Lehman's Fuld: U.S. regulators had 'flawed information' when denying bailout help
Richard S. Fuld, Jr., former chairman and CEO of Lehman Brothers; Barry Zubrow, chief risk officer for JPMorgan Chase; and Wachovia CEO Robert Steel testified on Capitol Hill today.
(Photo credit: AP)
By Ariana Eunjung Cha
U.S. regulators acting on "flawed information" denied Lehman Brothers the bailout assistance that its Wall Street competitors received, dooming the bank to collapse, former company CEO Richard S. Fuld said Wednesday.
In testimony prepared for the Financial Crisis Inquiry Commission set up by Congress, Fuld--a central figure in the crisis criticized for taking too much risk--argued that the sudden collapse of Lehman that shocked markets could have been avoided as late as the weekend before had the government taken action.
After Lehman filed for bankruptcy on September 15, 2008, the financial crisis deepened as credit markets almost froze.
"Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued," Fuld said.
The 10-member Financial Crisis Inquiry Commission is charged with writing the official account of the financial meltdown and reporting whether specific financial institutions would have lived or died without exceptional government assistance.
Fuld said Lehman gave government regulators a number of options for saving the company but they were rejected. He said the regulators just weeks later extended similar measures to other Wall Street banks.
"Lehman was forced into bankruptcy not because it neglected to act responsibly or seek solutions to the crisis, but because of a decision, based on flawed information, not to provide Lehman with the support given to each of its competitors and other nonfinancial firms in the ensuing days," Fuld said.
Thomas Baxter, general counsel of the New York Federal Reserve, defended the government's actions, saying: "The Federal Reserve did not 'allow' Lehman Brothers to die." In fact, he said Federal Reserve lending facilities had "calmed markets," allowing Lehman time to seek another alternative to filing for bankruptcy.
He drew a distinction between Lehman, which
did not receive aid, and AIG, which the same week received a bailout,
saying that AIG--which received $182.3 billion--had sufficient
resources to back a loan.
Today's hearing was the first of a two-day inquiry into the expectation and impact of the extraordinary government intervention. Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp Chairman Sheila Bair are scheduled to testify on Thursday.
The FCIC's final report is due in December and is likely to contain mounds of internal documents from banks and government agencies regarding the actions they considered and took during the crisis.
Ariana Eunjung Cha
September 1, 2010; 9:09 AM ET
Categories: Congress , Financial Crisis Inquiry Commission
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