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Lehman Brothers June 2
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Fuld's Continuing, And Stunning, Refusal To Take Blame For Lehman
Jun 1, 2015 | Bloomberg
By Barry Ritholtz
Richard Fuld, the former chief executive officer of Lehman Brothers, is the Shaggy of finance. On the cause of the financial crisis and the collapse of Lehman Brothers, his claim is, "It wasn't me." Seven years after he drove the 158-year old firm he ran with an iron fist into bankruptcy, he has reappeared to accept blame for, well, absolutely... -
Self-Delusion Will Sink Sepp Blatter Just As It Sank Dick Fuld
Jun 1, 2015 | Financial Times
By Andrew Hill
I blame Sebastian Junger. The success of The Perfect Storm, the journalist’s 1997 book about a doomed fishing boat gave embattled corporate titans the perfect metaphor for what went wrong on their watch. So here is Dick Fuld, former head of Lehman Brothers, in his first voluntary public appearance since its collapse, explaining last week... -
Wall Street Still Blames Everybody Else For The Financial Crisis
Jun 1, 2015 | The Washington Post
By Allan Sloan
They still don’t get it. That was my reaction when I saw what former Lehman Brothers chief executive Dick Fuld had to say last week in his first voluntary public appearance since the firm collapsed seven years ago. And it’s what struck me when I saw that a big audience cheered him on rather than laughing out loud, which is what I would done. -
The Gorilla of Wall Street Is Still an Ape
Jun 1, 2015 | The Fiscal Times
By Yuval Rosenberg
It’s been years since Dick Fuld, the CEO who presided over the collapse of Lehman Brothers, has been in the public spotlight or, for that matter, the congressional hot seat. So as Fuld last Thursday gave his first public speech since the crisis of 2008, story after story about the former CEO provided a useful reminder of just who he was... -
Disgraced Lehman Brothers Boss Who Presided Over Biggest Bankruptcy In American History Trying To Sell Off The $27 Million Idaho Bolthole He Hid For Years
Jun 2, 2015 | The Daily Mail
By Alexandra Klausner
The disgraced former Lehman Brothers CEO is trying to sell the 75-acre property in Idaho he hid in for years after he presided over the largest bankruptcy in American history. Richard 'Dick' Fuld, 69, has apparently been trying to sell his multimillion-dollar Sun Valley home for a year but is struggling to find a buyer. -
Former Lehman Brothers CEO Trying To Sell 75-Acre Hideaway
Jun 2, 2015 | New York Post
By Kevin Dugan
Dick Fuld is coming out of hiding. The former Lehman Brothers CEO is trying to sell his 75.3-acre estate in Sun Valley, Idaho, where he holed up for years after the bank’s demise turned him into the poster boy for the financial crisis. The multimillion-dollar property is unlisted and is being shown by appointment only, according to three people familiar...
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Dick Fuld
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Fuld's Continuing, And Stunning, Refusal To Take Blame For Lehman
Jun 1, 2015 | Bloomberg
By Barry Ritholtz
Richard Fuld, the former chief executive officer of Lehman Brothers, is the Shaggy of finance. On the cause of the financial crisis and the collapse of Lehman Brothers, his claim is, "It wasn't me."
Seven years after he drove the 158-year old firm he ran with an iron fist into bankruptcy, he has reappeared to accept blame for, well, absolutely nothing. Fuld seems to believe himself blameless for either his role in the crisis or the collapse of Lehman. Speaking at a penny stock event, Fuld is still confused about the differences between ownership and control. He made the bizarre claim that "regardless of what you heard about Lehman Brothers' risk management, I had 27,000 risk managers because they all owned a piece of the firm."
As if an employee e-mail to Fuld would have changed the firm's direction: Imagine "Hi Dick, I own 10,000 shares of Lehman. Please divest all of our risky derivatives and securitized subprime mortgages because I think we're going to take losses on them." For the man known as "The Gorilla" to make such an assertion is beyond absurd.
Before we take a closer look at Fuld, a preface: The crisis was notcaused by Fuld or by Lehman Brothers alone. If we look at the top 25 things to blame, the five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, and Goldman Sachs) and their CEOs all fall somewhere in the middle of the list.
Keep also in mind that causation is a complex matter, and that finance is an intricate, interconnected system. There were many, many forces at work that led to the collapse. However, this complexity doesn't excuse bad actions, poor judgment, and terrible decision-making. I've spilled too many pixels explaining why Lehman crashed and burned, but for those of you who may have forgotten:
Wild Overleverage: cComments Got something to say? Start the conversation and be the first to comment. Add a comment 0
Lehman Brothers lacked sufficient capital. It used an excessive amount of leverage -- about 40- to-1 debt to equity -- to chase profit in all manner of exotic mortgage-backed securities.
Had it stayed with a more modest leverage ratio of, say, 12-to-1, it would have had a stronger capital cushion. There would have been less underwriting activity, smaller gains in proprietary holdings and lower risk. The downside of having a de minimus capital structure is when bad investments are made, there is almost no room for error and no buffer to absorb losses.
Why 12-to-1? Lehman Brothers was among a group of five banks that asked for -- and received -- a waiver of the 1975 net capitalization rule. This led the Securities and Exchange Commission to issue what became known as the Bear Stearns exemption. The rule, which still applied to all other investment firms except the five listed above, displaced the older ratio of 12-to-1.
Hence, this was a very conscious risk-management decision made at the highest levels of the bank.
Bad Modeling Assumptions:
When you are jacked up at 40-to-1 leverage, your investment models better be perfect. Lehman's models were decidedly not. Among the false assumptions in these models were: a) residential real estate never loses value; b) the derivatives market is always liquid, with ready buyers available; c) the risk of borrowing short and lending long can be readily managed. Even as substantial evidence was piling up that these assumptions were false, they were ignored by management.
Excessive Real Estate Exposure:
Lehman wasn't the only securitizer of subprime mortgages -- ground zero for the financial crisis -- but it was among the biggest. By 2004, Lehman Brothers was originating $40 billion a year in mortgages to feed its collateralized-debt obligation machine. As journalist Roger Lowenstein has pointed out, it was for a time much more lucrative than just selling stocks to investors and underwriting plain vanilla bonds.
Reliance on Ratings:
Here is an interesting conundrum: Lehman's securitized products were highly dependent on the ratings of Moody's and Standard & Poor's. However, Lehman was also one of the prime purveyors of credit-rating payola -- it participated in the conflict-ridden practice in which issuers pay raters to grade the quality of the debt sold by the payer. If both parties to this arrangement didn't know the credit ratings were worthless, they sure should have.
CDO Ownership:
Lehman kept the senior-most layers of the CDOs it created for itself, but bought credit default swaps on them for safety. Consider that Lehman's managers weren't confident enough in the models that forecast the solvency of those tranches, yet they used the same models to determine that American International Group was a creditworthy counterparty to insure them. When the music stopped, Lehman ended up holding lots of what turned out to be junk paper. That's why Lehman collapsed, and it was apparent (at least to me) back in June 2008 it was in trouble.
Repo 105:
Has Dick Fuld really forgotten about this accounting maneuver? On a quarterly basis, Lehman would sell short-term repurchase agreements to create the temporary appearance of cash on its balance sheet to offset some of its towering debt. This made the company look much less leveraged than it actually was. After the quarterly earnings report, the company then reversed the repurchase agreements and the cash drained from the balance sheet. It was a giant sham transaction...
For full story:
http://www.chicagotribune.com/news/sns-wp-blm-news-bc-fuld-comment01-20150601-story.html
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Self-Delusion Will Sink Sepp Blatter Just As It Sank Dick Fuld
Jun 1, 2015 | Financial Times
By Andrew Hill
I blame Sebastian Junger. The success of The Perfect Storm, the journalist’s 1997 book about a doomed fishing boat gave embattled corporate titans the perfect metaphor for what went wrong on their watch.
So here is Dick Fuld, former head of Lehman Brothers, in his first voluntary public appearance since its collapse, explaining last week why the bank went down in 2008: “It isn’t just one single thing, it’s all these things taken together: I refer to it as a perfect storm.” And here is Sepp Blatter, Fifa president, as he prepared the way for his re-election at football’s governing body in Switzerland. Last week’s arrests of Fifa officials, he told delegates, “unleashed a real storm”.
Blaming extreme weather is popular with controversial leaders, for good reason. The image of navigating through a tempest conveys personal authority and bravery but also lets them plead helpless innocence of the causes and consequences of what is happening. It is the false-heroic middle way between having to admit you are a fool, who had no idea what was going on, or a knave, who fostered the scandal. Instead, they can look like hard-bitten captains on the bridge, braced against the monstrous waves and wrestling with the wheel, while the elements conspire against them.
These are great days for collectors of leadership brass neck. In China, Li Hejun, chairman of Hanergy, the solar-panel maker, declared last week that talk of an investigation into the company was “purely rumour, there is no such possibility” and said he would be “the first to know if the authorities were really planning a probe”. Hours after Xinhua, China’s official news agency, aired the interview, the Hong Kong watchdog confirmed it was investigating the affairs of Hanergy Thin Film Power, the group’s listed entity, whose soaring share price crashed last month.
These are not necessarily lies. In Hanergy’s case, the Hong Kong investigation may have been covert, and it is not clear exactly when Mr Li recorded his interview. As for Lehman, it is true that no “one single thing” did for the bank. Mr Blatter’s earlier protest that he “cannot monitor everyone all of the time” is a statement of the obvious, familiar to anyone who has ever run a large organisation.
But there is something more corrosive than leaders lying to the outside world and that is leaders deceiving themselves.
Self-belief is a vital part of being an effective leader. Admitting to weakness is taboo. But it is easy for leaders to become overconfident and to start governing just by asserting the facts as they understand them and ignoring others’ legitimate concerns: “Hanergy has never been so good in our history” (Li); “Let this be the turning point” (Blatter).
Mr Fuld has had nearly seven years since the financial crisis to ponder what really happened in 2008. But he is still trying to shape the narrative.
Plenty of chroniclers of the meltdown do believe, like Mr Fuld, that the US government was partly responsible for what occurred. Few would agree, however, that Lehman was a model of prudence, protected, as Mr Fuld put it last week, by “27,000 risk managers” in the form of its stockholding employees. On the contrary, as Bethany McLean and Joe Nocera wrote in All the Devils Are Here, instead of trying to limit exposure to the US housing market between 2006 and 2008, Lehman “decided to double down . . . by financing and investing in big commercial real estate deals”...
For full story:
http://www.ft.com/intl/cms/s/0/6a34a232-05eb-11e5-b676-00144feabdc0.html#axzz3bswiDht0
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Wall Street Still Blames Everybody Else For The Financial Crisis
Jun 1, 2015 | The Washington Post
By Allan Sloan
They still don’t get it. That was my reaction when I saw what former Lehman Brothers chief executive Dick Fuld had to say last week in his first voluntary public appearance since the firm collapsed seven years ago. And it’s what struck me when I saw that a big audience cheered him on rather than laughing out loud, which is what I would done.
Fuld drew those cheers from more than 1,000 people at a standing-room-only presentation at the Marcum MicroCap Conference in which he blamed the federal government’s housing policies, the Federal Reserve and irresponsible borrowers for Lehman’s 2008 collapse. Did he blame himself at all? Or Wall Street? Not according to any of the reports that I have read. (I have to rely on others’ reports because I wasn’t at the speech, and the event’s sponsor told me there is no transcript or video available.) Allan Sloan is a columnist for The Washington Post. He is a seven-time winner of the Loeb Award, business journalism's highest honor. View Archive
To those of us who remember what happened, Fuld’s refusal to assume any blame for Lehman’s failure is utterly absurd. Lehman was so overextended that a decline of less than 4 percent in the value of its assets was enough to wipe out its capital. Among other things, it stuffed tons of toxic mortgage securities into its portfolio during the housing bubble, and made some large, awful real estate acquisitions. So when the housing market headed south and short-term lenders belatedly realized that Lehman wasn’t exactly a top-tier credit, the firm had no staying power.
It’s the CEO’s job to keep a firm from getting into that kind of trouble — and Fuld didn’t do his job. Even worse, numerous accounts of Lehman’s final days say Fuld was urged to sell Lehman, but he hung tough, played chicken and didn’t realize Lehman’s peril until it was too late. Lehman filed for bankruptcy on Sept. 15, 2008.
Shortly afterward, a run on money-market funds began when the Reserve Primary Fund said it could no longer redeem shares at full value because of losses on Lehman paper. So the federal government had to guarantee trillions of money-market deposits to avoid a disastrous run.
Goldman Sachs and Morgan Stanley, which unlike Lehman had been run prudently, were about to fail because hedge funds and other “prime brokerage” customers began yanking their cash and securities in response to prime brokerage assets at Lehman’s London branch being frozen. That forced Uncle Sam to let Goldman and Morgan Stanley become (heavily regulated) bank holding companies so the Fed could shower them with loans.
I don’t know what Fuld thought he was doing by agreeing to speak publicly at the Marcum conference, whose sponsor, Marcum LLP, is a national accounting and advisory firm based in New York City. (Marcum, a once-obscure firm that got tons of attention, is the big winner here).
I tried to talk to Fuld on Monday, but he continued a decades-long pattern of neither accepting nor returning my calls.
Maybe he felt it was time to rewrite history. Or maybe he was trying to hustle business for the firm that he founded in 2009 whose target market is the kind of companies that attend microcap conferences.
Given the damage that Lehman did to the financial system and the extra regulation that Lehman’s failure ultimately forced onto Wall Street, you would think that a financially oriented audience would shower Fuld with rotten tomatoes rather than applause. But you would be wrong...
For full story:
http://www.washingtonpost.com/business/economy/wall-street-still-blames-everybody-else-for-the-financial-crisis/2015/06/01/dd028fbe-0897-11e5-95fd-d580f1c5d44e_story.html
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The Gorilla of Wall Street Is Still an Ape
Jun 1, 2015 | The Fiscal Times
By Yuval Rosenberg
It’s been years since Dick Fuld, the CEO who presided over the collapse of Lehman Brothers, has been in the public spotlight or, for that matter, the congressional hot seat. So as Fuld last Thursday gave his first public speech since the crisis of 2008, story after story about the former CEO provided a useful reminder of just who he was: the hard-charging, little-liked Gorilla of Wall Street.
Fuld may have emerged from his years of silence in part because the legal cloud over his head has dissipated with the passage of time — and in part because he’s eyeing a comeback of sorts. His financial advisory firm, Matrix Advisors, has launched a licensed real estate brokerage, USA Today reported. And he reportedly also has a hand in the planned relaunching of the National Stock Exchange slated for later this summer. But Fuld’s speech made clear that, nearly seven years after Lehman filed for bankruptcy, this gorilla is still more likely to thump his chest than to beat his breast in contrition.
From the podium at the Marcum MicroCap Conference in New York, the 69-year-old Fuld reportedly blamed the crisis that left the bank frozen out of the financial world and with no choice but to declare bankruptcy on a “perfect storm” of factors, including government policies that encouraged lower lending standards for homebuyers and mortgage borrowers who tapped into their mounting home equity their homes “as ATM accounts.” Fuld also pointed to the unchecked growth of hedge funds and other investment outlets and to the Federal Reserve’s interest rate moves that stoked the housing boom and then abruptly ended it.
“It’s not just a one single thing, it’s all these things taken together,” he said.
Fuld’s brief analysis stopped there, though. It failed to delve into the role Wall Street or his bank played in the crisis — or his own role in Lehman’s bankruptcy, the largest in U.S. history. Fuld apparently did respond to one question by saying, "You don't have time to hear about all the things I'd have done differently," and said that “there is no if we woulda, coulda, shoulda." But if he has any remorse about the concentrated bets that led to its demise or the actions he could have taken to save the firm, Fuld kept mum.
More than that, he began his remarks by touting the corporate culture that made Lehman Brothers “one of the great investment banks on Wall Street,” including compensation practices that were meant to foster teamwork and a sense of communal ownership. Fuld noted that Lehman employees owned more than 30 percent of the company’s stock. "Regardless of what you heard about Lehman Brothers’ risk management,” he said, “I had 27,000 risk managers because they all owned a piece of the firm."
Clearly, 27,000 risk managers wasn’t enough, as the March 2010 examiner’s report in Lehman’s bankruptcy case made clear:
“In 2006, Lehman made the deliberate decision to embark upon an aggressive growth strategy, to take on significantly greater risk, and to substantially increase leverage on its capital. In 2007, as the sub‐prime residential mortgage business progressed from problem to crisis, Lehman was slow to recognize the developing storm and its spillover effect upon commercial real estate and other business lines. Rather than pull back, Lehman made the conscious decision to ‘double down,’ hoping to profit from a counter‐cyclical strategy. As it did so, Lehman significantly and repeatedly exceeded its own internal risk limits and controls.”
Perhaps Fuld’s 27,000 risk managers missed all this because most of those employees weren’t aware of just how leveraged Lehman was or how concentrated its exposure was in illiquid positions in the commercial real estate and subprime markets. Or perhaps it was because the stock holdings of some investment bankers made them more aggressive about the upside of any bets than worried about the downside. The examiner’s report said that “in practice, Lehman rewarded its employees...
For full story:
http://www.thefiscaltimes.com/2015/06/01/Gorilla-Wall-Street-Still-Ape
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Jun 2, 2015 | The Daily Mail
By Alexandra Klausner
The disgraced former Lehman Brothers CEO is trying to sell the 75-acre property in Idaho he hid in for years after he presided over the largest bankruptcy in American history.
Richard 'Dick' Fuld, 69, has apparently been trying to sell his multimillion-dollar Sun Valley home for a year but is struggling to find a buyer.
The property-valued at $27m in 2008- is unlisted and being shown by appointment only, reports The New York Post.
An unnamed Idaho local told The New York Post that Fuld's Big Wood River Drive property is 'modest' by Sun Valley Standards.
Fuld's property consists of mostly undeveloped land, a house, and a private road and bridge. Fuld owns other patches of land in the area making a total of 97 acres.
The posh private community of Sun Valley is a popular getaway for celebrities like Bruce Willis and wealthy individuals like Steve Jobs' widow Laurene Powell.
Fuld also owns other properties in Greenwich, Connecticut and Jupiter, Florida.
In 2009, Fuld sold his $13.3 million Jupiter, Florida mansion to his wife for just $100, according to Florida real estate records.
The couple had jointly bought the home for $13.75 million in March 2004, as first reported by
Last week, in his first public remarks since Lehman Brothers went bankrupt, former CEO Richard Fuld said no single factor caused the 2008 financial crisis that destroyed Lehman.
Fuld said Lehman Brothers 'was all about team' and put clients first.
He added that because every employee owned stock in the company, they were all focused on the good of Lehman Brothers.
'Regardless of what you heard about Lehman Brothers' risk management, I had 27,000 risk managers because they all owned a piece of the firm,' he said.
Fuld, 69, was the keynote speaker on Thursday at the Marcum MicroCap Conference in New York.
Lehman Brothers was more than 150 years old when it collapsed in September 2008 in the largest corporate bankruptcy in U.S. history.
Its failure was seen as a key trigger in the financial crisis.
After Lehman imploded, inquiries showed that the company used accounting tricks to mask $50 billion in debt, making it look like Lehman was in better shape than it really was...
For full story:
http://www.dailymail.co.uk/news/article-3106749/Disgraced-Lehman-Brothers-boss-trying-sell-75-acre-hideaway.html
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Former Lehman Brothers CEO Trying To Sell 75-Acre Hideaway
Jun 2, 2015 | New York Post
By Kevin Dugan
Dick Fuld is coming out of hiding.
The former Lehman Brothers CEO is trying to sell his 75.3-acre estate in Sun Valley, Idaho, where he holed up for years after the bank’s demise turned him into the poster boy for the financial crisis.
The multimillion-dollar property is unlisted and is being shown by appointment only, according to three people familiar with the area’s real estate market.
The Big Wood River Drive property, which is in the shadow of Bald Mountain near downtown Ketchum, is largely undeveloped land except for a house, a private road and a bridge, one person said.
The house is considered “modest” by Sun Valley standards, according to another person.
Brokers have been showing the property for about a year but have yet to find a buyer, one person said.
Fuld owns other parcels of land in and around the tony resort area — 97 acres in total — valued at a reported $27 million in 2008.
The area is a favorite getaway for the ultra-wealthy, including actor Bruce Willis and Steve Jobs’ widow, Laurene Powell, in part because of an unwritten code of silence about its famous residents.
Fuld, 69, spoke publicly last week for the first time since Lehman’s 2008 collapse sparked public outrage over Wall Street’s antics...
For full story:
http://nypost.com/2015/06/01/former-lehman-brothers-ceo-trying-to-sell-75-acre-hideaway/
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Dick Fuld
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