Former Lehman CEO Richard Fuld blames feds for bankruptcy
Former Lehman Brothers Chief Executive Officer Richard Fuld defiantly told a financial inquiry panel Wednesday his company could have survived the 2008 financial meltdown if it had only received some cash from the feds.
He told the Financial Crisis Inquiry Commission Wednesday afternoon that the company failed only because it was denied support given to its competitors, like Morgan Stanley and Goldman Sachs. He said the company made some mistakes, but those errors were also made by its competitors and by government officials.
Continue ReadingThe remarks in a Senate hearing room show that Fuld is still angry over the fact that Lehman was allowed to fail while other big banks got a government bailout.
“The big mistake that was made was that Lehman, as a sound company, was mandated to file for bankruptcy,” he said. The company had “derisked” in 2007 and 2008, he said, and added that he never received a negative assessment of the company’s amount and quality of collateral, which the Fed says was insufficient.
He repeatedly said that the company had done everything it could to avoid its bankruptcy.
Fuld, a nearly 40-year veteran of the company, spoke aggressively both when reading his written testimony and when answering questions from the panel over several hours on Wednesday afternoon.
“I am proud to have spent my entire business career of 40 years at Lehman Brothers and am more proud to have been CEO for 14 years,” he said off-the-cuff at the end of his time for prepared remarks.
As he lashed out at the feds, he also acknowledged he had made mistakes in his long tenure at the top of the prestigious firm.
“I take full and total responsibility for the decisions that I made. I made them with the information available to me at the time. That’s the only way we can ever make decisions,” he said.
For example, Fuld said the company should have closed its mortgage-backed securities division in 2005 or 2006 instead of in the middle of 2007, even though his competitors would have called such a move “irrational.”
Fuld said his company got trapped in a moment of capitalism’s failure.
“Capitalism works within a finite range of standard deviations of volatility. When I talk about uncontrollable market forces, we were way outside" that range in 2008, he said. “Had the Fed totally ignored everything, and Treasury ignored everything, in a pure capitalist free market, not only would you have lost Lehman, but Morgan Stanley quickly, and Goldman Sachs thereafter.”
Federal officials vehemently rejected Fuld’s criticisms.
Thomas Baxter, an executive vice president at the Federal Reserve, said “there was no strong arming” when it came to the company’s bankruptcy and that the Fed made a “serious and determined” effort to save the company.
But he called lending money to Lehman “a bridge to nowhere” because the Fed would never have gotten the money back. The Fed would have lost the money to Lehman’s creditors, whom the company was unable to pay.
“The Federal Reserve did not ‘allow’ Lehman Brothers to die,” Baxter said. “Instead, the Federal Reserve, the United States Treasury Department, the Securities and Exchange Commission, and others tried hard to save it — not for its own sake, of course, but for the sake of all the families and businesses who would be harmed by the devastating effects of a Lehman bankruptcy.”
“We did not succeed, but the effort made was serious and determined. We came very close.”
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Simmi Aujla
Readers' Comments (61)
One of the most under-reported and under-researched aspects of the whole meltdown - in a few words - is how was the decision made to let Lehman drown and Goldman-Sachs to survive?
A good place to start is to read the Sept 21, 2009 New Yorker article ("Eight Days: The battle to save the American financial system."). There are MANY other places to look but, for the layman, this is a good beginning.
Then, ask yourself "Were all parties brought equally to the table" in these days? Were some favored over others?
I believe THIS is to be the TRUE story of this whole affair. And, the more closely this is scrutinized, the worse it looks for the government officials involved.
Watch this story for the next few months, It will be an important one.
BEep BEep BEeper 812
The government did arbitrarily pick the winners and the losers.
Lehman did get shafted while others were saved.
It was totally bogus the way that entire debacle went down. .
One has only to look at the huge number of Goldman Sachs grads who were involved in critical decisions and to know that Dick Fuld was regarded as an ostentatious and arrogant ***** by his competitors. And, unfortunately, he was a *****.
The Wall Street boys pushed Lehman and Fuld under the bus for their own vanity and to even scores which were years in the making.
This was must the Medicis getting revenge when it was handed to them on a silver platter. Evening scores.
A pox on all their houses.
Hank Paulson, Bush's Treasury Secretary, was the former CEO of Goldman Sachs. Paulson, along with Timmy Giethner, made the decision to deny Lehman the chance to become a bank holding company right before the "crisis". Had Lehman converted to that type of entity, it would have had access to the fed funds window, which would have given it the liquidity to survive. Within weeks of Lehman's failure, both Goldman Sachs and Morgan Stanley were allowed to convert to bank holding companies and were given access to govenment funds. Goldman was rewarded handsomely by the Obama Administration and was made whole to the tune of around $10 billion, by the taxpayers, after taking the same risks that Lehman took. The real scandal is why the "crisis" was manufactured in the middle of the 2008 presidential campaign. McCain had a five point lead in the polls before the "crisis". After the "crisis" struck, he fell behind and never recovered.
It's very easy to extrapolate this sort of cronyism and corruption out to the day that ObamaCare meets limited resources.
Even if Lehman was treated differently than others in the same boat, management and the board are still accountable for dropping them into the fat. No one really wants to hear some ersatz master of the universe whine about how it was someone else's fault. Grow up, for pete's sake.
I am grateful for your responses, confirming - as they do - what I suspected all along: that the government's willful decisions created this crisis and that the government never had any intention of allowing the free market to work
This may be the single biggest reason I loathe the Obama Administration, their people, their philosophies and their actions. Their haughty attitude that they know what's best conceals the truth: they reward their friends and screw their enemies, just like garden-variety punks.
Only they wrap their punk behavior in a thin veneer of sophistication and high-mindedness.
Chicago thuggery, writ large.
Economy Loses 10,000 Private Sector Jobs in August – Construction at Lowest Level in 10 Years
Worst. Jobs. President. Ever.
Barack Obama is the worst jobs president since the Great Depression and possibly is the worst jobs president in US History.
(Source: US Misery Index)
Can we afford Obama and his Obamacrats?
Listen up all
Lehman went under in Sept of 2008, Pres Obama came into office in Jan 2009.
What does this have to do with the Obama Admin, I see Beeper812 and others blaming the Obama Admin.
While we at it some more things we could blame Pres Obama for:
_ The war in Vietnam
_ The second World War
_ The American Civil War
_ 911 disaster
_ The sinking of the Titanic
_ The Oklahoma bombing
Amen.
Is this somehow different than the way the world works? Halliburton had Cheney and look how that company fared. I am quite sure that Fuld leveraged all his personal contacts and networked vigorously to climb the corporate ladder. His business dealings assuredly leaned towards helping those he knew at the expense of others. Now he's claiming victimhood because capitalism isn't based on merit. Well, I'm not rich, but Fuld and his comments certainly are.
Fuld did not grease the right palms. Life goes on.
Fuld did not grease the right palms. Life goes on.
Obama has placed Goldman acolytes into key positions in the government...I wonder why?
Obama has placed Goldman acolytes into key positions in the government...I wonder why?
Obama has placed Goldman acolytes into key positions in the government...I wonder why?
What a whiner. He is uspset he didn't get his share of the loot. I would have been more impressed if he had accepted responsibility for his company's poor behaviour and taken it like a man.
Hey, Fuld is just following Obama's example - he's blaming Bush. If it works for Obama, it should work for Fuld, too.
the picks were anything but arbitrary...
they knew who they were helping and who was getting the axe...
IamBiggie wrote:
"Lehman went under in Sept of 2008, Pres Obama came into office in Jan 2009.
What does this have to do with the Obama Admin, I see Beeper812 and others blaming the Obama Admin."
Why was no opportunity afforded to Lehman as was afforded Bear Stearns (to enter into a merger)?
I am guilty of believing the market could have absorbed all of this by a mixture of writing off losses, directing mergers and providing other guarantees of last resort. Put another way, I believe the market could have worked.
I want to know why it was decided not to allow it to work?...And how the decisions were made to save some and allow others to go under.
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