Former Lehman CEO Richard Fuld blames feds for bankruptcy
Baxter said a deal to save Lehman failed to materialize because the bank didn’t have enough collateral to secure help. Fed backing of a Lehman deal would have been too risky, he said. He also says the Fed didn’t have the legal authority at the time to intervene.
Another Fed official, responding to questions from the panel, said Lehman was simply a “victim of circumstance.”
Continue ReadingAsked to respond to Fuld’s assertions that the bank did nothing wrong, Federal Reserve General Counsel Scott Alvarez conceded that the bank did work very hard to avert its total collapse by at first raising capital in the spring of 2008 and by later drafting a plan to wind down its assets.
“The management of Lehman tried very hard to save the company,” Alvarez said. “There should be no illusions about that.”
“They failed because they were a victim of circumstance and some bad decisions they had made in the years up to that,” he said. “But they didn’t have time to get out.”
Some panel members also lent Fuld a sympathetic ear.
Peter Wallison said the Fed should have loaned Lehman money to show markets that it had confidence in the company.
“The purpose of that is to say to the market this is a solvent company and we are willing to lend the money that it needs,” he said. “Eventually the run stops because the market says well the Fed says this is a solvent company and I need to stop worrying.”
The Financial Crisis Inquiry Commission is hearing from Fuld as it gears up to release to the president and Congress on Dec. 15 a report on Wall Street’s 2008 collapse. It is also hearing from former Wachovia executives Wednesday. It will hear from Federal Reserve Chairman Ben Bernanke and FDIC Chairwoman Sheila Bair on Thursday.
The panel’s vice chair grilled also government officials Wednesday regarding Wachovia’s October 2008 federal rescue.
In the case of Wachovia, government officials altered tax code to make an acquisition of the bank more attractive to Wells Fargo. Bill Thomas, a former Republican Ways and Means chair, criticized the move Wednesday morning, calling it an “unprecedented executive branch usurpation of tax law” that cost taxpayers billions of dollars in lost revenue. He went after former Wachovia CEO Robert Steel’s statement that the Wells Fargo deal didn’t require government assistance.
“How could you say there was no cost to the government?” he asked. “Wells Fargo sharpened its pencil and figured it was a pretty good deal. How can you not call changing the tax code to provide you with significant tax benefits ‘doing it without government assistance.’ Isn’t taking money away from taxpayers and the general fund government assistance?”
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Readers' Comments (61)
beeper812 Party: Conservative
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Sep. 1, 2010 - 9:28 AM EST
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Obama Success Story for Sept 1, 2010
Posted by Jim Hoft on Wednesday, September 1, 2010, 8:32 AM
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Read all 61 comments in our forumOne 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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