Lehman Brothers CEO Richard Fuld told Congress today that his company’s bankruptcy was “an absolute tragedy.”
“I feel horrible about what happened,” he said in prepared remarks submitted to the the House Committee on Oversight and Government Reform.
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“Ultimately what happened to Lehman Brothers was caused by a lack of confidence,” Fuld said. “This was not a lack of confidence in just Lehman Brothers, but part of what has been called a storm of fear enveloping the entire investment banking field and our financial institutions generally.”
The House panel is conducting two days of hearings examining the collapse of Lehman and insurance giant AIG.
Committee Chairman Henry Waxman described Lehman as “a company in which there was no accountability for failure.”
He read portions of company documents indicating that a recommendation that top execs forgo bonuses was ignored. Instead, Waxman said, Lehman’s compensation board received a request on Sept. 11 - four days before the company declared bankruptcy - requesting that three execs be given $20 million in additional 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.
“Mr. Fuld will do fine,” he said. “But taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis.”
Fuld will likely be grilled today about his own pay package, which totalled more than $40 million last year. According to an analysis by Equilar, a research firm, Fuld was paid nearly $465 million from 1993 through 2007.
In his prepared statement, he said Fuld the company did everything it could to 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. “What happened to Lehman Brothers could have happened to any firm on Wall Street, and almost did happen to others.”
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1 Comments
#1. Geoff Miller 10.11.2008
For years, Lehman Brothers has been squeezing its middle-to-lower tier employees in order to keep the top level executives highly over-compensated. The top Sr. members(SVP, Managing Directors and above..) have never suffered a decreasing bonus, in both good OR bad years. The only way to get a payout at Lehman Brothers was to 1) have a guaranteed contract OR 2) already be a top-level LEH executive
Every year I worked at LEH, i saw that top level mgmt. would “hoard” the bonus pool $$s leaving the lower tiers to fend for themselves, and it’s a damaging way to run a company that will only lead to their eventual demise, as time has just proven in Lehman’s case.
After too many 14-hour work days on the trading desk and often working weekend hours, I realized that working on Wall Street was a sham in many respects, as the top levels always got paid-out regardless of performance, and many of the worker bees were left to fend for themselves.
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