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Apparently not. The former Lehman CEO devolved into long soliloquies about the history of the bankrupt firm, took long pauses and seemed generally delusional in his testimony in front of the House Financial Services Committee this afternoon. Here’s a recap of Fuld’s bizarreness:
The most peculiar answer: “We were risk averse,” Fuld says in response to a question about why the firm failed. He chalks the losses up to “terrible timing” on commercial real estate investments. Still, at the end, Fuld says there was “no capital hole.” “We could not convince the world about the [good] position we were in.” He also blamed naked short sellers, again.
Asked if 30 to 1 leverage seemed risk averse to him, Fuld said 30 to 1 was a misconception. (It seems as though he really believes this.)
At the end of his his opening statement, Fuld looks up from his prepared remarks, takes off his glasses and says: “Given all that has been said, I would like to add that I am aware that one day we had a firm and the next day we did not and a lot of people got hurt with that and I have to live with that. ”
Asked if he should have known about the Repo 105 transactions, Fuld said “there was no reason why I would know about those sale transactions” because they were merely sales of government securities. “I was focused on less liquid assets: commercial real estate, residential mortgage, leveraged loans. I was focused on what could impact our capital. Government securities do not impact our capital.”
After a question about what caused the demise of Lehman Brothers, Fuld pauses for an uncomfortable amount of time and then begins a history lesson on Lehman, which goes back 150 years and leads up to to the firm’s IPO in 1994 before he’s cut off by Rep. Paul Kanjorski, who asks him to make his answer more succinct. But Fuld keeps fumbling and going back in time talking about how great the firm was. Kanjorski interjects again: “I haven’t heard you take responsibility” and “Don’t give me an advertisement” for the firm.
Later in the hearing we finally get a sort of answer out of Fuld about the mistake he made: “We did not understand the contagion of one asset class to the next and failed to see the depth of the crisis,” he sad. Oh yeah, and the firm “had too much commercial real estate,” he adds.
One representative asks Fuld if he gambles. After another long pause he says, “Not in the way you’re asking.”