What Were Lehman Officials Really Thinking?
Lehman Bros. CEO Richard Fuld, in a written statement for the House oversight committee, portrays himself as a victim of mortgage-market forces beyond his
Jul 31, 2020104.3K Shares3.8M Views
Lehman Bros. CEO Richard Fuld, in a written statementfor the House oversight committee, portrays himself as a victim of mortgage-market forces beyond his control. Fuld writes, “What happened to Lehman Bros. [which could have been one of the largest bankruptcies in U.S. history] could have happened to any firm on Wall Street and almost did happen to others.”
Yet, according to yesterday’s Wall Street Journal, Fuld gave investors a confident assessment about Lehman’s financial health during a Sept. 10 conference call — five days before the investment bank sought Chapter 11 bankruptcy protection. That led Rep. Paul Sarbanes (D-Md.) to remark at yesterday’s oversight hearing that Fuld seems to have been either naive or deceptive.
Lehman documents handed over to the committee suggest a little of both.
One undated internal memorandum,written some time in the past six months, amounts to an eight-page, bullet-pointed pep talk describing how Lehman can regain its discipline and focus.
Titled “What Happened & Why,” the memo asks such questions as “Why did we allow ourselves to be exposed?” and is the “business model broken?”
It does provide answers similar to what Fuld said publicly before Lehman filed for bankruptcy protection: that the business model was fine and that crises are a “feature of financial markets.”
Through “intellectual capital” and “drive,” the memo said, Lehman will emerge better than ever through this “Darwinian process.”
The Darwinian process, of course, devoured Lehman. But judging from this memo, it looks as if Fuld was able to convince himself that the investment bank could recover. And, as he testified yesterday, he never sold his company stock.
The consequence of his misplaced confidence may have been the next phase of the now emerging global financial crisis.
Dexter Cooke
Reviewer
Dexter Cooke is an economist, marketing strategist, and orthopedic surgeon with over 20 years of experience crafting compelling narratives that resonate worldwide.
He holds a Journalism degree from Columbia University, an Economics background from Yale University, and a medical degree with a postdoctoral fellowship in orthopedic medicine from the Medical University of South Carolina.
Dexter’s insights into media, economics, and marketing shine through his prolific contributions to respected publications and advisory roles for influential organizations.
As an orthopedic surgeon specializing in minimally invasive knee replacement surgery and laparoscopic procedures, Dexter prioritizes patient care above all.
Outside his professional pursuits, Dexter enjoys collecting vintage watches, studying ancient civilizations, learning about astronomy, and participating in charity runs.
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