Top executives of Wall Street's biggest banks acknowledged broad failures as they testified to a U.S. commission looking into the financial crisis, while the White House said an industry apology was in order.

With U.S. unemployment near a 26-year-high after the worst recession in decades, public fury is growing over the cost of taxpayer bailouts and huge bonuses for bankers, now that the industry has rebounded from the 2008 meltdown.

The top executives acknowledged mistakes in managing risk but defended their pay packages and called for modest regulatory changes.

Goldman Sachs CEO Lloyd Blankfein was compelled to defend his firm's role in creating subprime mortgage-backed securities at the center of the financial crisis, while at the same time shorting them, or betting they would lose value.

Blankfein said professional investors were still demanding these products, but the chairman of the Financial Crisis Inquiry Commission was skeptical.

It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars, said Phil Angelides, a former state treasurer of California.

The hearing took place as President Barack Obama, who has talked tough about bonuses while seeking to tighten financial regulations, prepared to unveil a plan to recoup $120 billion in bailout funds through a fee on banks.

White House spokesman Robert Gibbs told reporters on Wednesday that an apology from Wall Street leaders would be the least of what anybody might expect.

Sworn in to testify with Blankfein to the commission were JPMorgan Chase CEO Jamie Dimon, Bank of America CEO Brian Moynihan and Morgan Stanley Chairman John Mack.

Angelides said his 10-member panel will hold hearings through the year and take testimony from hundreds of people. People are angry. They have a right to be, he said, citing Wall Street's bonuses and profits.

Due to report by December 15, the panel created by Congress is modeled after the Pecora Commission, which investigated the Wall Street crash of 1929. Its findings helped lead to the formation of the U.S. Securities and Exchange Commission and other key reforms.

Whether the Angelides Commission has a similar impact remains to be seen.


No major revelations were forthcoming from the banking executives about the causes of the crisis that shook economies worldwide.

From a real estate bubble and subprime mortgages, to runaway securitization and exotic debt instruments, the financial system failed spectacularly in the final months of the Bush administration.

But Angelides and others on the panel showed a willingness to challenge the financial world's most powerful figures.

At one point, Blankfein compared the forces underlying the crisis to being hit by a wave of hurricanes.

Angelides shot back: 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.

The hearings come as the U.S. Senate Banking Committee is engaged in sensitive closed-door negotiations on a sweeping overhaul of financial regulation, the aim being to prevent another banking crisis in the future.

The four bankers conceded that the financial system became over-leveraged in the years ahead of the collapse of Lehman Brothers and the bailouts of firms such as AIG and Citigroup, adding that regulatory change is needed.

We talked ourself into a complacency which we should not have gotten ourselves into, and which, after these events, will not happen again in my lifetime, Blankfein said.

Morgan Stanley's Mack acknowledged problems with mortgage-related securities created by Wall Street during the massive real estate bubble.

On some of the product in mortgages, we did our own cooking and we choked on it. We kept positions and it did not work out, he said, adding that Morgan Stanley did not put enough resources into risk management ahead of the crisis.

JPMorgan's Dimon told the commission there may be legitimate concerns that bonuses contributed to excessive risk taking, but he said JPMorgan's pay practices have been and remain appropriate.

(Additional reporting by Karey Wutkowski, Steve Eder, Elinor Comlay, Joe Rauch; Editing by Tim Dobbyn)