Economy Fix: Playing the Financial Crisis Blame Game

Feb. 19, 2009 <br/> NEW YORK&#151; -- Who's most to blame for our current landmark financial crisis? Ask three of the business world's biggest financial names, and they'll give one of three answers: A. Ratings agencies; B. Managers of Wall Street companies; or C. All of the above.

Ratings agencies gave companies using risky investment strategies top ratings and "Wall Street put its head in the sand," said J.C. Flowers, the billionaire founder and chief executive of the investment firm J.C. Flowers & Co.

Flowers joined outspoken former AIG chief executive Hank Greenberg and Peter Peterson, the co-founder of private equity investment giant Blackstone Group, in a frank panel discussion today about today's financial crisis, what caused it and what the future may bring. Moderated by Vanity Fair columnist Michael Wolff, questions asked of the panelists included, "How do you get up in the morning?"

The discussion, though punctuated by some gallows humor, was expectedly grim.

"I'm not sure anybody knows what's going on," Flowers said.

The panelists echoed much of the criticism commonly levied against the financial industry: that corporate managers didn't have back-up plans in place to cope with the crash in housing prices, that they didn't understand the complex investments – like mortgage-backed securities -- their companies were making, that they leveraged or borrowed too much to make those investments, and that ratings agencies failed to accurately gauge how much risk these investments posed.

Wall Street "got carried away," said Greenberg, who accumulated billions of dollars worth of AIG stock before being ousted from the 2005. He has since seen that fortune dwindle as AIG received tens of billions in government dollars to keep it afloat. Greenberg directed specific criticism at the compensation paid to today's Wall Street executives.

"I don't think any individual working at a public company deserves a $50 million bonus," he said.

Though the panelists ranked Wall Street managers and rating agencies as those most responsible for the financial crisis, they didn't absolve the government's role, both in the past and today.