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Lehman CEO Fuld blames Government for bankruptcy.

rafterman

A sadder and a wiser man
Feb 15, 2004
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for not bailing Lehman's ass out during the 08 crash.

http://www.guardian.co.uk/business/2010/sep/01/dick-fuld-lehman-collapse

Boss of Lehman Brothers attacks regulator for lack of action, but admits: 'I myself did not see the depth and violence of the crisis'
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Andrew Clark in New York guardian.co.uk, Wednesday 1 September 2010 20.52 BST Article history
Former Lehman chief executive Dick Fuld at the Financial Crisis Inquiry Commission hearing today. Photograph: Carolyn Kaster/AP
Former Lehman Brothers boss Dick Fuld delivered a defiant defence of his management of the defunct Wall Street bank today, telling an official inquiry that the firm's 2008 bankruptcy was down to false rumours about a solvency crisis, uncontrollable market forces and a refusal by the US government to come to the rescue.

Appearing in front of the bipartisan US Financial Crisis Inquiry Commission in Washington, Fuld was only willing to accept very limited blame for the implosion of the bank, which sent financial markets into the worst global panic since the second world war.

"I clearly made mistakes," said Fuld, conceding that Lehman had too many illiquid assets, such as commercial property, on its books, and insufficient capital. But he said these issues were addressed before bankruptcy as the bank raised $3.8bn in equity capital and "de-risked" by shedding 50% of its less saleable investments.

"Did we do everything right? We clearly did not," said Fuld. "I myself did not see the depth and violence of the crisis. I did not see the contagion. I believe we made poor judgments in timing for the assets we bought and for the businesses we supported. Would I love today to be able to reach back and [re]take those? Yes."

However, Fuld told the panel, he would have needed a "crystal ball" to take more radical action – such as pulling Lehman out of the troublesome mortgage market earlier. And he repeatedly shifted blame onto the US government, insisting that the Federal Reserve refused to allow Lehman access to its "discount window" that provided cheap capital to Wall Street.

Nicknamed "the gorilla" for his uncompromising style, Fuld was chief executive of Lehman for 14 years up until the bank's implosion. He has since kept a low profile, establishing a small financial advisory boutique, Matrix Advisors, but spending some of his time at a ranch near the mountain resort of Sun Valley, Idaho.

Set up by the Obama administration, the FCIC has a mandate to investigate the factors behind the financial crisis and is due to provide a detailed report to Congress in December. It has already heard from a string of key players including the bosses of Bear Stearns, Goldman Sachs and JP Morgan. Federal Reserve chairman Ben Bernanke will take the stand tomorrow.

Fuld claimed that far from having a "capital hole" at bankruptcy of $30bn to $60bn, as claimed by critics, Lehman had positive equity in its final days of $26.7bn. But as the former chief executive defended his stewardship of Lehman, a disagreement broke out about the Fed's actions. Thomas Baxter, vice-president of the Fed's New York branch, insisted that the central bank had, in fact, offered liquidity to Lehman on the fateful day before the bank's collapse, but he admitted that confusion had abounded that day among exhausted banking chiefs and regulators.

"If I could take you back in time to Sunday September 14 [2008], and you could be with us, having been up for several days, you might understand better why there could have been a lack of clarity in terms of communications," Baxter told the commission.

The demise of Lehman Brothers remains one of the most contentious and furiously debated events of the credit crunch. Its smaller rival, Bear Stearns, had run into trouble six months earlier but had been rescued by JP Morgan in a deal arranged, and partially guaranteed, by the Bush administration. Fuld remains furious that the US government did not step in similarly to salvage Lehman – although Fed officials say this was impossible because the only two possible buyers for the bank, Bank of America and Barclays, were unable to put together a deal fast enough to forestall a bankruptcy filing.

In the seven years between 2000 and 2007, Fuld was paid more than $310m and his uncompromising attitude made him, in the eyes of Wall Street's critics, one of the poster boys for the banking industry's excesses. A 2,200-page report compiled by a court-appointed bankruptcy examiner in March found that Lehman had used a contentious accounting technique known as "repo 105" to understate its liabilities to the tune of $50bn.

Along with his wife, Kathleen, Fuld has exhibited a modest belt-tightening. In the wake of Lehman's failure, the couple auctioned off a $20m personal collection of 16 abstract drawings including art by Willem de Kooning and Barnett Newman. But he and his wife still own a nine-bedroom mansion in the wealthy New York commuter town of Greenwich, Connecticut, and they have a beachside retreat on Jupiter Island, Florida.
 
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