Lehman CEO: Why Weren’t We Bailed Out?

By
Monday, October 06, 2008 at 3:57 pm

The House oversight committee has spent the day unloading on Lehman Bros. CEO Richard Fuld — his $480 million in compensation over the past eight years, his investment bank’s unprecedented leveraging of mortgage assets, his misleading of Lehman shareholders up to the day the company declared bankruptcy and the fate of 25,000 Lehman employees.

Fuld has deflected questions on whether he’s unfair, unethical and has committed fraud. He has spoken deliberately, demonstrated little passion and largely stonewalled lawmaker’s questions as if he were a member of the Bush administration’s Justice Dept. Until Peter Welch (D-Vt.) asked Fuld why the government bailed out AIG but didn’t bail out Lehman.

Fuld became animated: “I do not know why we were the only one.”

He discussed how the Treasury Dept. bailed out fellow investment bank Bear Stearns in March, and Bank of America bought Merrill Lynch the week Lehman declared bankruptcy.

He also encouraged questions from Welch and Rep. Dennis Kucinich (D-Ohio) that AIG was bailed out because Goldman Sachs, where Paulson was formerly CEO, had a reported $20-billion tie to the insurance giant.

With the hearing winding down, Fuld kept saying, “I wake up every single night thinking what I could have done differently. This is a pain that will stay with me the rest of my life.”

On whether the Treasury Dept. should have bailed out Lehman, the committee actually seems in agreement with Fuld.

Henry Waxman (D-Calif.) said in his opening statement: “Many experts think Lehman’s fall triggered the credit freeze that is choking the economy and made the $700 billion rescue necessary.”

The committee holds a hearing tomorrow on AIG.  Will the committee push the line of questioning encouraged by Fuld– that AIG was bailed out, and Lehman Bros. wasn’t, because that was the scenario most beneficial to Goldman Sachs, a rival investment bank to Lehman?

No one is suggesting that Paulson was merely making decisions based on Goldman Sach’s best interests. But the oversight committee’s work may discover that it was at least a factor.

Comments

8 Comments

PacificGatePost
Comment posted October 6, 2008 @ 11:44 pm

A NEEDED FIX IN THE BOARD ROOMS

In't it time the system went in for some much needed repair?

Due diligence and oversight long ago slid out the window. No one was watching.

Time to do something about it.

Here's a huge one they all missed…. The dramatic change that swept through all of North America's boardrooms over the past 30 years. It is one of the underlying causes of the headache the economy is now feeling, but more importantly, it has resulted in the general feeling of “disconnect” by most Americans.

“WE THE SHAREHOLDERS OF YOUR COMPANIES……

http://pacificgatepost.blogspot.com/2008/03/let…


Ken Lay
Comment posted October 7, 2008 @ 1:21 am

His half a billion in salary + bonuses should help to soothe his pain.


frit
Comment posted October 15, 2008 @ 5:11 am

The answer not to bailout of Lehman, while lending money to AIG is simple.

AIG had adequate assets for sale with valuation much higher than $850 billion lent by the Fed.
AIA, plus many subsidiaries of AIG, worth a lot of money, and a lot of companies might have interest in bidding for AIA .

What did Lehman have to repay the temporary loans lent by AIG at the brink of their collapse.
Lehman did not worth it.

Why UK and European banks were in trouble? They had extraordinary low capital ratio.
Think about it, if UK wanted to raise the capital ratio of their banks to 11%, and UK finally got over 50% or 40% ownership of some banks, one bank had capital ratio of around 5-6% (significantly less than 8% requirement for the one which UK have over 50% ownership) and the other had capital ratio of around 6-7% (for the one which UK have over 40% ownership). In other words, these banks might be as speculative as Bear Sterns and Lehman.Brothers.

UK need to inject capital to so many banks because the bank supervision of such banks was so loose that so many big banks did not have adqeuate captial at the same time. US can let Bear Sterns and Lehman Brothers to end their business because a lot of banks still have adqeuate captial ratio.
For the ones which fail to meet the capital ratio requirement, Washington Mutual, IndyMac, Wachovia were the examples. Fed and FDIC did pretty good jobs here.

This banking crisis occurred because the fools from UK, France, Germany, Italy and ECB had the guts to go out of the conference room on a particular Saturday without a solid proposal to save their own financial system. Germany was right to reject the proposal to form a fund save the whole Euro Dollar financial system, as the taxpayers should not be responsible to pay for liabilities of other countries. However, they can form some kind of assurance to the financial markets, to assure the safety of the deposits of depositors in their banks, by offering a common scheme of deposit insurance, and to flood the banks with Eurodollars funding, to alleviate the difficulties in borrowing money in Libor and all inter-banks lending.

Hence, this financial crisis is the failure of UK and EU in handling their own crisis in a prompt manner.
Germany devised their own rescue plan on the following Sunday, UK had announced rescue plan on Tuesday, Italy rescue plan on Wednesday, while the stupid France need to wait for Friday G7 Meeting, Saturday/Sunday G20 meeting to devise rescue plan. Can the stupid French completed this assignment by phone on Monday or Tuesday?

If the big 4 European countries had a rescue plan similar to that agreed in the G7 or G20 meeting, during their first Oct Saturday meeting, the extent of this crisis would not be so extended.

In 1907 bank run crisis, JP Morgan was reported that he invited bankers to have a meeting in his library.
When the bankers entered the library, he locked the door with key, and told everybody that no one can go out of the room if no solution could be devised to save the crisis. This is the right manner for the fools of Europe when they held that meeing.


Elsie M Aiken
Comment posted February 3, 2009 @ 11:10 pm

Excellent, entertaining, useful reading, Thanks !!


Helen Atwood
Comment posted February 16, 2009 @ 12:33 am

your blog is awsome


buy rift platinum
Comment posted April 6, 2011 @ 9:35 am

thanks for you share with us.


runescape gold
Comment posted April 6, 2011 @ 9:37 am

Fuld became animated: “I do not know why we were the only one.” haha, that is intertesting.


RSS feed for comments on this post.

Sorry, the comment form is closed at this time.