Covering the Self-Serving Fuld Testimony

Several misses and one hit

The coverage of Dick Fuld’s appearance before the Financial Crisis Inquiry Commission is somewhat uneven this morning.

The Wall Street Journal’s report, unfortunately, goes for the savvy angle: Playing up the political differences on the panel and how that will affect its ability to produce a report.

The Democratic chairman of a blue-ribbon panel examining the U.S. financial crisis said Wednesday that government officials made a “conscious policy decision” not to prevent Lehman Brothers Holdings’ 2008 collapse, potentially accelerating the financial crisis.

But Republicans on the panel disputed aspects of that narrative, setting the stage for a difficult debate within the Financial Crisis Inquiry Commission as it begins to craft its report on the 2008 meltdown’s causes.

The Financial Times goes with the old story: Dick Fuld accuses the government of killing Lehman Brothers. This is stupid on its face, and the FT shouldn’t give it the credence it does by leading its story with it.

Almost two years since the collapse of Lehman roiled markets, Mr Fuld mounted his most robust defence yet, accusing regulators in testimony to the Financial Crisis Inquiry Commission of pushing the bank into bankruptcy and failing to get a grip on the crisis early in 2008.

Bloomberg goes with that, too.

And the Los Angeles Times also goes with the bogus Fuld-blames-Bush angle.

The former chief executive of Lehman Bros. came out swinging at federal officials Wednesday, blaming them for failing to give the beleaguered investment banking firm the extraordinary help it gave to its rivals — aid that would have saved it from the 2008 collapse that helped trigger the worldwide financial crisis.

So Lehman went broke because government officials wouldn’t bail it out? Duh!

The New York Times uses the FCIC-was-sympathetic-to-Fuld angle, which no one else seems to notice. Its lede, though, does back up my point on the non-news of Fuld’s blaming the government:

In the nearly two years since Lehman Brothers filed for bankruptcy, its former chief executive, Richard S. Fuld Jr., has often seemed a tragic and solitary figure, telling anyone who would listen that the investment bank could have survived if only it had had more time — and received a bailout like the government gave other Wall Street banks.

Though the Times is right to question the hearing’s focus:

The commission’s six-and-a-half-hour hearing Wednesday, which also covered the sale of Wachovia to Wells Fargo, did not focus on Lehman’s responsibility for its own undoing, including its excessive leveraging and speculative investments. Nor did it question the accounting gimmicks, known as Repo 105, that Lehman had used to conceal some of its debt, as a court-appointed bankruptcy examiner detailed in March.

Only Reuters, from what I’ve read, threads the needle:

Officials appeared to have made a policy decision not to bail out Lehman Brothers, the head of a panel investigating the financial crisis said on Wednesday, challenging the view of regulators that they had no legal authority to help.

The comments lent support to former Lehman Chairman Richard Fuld’s contention that the Federal Reserve and Treasury could have done more to prevent his firm’s 2008 bankruptcy, which hastened the worst global recession since World War Two.

That’s right. The real question here (at least from the hearing yesterday) is why the Bush administration didn’t bail out Lehman. Hank Paulson et al have long said that they had no choice (actually they only started saying that a few weeks after they let Lehman go and realized what a catastrophic mistake it was). But Angelides has evidence in emails that it was a conscious political decision:

“I just can’t stomach us bailing out lehman,” Jim Wilkinson, who was then Treasury chief of staff, wrote in an internal email dated September 9, 2008, days before Lehman’s bankruptcy. “Will be horrible in the press don’t u think?”

In another email, Wilkinson wrote that the White House had ruled out any government money to back a Lehman rescue, adding there was “no way in hell (Treasury Secretary Henry) paulson could blink now.”

It may seem like a minor distinction between Reuters story and those of the FT, LAT, and Bloomberg, but the emphasis is important. Lehman was bankrupt. The government didn’t “push” it down, as Fuld’s self-serving spin would have it. It saw the calamity that resulted from letting it go and then decided it couldn’t let the others go down, too.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.