News and Politics | October 06, 2008 | 56 comments

Lehman diverted millions to execs

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Pericles_Lewnes
Congress heard Monday that Lehman Brothers, days away from becoming the largest bankruptcy in U.S. history, was pleading for a federal rescue while steering millions in dollars to departing executives.

The first hearing into what caused the nation's financial markets to collapse last month, precipitating a $700 billion bailout, opened with finger-pointing and glimpses into internal company documents from Lehman's chaotic last hours.

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, said the giant investment bank was "a company in which there was no accountability for failure." Lehman's collapse set off a panic that within days had President Bush and Treasury Secretary Henry Paulson asking Congress to pass the rescue plan for the financial sector.

Richard S. Fuld Jr., chief financial officer of Lehman Brothers, was among witnesses called to testify.

"What has happened is an absolute tragedy," Fuld said in prepared remarks. "I feel horrible about what happened."

Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept. 11 request to Lehman's compensation board that three executives leaving the company be given $20 million in "special payments."

"In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation," Waxman said.

The government let Lehman go under Sept. 15, only to bail out insurance giant American International Group the next day, in a cascading series of financial shocks and failures that put Washington on track for the multibillion-dollar rescue starting the end of that week.

Waxman described that plan as a life-support measure. "It may keep our economy from collapsing but it won't make it healthy again," he said.

That sentiment echoed on Wall Street, where the Dow Jones industrials sank below 10,000 on Monday for the first time in four years. Investors fear the crisis will weigh down the global economy and the bailout won't work quickly to loosen credit markets.

The rescue plan, now law, was so rushed that the usual congressional scrutiny is only coming now, after the fact.

Waxman said that in January, Fuld and his board were warned the company's "liquidity can disappear quite fast."

Despite that warning, he said, "Mr. Fuld depleted Lehman's capital reserves by over $10 billion through year-end bonuses, stock buybacks, and dividend payments."

Waxman quoted Fuld as saying in one document, "Don't worry" to the suggestion that executives go without bonuses.

That suggestion came from Lehman's money management subsidiary, Neuberger Berman. Waxman quoted George H. Walker, President Bush's cousin and a Lehman executive who oversaw some Neuberger Berman employees, as responding with a dismissive tone to the idea of going without bonuses.

"Sorry team," he wrote to the executive committee, according to Waxman. "I'm not sure what's in the water at 605 Third Avenue today.... I'm embarrassed and I apologize."

Fuld said in his statement that the company did everything it could to limits its risks and save itself.

"In the end, despite all our efforts, we were overwhelmed, others were overwhelmed, and still other institutions would have been overwhelmed had the government not stepped in to save them," he said.


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56 comments // Lehman diverted millions to execs

  • PokerKnave
    • 0
      PokerKnave  
    • It reconfirms that these bums should be locked up as dangerous criminals. Just because they do not wear a mask and carry a baseball bat dosen't mean their crime will not create a lot of physical injuries to others lower down the 'food chain'.

    • 3 years ago
  • Wilmingtonian
    • 0
      Wilmingtonian  
    • I hate this story so much it really makes me want to hurt these people. It makes my eye twitch and I never even met these bastards or gave 'em a dime. It Makes me sick I really do hope something unfortunate happens to people like them good riddence

    • 3 years ago
  • alicynx
    • 0
      alicynx  
    • Its amazing how we have three strikes laws on the books, keeping professional thieves in prison for life. If you commit armed robbery three times and get caught three times, you'll be in jail for life.
      These guys have all committed acts that will impact the lives of every American, citizen or no, and what do they get? A $20 MILLION severence?? $350 MILLION in compensation?? Could a DA not earn his pay and find a way to prove that this theft was Treason? It certainly is an act that has crippled the United States economically, and thus diminished its role in the global community - if it led to the collapse of the American Government, could we then put them before a firing squad? I just think that if a poor, fucked up meth head can lose his freedom for being stupid three times in a row, then these intellectual bastards should rot in prison for the rest of their lives for masterminding the worst collapse of our economy in over 60 years.

    • 3 years ago
  • delas78
    • 0
      delas78  
    • When the gates of hell open up, they'll be ushered straight to the front of the line!

      But until then, NOTHING will be done about this. These criminals will steal our money 'till the day they die with NO punishment.

    • 3 years ago
  • Pericles_Lewnes
    • 0
      Pericles_Lewnes  
    • Image
    • Lehman's Fuld: Where was our bailout?

      Richard Fuld, the disgraced head of Lehman Brothers (LEHMQ.PK), said he would wonder "until they put me in the ground" why the U.S. government did not rescue the 158-year-old Wall Street firm and claimed regulators knew the full scale of its condition far before its collapse...

      Rest at Link...

    • 3 years ago
  • lotus_65
  • aliquid_
    • 0
      aliquid_  
    • Our land is angry in turmoil about the economy and this comes to light. When the smoke clears, this ceo and others wil come to light and stand toe to toe.

      They get up each and evey morning and actually look at themselves in the mirror saying" Today is the day I rob, rape and steal from my own counrymen"

    • 3 years ago
  • MukNFenTaL
    • 0
      MukNFenTaL  
    • "In the end, despite all our efforts, we were overwhelmed, others were overwhelmed, and still other institutions would have been overwhelmed had the government not stepped in to save them," he said.---

      I feel so sorry for these multi-billionaire execs. Thank goodness the good ole American tax payers were there to save them from further poverty

    • 3 years ago
  • chasmartin
    • 0
      chasmartin  
    • Sorry friends for the delay, but I'm taking a course out at the college near me. But on the subject of where all our money is going, well I just saw Jeb's name in the wood pile. I thought I would trip over myself trying to turn off the alarm. The afternoon that Bush came outside last week to explane what was going on his body language did not match what he was saying. I think this plane has a serious problem and we've only got 30 minutes of fuel on board.

    • 3 years ago
  • bigred5
    • 0
      bigred5  
    • Ecclesiastes 7:15
      All things have I seen in the days of my vanity: there is a just man that perisheth in his righteousness, and there is a wicked man that prolongeth his life in his wickedness.

    • 3 years ago
  • nkeg87
    • 0
      nkeg87  
    • Ya know what, they shouldve WAITED to pass the bill until after these hearings and the investigation. Evidently from the DOW today, passing it in the rush hasnt been an immediate savior. I dont think waiting wouldve killed anyone...

    • 3 years ago
  • iloveravi
  • iloveravi
    • 0
      iloveravi  
    • Why do americans allow their government to transfer public money into private hands and private debt to the public? You realize you can stop them right?

      You also realize that this 900 billion will only be the start right? If you are fucking stupid enough to allow 900 billion you think they'll stop there?

      In Bangkok the people organized and overthrew the parliamentary buildings and ousted the Thai Prime Minister over accepting money and appearing on a TV show.

      Your guy lies you into war, kills thousands of your young people, fucks up your economy so badly that you have mass homelessness, wipes his ass with you privacy and bill of rights, turns you into one of the most hated nations on the planet and you can't even get impeachment proceeding started?

      Americans are either incredibly lazy, incredibly stupid or incredibly stupid and lazy.

    • 3 years ago
  • nkeg87
    • 0
      nkeg87  
    • iloveravi:

      I know. Im ashamed. But they have us so fearful, most of us are unwilling to stand up at all. Its easier to pretend not to notice and carry on our daily lives and hope it never directly impacts us. I think most American think they wont lose their jobs or that losing money wont matter as much as ending up in jail or dead.

    • 3 years ago
  • iloveravi
    • 0
      iloveravi  
    • iloveravi:

      Well, flud just got his ass kicked at the gym so some Americans are making a stand in certain way.

      nkeg87,
      It saddens me when I hear americans say they have been frightened.

      saddens and angers me.

    • 3 years ago
  • chrpettit
    • 0
      chrpettit  
    • iloveravi:

      i think you are right...americans are BOTH stupid and lazy. besides, who is going to watch oprah if the people are trying to do something productive for society. i think it has to do with cross breeding... americans are getting dumber and dumber. there should be a procreation test, if you fail, no kids for you

    • 3 years ago
  • blueman53
  • Raven6
    • 0
      Raven6  
    • Contractual agreements protected by the Constitution ? Have you read the it ?

      Quick lesson. You and some moron decide to rob a bank and write up a contract which states you'll split the money. You think that will hold up ? No. Constitution has nothing to do with the contract.

      Now lesson #2.
      The Constitution does allow for my pursuit of happiness and gawddammit that means letting me put my foot switfly, violently, and with extreme prejudice up their pampered asses, locking them up in San Quentin, and taking our gawdamn money back ! ! ! ! !

    • 3 years ago
  • blueman53
  • chasmartin
  • blueman53
    • 0
      blueman53  
    • the execs had a contract to receive this money. If that is the case, then it is their personal property. and protected by the constitution.

      If you take their money than you are breaking the constitution. you can do that.

      I don't like it anymore than anyone else, but the constitution protects everyone, even the rich.

    • 3 years ago
  • frady
    • 0
      frady  
    • I hope their diversion of funds to retiring execs on September 11th was criminal behavior. Although I blame the Clinton Administration's insistence that Fannie and Freddie and other banks write mortgages for under-qualified people, the greed of executives at companies such as Lehman's brought this crisis to fruition and I hope they do prison time and are forced to forfeit their oceanfront mansions if they violated the law. I'd like to see the politicians that took exorbitant lobbying donations from Fannie and Freddie investigated, too.

    • 3 years ago
  • Nephwrack
  • isnamthere
    • 0
      isnamthere  
    • Nephwrack:

      hiding under his rock, hopefully. Anyway, he's so predictable do you really need to see his post to know what he would say:

      "what about Obama? He voted for it. Why don't you talk about that?"

    • 3 years ago
  • KarlitoMosquito
  • lenhart
    • 0
      lenhart  
    • Northing was learned from the Enron debacle.

      I wonder where Ken Lay is hiding out after faking his death.

      Did any credible person ever report seeing the body?

    • 3 years ago
  • Nephwrack
  • Gordonclyne
    • 0
      Gordonclyne  
    • I cant afford to fly across the country and personally smack the daylights out of these financial terrorists, but I would if I could, its the only satisfaction I'd get, because I'm sure their money is safe from getting suddenly lost. Stealing in broad daylight is what it is.

      ....and why had Bush been telling us the economy is "essentially sound" for so long, and then we're suddenly in a crisis? whats up with that? more lies and deceit, and a stunning lack of leadership or accountability.

      anyone want a third alternative to the election?, its called a revolution, so while the troops are in Iraq, lets sneak in and take over, and let the banks go belly up, free market works, right? the economy is sound, right george?

    • 3 years ago
  • Gordonclyne
    • 0
      Gordonclyne  
    • Where the hell is lee harvey oswald when we need him....

      I want to find out where these guys live, and tell every foreclosed/ homeless person. perhaps they have a spare room or two they could let us use.
      If Fuld and Co could cough up a couple of years bonuses, we'd only need 699.999 billion to bail out these bas*&rds.

    • 3 years ago
  • abbym0308
  • Brockie
    • 0
      Brockie  
    • Now what did you expect? Pres. Bush couldnt let his wonderful cousin George H. Walker and other greedy asshole buddies go without their year end bonus! Now reach deep into your pockets and cough up the cash for the big bailout!!

    • 3 years ago
  • Raven6
    • 0
      Raven6  
    • Aaaaaaaaaaaaaaaaaaaaah !!!!!!!
      Just fu#%ing Aaaaaaaaaaaaaaahhhhhh !!!!!!!!!!!

      They are outright fu#%ing us ! ! ! What the fu#% ! ! !

      Just fu#%ing, fu#% me, the fu#%ing fu#%s

      Fu#% them ! Fu#% Eloquence, FU#% THEM ! ! ! ! !

      god fu#%ing damn I'm mad

    • 3 years ago
  • isnamthere
  • sandychronic
    • 0
      sandychronic  
    • I think my grandma was right. Never use a credit card, keep your life savings under the mattress, invest in gold, learn to sew, and buy food in bulk. conscious consumers, lead the way!!

    • 3 years ago
  • regjoeschmo
  • NeoDotCom
  • darkhorsejim
  • damnneargenius
    • 0
      damnneargenius  
    • If they feel so horrible then why not return the money?

      How about the money or your life?

      Seems fair enough doesn't it? Think of how many lives the bailout will destroy in the long-run.

      That is evil, and not only premeditated, but carefully engineered.

      It would be nice to see everyone remotely involved in these dealings tried by an entirely new set of government representatives installed by force if necessary.

      In light of this, people should be able to refuse to pay taxes and cite this exact behavior as the reason. We are not obliged to support corruption, and it crosses me on my core principles.

      Enough is enough. I say replace and investigate everyone that supported this fraudulent scheme.

      What is the government for if not to protect the people from criminal behavior? What happens when the government has become the main protector of criminal behavior instead?

      Huge glaring flaws...

    • 3 years ago
  • Toughth
  • matea
  • mikesupertramp
  • bigred5
  • csmonut
  • Pericles_Lewnes
  • Pericles_Lewnes
    • 0
      Pericles_Lewnes  
    • Image
    • Fuld Earnings: Rep. Waxman asks Fuld about his compensation: "I have a very basic question for you: Is this fair?" -- after putting this chart on a screen:

    • 3 years ago
  • damnneargenius
  • kennymotown
  • Thomas_Morse
    • 0
      Thomas_Morse  
    • Those execs getting parachutes when they leave should also get a pair of braclets.. attached to a Federal Marshal!
      Peoples lives are destroyed and these people laugh all the way to the offshore bank.
      They should all go to jail.

    • 3 years ago
  • k8_hj
    • 0
      k8_hj  
    • I'm not surprised by this but it's still disgusting. It's totally appalling that execs expect the taxpayer to pay for their million dollar life style. What egos. This is the reason I believe in Karma because otherwise I would be too ill to get out of bed each morning.

    • 3 years ago
  • aamiller
    • 0
      aamiller  
    • they had better nail his butt to the wall - and the others that will have to answer to all of this......

      ...........but i am talking to the wall myself.............i mean what will really come out of all this????

      .....wanna bet that after they get done looking shocked, scolding him, pointing fingers and shaking theirs fists......the ceos will still have their millions.......
      ......and........
      .........in 2009 congress will still vote themselves better cost-of-living raises and keep their excellent long term retirement and healthcare , and bill the united states taxpayers..............

    • 3 years ago
  • onechance
  • pakazak
    • 0
      pakazak  
    • ah yes, the bailout. what a wonderful save by the american people.
      isn't that why we donated $700 billion, so they can moon us while they count the cash?

    • 3 years ago
  • F7
    • F7  
    • This comment has been hidden for review.
  • simplecj
  • jef_jef
  • KarlitoMosquito
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