In a maddening exchange today between former Lehman Brothers CEO Richard Fuld and Rep. Paul Kanjorski (D - PA.) in front of the House Financial Services Committee, Fuld found it nearly impossible to identify why his bank failed.
Or, rather, he did whatever he could to avoid admitting exactly why his firm tanked. Here's the exchange (abridged for length):
Kanjorski: What caused the demise of Lehman Brothers?
Fuld: A number of factors...
Kanjorksi: What are they?
Fuld: A little bit of history, I'm not going to back 150 years....
Kanjorski soon interrupted and said, "Can you succinctly tell us, why did Lehman Brothers fail?"
After another stalled response from Fuld, Kanjorski asked again: "Very simply what caused your demise? Did you over-invest in risky obligations? Did you have less than adequate staff hired in executive execution? There's gotta be some fundamental reasons, I can agree that you can't give us one cause, but don't give me an advertisement..."
Fuld then went on to say that he never heard any feedback from regulators that his firm did not have enough liquidity.
WATCH the exchange:
Former Regulator: Lehman Was The Largest Purveyor Of 'Liars' Loans' In The World
In fiery testimony before the same committee, William K. Black, a former regulator during the S&L crisis, told members of the committee, "You asked earlier for a stern regulator, you have one now in front you."
Black, currently an associate professor of Economics and Law at the University of Missouri-Kansas City School of Law, was blunt: "When people cheat, you cannot as a regulator continue business as usual."
He called Lehman's failure "a story, in large part, of fraud" that begins at the latest in 2001:
"Lehman was the leading purveyor of liar's loans in the world. For most of this decade, studies of liar's loans show incidence of fraud of 90%. Lehmans sold this to the world, with reps and warranties that there were no such frauds."
After failing to act, Black says, regulators offered "sad excuses" about insufficient staffing. Here's more from Black:
"The SEC: we're told they're only 24 people in their comprehensive program. Who decided how many people there would be in their comprehensive program? Who decided the staffing? The SEC did. To say that we only had 24 people is not to create an excuse -- it's to give an admission of criminal negligence. Except it's not criminal, because you're a federal employee."
WATCH Black's Testimony: