Second. Yes, the article raises a crucial question in asking why Lehman was let to fail—severely deepening the financial crisis—and the argument now floating around that Paulson and Bernanke should have saved it is quite convincing. Count us among those who want to know more about the logic of that decision.


That said, New York has the roles all mixed up. We are the ones who should feel betrayed here, and not just by Fuld. The fact is, the government owed Fuld nothing and the public everything—and the Lehman debacle was just one more way the bailout, such as it is, didn’t deliver.

Now, that Fuld has a somewhat narrower view is not surprising—after all, we are all at the center of our own universes, and CEOs with nicknames like “gorilla” probably even more so—but NY doesn’t have to go along with it.

Which brings us to what should have been the heart of the article. These nuggets are buried a few pages in, and briefly describe two important facts. One, Lehman’s leverage:

At one point, it was said that Lehman had borrowed $32 for every $1 in its coffers.

And two, its role in subprime:

Lehman quickly put its capital to work in real estate and soon was a dominant force in the sub-prime mortgage market, which catered to borrowers with shaky financial backgrounds.

But not only does the piece largely gloss over these points before returning to its victim narrative, it passes along Lehman excuses, like:

To push the stock price, Lehman had to continually increase revenues. How to do that wasn’t a big mystery. ‘In the late nineties, Goldman Sachs had made a ton of principal investments which paid off four years later,’ says one former Lehman executive. ‘It drove Lehman higher-ups to think we weren’t being aggressive enough. We had to keep up.’

This is an excuse for subprime? It is certainly in the interest of Lehman executives to make us think so. Again, New York seems to have lost critical perspective.

In short, this piece works too hard at making us see life according to Fuld—and his coterie at Lehman—and not nearly hard enough at giving us the bigger picture.

What is that bigger picture? Substantive context for the Lehman collapse is largely to be found in bits and pieces, shards of information in articles whose interest is more circumscribed. Some examples:

• The WSJ’s early October article (subscription) titled “The Two Faces of Lehman’s Fall,” which examined whether during its last days Lehman misrepresented its condition to investors in an effort to save itself. (Dean praised this piece in an otherwise tough critique of the paper’s crisis coverage.)

• An early October New York Times piece , “The Road to Lehman’s Failure Was Littered with Lost Chances,” that examined the question of whether Fuld could have saved Lehman had he handled the firm’s mounting crisis differently.

• Another early October piece in the WSJ that examined how Lehman real-estate hot shot Mark Walsh continued “doing deals even as rivals stepped back amid signs that credit was tightening and the market had peaked.”

All of these pieces contain some nice reporting, and all point to serious failings at Lehman. As the New York State comptroller Thomas DiNapoli wrote recently in a motion filed in U.S. Bankruptcy Court, “Mr. Fuld’s decisions drove the company toward ruin.” So if you are angry at Fuld, you have plenty of company.

But despite what we do know, coverage still has large gaps. We get a sense of what we as readers are still missing when we come across the rare example of a piece that really gets it.

In a prescient 2007 WSJ article (subscription), Michael Hudson aired some dirty laundry and explained how Lehman was “a prime example of how Wall Street’s money and expertise have helped transform subprime lending into a major force in the U.S. financial markets.” He then went on to describe how Lehman distinguished itself in the subprime arena:

Lehman topped other Wall Street firms over the past two years, packaging more than $50 billion in subprime-mortgage-backed securities in both 2005 and 2006. Overall, Lehman officials say the subprime business has accounted for 3% of the firm’s overall revenues in recent quarters, or roughly $500 million in 2006.

Lehman has also been a leader in investment banks’ push to buy their own lenders. Through its subprime unit BNC Mortgage Inc., it lends directly to consumers, bringing in more fees and giving it more control over the quality of the loans.

Elinore Longobardi is a Fellow and staff writer of The Audit, the business-press section of Columbia Journalism Review.