Lehman Brothers ex-chief Dick Fuld blamed the government for his firm’s failure.
Fuld, in written testimony Wednesday before the congressionally appointed Financial Crisis Inquiry Commission, insisted Lehman was healthy enough to survive its September 2008 brush with bankruptcy if only federal officials led by Henry Paulson, Ben Bernanke and Tim Geithner had extended a hand.
Many on Wall Street were mentally sticking a fork in Lehman the moment its smaller rival Bear Stearns collapsed in March 2008, on the reasoning that the firm simply had been too aggressive in chasing bubbly real estate assets in the boom.
But Fuld contended Lehman had adequate capital, sufficient liquidity and enough well functioning businesses that it could have made it through the crisis had the government backstopped the firm.
He claimed it was policymakers’ decision not to assist Lehman, rather than the firm’s overreach during the credit bubble or his own failure to find an equity partner, that resulted in the biggest-ever U.S. bankruptcy the morning of Sept. 15, 2008.
In a rare concession to reality and a bit of an understatement, Fuld said that “there is no question we made some poorly timed business decisions and investments.”
But he contended Lehman had raised enough capital and had recognized enough losses that it could have survived had it simply received the same level of support extended to other faltering financial firms.
Fuld takes pains to show Lehman didn’t suffer from capital shortfall that has been bandied about on Wall Street since before the firm filed for bankruptcy. He says the reports of a capital hole are mistaken.
Fuld also talks extensively about liquidity, mentioning the word nine times. He does not, however, directly address the contention that Lehman vastly overstated the size of its liquidity pool, and that the firm ran out of cash after its trading partners withdrew.
The massive report by the court-appointed bankruptcy examiner supports this conclusion, but as it happens that view doesn’t jibe with Fuld’s preference for pointing the finger at others.
Fuld will never admit it, but the information wasn’t the only thing that was flawed in the Lehman crisis.