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A review of Dick Fuld on Capitol Hill
October 6, 2008
I have just finished watching Dick Fuld, the chairman and chief executive of Lehman Brothers (RIP), testifying to a US House of Representatives committee on the collapse of his investment bank. The House members picked a dramatic time for the hearing: global stock markets were falling as he spoke.
Testifying in front of politicians after something goes badly wrong at your business, and hurts investors and others, is a thankless task. The best you can hope for is to get out in one piece, having been suitably contrite and humble without admitting to wrongdoing or incompetence.
On this measure, I thought Mr Fuld did well.
I and others have criticised his failure to do more in the last months at Lehman to save the investment bank. But I thought he put on a decent defence of his actions and endured his dressing-down for earning so much money during the good times on Wall Street with as much aplomb as could be expected.
He took responsibility for what had happened and did not lose his temper even when he was being fiercely criticised. Yet he also managed to defend his actions and not to admit every charge that was thrown at him.
Mr Fuld also managed to get the politicians on the back foot by making quite clear just how much he has been scarred by the bank’s failure. In his most open piece of testimony near the end, he said:
“Not that anybody on this committee cares about this but I wake up every single night thinking what could I have done differently, in certain conversations what could I have said . . . I can look right at you and say this is a pain that will stay with me the rest of my life.”
Having said that, Mr Fuld cannot expect much mercy from the House oversight committee in its report. Americans are incensed at having to foot the bill for a $700bn bail-out when Wall Street executives paid themselves so much and Mr Fuld admitted to having gained $350m in compensation since 2000.
Dick Fuld was my neighbor in NYC for many years. He is a great family man, a good husband, a good father. While everyone was making loads of money while Lehman did well, how many praised Fuld or thanked him? Now it is not going well and he is vilified and blamed? Sounds like a bunch of Wall Street crybabies blaming Fuld for their own greed and lack of foresight. Isn’t the Wall Street motto “diversify, diversify”?
Posted by: JOANNE | October 6th, 2008 at 9:48 pm | Report this commentIf Mr. Fuld thought as slowly as he spoke before Congress it’s no wonder he waited too late to take evasive actions. However, I wonder why the other top executives at Lehman didn’t recognize or warn against the impending problems? Isn’t this, after all, what they are paid to do?
Posted by: Marsha Harris Scott | October 6th, 2008 at 10:23 pm | Report this commentIt doesn’t matter that he was a good neighbor, father, husband, etc. What matters is what happened to Lehman Brothers with him as Captain. Think about the 26,000 employees of his. Ridiculous comparison Joanne. Jamie Diamond certainly turned his ship around when his top executives warned him of their calculations. He took IMMEDIATE ACTION to get out of that segment of business. BTW: Think Mr. Fuld is giving any of his “compensation” to the minions of Lehman?
Your point is well taken, Marsha.
Posted by: JOANNE | October 6th, 2008 at 11:25 pm | Report this commentWhat is the story with Lehman’s other top executives?
What oversight did they neglect?
Who was “watching the store”?
I think ppl cant single out Dick Fuld. If you do a benchmarking exercise across banks CEO/ top management compensation packages, you will realised $350 is not that big a number. I know of bankers hired at ML from GS in London with guaranteed bonus packages of $90m each - here we are talking abt normal MDs, not management.
Posted by: Bharat | October 6th, 2008 at 11:38 pm | Report this commentDick Fuld has created a lot of wealth too for many ppl who have ‘cashed in’ pretty it during his reign.
Dick Fuld has made himself very rich while bankrupting his company. Doing very very good in good times and just very good when bankrupting his firm. The word incompetent comes to mind ! This guy has caused massive damage to his firm, financial markets and the global economy. Billions and biliion have been lost by sheer incompetence. Do not defend these bankers!
Posted by: Keith | October 7th, 2008 at 12:15 am | Report this commentIt is very important (Bharat or Joanne) to point out that we are talking about a couple of individuals who made a lot of money. But what’s about the others 28,000 like me? I did n’t see any of that…
Posted by: xwer | October 7th, 2008 at 12:25 am | Report this commentIt is really sad and outrageous to see that despite being the CEO of a company that filed for the biggest bankruptcy in wall street’s history, he still believe that “he didn’t nothing wrong”.
And Joanne for your records, a CEO is the one who is taking the final decisions. He is responsible for the operating businesses and represents the firm. Dick Fuld is responsible of the failure. And if you watch the testimony, he choose to ignore many internal warnings that he came to his attention and instead preferred to fire those who were courageous enough to warn him. That is really brave… He acted liked a dictator leading “his troups”.
I have to say I do not care if he has nigthmares and can not sleep well at night. Who cares?… At least, he has $350m to keep him warm. FOR ME and millions of others, I HAVE NOTHING BUT DEBTS AND MY EYES TO CRY.
Joanne et al…Carl Icahn said it all very well…when you are brought up in the corporate culture it’s always to your best interests to have people dumber than you working for you…that way you can make your climb to the top & stay there. Look up Mr. Icahn’s website. Where was the Board of Lehman, you might ask also? I am familiar with the fine Lehman…from decades ago…not the sham of a company it became under the leadership of a man who started in the mailroom. ME? I think he should give back every single cent he has…but, yeah, let him keep his $22,000,000 house in Florida.
Posted by: Marsha Harris Scott | October 7th, 2008 at 12:56 am | Report this commentNot sure why he didnt ask the committee how much the federal and local government made on taxes for the compensation of himself, his employees and the company.
Posted by: ex lehman | October 7th, 2008 at 1:12 am | Report this commentLet’s remember this is a country that sent Martha Stewart to prison essentially for spitting on the sidewalk, and Conrad Black for what wouldn’t even amount to a rounding error in the present debacle. I’m not saying Dick Fuld and the others of his ilk should be indicted for securities fraud; I’m willing to let a federal grand jury make that determination.
Posted by: John | October 7th, 2008 at 1:52 am | Report this commentHaving been in the securities industry, let me say this, I don’t know Mr. Fuld, but his firm has always (dating back to the 80’s) had a reputation for aggressive and borderline practices, with both investors and their own investments. You can’t put it all on one individual, but he certainly did nothing to change the culture. 350mil. in compensation is obscene, and he, as well as others, have virtually assured Obama of victory which will further destroy our financial system.
Posted by: Paul Raihle | October 7th, 2008 at 3:03 am | Report this commentbarney frank goes free!! What a country.
Posted by: vicki | October 7th, 2008 at 3:50 am | Report this commentPaul & Vicki…Congratulations!!! You said it best of all!!!
Posted by: Marsha Harris Scott | October 7th, 2008 at 4:56 am | Report this commentAs a former LB Employee (Up until 9/2008), I have to say I do not blame Dick Fuld. Lehman did NOT do anything that every other wall street firm and for that matter banks around the country didn’t do. If Lehman didn’t increase their balance sheet over the years, we would have been bullied out of the market because as I already mentioned everyone else on the street was doing the same thing. Since Clinton signed the bill which counteracted the Glass-Steagall the I-Banks like Lehman had to beef up their balance sheets to be more like the commercial banks or otherwise they just could not compete.
But I do concede that just because everyone else on the block is doing something doesn’t mean you should do it, I’m merely pointing out the facts.
If you watched the entire 2 hours 10 minutes of Dick Fuld’s testimony you would have saw him say “until the day they put me in the ground I will wonder” (why Lehman was the only major wall st firm not to receive a govt bail out).
As a former Lehman Employee, I have to agree with that. I do not have any facts on this, but I do hope that the govt investigates why the FED/Treasury did not bail out Lehman, which as most people will agree at this point definitely contributed in a big way to the credit crisis we are currently in and why instead of investing 10’s of billions of dollars to save Lehman (as was given to Bear, AIG), we now have to pay for a 700 billion bail out…
As for me I will miss the company. It was a great company to work for and I wish I was still working there!
Posted by: Robert | October 7th, 2008 at 5:16 am | Report this commentI was in awe at how Fuld was able to “Fed Speak” and stoicly dance his way out of pressing questions (in order to not be a snitch on the street i presume). What I would really like to know is what happened between Lehman and Paulson, GS, JBM and even Barclays who appeared to pretty much do their best to insure that Lehman got rubbed out.
Posted by: rob | October 7th, 2008 at 5:28 am | Report this commentAnother comment.. I was quite irritated with the subcommittee’s obsesion with TIME keeping. It forced answers to be short and flat. I believe that they prevented very pertinent information from being divulged by Mr. Fuld.
I expected The FT to do better than parrot the ‘$350m since 2000′ line
Envy–and the fact that dedicated teachers and heroic emergency workers get much less than even politicians–aside, there is no disgrace in getting paid millions in a year when the bank under your stewardship during that year earned billions.
It is, however, inexcusable to continue to ask for millions in the very same months when the bank is sinking. Give us the figures for those relevant months, Mr Gapper.
Posted by: J Michael AJP Llamas, ex-private banker, 39 | October 7th, 2008 at 10:20 am | Report this comment“….I can look right at you and say this is a pain that will stay with me the rest of my life.”
Posted by: James Coleman | October 7th, 2008 at 11:05 am | Report this commentExcept when he is counting his $350m+ fortune obtained by pyramid selling and other spivy practises.
“…..I can look right at you and say this is a pain that will stay with me the rest of my life.”
Posted by: James Coleman | October 7th, 2008 at 11:08 am | Report this commentExcept when he is counting his $350m+ wealth obtained by pyramid selling and other spivy practises.
He got off lightly so far.
Give it a year and it will firing squads.
Posted by: James | October 7th, 2008 at 12:29 pm | Report this commentDick Fuld told the committee that he and others at Lehman were paid for performance, a concept which must have terrifed any House member who understood it.
Posted by: Tom Groenfeldt | October 7th, 2008 at 1:01 pm | Report this commentTom Groenfeldt, you said it best!
Posted by: JOANNE | October 7th, 2008 at 1:14 pm | Report this commentWere our House members paid for performance, they’d all be on the unemployment line!
Fuld and Lehman performed very, very well for many years.
Wall Street pays well…we all know that.
One chooses one’s profession.
Business professions, especially those on Wall Street, equal high salaries, perks and bonuses…this is nothing new.
Shall we think now about the greed on Main Street that propelled “Joe Six Packs” to borrow money to buy homes that were far out of their financial ability to repay?
As I’ve read elsewhere: How does one “own”a home when one is still paying for it and it can be taken away at anytime due to non-payment?
I’m rambling somewhat here, but I’d enjoy hearing other thoughts onthis.
Someone should really look into the real net compensations for the Wall Street heads. After taxes they kept much less and in many cases the bonuses were in more stock and options which they probably held onto until it was worthless. What a goofy system and I for one think that considering they (pick a Wall Street financial company) never really produced any profits, they don’t deserve to keep anything they were “given”. And I really don’t understand the “bonuses” or “retentions” whatever you call them that are being given to executives to stay on and help clean up the mess, heck, they created the mess . . . hire some fresh new faces at substantially lower salaries to do the work.
Posted by: C Kincaid | October 7th, 2008 at 2:26 pm | Report this commentAccording to my friends at Lehman, he is the nicest Irish lad on Wall Street and they are all loaded and live in Rye in million dollar homes because of him, leave this man alone!
Posted by: Shaemus O'Flanahan | October 7th, 2008 at 2:45 pm | Report this commentThat’s the magic of risk assessment and leverage isn’t it Joanne?
The discussion is about “…the greed on Wall Street that propelled “Joe Single Malts” to borrow money to buy securities that were far out of their financial ability to repay?”
I’ll let you rephrase the next sentence you wrote on your own.
Seems to me everybody is culpable. Doesn’t it seem that way to you?
What raises everyone’s ire is the flaw in the compensation model. They aren’t really retroactively punitive. In this case, Joe Six-Pack could have done everything right and still been burned.
Posted by: CBayne | October 7th, 2008 at 2:49 pm | Report this commentI think this is so much BS. I think Dick was right in asking why Lehman was excluded from the US Bailout? well, Hank seems to be moving earth and moon to protect his alma matter, so why destroy this when the next day they spent USD 85B to save a poorly run Insurance Scam house? Having worked closely with Lehman, I can say Dick and his team got the raw end of the stick.
Posted by: Badri | October 7th, 2008 at 4:33 pm | Report this commentI look forward to his book about the subprime scam. Suggested title
“How You Were All Fuld”.
Posted by: J.J. | October 7th, 2008 at 6:03 pm | Report this commentThank you C. Bayne, I always enjoy a critique of my poor sentence structure.
Posted by: JOANNE | October 8th, 2008 at 12:28 am | Report this commentPerhaps Dick Fuld’s eternal pain would be somewhat relieved if he offered to return a substantial portion of his 350 million to former employees and Lehman investors who can’t pay the rent next month.
Posted by: Marguerite Beaulieu | October 8th, 2008 at 4:02 pm | Report this commentLet’s not be fuld by his peformance! This will have been rehearsed many times prior to facing the committee. Being a leader means taking the rough with the smooth (enormous bonuses). When things go really wrong, then the guy in charge should accept accountability and not, like the previous CEO of AIG who when answering similar questions a few hours/days later blamed everyone and everything else. Good luck DF, I really hope you do feel for your loyal and committed ex-employees.
Posted by: jdesalab | October 9th, 2008 at 4:51 am | Report this comment