A senior US official has told an investigative panel that financial regulators failed to protect Americans from the 2008 financial crisis.
In testimony that urged stricter oversight in future while admitting past errors, Federal Deposit Insurance Corp chairman Sheila Bair headlined the second public hearing of Congress's Financial Crisis Inquiry Commission.
'Not only did market discipline fail to prevent the excesses of the last few years, but the regulatory system also failed in its responsibilities,' she said. Ms Bair added that record profits in the financial services industry helped shield it from regulatory action.
The 10-member panel, in its first public hearing on Wednesday, heard a tale of misjudgements and regret from top banking executives, but received no outright apology or any new explanations for the debacle that shook world markets.
The bankers acknowledged taking on too much risk and having choked on their own financial cooking in the sub-prime mortgage market, but they defended their pay packages and the huge size of their businesses in the face of proposals to break them up.
Also today, the commission heard from Securities and Exchange Commission chairman Mary Schapiro, who said the SEC was reviewing investment bank practices in markets for sub-prime mortgage-backed securities and collateralised debt obligations during the property bubble before the crisis.
'We are seeking to determine whether investors were provided accurate, relevant and necessary information, or misled in some manner,' Schapiro said.
US Attorney General Eric Holder told the panel that the Justice Department's goal 'is not just to hold accountable those whose conduct may have contributed to the last meltdown, but to deter such future conduct as well,' according to his prepared testimony.
Both Bair and Schapiro are the leaders of agencies that were deeply involved in the run-up to the crisis that peaked in late 2008 after the collapse of former investment banking giant Lehman Brothers.
The commission, chaired by former California State Treasurer Phil Angelides, is beginning its work amid rising public fury over the crisis, its aftermath and what to do to prevent something like it from happening again.
'We have a lot of digging to do, and I believe our work will illuminate what happened,' he said after Wednesday's session. The Angelides panel is modelled after the Pecora Commission, which probed the 1929 Wall Street crash. Its findings helped lead to the creation of the SEC and other reforms. Whether the new commission will be as substantive remains to be seen.
