Breaking Silence, Richard Fuld Speaks on Love, Putin and 'Rocky' - NYTimes.com - 0 views
www.nytimes.com/...ce-since-lehmans-collapse.html
wall street great recession inequality government crisis policy
shared by Javier E on 29 May 15
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Explaining the origins of the financial crisis, Mr. Fuld avoided any mention of investment banks’ eagerness to issue subprime mortgages. (Lehman had an enormous portfolio of subprime loans.)“It’s not just one single thing,” Mr. Fuld said. “It’s all these things taken together. I refer to it as the perfect storm.”
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At the root of the crisis, in his view, was the government’s push for homeownership. At the same time, hedge funds, private equity firms and sovereign wealth firms grew rapidly, supercharging the global financial system and driving up equity values, balance sheets, the volume of financial products and the need for financing, he said.“There was very little regulation or market supervision
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Then in 2007, the Fed raised interest rates, essentially ending the housing boom it had encouraged, Mr. Fuld said.“The increased rates led to increased mortgage rates and payments, a huge number of residential foreclosures,” he said. “Banks wrote down and sold assets.”In the wake of this, companies began cutting costs and jobs, Mr. Fuld said, and it became “a self-fulfilling economic loop.”
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“I know you don’t want to hear this from me, but the wealthy are getting wealthier, and again, the belly of America is getting hurt,” he said. “Look, I’m a hard-core capitalist. But let’s be fair — capitalism only works if it starts at the top and filters down. If it doesn’t get down, we’re going to lose.”
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“Taken together, they are fraying the fabric of our system,” he said.And once again, he pointed the finger at Washington, prompting the crowd to cheer
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Mr. Fuld also quickly offered three data points that he suggested made it clear that Lehman could have survived, had the Fed not forced it to fail: “When Lehman was mandated into bankruptcy, we said our equity capital was $28 billion. Second, we had a Tier 1 capital ratio of 11 percent. Third, Lehman had unencumbered collateral of $127 billion.”
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“It’s very easy to look back. As they said, hindsight is 20/20. There is no ‘if’ or ‘woulda coulda shoulda,’ ” he said. “You can only make a decision at any specific time with the best information that you think you have.”Going further, Mr. Fuld insisted that he could have saved the firm: “Lehman Brothers at the point of 2008 was not a bankrupt company.”
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Asked what he could have done differently, he avoided answering directly, and instead said, “I think I missed the violence of the market and how it spread from one asset class to the next. Did we do everything we could? Did we fall prey to some other agendas? I’ll leave it at that.”
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In the end, Mr. Fuld seemed hung up on the fate of his own firm, not the broader crisis that its bankruptcy helped ignite.