Charles Prince and Robert Rubin, often blamed for huge losses at Citigroup during the 2008 banking crisis, voiced regrets on Thursday but did not take responsibility for Citi's woes or its $45-billion taxpayer bailout.

I can only say that I am deeply sorry that our management -- starting with me -- was not more prescient and that we did not foresee what lay before us, former Citi CEO Prince told a U.S. congressional panel that is investigating the origins of the worst U.S. financial crisis since the Great Depression.

Congress is proposing regulatory reforms for banks that are seen as too big to fail but Prince denied that Citi was either too big to fail or too big to manage.

I personally do not think that Citi was too big to manage, said Prince in testimony before the Financial Crisis Inquiry Commission, assigned to report to Congress by December 15.

Citi has been in the panel's crosshairs for two days now as it probes the breakdown of Wall Street's subprime mortgage securitization business, the complex securities it produced, and the way they nearly destroyed financial giants, such as Citi, which were saved in the end only by U.S. taxpayers.

The commission will hold another hearing on Friday to hear from former executives of housing finance giant Fannie Mae and former regulators who supervised it. Fannie Mae was seized by the government in September 2008.

The bailouts and seizures of those fateful months in 2008, slapped together in a near panic by the Bush administration, unleashed a Congressional and public backlash, resulting in a wave regulatory reforms that could reshape the banking sector.


Testifying alongside Prince was Robert Rubin, former Citi chairman, a former Goldman Sachs executive, and a former U.S. Treasury secretary in the Clinton administration.

He expressed deep regrets for not recognizing the approach of the financial crisis. Everyone involved in the financial system bears responsibility, he said.

Almost all of us ... missed the powerful combination of forces at work and the serious possibility of a massive crisis, said Rubin.

Bad bets on repackaged debt securities, consumer loans and other assets forced Citigroup to take three separate government rescue packages totaling $45 billion, more than any other major bank. When the dust settled, taxpayers held about a third of Citigroup's common stock and $27 billion of its debt.

Rubin was on Citi's board and advised the firm beginning in 1999 but said on Thursday he was a Citi adviser, not a decision maker.

The overriding lesson of the financial crisis was that the financial system is subject to more severe downside risk than almost anyone had foreseen, he said. It is imperative that private institutions and the government act on that lesson.

Rubin also said derivatives need to be regulated, although in the late 1990s, he and others resisted attempts by former Commodity Futures Trading Commission chair Brooksley Born to bring some oversight to over-the-counter derivatives.

The Obama administration is backing a reform proposal that would limit the future growth of mega-banks by imposing a new market-share cap. Some lawmakers in Congress have called for breaking up large financial conglomerates such as Citi.

But Prince said he believes the financial world needs large, diversified banks. We are past the days of exclusively small, local banks and financial institutions, he said.

(Additional reporting by Elinor Comlay in New York)