Lehman's fall probed by Congress

by Frank James

Richard Fuld, former chief executive officer of the extinct Lehman Brothers investment bank was on Capitol Hill today to answer questions about the demise of his firm and the huge pay packages he and other top executives received before Lehman filed bankruptcy.

What did Fuld say? Mistakes were made but not so much by him. Rather, he made investors who made bets against his company by short selling its shares the villains of the piece.

Fuld did say he wakes up in the middle of night to ask what he could have done differently to save the company. He also said he would be haunted by the fall of the House of Lehman for the rest of his life.

When House Democrats questioned why Lehman didn't get federal help to stay afloat like AIG for instance, Fuld indicated he shared that question.

But he pushed back numerous times. When Rep. Henry Waxman, chairman of the House Oversight and Government reform committee, asserted that Fuld received $500 million between 2000 and 2008 in compensation, Fuld didn't agree with that number, saying Waxman had overstated what he received in options.

He also pointed out that he didn't receive a golden parachute, didn't have a contract which guaranteed a payout on his exit and had millions of shares that weren't worth much on the day Lehman closed his doors. Wisely, he said he wasn't seeking the committee's sympathy and none was given.

There were a lot of questions from House members on why Fuld was telling investors even in the days before his company filed for bankruptcy protection that Lehman's capital position was strong.

His answer? Lehman's position was strong when he made such assertions. He gave a very technical answer to explain why this was so.

But lawmakers didn't buy his explanation. They read internal Lehman e-mails and memos which suggested that other of the company's executives were concerned about the Lehman's deteriorating financial position even if Fuld wasn't.

One of the most interesting lines of questioning was raised by Rep. Dennis Kucinich, the Ohio Democrat, who suggested in his questioning that Treasury Secretary Henry Paulson Jr., Goldman Sachs' former chief executive, might have allowed Lehman to go under as a favor to his old firm.

Fuld said he certainly hoped that wasn't the case but it probably wan't the first time that thought had crossed his mind.