Chairman and CEO of Lehman Brothers Holdings Richard Fuld Jr. said that his company’s fall could have happened to anyone because “nobody expected such decline” in the housing market. Rep. Jim Cooper (D-Tenn.) said that while Fuld claimed this could have happened to any company, “it didn’t happen” to other companies.

Fuld said that Lehman Brothers’s capital was in good shape on September 10, five days before the company filed for bankruptcy. Rep. John Sarbanes (D-Md.) called Fuld’s account of the fall of the company “implausible.”

Fuld said closing the mortgage business of Lehman Brothers down would have been a good idea in retrospect, but others would have considered that “irrational” at the time. Rep. Peter Welch (D-Vt.) said that companies had taken the business of mortgage lending, and “put it on steroids.”

Rep. Chris Van Hollen (D-Md.) said that the previous compensation packages Fuld had accumulated (Fuld said he received about $350 million in compensation while at Lehman Brothers) should be given to the shareholders of the company. Fuld said he suffered financially from his company’s bankruptcy considering he was “the single largest shareholder.”

Fuld said that while he gave the U.S. Securities and Exchange Commission (SEC) high marks, “the overall regulatory system has to be redone.” Rep. Diane Watson (D-Calif.) said that the SEC was either “unable or unwilling” to regulate companies such as Lehman Brothers.

The general consensus was “jail not bail” for Lehman Brothers CEO Richard Fuld, Jr., at a hearing by the House Committee on Oversight and Government Reform on the causes and effects of the Lehman Brothers bankruptcy. This view was held by the Committee, panel, and Code Pink protestors (who were eventually thrown out of the hearing). Congressman Jim Cooper (D-Tenn.) said, “Is this Wallstreet or a casino? Lehman did not find itself in this situation by accident. It as the unlucky draw of a consciously made gamble.” Dr. Luigi Zingales of the University of Chicago pointed out that by bailing out these investment banks, we are giving them incentive to gamble at the cost of taxpayers down the line.

Nell Minow of the Corporate Library said that Fuld, “intentionally surrounded himself with people who are complicit. These were people who were getting side payments from the company. They had no incentive to provide any kind of independent oversight.” Minow said that by doing so, Fuld created a false idea of the value of his company. These false ideas created high leverage rates, leaving little security in times of economic trouble, and eventually the downfall of Lehman Brothers. Minow proposed a general rule be mandated to pay executives based on the value of business rather than the volume of business. Peter Wallison of the American Enterprise Institute agreed that the only protection taxpayers have at this point is more government regulation.

Additionally, Congressman Dennis Kucinich (D-Ohio) said, “there is an apparent conflict of interest permitting Treasury Secretary Paulson, former CEO of Goldman Sachs, to be involved in these discussions on the survival of Lehman Brothers.” The panel agreed it was clear that Goldman Sachs benefits from Lehman Brothers going under, due to the competitive market they’re in. As long as Goldman Sachs’ interest is in Paulson’s pocket, Kucinich says, his role in the bailout goes “against the free market.”

Chairman and CEO of Lehman Brothers Richard Fuld Jr. explains how he was compensated. He also says he lost more money than anyone else when the company went bankrupt. (0:41)

 

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Rep. Betty McCollum (D-Minn.) questions Chairman and CEO of Lehman Brothers Richard Fuld Jr. about the final week at Lehman Brothers. Fuld says business was good up until the end. (1:33)

 

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Nell Minow of the Corporate Library explain how Lehman Brothers CEO Richard Fuld, Jr. chose his board with the incentive of creating a false sense of business value, eventually leading to Lehman Brothers’ downfall. (00:34).

 

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Congressman Jim Cooper (D – TN) compares Lehman Brothers’ investment risks to gambling. Dr. Luigi Zingales of the University of Chicago explains the consequences of the bailout down the line. (01:00)

 

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Pentagon Correspondent Dawn Casey will attend Secretary of Defense Robert M. Gates’s honor cordon to welcome Denmark’s Minister of Defense Soren Gade. Legal Affairs Correspondent Jay Goodman Tamboli will cover the Supreme Court arguments in Altria v. Good dealing with lawsuits against tobacco companies. The Washington Bureau will also be covering the House Oversight and Government Reform Committee’s hearing on “The causes and effects of the Lehman Brothers bankruptcy,” a discussion at the Woodrow Wilson Center on “North Ossetia’s geopolitical entanglements,” a protest by Vietnam veterans and Vietnam’s victims of Agent Orange to have the Supreme Court consider their lawsuit against chemical companies, a discussion at the Institute for Policy Studies on “War, peace, and the 2008 presidential race,” the American Enterprise Institute for Public Policy Research’s discussion on “Beyond Georgia: Securing America’s allies on Russia’s periphery,” and an address by World Bank Group President Robert Zoellick on “Development and the implications from the global financial crisis.”