Considering that we got such articles while the crisis was building, it is not a shock that we now get articles that tell us Lehman’s disaster started in the past several months or in the past few years.
So now let’s go back to the latest coverage of Fuld. Our purpose in doubling back is to make an important point clear: Yes, Fuld deserves criticism, but excessive focus on Fuld is still a problem because it obscures the larger picture.
Take, for example, the early October segment on Fuld that came as a part of Anderson Cooper 360’s “Culprits of the Collapse” feature. CNN correspondent Joe Johns didn’t mince words:
Fuld is the guy who ramped up Lehman’s business in mortgage-related securities, at least until the bubble burst. But unlike many other firms, when the subprime market went south, he didn’t pull back. Instead he got in deeper.
This is true. And it is important—one of the shards of context we mentioned earlier—but “culprits of the collapse” is the wrong framework for this kind of examination, because it doesn’t address the problem as systemic. To start and stop with Fuld, or any other CEO, is to make a variant of the same mistake New York did.
We got more-sophisticated examples of that same mistake in late December, from the WSJ (subscription) and Bloomberg. These articles offer a variety of details on Lehman’s fall, but their focus is misleadingly narrow: negotiations inside Lehman and between Lehman executives and the rest of the financial establishment.
The inclusion of visual details (e.g. “Mr. Fuld, his suit jacket now off, leaned back in his chair”) is a time-honored business-press device, and we have no problem with it, but it’s no substitute for context.
We’ll close on a related note, by pointing out a problematic sub-genre of Lehman coverage: comparing Fuld unfavorably to Merrill CEO John Thain. The premise of these stories, in the NYT or the WSJ, for example, is that the comparison is interesting because one firm survived and the other didn’t. But this comparison is ultimately of limited importance because both firms were essentially playing the same game.
And, crucially, what happens is that these pieces help to justify the government’s decision not to save Lehman—a decision that, problems with the bailout aside, has been increasingly looking like the wrong one.
For example: In the days just before Lehman’s fall, The Wall Street Journal published a (now-to-be-regretted) editorial that opposed a government bailout for Lehman. The argument included the observation that Fuld “appears to have managed the crisis with less skill and dispatch than has, for example, John Thain at Merrill.” Maybe so, but so what? Whatever Fuld did or didn’t do, at the eleventh hour all that should have mattered to Paulson and Bernanke was the impact of Lehman’s fall on the larger economy. Let the prosecutors—and, fingers crossed, the media—figure out the rest.
In the end, the proper response to the demonization of Fuld is not to pull a New York and say he is a victim, but to perform a Michael Hudson and look at the larger picture.