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Lehman CEO takes responsiblity for downfall
Wednesday, 08 Oct, 2008
Former Lehman CEO Richard Fuld testifies at a hearing held by the House Committee on Oversight and Government Reform on Capitol Hill. -Reuters
WASHINGTON: Richard Fuld, the disgraced head of Lehman Brothers, said he took full responsibility for his actions ahead of the downfall of the 158-year investment bank, but said US regulators knew exactly what the firm's liquidity was and how it was pricing its distressed assets in the months before its collapse.
Despite his acceptance of his role before the collapse, US lawmakers expressed outrage to Fuld about Lehman on Monday, saying that Fuld, board members, regulators and Congress all shared blame for its downfall.
'I want to be very clear. I take full responsibility for the decisions that I made and for the actions that I took based on the information that we had at the time,' Fuld told a congressional panel.
Fuld said Lehman took steps to reduce the firm's leverage as market conditions worsened and by Sept 10, it had reduced its balance sheet by close to $200 billion.
Five days later, Lehman filed for Chapter 11 bankruptcy protection, leaving three major investment banks. Since then, Merrill Lynch & Co Inc agreed to be taken over by Bank of America Corp, and Goldman Sachs Group Inc and Morgan Stanley said they would become commercial banks.
The US Securities and Exchange Commission loosely supervised the five largest investment banks, including Bear Stearns, for capital and liquidity levels. However, that supervision was voluntary and the SEC ended that program given that those banks have either collapsed or reorganized.
Fuld said that throughout 2008, the SEC and the Federal Reserve 'actively conducted regular, and at times daily oversight of both our business and balance sheet.'
'(Regulators) held regular price verification reviews. They were privy to everything as it was happening,' Fuld said in testimony delivered to the
House Oversight and Government Reform Committee.
Rep. Henry Waxman, a California Democrat who chairs the panel, is holding a series of hearings to find out what went wrong and what changes are needed in financial services regulation.
The committee obtained thousands of pages of e-mails and other internal Lehman documents that 'portray a company in which there was no accountability for failure,' Waxman said.
Regulators 'failed miserably' to prevent Lehman's collapse and its resulting impact on the US economy which forced Congress last week to approve a
$700 billion bailout for the financial industry, Waxman said.
The bailout empowered the Treasury Department to buy mortgage-backed securities and is designed to thaw out frozen credit markets and restore confidence in the markets.
Wednesday, 08 Oct, 2008
Former Lehman CEO Richard Fuld testifies at a hearing held by the House Committee on Oversight and Government Reform on Capitol Hill. -Reuters
WASHINGTON: Richard Fuld, the disgraced head of Lehman Brothers, said he took full responsibility for his actions ahead of the downfall of the 158-year investment bank, but said US regulators knew exactly what the firm's liquidity was and how it was pricing its distressed assets in the months before its collapse.
Despite his acceptance of his role before the collapse, US lawmakers expressed outrage to Fuld about Lehman on Monday, saying that Fuld, board members, regulators and Congress all shared blame for its downfall.
'I want to be very clear. I take full responsibility for the decisions that I made and for the actions that I took based on the information that we had at the time,' Fuld told a congressional panel.
Fuld said Lehman took steps to reduce the firm's leverage as market conditions worsened and by Sept 10, it had reduced its balance sheet by close to $200 billion.
Five days later, Lehman filed for Chapter 11 bankruptcy protection, leaving three major investment banks. Since then, Merrill Lynch & Co Inc agreed to be taken over by Bank of America Corp, and Goldman Sachs Group Inc and Morgan Stanley said they would become commercial banks.
The US Securities and Exchange Commission loosely supervised the five largest investment banks, including Bear Stearns, for capital and liquidity levels. However, that supervision was voluntary and the SEC ended that program given that those banks have either collapsed or reorganized.
Fuld said that throughout 2008, the SEC and the Federal Reserve 'actively conducted regular, and at times daily oversight of both our business and balance sheet.'
'(Regulators) held regular price verification reviews. They were privy to everything as it was happening,' Fuld said in testimony delivered to the
House Oversight and Government Reform Committee.
Rep. Henry Waxman, a California Democrat who chairs the panel, is holding a series of hearings to find out what went wrong and what changes are needed in financial services regulation.
The committee obtained thousands of pages of e-mails and other internal Lehman documents that 'portray a company in which there was no accountability for failure,' Waxman said.
Regulators 'failed miserably' to prevent Lehman's collapse and its resulting impact on the US economy which forced Congress last week to approve a
$700 billion bailout for the financial industry, Waxman said.
The bailout empowered the Treasury Department to buy mortgage-backed securities and is designed to thaw out frozen credit markets and restore confidence in the markets.
