Fuld criticises Lehman's investigators 'distortions'
Wednesday 21 April 2010
The former head of Lehman Brothers has hit out at the investigator who accused the bank of masking debts with an accounting trick, saying he had "distorted the facts" and Lehman's employees had been "unfairly vilified".
Dick Fuld, chief executive of the 158-year old bank when it collapsed in 2008, launched a robust defence of the group's practices to the US House of Representatives Committee on Financial Services yesterday.
The statements came just weeks after a bankruptcy court-appointed investigator published a 2,200 page report into Lehman's demise.
Anton Valukas criticised the bank for using the so-called Repo 105 tactic to improve its balance sheet by $50bn. The "gimmick" - according to the report - allowed the bank to sell toxic securities, removing them from the balance sheet before disclosure in quarterly results, with an agreement to buy them back shortly after. Yesterday market Mr Fuld's first official response to the report.
Mr Fuld, who ran Lehman for 17 years, said he has "absolutely no recollection whatsoever of hearing anything about Repo 105 transactions while I was chief executive of Lehman". In fact, the first time he remembered hearing the term was when Mr Valukas quizzed him on the subject a year after Lehman filed for bankruptcy.
The group did not use Repo 105 to remove toxic assets from its balance sheets, he said, and they were not used to hide Lehman's assets.
It was not true to say Repo 105 contributed to Lehman's bankruptcy, Mr Fuld said, which left the world's financial markets reeling. "Lehman was forced into bankruptcy amid one of the most turbulent periods in our economic history, which culminated in a catastrophic crisis of confidence and a run on the bank."
He believes the report drawn up by Mr Valukas "distorted the relevant facts, and the press, in turn distorted the examiner's report. The result is that Lehman and its people have been unfairly vilified."
Mr Fuld said that despite "misconceptions" about the company's valuation of its mortgage and real estate assets, liquidity and risk management, the investigator "found no breach of duty by anyone at Lehman with respect to any of these".
He said: "The world still is being told that Lehman had a huge capital hole. It did not." He added that these arguments "were used by many to undermine Lehman's bid for support on that fateful weekend of 12 September 2008."
Ben Bernanke, chairman of the Federal Reserve, also testified to the committee as did Mary Shapiro, the head of the Securities and Exchanges Commission and Treasury Secretary Timothy Geithner.
Mr Fuld said the regulators had been given all the access they needed in the months before Lehman's bankruptcy. "I am not aware that any data was ever withheld from them."
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