By Michael Corkery
To hear the way Dick Fuld describes it, Lehman simply never got the memo: The firm would be rescued, after all.
The former Lehman Brothers chief testified to the Financial Crisis Inquiry Commission on Wednesday that he was told that Lehman did not have access to an expanded primary dealer credit facility opened up to other banks. This facility allowed Wall Street firms to borrow from the Federal Reserve during the panic of September, 2008. Without access to this emergency money, Lehman was forced to file for bankruptcy.
On the contrary, testified Tom Baxter, a general counsel at the New York Fed. Lehman was told in writing on Sunday, Sept. 14, the day its board was considering whether to file for bankruptcy, that it had access to the facility. Provided, of course, that Lehman could produce the necessary collateral. That was an issue very much in dispute. Regulators and investors have said much of Lehman’s asset base, such as its commercial real estate and residential mortgage holdings, was illiquid and difficult to value as collateral.
During his testimony Wednesday, Baxter cited a letter that the NY Fed sent to Lehman on Sept. 14 via email, granting Lehman access. Fuld said Wednesday he was unaware of the letter, which was addressed to Robert Gugielmo, a senior vice president in Lehman’s legal department. [A copy of the letter can be read here]. Baxter added in testimony that Fuld was flat out “wrong” to say Lehman did not have access to this emergency credit facility.
At first, Baxter told the commission in testimony Wednesday that the letter was sent to Lehman on Sept. 15, the day after the bankruptcy filing. That riled Fuld to remark: “Thank you for the letter. But we had already filed by then.”
Harvey Miller, who is the chief restructuring lawyer for the Lehman estate, says he believed that the firm would not have access to the lending window until after it filed for bankruptcy.
After being prompted by an aide, Baxter corrected the record to say the letter was sent on Sept. 14.
Baxter added: “We put it in writing because we were concerned that communications were not as robust as they could have been’’ during that frantic weekend of negotiations nearly two years ago .
This dispute is a big wrinkle in the story of the Lehman bankruptcy. And the NY Fed’s admission that communications between regulators and Lehman execs were not “robust” is troubling given the consequences.
Of course, memories can fade with time or be skewed by certain points of view. Fuld has been dogged in his opinion that regulators pushed Lehman into bankruptcy. [Click here to read Fuld's written testimony]
Yet, Fuld may have scored some allies on the commission today. Speaking to Dow Jones Newswires, chairman Phil Angelides said Baxter’s account was not “fully credible” that somehow Lehman was allowed to borrow from the facility. Angelides said the commission now wants proof that Lehman actually received the letter.
On the copy of the letter posted on the commission’s website, there is no time stamp or signatures from Lehman officials certifying that they received it — which is something the Fed requested Lehman do.
J Paulson is the rat. GS got their 60 billion w/ no hair cut. Paulson made sure of that. This was w’s parting gift to the american people after sticking it to the working man for eight years. gee thanks.
An email, to one individual, on a Sunday. That’s how they cover their rear end when they “were concerned that communications were not as robust as they could have been’’???
You guys are beatting a dead “DOG” of the Dow! Like the Oz said in 2007… “Dead Company… Walking”! Paulson was and still is the… “RAT”… that is still working for GS… doing God’s work I might add!
What? Even I remember all the NEWS media talking about the emergency meeting taking place that weekend and the significance of the event. The Fed could not have contacted the Lehman people at that meeting? E-mail? That may be for a documentation purpose, but to now say that they sent an e-mail and that ???? What a joke! Mind boggling statement. And all the consequences from the fall out of that??? I smell more of RAT than anything else here!
Lehman like the rest screwed this economy. Now Flud wants to blame everyone but himself. He took risky bets, yep just big gambling bets. and now cries the baby blues. Them and AIG with GS all deserved to flip flop like flounders out of water. What happens when a person gets let go? Fuld, stop being a baby and face the facts, you put all your money on Black, and it came up Red.
Screw all of wall street