Lehman Brothers Reloaded

As we mentioned in a previous blog, it was impossible that the Lehman Brothers did not know what was the price of their assets – and this months ago before the collapse. Maybe Fuld did not have a precise idea of total dimensions of the issue, but he knew how close he was for sure.
This is not of course a surprise for anybody. What emerged today in the news in the follow up of the next Enron was that FED was checking regularly and quite often reviews of how Lehman Brothers priced their assets. In a House Oversight and Government Reform Committee hearing, Fuld ascertained that SEC and FED actively conducted regular, and at times daily oversight of both our business and balance sheet”. And of course, in a tale of greed and decay, Mr. Fuld is taking no responsibility of the banks collapse, blaming this on the authorities who failed to pull the strings to secure Lehman’s business.
Sounds familiar? The Worldcom and Enron guys told the same story. Of course, they will spend the rest of their lives in jail, as Mr. Fuld will probably do if he’s found guilty. Which is very likely, since the authorities have a natural incentive to cover their footsteps and blame it on the so-hated ex-Lehman authoritary CEO.
As Reuters mentioned, Rep. Elijah Cummings, a Maryland Democrat, cited an e-mail exchange in which George Walker, President Bush’s cousin and a member of the Lehman executive committee, mocked a proposal for top company executives to forego their 2008 bonuses.

Walker responded to the proposal from a fund manager at Lehman unit Neuberger Berman by saying, “Sorry, team. I’m not sure what’s in the water” at the unit’s headquarters.

“In … my block in Baltimore,” said Cummings, “if they perform poorly, they get fired. They certainly do not get a bonus.”

Another Democrat, Ohio Rep. Dennis Kucinich, questioned why Treasury Secretary Henry Paulson decided to bail out American International Group and other companies and not Lehman. One day after Lehman filed for bankruptcy protection, U.S. authorities stepped in to rescue AIG with a plan to lend the insurer up to $85 billion. My guess would be because Fuld and his team were not very loved in Washington, a fact which comes now at full light.
This short story illustrates how human a company can be and how easily it can fail. This is why the investments tactics have to consider not only the cruel reality of the numbers, but also the strategy behind them. Not something that Mr Buffet and his kin are doing very often, isn’t it?

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