Richard Fuld - Opening Statement on Lehman Brothers Bankruptcy (Enhanced Audio) — Transcript

Full transcript

1. 0:00chairman Waxman ranking member Davis and
2. 0:04members of this distinguished committee
3. 0:07today there is unprecedented turmoil in
4. 0:11our capital markets nobody including me
5. 0:16anticipated how the problems that
6. 0:18started in the mortgage markets would
7. 0:21spread to our credit markets and our
8. 0:23banking system and now threaten our
9. 0:26entire financial system and our country
10. 0:30like many other financial institutions
11. 0:33Lehman Brothers got caught in this
12. 0:36financial tsunami but I want to be very
13. 0:40clear I take full responsibility for the
14. 0:46decisions that I made and for the
15. 0:51actions that I took based on the
16. 0:55information that we had at the time I
17. 0:57believed that these decisions and
18. 1:00actions were both prudent and
19. 1:02appropriate none of us ever gets the
20. 1:09opportunity to turn back the clock but
21. 1:12with the benefit of hindsight would I
22. 1:14have done things differently yes I would
23. 1:18have as painful as this is for all of
24. 1:22the people affected by the bankruptcy of
25. 1:25Lehman Brothers this is not just about
26. 1:27Lehman Brothers these problems are not
27. 1:30limited to Wall Street or even Main
28. 1:33Street this is a crisis for the global
29. 1:36economy we live in a world where large
30. 1:40investment large independent US
31. 1:43investment banks are now extinct where
32. 1:46AIG and Fannie Mae and Freddie Mac are
33. 1:48under government control and where major
34. 1:51institutions are being rescued and where
35. 1:54regulators are engaged in a daily
36. 1:56struggle to stabilize the financial
37. 1:58system in this environment it's not
38. 2:01surprising that the media coverage of
39. 2:04LeMans demise has been rife with rumors
40. 2:06and inaccuracies I
41. 2:10appreciate the opportunity to set the
42. 2:12record straight for this committee and
43. 2:14to be as helpful as possible in
44. 2:16explaining why we ultimately could not
45. 2:19prevent a bankruptcy filing and then I
46. 2:22want to respond to your questions I'm a
47. 2:26Lehmann lifer I joined as an intern in
48. 2:291966 and got a full-time job as a
49. 2:32commercial paper trader while earning my
50. 2:34business degree at night in 1994 when
51. 2:38Lehman Brothers was spun out of American
52. 2:40Express as a separate company and I
53. 2:42became the CEO we were a small domestic
54. 2:46bond firm by 2007 we had built Lehman
55. 2:49into a diversified global firm with
56. 2:5328,000 employees I feel the deep
57. 2:56personal connection to those 28,000
58. 2:59great people many of whom have dedicated
59. 3:01their entire careers to Lehman Brothers
60. 3:04I feel horrible about what has happened
61. 3:09to the company and its effects on so
62. 3:13many my colleagues my shareholders my
63. 3:18creditors and my clients as CEO I was a
64. 3:23significant shareholder and my long-term
65. 3:26financial interests were completely
66. 3:28aligned with those of all the other
67. 3:31shareholders no one had more incentive
68. 3:34to see Lehman Brothers succeed and
69. 3:36because I believed so deeply in the
70. 3:39company I never sold the vast majority
71. 3:43of my Lehman Brothers stock and still
72. 3:46owned 10 million shares when we filed
73. 3:49for bankruptcy
74. 3:50as I said following the spinoff of
75. 3:53Lehman Brothers from American Express
76. 3:55our business was almost exclusively in a
77. 3:58fixed income we recognized the need for
78. 4:01diversification and over the subsequent
79. 4:0314 years we built and acquired
80. 4:06significant equity and asset management
81. 4:08businesses we established a presence in
82. 4:1228 countries we also continually
83. 4:14strengthened our risk management
84. 4:16infrastructure Lehman Brothers did have
85. 4:20a significant presence in the mortgage
86. 4:23market
87. 4:24should not be surprising though US
88. 4:26residential mortgages are an 11 trillion
89. 4:30dollar market more than twice the size
90. 4:32of the US Treasury market any serious
91. 4:35participant and the fixed-income
92. 4:37business had a significant presence in
93. 4:40the mortgage market as the environment
94. 4:43changed we took numerous actions to
95. 4:45reduce our risk we strengthened our
96. 4:48balance sheet reduce leverage improved
97. 4:51liquidity closed our mortgage
98. 4:53origination businesses and reduced our
99. 4:55exposure to troubled assets we also
100. 4:58raised over 10 billion dollars in new
101. 5:00capital we explored converting to a back
102. 5:03a bank holding company we looked at a
103. 5:06wide range of strategic alternatives
104. 5:08including spinning off our commercial
105. 5:10real estate assets to our shareholders
106. 5:12we also considered selling part or all
107. 5:16of the company we approach many
108. 5:18potential investors but in a market
109. 5:21paralyzed by a crisis in confidence
110. 5:23none of these discussions came to
111. 5:26fruition indeed contrary to what you may
112. 5:29have read I never turn down an offer to
113. 5:34buy Lehman Brothers throughout 2008 the
114. 5:39SEC in the Federal Reserve conducted
115. 5:41regular and at times daily oversight of
116. 5:43our business and our balance sheet they
117. 5:46saw what we saw in real time as they
118. 5:49reviewed our liquidity or funding a
119. 5:51capital risk management and our
120. 5:53mark-to-market
121. 5:54process as the crisis in confidence
122. 5:57spread throughout the capital markets
123. 5:59naked short sellers targeted financial
124. 6:01institutions and spread rumors and false
125. 6:05information the impact of this market
126. 6:08manipulation became self-fulfilling as
127. 6:10short sellers drove down the stock
128. 6:12prices of financial firms the rating
129. 6:15agencies lowered their ratings because
130. 6:17lower stock prices made it harder to
131. 6:20raise capital and reduced financial
132. 6:23flexibility the down greens in turn
133. 6:26caused lenders and counterparties to
134. 6:28reduce credit lines and then demand more
135. 6:30collateral which increased liquidity
136. 6:33pressures at Lehman Brothers the crisis
137. 6:37in common
138. 6:38that permeated the markets led to an
139. 6:40extraordinary run on the bank in the end
140. 6:43despite all of our efforts we were
141. 6:45overwhelmed however what happened to
142. 6:47Lehman Brothers could have happened to
143. 6:49any financial institution and almost did
144. 6:52happen to others Bear Stearns Fannie Mae
145. 6:55Freddie Mac AIG Washington Mutual and
146. 6:58Merrill Lynch all were trapped in this
147. 7:00vicious cycle Morgan Stanley and Goldman
148. 7:03Sachs also came under attack Lehman's
149. 7:06demise was brought on by many
150. 7:08destabilizing factors the collapse of
151. 7:11the real estate market naked short
152. 7:13attacks false rumors widening spreads on
153. 7:15credit default swaps rating agency
154. 7:18downgrades a loss of confidence by
155. 7:21clients and counterparties and buyers
156. 7:23sitting on the sidelines waiting for an
157. 7:25assisted deal again this is not just a
158. 7:29Lehman Brothers story it's now an
159. 7:31all-too-familiar tale it is too late for
160. 7:35Lehman Brothers but the government has
161. 7:38now been forced to dramatically change
162. 7:40the rules and provide substantial
163. 7:43support to other institutions I greatly
164. 7:47appreciate the opportunity to speak with
165. 7:50you today and if I can be helpful to
166. 7:52this committee in any way to understand
167. 7:55how we got here
168. 7:56and what our country can do to move
169. 7:59forward I am happy to do so thank you
170. 8:02sir thank you