My Surprising Conversation With Dick Fuld (Yes, That Dick Fuld) and the Future of America

Why generational conflicts and resource fights are coming soon to a theater near you

On a Saturday morning in February 2013, I was attending an event for Kairos Society, an organization that supports and celebrates college students who are entrepreneurs, which was held on the floor of the New York Stock Exchange no less, when I found myself walking right towards Dick Fuld, the controversial former CEO of Lehman Brothers.

It was a surreal moment. I couldn't believe it was actually Fuld at first, but there was no mistaking his tough-guy scowl and glare. He walked with a measured gait, as he carefully scanned the scene, truly like a fallen boxer re-entering the ring (Fuld's competitiveness and intensity is legendary, and he was known as "Gorilla" on Wall Street). Overtaken by curiosity, I extended my hand saying, "Dick," and introduced myself. His scowl immediately turned into a smile, seemingly delighted to encounter a friendly face, and we then spoke for about 10 minutes.


During that conversation, Fuld would come to represent something larger in my mind than just a fallen Wall Street lord. He became a metaphor for both the hopes and weaknesses of the Baby Boom generation, a generation that stands to be the first in American history to leave the country and its institutions in worse shape than it received them. Make no mistake: If we haven't learned from the past, there will be significant generational conflicts in America, and very soon, as public resources become more constrained (pensions crises are a favorite "canary in the coal mine"). Our institutions are increasingly under fire from rising populism including capitalism itself. And, in my mind, the core tension in American capitalism today is between a burgeoning form of crony financial capitalism that has increasingly become the cultural norm and the entrepreneurial capitalism that makes America so unique, and truly exceptional.

Now, I am not a lawyer, and I don't know enough about the details of the "balance sheet manipulations" or "accounting gimmick" -- as the bankruptcy court examiner would later describe Lehman's use of its controversial "Repo 105" accounting techniques -- that made Lehman Brothers's balance sheet look $50 billion smaller during the first and second quarter of 2008 before the bank collapsed. I also don't know enough about the evidence to know whether or not Dick Fuld or his team legally or technically committed fraud - a sad statement on our current political and legal system - yet the facts of Lehman's atrocious risk management and devious accounting practices and management could not be more clear. And, we all know that Fuld was the CEO of one of the world's largest investment banks when it collapsed, dissolved 158 years after it was founded, all while nearly bringing the world economy down with it.

That's old news.

It's also old news that the "too big to fail" investment banking system (originally chronicled in Andrew Ross Sorkin's tome "Too Big to Fail") still exists nearly six years after Lehman's collapse and neither Fuld nor any other executive presiding over firms went to prison following the world's worst financial collapse since the Great Depression. But, those realities are an indictment of the country's current institutional frailty, and even worse, a kind of institutional corruption that could threaten the future of American financial capitalism. After all, in this era of rising populism, God only knows how the citizenry would react to another collapse.

All of that said, the mood that day last February was sunnier surrounded by college entrepreneurs. After some small talk with Fuld about the new merchant bank that he started (called Matrix Advisors) and my work, I was most interested to know what several years of reflection might have produced in the way of "lessons learned." Call me overly-optimistic or naïve, but for the American system of financial capitalism to experience renewal, the first thing that occurred to me as we began speaking was that Fuld would have to play a big part of the potential solutions, just as others from his generation must.

When I asked Fuld if we had learned from the crisis, I was somewhat (and pleasantly) surprised by his response. "No. Not at all!" he said emphatically.

Now, America has long been an exceptionally redemptive society. Even if you screw up really badly, if you are willing to reflect long and hard, learn from your mistakes and demonstrate a commitment to a larger purpose than your own ego, you can emerge on the other side and begin anew. Former "Junk Bond King" Michael Milken, as he was literally nicknamed by critics, is a case in point. In a plea bargain in 1990, Milken pled guilty to securities and reporting violations, was sentenced to ten years in jail, fined $600 million and banned from the securities industry for life. After being released from prison, Milken has focused on building the Milken Institute which is focused primarily on medical research.

That was then. This is now.

When I asked Dick Fuld if he was willing to speak out about what we could all learn from the meltdown and crisis, he said that he would like to do so eventually, but could not then. That would make sense then, in February of 2013, since he was still under government investigation. Yet by September of 2013, just a few months after our conversation, the eight-member SEC Lehman Brothers team unanimously agreed to end its investigation, just as the FBI also came up empty on a parallel criminal case before the statute of limitations for filing most charges expired.

The oft-asked question, across the ideological spectrum, is: How can it be that no one went to jail? Because, as reported by the New York Times, after much apparent debate and disagreements, the SEC team led by George Canellos ultimately concluded that Lehman had not omitted "material information" from investors. This conclusion was drawn despite the existence of a 2,200-page bankruptcy report in which the court outlined what the bankruptcy examiner called "balance sheet manipulations." I would like to have a discussion with Canellos about what is "material information," since Lehman executives had, as reported in the Wall Street Journal, become addicted to using Repo 105 transactions to wipe $50 billion in assets off its balance sheet each quarter.

But, the open question really is this: What have we learned from the crisis? Before the collapse, the Securities and Exchange Commission was nowhere to be seen, either during the manipulations at Lehman Brothers, or in response to complaints raised against Bernard Madoff Investment Securities. And, for all the publicity around fines the SEC and Justice Department has levied at banks, very little has changed since before the crisis, despite the rise in symbolic "admissions of wrongdoing." What's more, according to the Times' investigation, Canellos' SEC team argued that Mr. Fuld did not know that Lehman was using questionable accounting practices despite testimony from another Lehman executive that suggested otherwise.

During the Volcker Rule negotiations (named after its primary advocate, former Federal Reserve Chairman Paul Volcker), bank lobbyists managed to persuade Tim Geithner, Larry Summers and others in the Obama Administration to remove the separation of investment banking and trading operations, the cornerstone element of the original rule. The original Volcker Rule was simple: Go back to the Glass Steaggal Act, and separate commercial banking (i.e. loans and advisory services) from securities dealings (i.e. investing and trading securities), which would have included principal investing (such as private equity and hedge funds). Well, that didn't last. Senator Chris Dodd's bill watered down the Rule so that banks could put up to 3% of their funds into private equity funds or hedge funds.

Hearing this, as it was widely reported, Volcker said: " 'Shock' is too strong a word. But I was disappointed." So you get the basic pattern, and a legal battle in the trenches ensued. And today, after years of bank lobbying, I'm not sure if even Paul Volcker knows how the remaining parts of Dodd-Frank will be implemented. In fact, banks are still fighting to delay it tooth and nail. The law should be simple. Excessive complexity seems to be the surest indicator that paid lobbyists have corrupted what is ultimately best for the citizenry.

Paul Volcker is someone who could be referred to as an example of what I call an "American Trustee" -- a bipartisan statesman with great integrity and purpose who can be relied upon to put the country's interests above partisanship. As best I can gather from both my sources and publicly available accounts, the banks were in one corner while Volcker was in the other, along with Austan Goolsbee, one of Barack Obama's longest serving economic advisors, who was then chief economist of the White House advisory board that Volcker chaired. To use the David vs. Goliath analogy would be cliched, but you get the picture. (Geithner and Summers it seems to me wanted to do the best thing for the system, yet argued for a technocratic solution, and lacked empathy for the type of strong reform leadership Americans needed.) Historians can surface all the details, but when too big to fail still exists, and not even Dick Fuld thinks we're close to learning the right lessons from the crisis, there was a failure of leadership.

Anyhow, when I asked Fuld about what could be learned from the 2007 crisis, and how to renew American capitalism, he didn't have a clear answer, but after asking for my card, he did offer a few thoughts. Fuld's first suggestion was bleak. He noted that he did not believe that the country's debt levels were sustainable, and thought that America would ultimately have to default on its debts. "You mean like Argentina?" I asked, to which Fuld nodded. That was depressing, so I said, perhaps naively, "That can't happen. This is America." Fuld got a little fired up at this, and he literally put his finger into my chest and said: "I tell you what. When someone owes you money and they can't pay it, you get screwed! There is no way we can afford all of this and it's only a matter of time. The government is totally screwed up. It's a total mess!"

True to his nickname, "Gorilla," Fuld's eyes flamed and his body tensed. I was taken aback by the sudden aggression, until I realized it was a classic power tactic from one of Wall Street's formerly premier power players. Yet after a Shakespearean fall, Fuld was anything but powerful that day. When I asked him what he could do to help solve America's problems, he said that he used to be able to get things done with the snap of his fingers. Not anymore.

As the conversation wound down, there was a silver lining. What gave us both hope for the future was America's culture of entrepreneurship. That spirit of innovation and invention was on full youthful display at the Kairos Society event that day. "I love entrepreneurs," Fuld said at one point. There we were on the floor of the NYSE on a Saturday morning, surrounded by energetic, bright-eyed college students pitching all comers on their product or service or non-profit venture. It was inspiring. Fuld also agreed with me that both the Democratic and the Republican parties had sold out to moneyed interests, and that the institutional "corruption" was real. How ironic.

Buckle up: generational conflicts are coming soon to a theater near you

All of that said, it's impossible for me to explain to my Uncle Joe, a lifelong truck driver, why in America today, Dick Fuld can pocket all of his gains (estimated to be in excess of $100 million; BusinessWeek reported that Fuld took home as much as $529 million from 2002-2007), while taxpayers shoulder the losses from Lehman's default. For Fuld to suggest that on top of that, America would just default on its debts brings to mind the worst image for describing the Baby Boom generation as entitled. Put another way, let's just say that I would like to see Fuld ride in Uncle Joe's truck for one day making these arguments, without getting a boot out the right door. Rising populism mustn't be ignored. In order to solve problems in new and creative ways together, we must first close that empathy deficit.

The good news for us all is that the generation coming of age today could be described as "Generation Entrepreneur." Unlike during the 1960s when the Kennedys made public service cool and stimulating, and as a place for change-makers and innovators to make immediate impact through such programs as the Peace Corps or NASA, the most talented young people are rarely drawn to work in government today. In a fascinating shift, the sexiness and prestige of a job on Wall Street, so prevalent in the 1980s and 1990s especially, has virtually vanished, and moved instead to Silicon Valley, entrepreneurship and social entrepreneurship.

While younger Americans may not understand pension accounting, you had better believe that those of us from Generation X and Y (Millenials) understand that our lives, careers and world are going to be a world apart from that of older siblings, let alone their parents. Young people want to make things happen and get things done. Popular mantras from the trenches of reinvention of America -- from the repurposed industrial buildings of Detroit to Oral Roberts University in Tulsa -- now include a desire to "get sh*t done" or "make things." People just want to solve problems, and make an impact while making a living. As the comedian and actress Amy Poehler puts it, "I want to be around people that do things. I don't want to be around people anymore that judge or talk about what to do. I want to be around people who dream and support, and do things."

Given the many painful tradeoffs ahead for America, generational conflicts and resource fights are coming soon to a theater near you. Social entrepreneurship offers the greatest hope for solving those problems creatively from the bottom up, especially when combined with the wisdom and leadership that only the Baby Boom generation can provide.

Dr. Howard Gardner, the Harvard University Professor of Cognition and Education, has a question he likes to be asked of leaders from the Baby Boom generation: "What did your generation do well, and where did you screw up?" There are plenty of superb leaders who want to be a part of the solution to American renewal rather than a part of the problem. These statesmen and stateswomen - America's trustees - must lock arms with a younger generation of entrepreneurial problem-solvers to drive American renewal.

We've done it before, and we'll do it again. Let's do this, and let's not forget that we still have a lot to learn from recent history.

Peter Sims is a best-selling author and social entrepreneur. His latest book is Little Bets: How Breakthrough Ideas Emerge from Small Discoveries and he was the coauthor, with Bill George, of True North: Discover Your Authentic Leadership. He is also the cofounder of Fuse Corps (, which gives 10-20 entrepreneurial catalysts each year the opportunity to spend a year helping governors, mayors and community leaders across the United States bring about social change using creative approaches to solving citizen problems.