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.

Lehman’s deep involvement in the business has also made the firm a target of criticism. In more than 15 lawsuits and in interviews, borrowers and former employees have claimed that the investment bank’s in-house lending outlets used improper tactics during the recent mortgage boom to put borrowers into loans they couldn’t afford.

This piece stands out for both its foresight and its perspicacity: It puts Lehman in the context of subprime and links it not just to investors, but borrowers.

And Hudson’s piece builds on earlier reports like an excellent 20/20 and New York Times segment, from 2000, on Lehman and subprime. The piece—which we
owe Hudson for calling our attention to in his recent Audit interview—will show you some of the real victims. It’s well worth a watch.


On December 22, The Globe and Mail (subscription) in effect redid and expanded on Hudson’s WSJ piece, showing Lehman wading deliberately, organizationally, inexorably into the subprime slime:

Eric Hibbert felt uneasy when he toured First Alliance’s head office in Irvine, Calif., in July, 1995.

Mr. Hibbert was a vice-president at Lehman Brothers and he’d been sent to meet First Alliance founder Brian Chisick to see if Lehman could form some kind of relationship with the mortgage lender.

‘This is a weird place,’ he wrote later in an internal memo. While he noted the company’s ‘efficient use of their tools to create their own niche,’ he also pointed out that ‘there is something really unethical about the type of business in which [First Alliance] is engaged.’

The article goes on to explain well the “elaborate game of passing the buck” that eventually brought down Wall Street and did so much damage beyond it. The account includes not just the actions of Dick Fuld and Co., but also raises the impact on borrowers and the role of deregulatory legislation like Sen. Phil Gramm’s Commodity Futures Modernization Act.

That this kind of reporting, as infrequent as it is, hits the heart of the matter is clear from the recent book Chain of Blame, which documents Wall Street’s role in causing the financial crisis. Here, authors Paul Muolo and Mathew Padilla set recent history straight:

Several Wall Street firms had rushed into the subprime market mid-decade [1990s], taking nondepository mortgage companies (old and new alike) public. Firms like Bear Stearns and Lehman Brothers managed the IPOs for them, bought and securitized their subprime mortgages, and lent them money through warehouse lines of credit.