WASHINGTON, Oct. 6, 2008
As Lehman Collapsed, Execs Were Rewarded
Failed Bank's Managers Received Bonuses While Pleading For Federal Aid, Documents Reveal
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"I feel horrible about what happened," Richard S. Fuld Jr., chief executive officer of Lehman Brothers, declared to the House Oversight and Government Reform Committee Oct. 6, 2008. (AP Photo/Susan Walsh)
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As well, executives who feared for their bonuses in the company's last months were told not to worry, according to documents cited at a congressional hearing. One executive said he was embarrassed when employees suggested that Lehman executives forgo bonuses, and cracked: "I'm not sure what's in the water."
The first hearing into what caused the nation's financial markets to collapse last month, precipitating a $700 billion bailout, opened with finger-pointing and glimpses into internal company documents from Lehman's chaotic last hours.
Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, said the giant investment bank was "a company in which there was no accountability for failure." Lehman's collapse set off a panic that within days had President Bush and Treasury Secretary Henry Paulson asking Congress to pass the rescue plan for the financial sector.
Richard S. Fuld Jr., chief executive officer of Lehman Brothers, declared to the committee "I take full responsibility for the decisions that I made and for the actions that I took." He defended his actions as "prudent and appropriate" based on information he had at the time.
"I feel horrible about what happened," he said.
Waxman questioned Fuld on whether it was true he took home some $480 million in compensation since 2000, and asked: "Is that fair?"
Fuld took off his glasses, held them, and looked uncomfortable. He said his compensation was not quite that much.
"We had a compensation committee that spent a tremendous amount of time making sure that the interests of the executives and the employees were aligned with shareholders," he said. Fuld said he took home over $300 million in those years - some $60 million in cash compensation.
Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept. 11 request to Lehman's compensation board that three executives leaving the company be given $20 million in "special payments."
"In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation," Waxman said before Fuld appeared as a witness.
With its clients clamoring for safe investments with above average return, the big Wall Street investment houses, including Lehman Brothers, bought up millions of the least dependable mortgages, chopped them up into tiny bits and pieces and repackaged them as exotic investment securities that hardly anyone could understand, 60 Minutes' Steve Kroft reports.
The government let Lehman go under Sept. 15, only to bail out insurance giant American International Group the next day, in a cascading series of financial shocks and failures that put Washington on track for the multibillion-dollar rescue starting the end of that week.Watch "60 Minutes'" explanation of the U.S.'s shadow economy.
Waxman described that plan as a life-support measure. "It may keep our economy from collapsing but it won't make it healthy again," he said.
That sentiment echoed on Wall Street, where the Dow Jones industrials sank below 10,000 on Monday for the first time in four years. Investors fear the crisis will weigh down the global economy and the bailout won't work quickly to loosen credit markets.
The rescue plan, now law, was so rushed that the usual congressional scrutiny is only coming now, after the fact.
"Although it comes too late to help Lehman Brothers, the so-called bailout program will have to make wrenching choices, picking winners and losers from a shattered and fragile economic landscape," said Rep. Tom Davis of Virginia, the committee's senior Republican.
Waxman said that in January, Fuld and his board were warned the company's "liquidity can disappear quite fast."
Despite that warning, he said, "Mr. Fuld depleted Lehman's capital reserves by over $10 billion through year-end bonuses, stock buybacks, and dividend payments."
Waxman quoted Fuld as saying in one document, "Don't worry" to the suggestion that executives go without bonuses.
That suggestion came from Lehman's money management subsidiary, Neuberger Berman. Waxman quoted George H. Walker, President Bush's cousin and a Lehman executive who oversaw some Neuberger Berman employees, as responding with a dismissive tone to the idea of going without bonuses.
"Sorry team," he wrote to the executive committee, according to Waxman. "I'm not sure what's in the water at 605 Third Avenue today.... I'm embarrassed and I apologize."
Rep. Elijah Cummings, D-Md., said: "I wonder how he sleeps at night."
Fuld said in his statement that the company did everything it could to limits its risks and save itself.
"In the end, despite all our efforts, we were overwhelmed, others were overwhelmed, and still other institutions would have been overwhelmed had the government not stepped in to save them," he said.
CBS News legal analyst Andrew Cohen noted the company and its executives can't be blamed for the global meltdown.
"But you can bet that sophisticated investigators will be looking at the books to see whether there was any corporate fraud, or any failed reporting requirements, that would support some sort of case going forward," said Cohen.
"If the investigation demonstrates that any individuals within the organization had any sort of criminal intent to defraud anyone, or if any sworn financial statements were inaccurate, we could easily see an Enron-type series of criminal and civil lawsuits. But those would take a long time to emerge and even longer to resolve," said Cohen.
© MMVIII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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Michelle Obama tells how her role as the First Lady has changed her perspective.
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See all 290 CommentsThe Dow fell STEADILY from 14,000 to 10,000 since January. THERE MUST BE A REASON why someone SEEMED TO KNOW IN ADVANCE.
"You guys don''''t listen...you half hear then spin. I wish you''''d spin on this."
I''m sorry - did you say something?
Oh, by the way, get f**king real - you can blame your beloved Republicanazis for that mess.
Now kindly GFAD.
They went to that new school that teaches students the new paradigm:
The primary metric for the success of a business is the level of compensation for the top executives. Nothing else matters.
The government is now in the mortgage business. Government keeps getting bigger...you libs want this...now shut the he11 up...you got it.
Idiots who don''t know anything about money and want to own homes because the liberal government says it''s a right to own a home. IT''S NOT a right...Idiots who can''t figure out their bills and buy houses they can''t afford and want me to pay for it! If you libs thinks it''s so important then you foot the d@mn bill.
We know what''s up with the DEMS. In a way I''d like to see Osama ben Bama as president. I''m b*i*t*c*hing about the libs now....I would continue, but maybe Osama bB would do all of the things he is saying and watch the LIBs b*i*t*c*h after he does all that and more. Libs are so d@mn pathetic. You guys don''t listen...you half hear then spin. I wish you''d spin on this.
Topic : FBI, SEC, Federal Reserve ''Failed to Connect the Dots''
to Wall Street
FBI, ''Failed to Connect the Dots''
THAT IS NOT TRUE
Wells Fargo Bank - REFUSED to get into : Sub-Prime Loans.
Wells Fargo Bank. - REFUSED - to give Loans for homes that were : Overpriced
Wells Fargo Bank REFUSED to give loans for : New construction Homes
That were Overpriced
The Actions and the Behavior of Wells Fargo Bank.
Gives clear evidence that : The Entire Banking Industry and
The FBI had a clear knowledge that Massive Bank Fraud and
Massive Bank Embezzlement Was Taking Place.
Out of an act of Political Nepotism to :
The Bush NAZI Fascist Crime Regime.
For eight (8) Long years. The Political Criminal FBI Refused to
ACKNOWLEDGE or to ACCEPT any Complaints ! !
Some of us tried to complain - But ......
Don''t just blame the : Banking Industry for this Mess
Blame also the Organization : The Political Criminal FBI.
Who''s Job it is- and - Is Paid a Wage Package to :
Protect Banking Consumers
But ... Purposely and Intentionally
REFUSED ! ! __ To do just that ! !
ABC.com - Is Censoring Comments in order to make it Appear
That The FBI, SEC, Federal Reserve
are Too Dumb and Stupid to Recognize that
Massive Bank Fraud and Massive Bank Embezzlement
Was Taking Place
Posted : CBS.com _ MSNBC.com _ Ruters ect ....
"He who builds only on visible and tangible things like success, career and money builds the house of his life on sand," the pontiff says.
"We are now seeing, in the collapse of major banks, that money vanishes, it is nothing," the pope adds.
The pontiff was speaking Monday as he opened the works of a meeting of 253 bishops at the Vatican.
Benedict says "the only solid reality is the word of God."
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CBS News has gone ahead and deleted / censored comments on that article. Why CBS?
"He who builds only on visible and tangible things like success, career and money builds the house of his life on sand," the pontiff says.
"We are now seeing, in the collapse of major banks, that money vanishes, it is nothing," the pope adds.
The pontiff was speaking Monday as he opened the works of a meeting of 253 bishops at the Vatican.
Benedict says "the only solid reality is the word of God."
---------------
CBS News has gone ahead and deleted / censored comments on that article. Why CBS?
[bq]
Waxman quoted George H. Walker, President Bush''s cousin and a Lehman executive who oversaw some Neuberger Berman employees, as responding with a dismissive tone to the idea of going without bonuses.
"Sorry team," he wrote to the executive committee, according to Waxman. "I''m not sure what''s in the water at 605 Third Avenue today.... I''m embarrassed and I apologize."
Rep. Elijah Cummings, D-Md., said: "I wonder how he sleeps at night."
[eq]
lollll....silly, silly Cummings.
For heaven''s sake, Cummings - the Bush in the White House can sleep like a baby even after telling lies to get thousands of Americans killed and tens of thousands of Americans maimed in Iraq.
After all, it is not like it is his life that is at risk!
You really expect a Bush relative on Wall Street to lose any sleep over a few hundreds of billions or even trillions of dollars in losses?
After all - it is not like it is his money that is at risk!
Waxman quoted George H. Walker, President Bush''s cousin and a Lehman executive who oversaw some Neuberger Berman employees, as responding with a dismissive tone to the idea of going without bonuses.
"Sorry team," he wrote to the executive committee, according to Waxman. "I''m not sure what''s in the water at 605 Third Avenue today.... I''m embarrassed and I apologize."
Rep. Elijah Cummings, D-Md., said: "I wonder how he sleeps at night."
[eq]
lollll....silly, silly Cummings.
For heaven''s sake, Cummings - the Bush in the White House can sleep like a baby even after telling lies to get thousand of Americans killed and tens of thousand of Americans maimed in Iraq.
You really expect a Bush relative on Wall Street to lose any sleep over a few hundreds of billions or even trillions of dollars in losses?
After all - it is not like it was his money!
If they were advising a US factory that actually made a product, layoffs and salary cuts (for the little guy) would have been the first options.
Where did these guys go to business school again? I''m glad they earned those millions.
Under McCain''''s plan, he would get a massive tax cut, after swindling thousands with bogus mortgages.
Have some sympathy on the guy, he has to downsize like the rest of us. Only half a dozen or so gigantic palaces!
It''''s clear that to McCain, Joe Six-Pack is just a tax cow to be milked until dry, so that wealth can be spread to jerks like this guy.
Posted by smurfcrusher
Be fair. Obama did not fight the 700 billion bailout of these people. In fact, neither Obama nor McCain fought the bailout. Now we have to choose between two candidates who defied the wishes of the American people. Is either candidate really a bargain?
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