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Lehman Oct 28
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5 of the Biggest Corporate Scandals in U.S. History
Oct 27, 2015 | Money Morning
By Tara Clarke
...In 2008, two of the largest American investment banks fell: The Bear Stearns Cos. and Lehman Brothers Holdings Inc. Lehman filed for Chapter 11 bankruptcy protection on Sept. 15, 2008 – to date, it's the largest bankruptcy in U.S. history with $613 billion in debts outstanding. Dick Fuld, the "Gorilla" on Wall Street, was the man in charge...
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5 of the Biggest Corporate Scandals in U.S. History
Oct 27, 2015 | Money Morning
By Tara Clarke
...Corporate Scandal No. 5: Lehman Brothers Holdings Inc., 2008
In 2008, two of the largest American investment banks fell: The Bear Stearns Cos. and Lehman Brothers Holdings Inc. Lehman filed for Chapter 11 bankruptcy protection on Sept. 15, 2008 – to date, it's the largest bankruptcy in U.S. history with $613 billion in debts outstanding.
Dick Fuld, the "Gorilla" on Wall Street, was the man in charge. He'd gotten the company into large positions in subprime mortgages. It even made its own subprime loans. Lehman passed on that toxic debt by the billions to investors in the form of bonds.
In its 2008 Annual Report, Lehman even boasted of having "a culture of risk management at every level of the firm." As an investor, one's question here has to be: "If there was a culture of risk management at every level of the firm, how come you allowed the leverage ratio (total assets divided by stockholders equity) to rise from 26.2 to 1 in the tranquil bull market of 2006 to 30.7 to 1 in the troubled market of November 2007?"
Indeed, once Fuld's corporate scandal began to unravel, he failed to recognize his firm was in trouble and take steps to prevent it. He rejected offers from Warren Buffett and others to inject capital or merge. In a 2009 book titled "A Colossal Failure of Common Sense," author Larry McDonald (a former senior Lehman Brothers trader) said Fuld required the firm's chief risk officer to leave the boardroom during key discussions.
In the first half of 2008 alone, Lehman's share value dropped 73%, and the company was forced to sell off $6 billion in assets. It'll come as no surprise that Dick Fuld earned a spot on our list of the top 10 people to blame for the 2008 financial crisis…
For full story: http://moneymorning.com/2015/10/27/5-of-the-biggest-corporate-scandals-in-u-s-history/
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