Former Citigroup Chairman Rubin: We 'missed' the signs of trouble

"Almost all of us, including me, who were involved in the financial system — that is to say, financial firms, regulators, rating agencies, analysts and commentators — missed the powerful combination of factors that led to this crisis," Rubin said Thursday.

Rubin's remarks came in testimony before the Financial Crisis Inquiry Commission, a group charged with examining the financial crisis and submitting its findings to Congress by Dec. 15.

Rubin, who worked for Citigroup during the financial crisis and served as its chairman and temporary CEO, told the panel that several factors were involved in bringing down the market, from excessive assumption of risk by investors to abnormally low interest rates that spurred a buying frenzy in the housing market.

Rubin said Citigroup underestimated the risk of its investments in sub-prime mortages, the housing loans turned into securities by Wall Street that led to the financial collapse.

The bank's models showed negligible risks for holding sub-prime investments, Rubin said. One model showed a 1-in-10,000 chance of the investments turning toxic. 

"In hindsight, there were obviously real problems," he said. 

Former Ways and Means Committee Chairman Bill Thomas (R-Calif.), the vice chairman of the commission, blasted Rubin and Prince for not taking responsibility for the financial crisis that befell the nation.

“When I get this kind of an argument for what happened in hindsight, it’s listening to someone blame the inferior quality of leather in a pair of shoes based on the feed that some person supplied to the cattle that produced the leather,” he said, adding: “What did you get paid for?”

Thomas suggested their written testimony lacked explanation, hinting what they submitted was not sufficient.

“I don’t believe there is a limit on the pages of written testimony,” he said.

Thomas also questioned why there wasn’t a claw-back on income the two made on investments that eventually turned toxic.

“It was all about big money on the way up, but it was never about money on the way down,” he said.

While Prince and Rubin were executives at Citigroup, the bank lost more money than another other company in history. Its stock dropped to about $1 a share, and it received a $45 billion bailout from the federal government, which became a huge shareholder in the company.

The government is now planning to sell off its 7.7 billion shares in the company.

This story was posted at 9:20 a.m. and updated at 9:58 a.m. and 10:19 a.m.