Waxman Takes on Lehman CEO at Hearing
The House Oversight and Government Reform Committee hearing into the collapse of Lehman Brothers is underway, and if chairman Henry Waxman's opening statement is indicative of how he will handle the testimony of Lehman CEO Richard Fuld, we could be in for some real fireworks.
In his statement, Waxman said, "These were lucrative years for Lehman's executives and Mr. Fuld. Lehman paid out over $16 billion in bonuses. Mr. Fuld himself received over $30 million in cash bonuses. His total compensation during these four years exceeded $260 million. But while Mr. Fuld and other Lehman executives were getting rich, they were steering Lehman Brothers and our economy towards a precipice."
He continued: "What's fundamentally unfair about the collapse of Lehman is its impact on the economy and taxpayers. Mr. Fuld will do fine. He can walk away from Lehman a wealthy man who earned over $500 million. But taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis."
In his written statement not yet read to the committee, Fuld said, "Some of the media coverage of Lehman Brothers' demise has been sensationalized - based on rumors, speculation, misunderstandings and factual errors. I believe to move forward, we first need to accurately understand how we got here."
While Waxman went after Fuld and other Lehman executives, Fuld went after short sellers -- investors who bet stocks will drop rather than rise.
Fuld's statement said: "Naked short selling, followed by false rumors, dealt a critical, if not fatal blow to Bear Stearns. Many knowledgeable participants in our financial markets are convinced that naked short sellers spread rumors and false information regarding the liquidity of Bear Stearns, and simultaneously pulled business or encouraged others to pull business from Bear Stearns, creating an atmosphere of fear which then led to a self-fulfilling prophecy of a run on the bank. The naked shorts and rumor mongers succeeded in bringing down Bear Stearns. And I believe that unsubstantiated rumors in the marketplace caused significant harm to Lehman Brothers. In our case, false rumors were so rampant for so long that major institutions issued public statements denying the rumors."
You can watch the hearing unfold here. Or you can just stay tuned to this blog for more updates.
-- Michael S. Rosenwald
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