Financial Crisis Inquiry Commission kicks off..

13th Jan marked the first public meeting of the Financial Crisis Inquiry Commission, and will be a year long process with a report due to be submitted by 15th Dec 2010.

The opening session goes on for 3.5hrs with 10 members from the Commission throwing questions at Goldman Sachs CEO Lloyd Blankfein, JPMorgan Chase CEO Jamie Dimon, Morgan Stanley Chairman John Mack, and Bank of America CEO Brian Moynihan. (pictured)

Commission chairman is Phil Angelides, watch him in the clip as he goes toe-to-toe with Blankfein, couple of pointers that are funny:

- Angelides compared Blankfein to a used car salesman “It sounds to me a little bit like selling a car with faulty brakes, then buying an insurance policy on the buyer of those cars.”

- Blankfein then referred to higher powers, comparing the market meltdown being hit by a series of hurricanes. Angelides responded "Mr Blankfein, I want to say this. Having sat on the board of the California Earthquake Authority, acts of God will be exempt. These were acts of men and women."

- Blankfein actually got pretty annoyed during the questioning, have a look at his response and how the company then releases a statement suggesting he said no such thing:

Angelides "I want to ask you about a very specific instance as a way of getting to how things worked and how things might be changing in the future. Based on the review of public documents, as you know, your firm sold a significant amount of subprime mortgage-related securities. And it appears, at least according to public documents and other reports, that you may have simultaneously betted against the securities you sold to clients. According to the reports, you sold about $40 billion in 2006, 2007. December 2006, I think you came to the conclusion the mortgage market was heading south and you began to reduce your own positions. And many of the securities that you sold to institutional investors, other folks, went bad within months of issuance. Now, one expert in structured financing said, the simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I’ve seen. Do you believe that was a proper, legal, ethical practice, and would the firm continue to do that practice, or do you believe that’s the kind of practice that undermines confidence in the marketplace?"

Blankfein responded "Well, the way it’s–the short answer is this is the practice of a market maker, and I would like to explain this. But the answer is I do think that the behavior is improper."

So it appears Blankfein admitted to “improper” actions, albeit a tad jittery in his response. But then the company releases a statement as follows:
“Mr. Blankfein was responding to a lengthy series of statements followed by a question that was predicated on the assumption that a firm was selling a product that it thought was going to default. Mr. Blankfein agreed that, if such an assumption was true, the practice would be improper. Mr. Blankfein does not believe, nor did he say, that Goldman Sachs had behaved improperly in any way,”

John Carney from The Business Insider, states "A structured credit product – whether its as simple as a mortgage backed security or a complex CDO – is not necessary flawed if it produces losses. Even enormous losses. Indeed, it might be perfectly well-designed but still deliver the buyers losses... It is possible to sell a financial product without believing the buyer’s rationale for buying it. As long as Goldman wasn’t lying to clients or over-hyping the financial products – and so far, no one has shown any evidence of this – there’s nothing really wrong with what Goldman was doing."

At least from this hearing, the 4 heavyweights did admit their mistakes.

Here's Day One's hearing - Panel 1:
//c-span.org/Watch/Media/2010/01/13/HP/A/28350/Financial+Crisis+Inquiry+Commission++Day+One.aspx