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PrintLehman sought millions for execs while seeking aid
Mon Oct 6, 2008 10:46 AM EDT
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The now-bankrupt investment bank Lehman Brothers arranged millions in bonuses for fired executives as it pleaded for a federal lifeline, lawmakers learned Monday, as Congress began investigating what went so wrong on Wall Street to prompt a $700 billion government bailout.
The first in a series of congressional hearings on the roots of the financial meltdown yielded few major revelations about Lehman's collapse, and none about why government officials, as they scrambled to avert economic catastrophe, declined to rescue the flagging company while injecting tens of billions of dollars into others.
But it allowed lawmakers still smarting from a politically painful vote Friday for the largest federal market rescue in history to put a face on their outrage at corporate chieftains who took home hundreds of millions of dollars while betting on risky mortgage-backed investments that ultimately brought the financial system to its knees.
That face was Richard S. Fuld Jr., the Lehman chief executive who sat for a two-hour-plus grilling before the House Oversight and Government Reform Committee as the panel combed through his pay history, management practices and financial strategies.
"You made all this money by taking risks with other people's money," Rep. Henry Waxman, D-Calif., the panel's chairman, said. "The system worked for you, but it didn't seem to work for the rest of the country and the taxpayers, who now have to pay $700 billion to bail out our economy."
A subdued Fuld opened his testimony declaring, "I take full responsibility for the decisions that I made and for the actions that I took," but he conceded no errors or misjudgments in the chaotic period that led to the firm's bankruptcy.
And he said a compensation system that he estimated paid him about $350 million between 2000 and 2007 even as the company headed for disaster was appropriate.
"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," Fuld said.
That wasn't good enough for some lawmakers who decried what they called a culture of entitlement at Lehman even as the company's performance nosedived.
The panel unearthed internal documents showing that on Sept. 11, Lehman planned to approve "special payments" worth $18.2 million for two executives who were terminated involuntarily, and another $5 million for one who was leaving on his own.
That was just four days before the government let Lehman go under, touching off a cascading series of financial shocks and failures that put Washington on track for the multibillion-dollar rescue the Bush administration urgently requested from Congress at the end of that week.
On Wall Street, uncertainty Monday about the effectiveness of the rescue sent the Dow Jones industrials sinking below 10,000 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 bailout, 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.
Fuld said Lehman did everything it could to limit its risks and save itself. It failed, he said, because of a "crisis in confidence" on Wall Street, market manipulation in which investors preyed on distressed financial players by betting on their demise, and would-be buyers who waited for the government to step in to help fund a sale.
"In the end, despite all of our efforts, we were overwhelmed," Fuld said, looking uncomfortable seated by himself at a witness table where he fiddled with a pencil and removed and donned his glasses habitually as he fielded at-times angry questions.
"Do you think it's fair?" Waxman demanded of Fuld as he outlined his exorbitant pay packages and noted that shareholders ended up with nothing.
Fuld said he is haunted nightly wondering what he might have done to avert Lehman's bankruptcy, the largest in U.S. history.
"This is a pain that will stay with me for the rest of my life," he said.
Also haunting him, Fuld said, is the question of why Lehman didn't get a federal rescue while others did: Bear Stearns, the mortgage giants Fannie Mae and Freddie Mac, and insurance giant American International Group Inc.
"Until the day they put me in the ground, I will wonder," Fuld told the committee.
But the committee's investigation painted Fuld as anything but a victim.
Waxman released e-mail correspondence from June 2008 in which Fuld dismissed the suggestion from executives at a Lehman subsidiary that the company's top people forgo bonuses to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."
Fuld wrote, "Don't worry — they are only people who think about their own pockets."
The suggestion came from executives at Lehman's money management subsidiary, Neuberger Berman, who also were recommending that Lehman spin off its business to insulate its employees — and their bonuses — from Lehman's sagging stock price and from "management mistakes."
George H. Walker, President Bush's cousin and a member of Lehman's executive committee, breezily shot down the ideas, according to the e-mails.
"Sorry team. I am not sure what's in the water at" Neuberger Berman, Walker wrote to the rest of the executive committee. "I'm embarrassed and I apologize."
Republicans dismissed the hearing as little more than a political stunt given that it failed to probe the role of Fannie Mae and Freddie Mac — huge players in the mortgage market — in the financial meltdown.
"If you haven't discovered your role today, you're the villain, so you have to act like the villain," Rep. John Mica, R-Fla., told Fuld facetiously, earning a tight smile.
In a statement, Rep. John Boehner, R-Ohio, the House minority leader, accused Waxman of refusing to investigate the mortgage giants "solely to shield his fellow Democrats politically," and said it "cheats the American people of key facts that could help all of us learn how we got here — and what we must do to make certain this situation never repeats itself."
© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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 | CNBC Confirms: Lehman Brothers CEO Punched Out at Gym | businessandmedia.org | Mon Oct 6 | 33 |
| Lehman Brothers Boss Defends $484 Million in Salary, Bonus | ABC News | Mon Oct 6 | 3 |
| House panel grills Lehman chief about bonuses | msnbc.com | Mon Oct 6 | 93 |
 | Fed to lend to companies in emergency move | Associated Press | Tue Sep 30 | 15 |
| Congress opens hearings on financial meltdown | msnbc.com | Mon Oct 6 | 1 |
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{"commentId":3335509,"authorDomain":"pjwrites"}
A bit after the fact, isn't it? Shouldn't these hearings have been held before the bailout? If our money is going to be worthless anyway, these million dollar bonuses won't count for much, right? Whatever. I'm so disgusted with this whole mess, that I have to believe we're headed back to the barter system.
{"commentId":3335509,"threadId":"380299","contentId":"1959020","authorDomain":"pjwrites"}
- 5 votes
#1 - Mon Oct 6, 2008 11:21 AM EDT{"commentId":3339090,"authorDomain":"jbdaad"}
I don`t know where you`ve been. There`s a hell of a lot of poor in this country who`ve been on the barter system for a long time. There`s a hell of of a lot of poor people period in this country. Hope someone tracks down these political connections that passed this sorry bailout.
{"commentId":3339090,"threadId":"380299","contentId":"1959020","authorDomain":"jbdaad"}
- 2 votes
{"commentId":3341352,"authorDomain":"shanman56"}
So what will Congress do about this?!
Offer them jobs, of course!
Paulson will have a whole board comprised of these theives and 100B will go just to pay them to "Figure" out what to do with the rest of the money so NOBODY thta needs it will get any!
{"commentId":3341352,"threadId":"380299","contentId":"1959020","authorDomain":"shanman56"}
- 1 vote
{"commentId":3342633,"authorDomain":"pjwrites"}
jbdaad,
I don`t know where you`ve been. There`s a hell of a lot of poor in this country who`ve been on the barter system for a long time.
What I should have said is that the barter system will exist for even those who once ruled the world via money management. In other words, if our money becomes worthless, there will be a whole new set/definition of "millionaires" depending on their ability to trade more than mere paper. The poor may just come out ahead on this deal, because they have skill sets the upper money echelon now lacks. Survival of the fittest, rather than the richest.
{"commentId":3342633,"threadId":"380299","contentId":"1959020","authorDomain":"pjwrites"}
- 3 votes
{"commentId":3344939,"authorDomain":"jbdaad"}
Was not a cut on you. You are correct...Peace.
{"commentId":3344939,"threadId":"380299","contentId":"1959020","authorDomain":"jbdaad"}
- 1 vote
{"commentId":3346510,"authorDomain":"KyanaBelle"}
Was not a cut on you. You are correct...Peace.
I know that speaking for myself, I've been so bent out of shape over the testimony going on today, I finally just went to bed. I was snapping on everyone here at home - even on the poochies.
It's just so damned frustrating to feel that a hoard of people have ripped us all off big time and there's not a damn thing we can do about it because our own senate and house are complicit.
{"commentId":3346510,"threadId":"380299","contentId":"1959020","authorDomain":"KyanaBelle"}
- 5 votes
{"commentId":3355523,"authorDomain":"pjwrites"}
If it's any consolation, guys, when I saw the headline in the paper, I was eating breakfast at my favorite little neighborhood coffee shop and I literally had to stop eating, I became so sick to my stomach.
It is one thing to "think" that your government may not be honest and that the press is complicit, but it is quite another thing to "know".
Heart-wrenching.
{"commentId":3355523,"threadId":"380299","contentId":"1959020","authorDomain":"pjwrites"}
- 2 votes
{"commentId":3336433,"authorDomain":"pccccc"}
It goes to show that crime does pay, you just have to steal enough money, so you'll get away with it....................., We should freeze and liquidate all of these guys assests immediately, and then make them work for a change, for minimum wage. Or send them home to Dubai
{"commentId":3336433,"threadId":"380299","contentId":"1959020","authorDomain":"pccccc"}
- 7 votes
#2 - Mon Oct 6, 2008 12:18 PM EDT{"commentId":3337434,"authorDomain":"j-mckee"}
Radical Muslim Terrorists . . . who needs em?
Our own greed, corruption and arrogance will ultimately be the demise of this country. We're well on our way it appears.
I couldn't believe that Palin & Biden were able to stand there throwing out empty promises about how they were going to do great things for the people of this country, blah, blah, blah "this great nation" . . . all the while spouting propaganda with a straight face during the VP debates the other night.
Then I remembered, they're politicians . . . lying to our faces while flashing a smile is what we pay them to do!
{"commentId":3337434,"threadId":"380299","contentId":"1959020","authorDomain":"j-mckee"}
- 5 votes
#3 - Mon Oct 6, 2008 1:01 PM EDT{"commentId":3340987,"authorDomain":"datr3128"}
Please remember to remove each and every incumbent at the polls on the first Tuesday of next month. PLEASE!
{"commentId":3340987,"threadId":"380299","contentId":"1959020","authorDomain":"datr3128"}
- 4 votes
{"commentId":3337496,"authorDomain":"KyanaBelle"}
Every damned one of them belongs in prison. And we want our damned money back.
{"commentId":3337496,"threadId":"380299","contentId":"1959020","authorDomain":"KyanaBelle"}
- 7 votes
#4 - Mon Oct 6, 2008 1:04 PM EDT{"commentId":3337582,"authorDomain":"ghetto-otaku"}
your kidding me right....?
We just got robbed, by the hands that supposed to feed us.....
{"commentId":3337582,"threadId":"380299","contentId":"1959020","authorDomain":"ghetto-otaku"}
- 6 votes
#5 - Mon Oct 6, 2008 1:08 PM EDT{"commentId":3338096,"authorDomain":"rdonaldsnyder"}
This scum ran their company into the ground, while screwing Americans over and then wanted to rob the bank on their way out. I agree, send them to prison! And I mean a REAL prison, not club-fed!
{"commentId":3338096,"threadId":"380299","contentId":"1959020","authorDomain":"rdonaldsnyder"}
- 6 votes
#6 - Mon Oct 6, 2008 1:33 PM EDT{"commentId":3338416,"authorDomain":"christhecanadian"}
"In the end, despite all our efforts, we were overwhelmed.."
The taxpayers of many nations are overwhelmed, especially the American taxpayers. I wonder what tax rate these "executive" kreeps will pay on their "special payments"? 99% sounds about right.
Shameful. No accountability, credibility, morals, ethics, conscience or manners. Shameful.
{"commentId":3338416,"threadId":"380299","contentId":"1959020","authorDomain":"christhecanadian"}
- 7 votes
#7 - Mon Oct 6, 2008 1:49 PM EDT{"commentId":3338474,"authorDomain":"scuramondo"}
What's all this talk about a $700B bailout? I thought the $700B got shot down base on the argument that it was would drive taxpayers into too much debt. So that situation was subesquently "corrected" by instead passing an $800B bailout package. (Which apparantly somehow made more fiscal sense to Congress than the $700B bailout package that was too expensive!) All of this was done as a knee-jerk reaction to the 500 point stock market dithers that occurred last week. ...And the punchline is that, after driving us $800B further into debt, the market is down another 500 points today anyway!---which just illustrates that no one really knows how to predict what the stock market will do anyway!
{"commentId":3338474,"threadId":"380299","contentId":"1959020","authorDomain":"scuramondo"}
- 5 votes
#8 - Mon Oct 6, 2008 1:52 PM EDT{"commentId":3338652,"authorDomain":"ghetto-otaku"}
Are you guys watching this LIVE right now?
They're playing "dumb", and at one point one guy was "smiling"....
I can't believe this! I'm losing my job because of these guys!!!!!!
{"commentId":3338652,"threadId":"380299","contentId":"1959020","authorDomain":"ghetto-otaku"}
- 8 votes
#9 - Mon Oct 6, 2008 2:00 PM EDT{"commentId":3340877,"authorDomain":"datr3128"}
It is gut wrenching and heart breaking to hear you will lose your job. You will have plenty of company, too, as shame gets piled on top of shame. What we REAL PEOPLE need to understand is that creatures like Fuld see a completely different sky above than we do. We do not matter to them. We are gamepieces in their private little tournament. They literally laugh at the misery we endure at their hands, and share in none of it.
{"commentId":3340877,"threadId":"380299","contentId":"1959020","authorDomain":"datr3128"}
- 4 votes
{"commentId":3355634,"authorDomain":"igmuska"}
I am watching the hearings, having watch the first one also yesterday. I think I understand now what this issue means. They keep saying "We've got to drain the swamp to see the problem." What for? The problem is they've taken the economic power of each and every individual, their bank deposits, and shifted these assets to back their liabilities, often misnamed as debits in their books.
Our economy is going to spiral downwards. Inflation is coming back! Our money needs to be re-evaluated against more solid standards and not the whims of corporate managers. Gambling with people's money is wrong, but not yet illegal. Corporations needs to be taken back by the people and not the current interests they currently serve: greed!
{"commentId":3355634,"threadId":"380299","contentId":"1959020","authorDomain":"igmuska"}
- 1 vote
{"commentId":3338758,"authorDomain":"ronron173"}
This is a "grilling"?!!!! Get real...this is all for show! No one in these Chambers is serious. It's the same old shell game. Oh, we were alerted that someone did wrong, guess we better have a hearing. Hell! Hearing? Jail would be more like it!
{"commentId":3338758,"threadId":"380299","contentId":"1959020","authorDomain":"ronron173"}
- 7 votes
#10 - Mon Oct 6, 2008 2:04 PM EDT{"commentId":3338878,"authorDomain":"ghetto-otaku"}
Your right! Throw then in the slammer for a week.....
I bet we'll get some answers then, right????
{"commentId":3338878,"threadId":"380299","contentId":"1959020","authorDomain":"ghetto-otaku"}
- 4 votes
{"commentId":3339214,"authorDomain":"cyan412000"}
few rounds in the shower playing soap on a rope might do these guys good...then they know how they been giving to us
{"commentId":3339214,"threadId":"380299","contentId":"1959020","authorDomain":"cyan412000"}
- 6 votes
{"commentId":3339573,"authorDomain":"karesony"}
(article quote): "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." (end of article quote)
I'm guessing what's in the water, is a growing slime from the presence of so much greed, graft and corruption among these financial executives. These slimeballs should export themselves to where we won't have to read about them anymore, since their words sicken, disgust and nauseate the rest of us who try to play by the rules.
These corporate millionaires don't play by any rules except their own, so they deserve their own private island dwelling. Is Alcatraz available???
{"commentId":3339573,"threadId":"380299","contentId":"1959020","authorDomain":"karesony"}
- 4 votes
#11 - Mon Oct 6, 2008 2:38 PM EDT{"commentId":3341555,"authorDomain":"KyanaBelle"}
Hey our Reps on both sides of the aisle have been giving these guys the financial and legislative equivalent of B $%^-J @%s for years in return for corporate financing and pretty little favors while selling us off to them as party favors. If your gonna lock up the Johns on Wall Street, lock up the whores in congress with them..
{"commentId":3341555,"threadId":"380299","contentId":"1959020","authorDomain":"KyanaBelle"}
- 4 votes
{"commentId":3341922,"authorDomain":"karesony"}
That's fine with me. Congress whores can continue to serve their bosses on Alcatraz.
Problem: who -- in a Republican "Justice Dept" -- is going to go after these rich thieves and make them pay restitution? We need a Special Prosecutor.
{"commentId":3341922,"threadId":"380299","contentId":"1959020","authorDomain":"karesony"}
- 3 votes
{"commentId":3343372,"authorDomain":"pjwrites"}
Karmi,
We need a Special Prosecutor.
Yeah, and I think we need a special jury, too. I wonder if the former Enron employees would be available to sit the jury on this case?
Fuld says;
"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
Coming from the corporate world, I can tell you that, in all probability, the compensation committee who spent a "tremendous amount of time" figuring this stuff out, was more than likely comprised of the same people who stood to benefit most from the set-up. And their time was more than likely not spent studying the feasibility or practicality for the company, their job was to "spin it" and "sell it" until it became fact.
{"commentId":3343372,"threadId":"380299","contentId":"1959020","authorDomain":"pjwrites"}
- 3 votes
{"commentId":3340480,"authorDomain":"Mars313"}
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.
"based on the information he had at the time"? I've heard this before, and we will hear again, and again, and again.
If only that worked in court for Joe Six-Pack. "Your honor, I felt the bank robbery was completely prudent, based on the information I had at the time"
{"commentId":3340480,"threadId":"380299","contentId":"1959020","authorDomain":"Mars313"}
- 7 votes
#12 - Mon Oct 6, 2008 3:16 PM EDT{"commentId":3343788,"authorDomain":"clariflutist73"}
These jackasses are at the utter height of hypocrisy and they have the nerve to crack a smile and apologize for their wrong doings? What the heck is going on?!? I guess before the impending hearings and committees these greedy people have had plenty of time to take their money out of Wall Street, and put it into Swiss Bank accounts and off shore accounts. I guess perhaps the only regret they will have is not figuring out a way to put their money into a bank account in Hell where they can have it forever. This makes me sick.
I guess they will all be slated as having "poor judgement" like McCain was after being investigated after the Keating 5 Scandal, and "exonerated" of any wrong doing.
{"commentId":3343788,"threadId":"380299","contentId":"1959020","authorDomain":"clariflutist73"}
- 3 votes
#13 - Mon Oct 6, 2008 5:26 PM EDT{"commentId":3346365,"authorDomain":"ElliePhat"}
Yet, they have the nerve to call it the Oversight and Government Reform Committee.
{"commentId":3346365,"threadId":"380299","contentId":"1959020","authorDomain":"ElliePhat"}
- 4 votes
#14 - Mon Oct 6, 2008 7:23 PM EDT{"commentId":3347185,"authorDomain":"paulpeg1"}
The worlds largest Texas hold-em game and Congress got bluffed out. Now we have to pay their re-entry fee. High crimes and treason against the American people!
{"commentId":3347185,"threadId":"380299","contentId":"1959020","authorDomain":"paulpeg1"}
- 2 votes
#15 - Mon Oct 6, 2008 8:15 PM EDT{"commentId":3347643,"authorDomain":"KyanaBelle"}
High crimes and treason against the American people!
Now that's what I'm talking about - right there. You nailed it Paul. Our government has committed a crime against every single one of us. I want prosecutions! Not just of the Execs but also of everyone who voted yes for this bailout.
My first couple of weeks on the vine, there was discussion of impeaching Bush. I said it was too late in the game, there were more pressing issues that needed attention, and how much damage can he do in 4 months?
File that in the same folder with the statement "What's the worse that can happen?" and "Well, it could be worse!" NEVER SAY ANY OF THOSE 3 STATEMENTS! Never. Ever. Don't even think them!
{"commentId":3347643,"threadId":"380299","contentId":"1959020","authorDomain":"KyanaBelle"}
- 2 votes
#16 - Mon Oct 6, 2008 8:49 PM EDT{"commentId":3348258,"authorDomain":"rncostarica"}
By government standards I recently went from middle class to poor. My 8yr. old daughter and I walked down to the creek today and did a little fishing. Didn't cost a dime. She giggled and laughed the whole time. No amount of money in the world can replace peace of mind. Turns out I'm rich.
Peace and love,
Richard
{"commentId":3348258,"threadId":"380299","contentId":"1959020","authorDomain":"rncostarica"}
- 5 votes
#17 - Mon Oct 6, 2008 9:28 PM EDT{"commentId":3348949,"authorDomain":"christhecanadian"}
Richard, if we all had your daughter's attitude we would not need any government or money.
I am glad she has someone to love and protect her. I only hope more representatives feel the same about the Constitution and the nation, not just their polls and their district.
I hope you caught one or two. If you give a man a fish, he eats for a day. If you teach a man to fish, you can sell him tackle and bait for the rest of his life. (grin)
{"commentId":3348949,"threadId":"380299","contentId":"1959020","authorDomain":"christhecanadian"}
- 5 votes
#18 - Mon Oct 6, 2008 10:20 PM EDT{"canLink":false,"threadId":"380299","isPrivate":false}
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