Fuld: 'I feel horrible about what happened'

Heard on Gall Street: Defunct Lehman's defunct CEO invokes 9/11 to House panel

Lehman CEO Richard Fuld tried to cash in on sympathy today in his appearance before Henry Waxman's House committee.

In his statement, he didn't of course mention his cashing in on Lehman's stock last year to the tune of $52.9 million in just two days of selling — when it was still worth something. (See my item earlier today.)

No surprise, but Fuld not only left out the words "compensation" and "salary" but also didn't even include the word "mistake" in the statement. His only use of "error" was reserved for the press, naturally:

Some of the media coverage of Lehman Brothers' demise has been sensationalized – based on rumors, speculation, misunderstandings and factual errors.

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Throughout, you can hear a strong whine that Lehman could have been bailed out but unfairly wasn't.

What mea culpa emerged from Fuld (at least in that formal statement) was more like an "our culpa" encompassing every other Wall Street firm. Yep, an excuse right out of the "mistakes were made" school:

"At Lehman Brothers' annual shareholder meeting, I . . . said what I absolutely believed to be true at the time — that the worst of the impact to the financial markets was behind us. With the benefit of hindsight, I can now say that I and many others were wrong."

And though his statement doesn't really get fully into the behind-the-scenes maneuvering in Lehman's panicked HQ (the Wall Street Journal gave out some fly-on-the-wall details earlier today), Fuld was wrong about what kind of help Lehman was going to get from Treasury Secretary Hank Paulson.

In one of the Lehman e-mails the company turned over to Waxman's committee, Fuld wrote fellow Lehman exec Tom Russo last April 12 when the investment bank was applying for corporate welfare:

"Just finished the Paulson dinner. . . . we have huge brand with treasury."

Oh, yeah, Treasury was really in Lehman's corner.

And belying what he said about his poor, poor, fellow Lehman's employees, another e-mail from Fuld, this one last June 3, has him scornfully dismissing a suggestion from a couple of execs that Fuld and other top executives forgo their bonuses:

"Don't worry — they are only people who think about their own pockets."

He should talk.

But that was in private. His public performance today wasn't quite as arrogant. As I mentioned above, Fuld emitted a collective Wall Street culpa that avoided his and his own company's responsibilities for their actions. He called what happened a "tsunami." Heckuva job, Dick, in explaining it:

In the end, despite all our efforts, we were overwhelmed, others were overwhelmed, and still other institutions would have been overwhelmed had the government not stepped in to save them.

What happened to Lehman Brothers could have happened to any firm on Wall Street, and almost did happen to others.

A litany of destabilizing factors: rumors, widening credit default swap spreads, naked short attacks, credit agency downgrades, a loss of confidence by clients and counterparties, and strategic buyers sitting on the sidelines waiting for an assisted deal were not only part of Lehman's story, but an all too familiar tale for many financial institutions.

The fallout from these repeated onslaughts is what has caused the government to intervene to dramatically change the rules and provide substantial support to other institutions.

And as Fuld himself said in his statement, he had told the Lehman shareholders that the worst was behind the firm but that management was wrong "in hindsight."

Too bad for Fuld that the Waxman Committee also released today a document entitled "Internal Lehman Brothers Presentation vs. Public Statement."

While he was saying publicly that Lehman was in good shape, the internal document, kind of a talking-points type thing for in-house discussion before the firm plunged into bankruptcy, didn't assign first blame to "rumors." Rather, it reveals some internal truth-telling back then about Lehman's recklessness and missteps — and the company "saw the warning signs" long before why Fuld now calls "hindsight" happened:

"WHY DID WE ALLOW OURSELVES TO BE SO EXPOSED?
• CONDITIONS CLEARLY NOT SUSTAINABLE
• SAW WARNING SIGNS
• DID NOT MOVE EARLY/FAST ENOUGH
• ILLIQUID ASSET ORIG'N TOO MUCH/TOO LONG
• BEHAVED TOO MUCH INVESTORS, NOT TRADERS
• NOT ENOUGH DISCIPLINE ABOUT CAPITAL ALLOCATION"

Fuld's statement today to the Waxman panel was expectedly short on such frankness but long on whining about how other Wall Street firms, but not his, were placed on the welfare rolls.

The topper, though, was Fuld's shameless comparison between 9/11 and the bankruptcy of his firm — oh, brother!:

"We saw the undeniable spirit of Lehman Brothers after the tragic events of September 11, 2001. Lehman employees watched the towers fall around them that morning as they fled for safety.

"We lost a co-worker that day, and we lost our homes at One World Trade Center and Three World Financial Center. In the hours and days that followed, we were dispersed to makeshift offices in and around New York City. We worked around the clock under incredible stress, with the goal of serving our clients and shareholders in a suddenly uncertain world and returning stability to rattled markets.

"Over that weekend, we built two complete trading floors in our temporary office in Jersey City. When the markets reopened the morning of September 17, to the surprise of many, Lehman Brothers was there.

"We still saw this courageous spirit of Lehman Brothers' employees in these last several weeks."

Yeah, Lehman did a solid for the nation by "returning stability" to rattled markets." Did itself a solid back then, too. What else could it have done?

It's a little silly to have to point out that tsunamis are natural disasters and that turbaned terrorists destroyed the World Trade Center while the Armani-clad Fuld and his crew destroyed their own firm.

And there was a lot else Lehman and its execs could have done to stay solvent.

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