Richard Fuld, Former Lehman CEO, Dodges Questions On Why Bank Failed (VIDEO)

In a maddening exchange today between former Lehman Brothers CEO Richard Fuld and Rep. Paul Kanjorski (D - PA.) in front of the House Financial Services Committee, Fuld found it nearly impossible to identify why his bank failed.

Or, rather, he did whatever he could to avoid admitting exactly why his firm tanked. Here's the exchange (abridged for length):

Kanjorski: What caused the demise of Lehman Brothers?

Fuld: A number of factors...

Kanjorksi: What are they?

(long pause)

Fuld: A little bit of history, I'm not going to back 150 years....

Kanjorski soon interrupted and said, "Can you succinctly tell us, why did Lehman Brothers fail?"

After another stalled response from Fuld, Kanjorski asked again: "Very simply what caused your demise? Did you over-invest in risky obligations? Did you have less than adequate staff hired in executive execution? There's gotta be some fundamental reasons, I can agree that you can't give us one cause, but don't give me an advertisement..."

Fuld then went on to say that he never heard any feedback from regulators that his firm did not have enough liquidity.

WATCH the exchange:

Former Regulator: Lehman Was The Largest Purveyor Of 'Liars' Loans' In The World

In fiery testimony before the same committee, William K. Black, a former regulator during the S&L crisis, told members of the committee, "You asked earlier for a stern regulator, you have one now in front you."

Black, currently an associate professor of Economics and Law at the University of Missouri-Kansas City School of Law, was blunt: "When people cheat, you cannot as a regulator continue business as usual."

He called Lehman's failure "a story, in large part, of fraud" that begins at the latest in 2001:

"Lehman was the leading purveyor of liar's loans in the world. For most of this decade, studies of liar's loans show incidence of fraud of 90%. Lehmans sold this to the world, with reps and warranties that there were no such frauds."

After failing to act, Black says, regulators offered "sad excuses" about insufficient staffing. Here's more from Black:

"The SEC: we're told they're only 24 people in their comprehensive program. Who decided how many people there would be in their comprehensive program? Who decided the staffing? The SEC did. To say that we only had 24 people is not to create an excuse -- it's to give an admission of criminal negligence. Except it's not criminal, because you're a federal employee."

WATCH Black's Testimony:

Comments

[sandzw007]

08:01 PM on 04/22/2010

This guy must be one of the worst CEOs ever. He does not even know what goes on in his own company? Yea right? He conveniently contracted Alzheimers.

[DomainDiva]

10:20 AM on 04/22/2010

Fuld should read Andrew Ross Sorkins' Book 'Too Big To Fail' then he will know the answer. Maybe everyone in Congress should read it too.

[AirViceMarshalPark]

02:08 AM on 04/22/2010

I know why it failed. It failed because it hired MBAs. That is the kiss of death for any company.

Imagine, this tool takes a 150 year old major house right into the WC and has no explanation.

[JPETERB]

07:22 PM on 04/22/2010

The typical MBA program ignores every thing and every one in the wide world except the acquisition of personal wealth and endless market growth through unscrupulous manipulation of either supply or demand or accounting. In the most profitable business plans both supply and demand will be manipulated with creative accounting, misinformation/advertising or simple strong arm tactics. Eliminating competition is job one. Collusion with the remaining monopolies is job two. Minimizing any threat to job one & two is job three. Vertical integration with associated industries is an absolute must. Real competition is to be avoided at all costs.

Any MBA candidate considering moral qualms, the law of business balance (You cannot give or pay a little and expect to get a lot) and civil rules of basic fairness or, G-d forbid, the Golden Rule, is flunked out or kept out. I know a few MBA graduates. For those who have gone on to work for large transnational corporations, most are closet sociopaths. They were educated to be ignorant of any ill effects of their business activities. MBA's are taught to disregard any fact or person or place or society or law that will not quickly increase their personal or corporate wealth. They are encouraged to plan and act to administer and maintain private supreme unilateral power over "the market" or as all the "little people" know it, the planet Earth and our families.

[JoeDoorman]

11:10 PM on 04/21/2010

doesn't know how it failed...
maybe he should have watch this frontline piece.

http://www.pbs.org/wgbh/pages/frontline/warning/

I believe everyone should watch it.
haven't seen a better timeline of what happened and why?

[CaliRN]

05:20 PM on 04/21/2010

Of course he can't explain (truthfully) why Lehman failed ... he would be incriminating himself for criminal prosecution.

[HisPetGoat]

12:15 PM on 04/21/2010

Our "best and brightest" at work.

[DannyGee]

11:36 AM on 04/21/2010

this toolbox should be arrested for being named "Dick Fuld".

[WindySailor]

11:07 AM on 04/21/2010

It's Richard Fuld. He believes Lehman failed because his gamepiece landed on Park Place, and Goldman Sachs had it stacked with hotels.

[stargazer13]

10:26 AM on 04/21/2010

brink of collapse middle class wiped out !!

bonuses given for a job well done !!

eewwhh just pisses me off to no end !!

and all I get from these LYING CEO,s is duh no one saw it coming duh I don,t recall the details

a Me don,t know ? any thing !!

and continuing the theft is CHASE and JP MORGAN with there gold manipulation that one is simmering in the back ground Justice Dept ( car 54 where are you ? )

[Kevin Atlanta]

10:26 AM on 04/21/2010

The Citizens damaged by these actions are 98% of the American population with the Bush Transfer of Wealth Program.
We have the power to make the change required.

[Kevin Atlanta]

10:24 AM on 04/21/2010

These Corporate Communists with Lehman in the lead discovered a SCAM of Bundling the Mortgages behind closed doors, getting pensions funds, municipalities and institutions to invest in the crap they underwrote, sold the whole mess off and then were re-imbursed by Fanny or Freddy for the crap mortgage they wrote while taking out insurance on the crap they sold failing and called it "honest business."
That pretty well defines the SCAM and FRAUD these creeps achieved while bankrupting AIG with malice and forethought in Collusion with each other all the way through...
They purchased the politicians and regulators to rubber-stamp their actions and the Bush Administration endorsed this re-distribution of wealth program as it's own while lying us into two unfunded, illegal wars, tearing up the constitution and raping the American people. Not just the Middle Class but 98% of the American people and they are still free!
Audit and End the FED
Restore Glass-Steagall
A strong Independent Consumer Protection Agency
Roll Freddy Mac and Fanny Mae up into the United States Mortgage Bank and remove this business from the Corporate Communists hands.

[stargazer13]

10:10 AM on 04/21/2010

Why did Lehman Brothers fail !! DUH !!!! ME DON, T NO !!

and this guy got paid how much !

[kdwestphal]

09:05 AM on 04/21/2010

In Ohio, there's a former managing director of Lehman Brothers running for governor!

[NevaforLeadership]

09:15 AM on 04/21/2010

What's your point?

I worked for a brokerage firm that went under once, but I personally had absolutely nothing to do with the activities that caused it to go under.

These kinds of witch hunts are no better than the odious activities we have seen from the teabaggers. Keep it up and watch Obama serve just one term.

[NevaforLeadership]

08:47 AM on 04/21/2010

I'm not a defender of Lehmans or Fud, but that Kanjorski is a jerk with a capital "J" -- even more so, because he doesn't know what the hell he is talking about.

When people behave like a...s...h...s like that, they never get the answers for which they are looking.

It would help if the committee members did their homework, at a very minimum to understand how the capital reserve system works in brokerage firms.

As an aside, Paulson's (Republican and former rival of Fud) decision not to extend the facility necessary for Lehman's to be taken over by Barclays or the other investment bank -- can't remember which one, leaving Lehmans to go down, triggered the meltdown.

Had Paulson made a different decision the melt down could have been avoided, albeit with quick action to address the toxic assets in many institutions and some shaky, tough times.

[Paul J James]

08:38 AM on 04/21/2010

These bastards don't go to jail. They are too big to fail and too big to go to jail but worse yet, they are too big to give the money back. Goldman Saks had a profit of 3 billion recently and collected 5 billion in bonus money. I wish I could run my business like that. When the government busted Bernie Madoff, they went to the investors that actually made money and tried to get the money back. We need to run these guys and their families out of the country.