Lehman CEO Testifies On Capitol Hill
ROBERT SIEGEL, host:
The head of Lehman Brothers was in the hot seat today in the first congressional hearing since negotiations began on the financial bailout. Lehman's CEO, Richard Fuld, was asked about what was going on at the firm in the days leading up to its bankruptcy filing. As NPR's Dina Temple-Raston reports, it was not a good day for the CEO.
DINA TEMPLE-RASTON: Richard Fuld appeared contrite as he began his testimony this afternoon.
Mr. RICHARD FULD (CEO, Lehman Brothers): I feel horrible about what has happened to the company and its effects on so many. None of us ever gets the opportunity to turn back the clock, but with the benefit of hindsight, would I have done things differently? Yes, I would have.
TEMPLE-RASTON: Fuld was the first Wall Street executive to face the committee. Lehman Brothers' demise transformed an already bad situation in the credit markets into a full-scale crisis. Congressman Elijah Cummings of Maryland tried to place blame.
Representative ELIJAH CUMMINGS (Democrat, Maryland): Mr. Fuld, I want to ask you about your personal responsibilities. Sir, do you agree that Lehman took on excessive leverage under your leadership? Please answer yes or no.
TEMPLE-RASTON: Fuld writhed. You could almost hear him thinking about how to reply.
Mr. FULD: It's not that easy.
TEMPLE-RASTON: Fuld says it was a confluence of events. Widening borrowing costs, accounting rules that forced the bank to write down its assets, and rating agency downgrades that all conspired to hobble Lehman. Diane Watson of California asked Fuld if U.S. regulatory bodies were also responsible. Fuld struggled to answer, and Watson pounced.
Mr. FULD: I'm sorry...
Representative DIANE WATSON (Democrat, California): If all the things I just spoke of you think were just fine and worked like they should, the regulations, then it's your total responsibility for the failure of Lehman Brothers. Thank you.
Mr. FULD: In retrospect, it's easy to go back.
Representative WATSON: Yes, no? Yes, no? My time is up.
TEMPLE-RASTON: Fuld said that in the past year, Lehman had recognized that it was overleveraged. It had been trying to bring down the amount of debt it had on its books, shedding among other things bad mortgages and other loans. He said that when Lehman finally declared bankruptcy in September, it had one of the best leverage ratios on Wall Street. But it wasn't enough.
Mr. FULD: I, like a number of other people, thought the mortgage crisis was contained to residential mortgages. There were a number of people, many experts included, that also thought that. And I was wrong.
TEMPLE-RASTON: The committee made much of the fact that in the days before declaring bankruptcy, Lehman Brothers steered millions of dollars to departing executives. Chairman Henry Waxman asked Fuld about his reported $480 million in compensation.
Representative HENRY WAXMAN (Democrat, California; Chairman House Oversight and Government Reform Committee): There's a lot of people ask, is that fair for the CEO of a company that's now bankrupt to have made that kind of money? It's just unimaginable to so many people.
TEMPLE-RASTON: Fuld took off his glasses and shifted uncomfortably. He said a compensation committee took care of those sorts of issues. He added that rumors about what he and other executives made were wildly off the mark. Fuld said he took home a little less than $250 million in the past eight years. About $60 million of it was in cash. Dina Temple-Raston, NPR News.