Wall Street Chiefs Grilled On Capitol Hill

The heads of several big Wall Street banks testified before Congress about the financial crisis today on Capitol Hill.

Executives that appeared before the Financial Crisis Inquiry Commission included Goldman Sachs Group Inc. (NYSE: GS) Chairman and CEO Lloyd Blankfein, JPMorgan Chase & Co. (NYSE: JPM) CEO James Dimon, Morgan Stanley (NYSE: MS) Chairman John Mack and Bank of American Corp. (NYSE: BAC) CEO Brian Moynihan.

The panel has been made up of 10-bipartisan members that have been charged with investigating the near collapse of the financial system and the subsequent recession that followed.

The executives agreed that the actions of the banks contributed the crisis that crippled the credit markets; however the hearings did not give investors any reason to abandon financial stocks.

"Whatever we did, it didn't work out well ... We were going to bed every night with more risk than any responsible manager would want to have," Blankfein said. "Without trying to shed one bit of our industry's accountability, we would also further our collective interests by recognizing other contributing causes to the security of the crisis." Phil Angelides, chairman of the commission, compared Blankfein to a used-car salesman, selling lemons then taking out on insurance policy on the cars.

Dimon noted that "the solution is not to cap the size of financial firms." Instead he said that "we need a regulatory system that provides for even the biggest banks to be allowed to fail, but in a way that does not put taxpayers or the broader economy at risk."

Moynihan added that "never has it been clearer how mistakes made by financial companies can affect Main Street." He later changed the word "mistakes" to "poor business judgments," what he considered a more neutral term.

President Barack Obama is set to propose a new Wall Street tax to compensate the taxpayers for any losses related to the bailouts on Thursday.

Banks are not expected to cut the massive bonuses that they plan to pay out to top employees, despite public scrutiny surrounding the issue. Banks believe that to keep the top talent they must be able to pay top dollar.

The commission is scheduled to meet again tomorrow to continue discussion on the banks' involvement in the financial crisis.

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