance left several members of the panel angry. Mr. Rubin earned more than $100 million during a decade at Citigroup. But he emphasized that period less than he did his tenure as a co-chief executive of Goldman Sachs, where he worked before joining the Clinton administration.

Mr. Angelides, a former California state treasurer and a fellow Democrat, did not buy it. “You were not a garden-variety board member,” he said. “I think to most people chairman of the executive committee of the board of directors implies leadership. Certainly $15 million a year guaranteed implies leadership and responsibility.”

Mr. Rubin maintained that his role had been misconstrued, saying that Citigoup’s executive committee met infrequently and “wasn’t a substantive part of the decision-making process.” He reiterated that his employment contract explicitly exempted him from operational duties.

Mr. Angelides was so critical of that explanation that Mr. Prince spoke up for Mr. Rubin.

“It is absolutely incorrect to suggest that Mr. Rubin had central responsibility, or any central responsibility for what happened to Citigroup,” Mr. Prince said.

Bill Thomas, a former chairman of the House Ways and Means Committee, assailed both executives for accepting millions of dollars in pay. He also leveled criticism at four Citigroup executives who oversaw the mortgage desk at the heart of the bank’s troubles and who testified on Wednesday. Together, they earned $150 million as business boomed.

“That same team, on the way down, didn’t have a nickel clawed back,” Mr. Thomas said angrily.

Earlier on Thursday, Mr. Prince spoke in personal terms about the impact of Citi’s troubles on his own net worth.

“As I sit here today, I own nearly every share of stock that I acquired in a nearly 30-year career,” he said. “I have watched it go from $50 to nearly $30 to less than $1 a share.”

Mr. Prince has kept a relatively low profile since resigning under pressure in November 2007. Now a corporate adviser, he is an avid golfer and spends much of his time in Palm Beach, Fla.

After the hearing, Mr. Prince stuck around to shake hands with commission members. “I’m a private citizen. I feel great,” he said. In contrast, Mr. Rubin raced out of the hearing room.

Though Mr. Rubin has many friends within the Obama administration and on Wall Street, he has kept a low profile since leaving Citigroup in January 2009. He keeps a Park Avenue office at the Council on Foreign Relations. He was a mentor to Timothy F. Geithner, now Treasury secretary. Mr. Rubin also is trying to revitalize the Hamilton Project, an economic policy group.

But it was Mr. Prince who was more expansive on Thursday. He weighed in with policy prescriptions, arguing that consolidating banking regulation would “lend itself to greater probity for the industry.” Mr. Rubin said he supported individualized financial advice for “the most vulnerable consumers,” though he added that it would be expensive.

When questioned about derivatives regulation by Brooksley E. Born, Mr. Rubin said his past reservations were grounded in legal concerns. Ms. Born, a former regulator who had clashed with him over derivatives during the Clinton administration, quoted from Mr. Rubin’s best-selling 2003 memoir to draw out his position on regulation.

Mr. Rubin got somewhat testy when he was asked about a risk assessment conducted by federal supervisors in November 2007, soon after the bank reported gigantic losses related to subprime mortgages. The report noted poor communication between business units and lax controls.

“I think you should read the reports before the crisis developed,” not just the autopsy, he responded.

Mr. Thomas told both men that contrition was not enough. “To make the argument that somehow a simple apology still allows you to maintain a profile of income based upon what devastated everybody else doesn’t fit the scale test,” he said, “no matter how often you feel really, really sad about what happened.”