Capitol Roasting For Bank Chief

Sydney Morning Herald

Wednesday October 8, 2008

ANNE DAVIES WASHINGTON CORRESPONDENT

IN A showdown between Main Street and Wall Street, Richard Fuld, the disgraced chief executive of the US investment bank Lehman Brothers, was hauled in front of a congressional committee this week to explain his role in the world financial meltdown.

For two hours on Monday Mr Fuld, looking strained and unhappy but defiant, answered questions from members of the House oversight committee. In a brief opening speech which was heard in silence, Mr Fuld told legislators that if he could turn back the clock he would do many things differently.

"I take full responsibility for the decisions that I made and for the actions that I took based on the information that we had at the time," Mr Fuld said. "I feel horrible about what has happened to the company and its effects on so many."

Then the committee chairman, Henry Waxman, a Democrat from California, weighed in. Holding up a chart that suggested that Mr Fuld's remuneration totalled $US480 million ($660 million) over eight years, he asked the question the whole world had been thinking.

"Your company is now bankrupt and our country is in a state of crisis. You get to keep $US480 million. I have a very basic question: Is that fair?"

After a long pause, Mr Fuld said the figure was exaggerated: "The majority of my compensation, sir, came in stock. The vast majority of the stock I got I still owned at the point of our [bankruptcy] filing."

Mr Waxman cut him off, saying that even if the figure was slightly lower, it was "unimaginable" to many people. "Is that fair, for a CEO of a company that's now bankrupt, to make that kind of money?"

Mr Fuld said: "The $US500 million number is not accurate. For the years you're talking about here, my cash compensation was close to $60 million ... and I took out closer to $US250 million [in shares]."

Interrupting again, Mr Waxman listed Mr Fuld's collection of property, including a $14 million villa in Florida and a home in an exclusive ski resort. "You and your wife have an art collection filled with million-dollar paintings," Mr Waxman said. "Your former president, Joe Gregory, used to travel to work in a helicopter.

"You made all this money taking risks with other people's money."

Refusing to give ground, Mr Fuld said his pay had been set by an independent compensation committee which spent "a tremendous amount of time" making sure executive interests were aligned with those of shareholders. "When the company did well, we did well," Mr Fuld said.

"When the company did not do well, we didn't do well."

But Mr Waxman disagreed. "Mr Fuld, there seems to be a breakdown because you did very well when the company was doing well and you did well when the company was not doing well. And now your shareholders who owned your company have nothing. They've been wiped out."

There were other questions, too. What had led to the 158-year-old bank's demise? A failure of the regulatory regime? Bad judgment? Greed fuelled by multimillion-dollar remuneration packages? Or a combination of this and more?

During questioning, Mr Fuld gave little insight into what went wrong, perhaps anticipating lawsuits in the future. But he did complain that he had "no idea" why Lehmans was allowed to go under while his competitors were bailed out by the US Treasury. "I do not know why we were the only one [not rescued]," he said bitterly.

Mr Waxman launched one more projectile: "I have heard you talk about what you should have done differently, but you don't seem to acknowledge that you did anything wrong," he said.

Mr Fuld did not reply.