May 25 (Bloomberg) -- Citigroup Inc. Chairman Richard Parsons said more financial crises will probably occur, regardless of regulatory efforts, because people tend to underestimate risk when pursuing profits.
“It’s something in our culture,” Parsons, 63, said in an interview to air on Bloomberg Television’s “Conversations with Judy Woodruff.” Crises are “borne out of the introduction of some kind of new technology, or approach, and people’s desires to sort of cash in on it and their willingness to believe that it can’t happen again. It won’t happen again. It won’t happen to me. It won’t happen this time.”
U.S. lawmakers last year passed the Dodd-Frank Act, the most sweeping rewrite of financial regulations since the 1930s, to avoid future crises after taxpayers were forced to prop up lenders with an unprecedented bailout. Nobody can disagree with the bill’s main goal of improving oversight and blocking some of the largest firms from the riskiest practices, Parsons said.
“But can you stop people from being people? No,” he said. “Can you absolutely sort of lock things up in a way that no one can ever make these kinds of mistakes that we’ve been making, you know, since time immemorial? I don’t think so.”
Parsons was chairman of New York-based Citigroup, the third-largest U.S. lender, when souring home loans fueled more than $29 billion in losses at the company in 2008 and 2009. The firm got a $45 billion bailout, and taxpayers guaranteed more than $300 billion of its troubled assets.
He previously led AOL Time Warner Inc., the media company that formed when Internet-access provider America Online acquired Time Warner in January 2001, around the height of the Internet boom. Parsons became chief executive officer in 2002, seeking to quell management and investor turmoil after the deal with AOL led to record losses.
LinkedIn Corp.’s initial public offering this month is reminiscent of the technology heyday a decade ago, he said. Shares of Mountain View, California-based LinkedIn, the first major U.S. social-media company to go public, have surged 112 percent since the sale last week, giving it a market value of $9.1 billion. LinkedIn had net income of $15.4 million in 2010, while sales more than doubled to $243 million.
“Remind you of anything about 10 or 12 years ago, AOL and the whole dot-com thing, where you take these companies public and overnight they would double and triple in value on no revenues and no earnings?” Parsons said.
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