Ex-Lehman CEO Cries Out Loud Because He Didn't Get a Bailout; On the Flipside, He and His Henchmen Made off Big with the Booty

Astonishing! Two Stories Tell Two Sides to the Lehman Debacle!


One of my favorite posters on Motley Fool boards, Goofyhoofy, just laid headlined post "Astonishing! Two Stories!" post on the METAR message board. This post was #258085 posted at 6:08 PM yesterday. To see the original post and the entire thread of answers to it, click here.

For a tease of what you can read from the links Goofyhoofy supplied to display Lehman's "It ain't easy being sleazy culture," I will simply print, word for word, what Goofyhoofy printed in his short post . . . including his two links to the bigger picture at what is wrong with white collar greedheads who used to work at Lehman:

Lehman's Fuld: Where Was Our Bailout?

Richard Fuld, the disgraced head of Lehman Brothers , said he would wonder "until they put me in the ground" why the U.S. government did not rescue the 158-year-old Wall Street firm and claimed regulators knew the full scale of its condition far before its collapse."Until the day they put me in the ground I will wonder," Fuld said in his first public comments since Lehman filed for bankruptcy protection. "I do not know why we were the only one" that was not rescued.


Lehman Managers Portrayed as Irresponsible

Even as the investment bank Lehman Brothers pleaded for a federal bailout to save it from bankruptcy protection, it approved millions of dollars in bonuses for departing executives, a Congressional committee was told Monday.One Lehman document among thousands reviewed by the House committee showed that four days before the bank filed for bankruptcy protection, Lehman’s compensation committee was asked to grant $20 million in “special payments” for three executives who were leaving, Mr. Waxman said. An e-mail exchange recommending a delay in bonus payments was apparently brushed aside.

(Note: the next words are those left by Goofyhoofy in his Original Motley
Fool post.)

Lehman spent $5 billion in executive bonuses, $4 billion in stock buybacks, and another $750 million in dividend payments in the last year, even as the company was being warned by its own internal auditors that it was facing a liquidity problem.

Now here are some important points which Goofyhoofy did not lay out in his short post and which I've scooped from both of his excellent links about the Lehman fiasco. My comments follow the bits I've taken from both New York Times articles.

From the first story Lehman's Fuld: Where Was Our U.S. Bailout?

• In several hours of testimony before Congress, Fuld spoke methodically and at times seemed to preach financial intricacies to lawmakers, losing patience several times with members who pressed him for precise answers. Well I'm sure His Arrogance, Mr. Fuld, made some friends in Congress with his short temper.

• Rep. Henry Waxman, a California Democrat who chairs the panel, is holding hearings to find out what went wrong and what changes are needed in financial services regulation. Waxman is a real congressional pitbull maverick who has been watching out for Americans best interest for years. The guy is not afraid to investigate any wrongdoing in either party.

• The committee obtained thousands of pages of e-mails and other internal Lehman documents that "portray a company in which there was no accountability for failure," Waxman said. Pride goeth before the fall. Chalk another one up for "Companies which are too big to fail."

• Lawmakers on Monday voiced opposition to the bailout bill, blasted Lehman's actions and took exception with Fuld's compensation, which the committee calculated as nearly $500 million in cash, stock and options from 2000 through 2008. Jeez O' Peet. His Arrogance Fuld received half a billion buckaroos for running Lehman into the ground? Where can I get me one of those jobs?

• Rep. Elijah Cummings, a Maryland Democrat, cited an e-mail exchange in which George Walker, President Bush's cousin and a member of the Lehman executive committee, mocked a proposal for top company executives to forego their 2008 bonuses.Walker responded to the proposal from a fund manager at Lehman unit Neuberger Berman by saying, "Sorry, team. I'm not sure what's in the water" at the unit's headquarters. Fuld also dismissed the idea. "Don't worry -- they are only people who think about their own pockets," he said in an e-mail to Walker. Why does this not surprise anyone who has followed members of the Bush family over the past 20 years? Why does this surprise anyone who followed the email trail in the Enron and Worldcom trials where we see over and over again men of no conscience enriching themselves at shareholders's expense.? These guys are sociopathic moneygrippers. If we don't regulate them, they always steal us blind.

• The Federal Reserve and Treasury Secretary Henry Paulson undertook a series of emergency measures to rescue mortgage finance companies Fannie Mae and Freddie Mac. U.S. authorities also orchestrated a deal to sell Bear Stearns to JPMorgan Chase & Co. However, as Lehman's stock continued to plummet and the investment bank was unable to secure a buyer, Paulson was adamant that no government money be used to rescue Lehman. Think about that Paulson guy, Your Arrogance Fuld. Paulson onced headed Goldman Sachs, one of your chief competitors. Did Your Arrogance ever piss off Mr. Paulson on a deal? Do you think this is some kind of payback for your legendary hubris?

From the second link:Lehman Managers Portrayed as Irresponsible

• Richard S. Fuld Jr. blamed the news media. He blamed the short-sellers. He blamed the government, as well as what he characterized as an “extraordinary run on the bank.”But the chief executive of Lehman Brothers Holdings, the bankrupt remnant of a once-great investment house, never really blamed himself. Yes indeed. You rise to the top of one of the biggest investment banks of the planet. You suck out $500 million in bonuses and salary in eight years, you seek the Hosannahs and praise of your cherry picked board, but when there's TROUBLE, you want no accountability? As the Church Lady used to say, "How convenient!"

• Members of the committee, several of whom mispronounced Mr. Fuld’s name as “Fold” or “Food,” also hammered the Lehman chief executive for making what they described as rosy public statements about the bank’s health that did not reflect a scramble for cash behind the scenes. I believe it's pronounced "Fool" rhymes with "cool".

• “I wake up every single night wondering what I could have done differently,” he said. “This is a pain that will stay with me the rest of my life.” Yo, dude, maybe someone would believe this act of being contrite if perhaps you gave back say 90% of what you took to your burned shareholders. Yeah, I'll bet that happen when there are ice bergs in Hell.

• Mr. Fuld, by turns combative and contemplative, and often pained by interruptions of his answers, repeatedly denied that any misrepresentations took place. Even when confronted with internal documents that seemed to tell a different story, Mr. Fuld said he believed until five days before the Sept. 15 bankruptcy filing that Lehman remained in decent health. His Arrogance Fuld must be pained he must sit and be told to shut the "F" up for the first time in his life. Sic Semper Tyrannus.

• At one point on Monday, Mr. Fuld was confronted with an internal memo dated June 8 that included warnings about Lehman’s condition and asked the question, “Why did we allow ourselves to be so exposed?” Mr. Fuld, after a long scan of the memo, said, “This document does not look familiar to me.” Note to His Arrogance Fuld: this is what "stepping on your dick" looks like to outside observers.

• Mr. Fuld was once worth close to $1 billion and now has a net worth estimated at about $100 million. He and his wife have been forced to sell some of their renowned art collection. "Oh my God, dear, don't let them take the Piss Christ, it's still accelerating in value!"

• Later in the hearing, Mr. Fuld was asked why Lehman approved nearly $20 million in payments for two departing executives about a week before the bankruptcy filing. Mr. Fuld said one payment, $2 million for Andrew J. Morton, the head of fixed income, was deemed “appropriate for his years of service.” Another $16 million, paid to Benoit Savoret, who was leaving as chief operating officer for Europe and the Middle East, was a result of a contractual obligation. "Hey, we're golf buddies. After this, I won't ever have to buy another round at the 19th hole."

• After the hearing — which started before a crowd of journalists and a smattering of protesters, then ended almost five hours later before a half-full room — a weary-looking Mr. Fuld approached Mr. Waxman and said he hoped his testimony was helpful. He then left under protection from Capitol Police officers, going to a waiting sport utility vehicle while members of the protest group Code Pink pelted him with insults and called for Mr. Fuld to be jailed. Later in the evening, over Chartre Nondrednon 1953, His Arrogance Fuld explained to his wife it was the Code Pink people who caused Lehman's downfall.

Thinking Globablly About Sustainable Living

(Click photo to enlarge)

Earth from above photos to be exhibited in NYC

I like sharing links with you. As I've only recently become interested in photography, I thought I'd share a new Boston Globe link with you. The beautiful shot above is of a forest in the region of Charlevoix, Quebec, Canada during Autumn. There are 37 more beautiful photos in a series shot from around the Planet.

For those of you who don't remember, the Globe was the online newspaper I linked you to in an earlier post with shots of Hurricane Ike's damage.

Today, the Boston Globe's Big Picture returns with a series of photos from photographer Yann Arthus-Bertrand. The intro to the 38 photos says the following. I leave you now to enjoy the photos with a morning cup of coffee:

Photographer Yann Arthus-Bertrand will bring his work back to the United States - to New York City for the first time in 2009. Aiming to inspire people to think globally about sustainable living, Arthus-Bertrand has been photographing unique views of our planet, seen from the sky, since 1994 - and has produced an exhibit of over 150 4-ft. by 6-ft. prints which will be on display in New York City at the World Financial Center Plaza and along the Battery Park City Esplanade from May 1, 2009 to June 28, 2009. When completed in New York City, the Earth From Above exhibit will also move on to California in 2010. Photographs and captions all courtesy of Yann Arthus-Betrand. (38 photos in all.)

Looking Back With a Cracked Mirror at the Housing Bubble

Looking back at the Housing Bubble's beginning: Part 1 . . . the role Fannie Mae leaders, Fannie Mae investors, the Clinton Administration and HUD played.

Over the past two months, I've read some incredibly shallow treatises on what caused the Housing Bubble. The Housing Bubble has finally turned into the Housing Crash which many of us bloggers predicted on message boards at Motley Fool years before the Mainstream Media were admitting to a Housing Bubble.

The Housing Crash has further developed into one of the largest financial crisis this world has ever seen. What we need to do as a nation is to objectively look back at what caused the Bubble/Crash cycle so that we do not repeat these mistakes again.

Having written objectively about this subject for years, I am now seeing too many Johnny Come Lately bloggers lay the blame of this whole mess on either Democrats or Republicans. Rarely do you see any blogger admit there's plenty of blame to go around on both sides.

I have no stomach for partisan politics when it comes to History. Like Howard Zinn, I feel we should go back in time, view transcripts of legal proceedings, view old laws still on the books, read old news stories with eyewitness accounts, and always let people's words quoted for the ages tell the truth about what happened "back when."

When truth be known, both parties, Democrats and Republicans, can be held to blame for their government meddling in the free markets. Both parties are guilty of causing the Housing Bubble and now the Housing Crash which is leading to a financial crisis of the ages.

Today, I will reprint an article from a nine year old New York Times story entitled, "Fannie Mae Eases Credit To Aid Mortgage Lending" which was written by Steven A. Holmes and published on September 30, 1999.

After you read the article, I will publish the takeaway points in bullets of my own so that you may include them when you have discussions with loved ones and friends trying to understand such a hard subject as the financial crisis we are suffering through now.

Without further delay, here is the NY Times story. You may click here to print the entire story direct from the New York Times website. I am going to print just the first four paragraphs to entice you to read the whole thing. After those paragraphs, I will print takeway points from the entire article:

By STEVEN A. HOLMES
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

Here are the points you can takeaway from this article:

• Fannie Mae was the largest "underwriter" of home mortgages back in late 1999. As an "underwriter", Fannie Mae purchased loans from banks and other lenders. This gave much needed capital back to banks and lenders so that these entities could go out and lend even more money to more needy borrowers.

• In 1999, the Clinton Administration "pressured" Fannie Mae to expand mortgage loans among low and moderate income people.

• Also, in 1999, stockholders in Fannie Mae were pressuring Fannie Mae executives to grow their profits at an even faster clip.

• Hence, Fannie Mae eased credit requirements on loans it would purchase from banks and lenders. This prompted these entities to make more loans to people with shaky credit histories who could not get conventional home loans in days gone by. Again, so that you understand, and as the article clearly states: 'Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.'

• Fannie Mae's now fired CEO, Franklin Raines, showed his interest in pumping subprime loans when he said at the time of this story: ''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements, yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

• As a portent of what would begin the cascading downcall of subprime loans, Holmes in his 1999 NYT article planted what would become one of the first red flags warning investors in both Fannie Mae, and later, mortgage backed securities, why this social engineering plan to put every American into a home was a bad idea. As a resident American Enterprices Institue fellow so perfectly predicted in 1999: 'In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's. ''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.'' '

• Because minorities lagged behind non-Hispanic white people in home ownership, the Clinton Administration, Fannie Mae's leadership, and HUD were all behind this new proposal to lower standards on using down payments as "collateral" for minorities. What these three wanted to do was up home ownership by minorities, eventhough through the 90s, minorities home purchases through Fannie had accelerated faster than non-white Hispanics. As the article stated 'Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent. In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.'
  


• The Department of Housng and Urban Development set a goal to up its purchase of shakier loans. As the article states, 'In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups."

My Last Worlds on Fannie Mae's and the Government's stance back in 1999: guys, by bending over backwards to insure "all" Americans would become homeowners in the American Dream, you set in motion a Frankenstein Greedmonster which would, and did, devour every crappy loan sent its way. This Frankenstein, a Government Sanctioned Enterprise named Fannie Mae . . . once unleashed . . . could not stop binge eating until it exploded. If it quit eating the bad loans, vapor profits would evaporate and shareholders would complain. Bonuses for its executives would diminish. It had to continue to grow to satisfy all parties. And, if it continued to eat, it would explode.

In the beginning of the 21st Century, only prescient bloggers outside the mainstream media cheerleading section or smart investors such as Warren Buffet knew what the outcome would be. Bloggers who predicted the mess we are now in were touted as "doomsayers" and "Chicken Littles", but they knew their Shit from Shinola. The best Economics writers outside the mainstream media never believed the Goldilocks Economy crock from CNBC. They knew their turds from raisins. They didn't buy into Jim Cramer's view that America's FIRE Economy was too big to fail. They knew when the government pressured a Government Sanctioned Enterprise (a publicly traded corporation with "implicit" government backing) to buy more crapola from lenders, that the lenders would invent new crapola to sell.

And now here we are: Brave New World Disorder

Vanity, vanity, it's all vanity. Ashes to ashes, funk to funky, we know Major Tom's a junky.

As always, caveat emptor,

Rock Trueblood

Economists are Favoring Obama

The Economist's poll of leading Economists is heavily in favor of Barrack Obama

The most recent issue of The Economist contained an eye opening poll of Economists. The table above was printed along with this poll. The resluts of the poll are discussed here. Here is a taste of the short copy attached to the table in the latest The Economist:

The detailed responses are bad news for Mr McCain (the full data are available here). Eighty per cent of respondents and no fewer than 71% of those who do not cleave to either main party say Mr Obama has a better grasp of economics. Even among Republicans Mr Obama has the edge: 46% versus 23% say Mr Obama has the better grasp of the subject. “I take McCain’s word on this one,” comments James Harrigan at the University of Virginia, a reference to Mr McCain’s infamous confession that he does not know as much about economics as he should. In fairness, Mr McCain’s lower grade may in part reflect greater candour about his weaknesses. Mr Obama’s more tightly managed image leaves fewer opportunities for such unvarnished introspection.

A candidate’s economic expertise may matter rather less if he surrounds himself with clever advisers. Unfortunately for Mr McCain, 81% of all respondents reckon Mr Obama is more likely to do that; among unaffiliated respondents, 71% say so. That is despite praise across party lines for the excellent Doug Holtz-Eakin, Mr McCain’s most prominent economic adviser and a former head of the Congressional Budget Office. “Although I have tended to vote Republican,” one reply says, “the Democrats have a deep pool of talented, moderate economists.”

There is an apparent contradiction between most economists’ support for free trade, low taxes and less intervention in the market and the low marks many give to Mr McCain, who is generally more supportive of those things than Mr Obama. It probably reflects a perception that the Republican Party under George Bush has subverted many of those ideals for ideology and political gain. Indeed, the majority of respondents rate Mr Bush’s economic record as very bad, and Republican respondents are only slightly less critical.