A congressional committee Monday grilled Richard Fuld Jr., chief executive officer of Lehman Brothers Inc., in his first public appearance since the bank fell apart in September in the largest bankruptcy in history.
Members of the House Committee on Government Oversight and Reform attacked Fuld for mismanagement and irresponsibility contributing to Lehman's dissolution and the resulting impact on the U.S. economy. The executive's $480 million in compensation since 2000 was a fat target for representatives seeking vengeance for Wall Street greed. Chairman Henry Waxman (D-Calif.) asked if such a compensation, considering the plight of the economy, was "fair."
"If you haven't discovered your role, you're the villain today," said Rep. John Mica (R-Fla.).
Fuld argued that the company was structured to compensate employees and executives when the company did well, while they absorbed losses when the company did not do well.
"I was probably the single largest individual shareholder," said Fuld, who still holds about 10 million-now worthless-shares in the firm. "I do not expect you to feel sorry for me. My point is, the system worked."
Furthermore, he contested the $480 compensation figure, saying his cash compensation in that period was $60 million, with options valued around $250 million.
"I got no severance. I got no golden parachute," he said. "I never sold my shares because I believe in this company."
But documents provided to the committee members showed that executive members were getting millions in compensation even as the company was looking for a bailout. Waxman said, looking at Fuld's compensation, it was "a lot of money."
"Everyone resents the people that are paid well. That's a natural human feeling," said Alex Pollock, a financial policy analyst and banking expert with the American Enterprise Institute.
Pollock suggested that executives receive bonuses over the long-term, instead of from year-to-year. That way, the leaders taking the risks could then share future losses from short-term profit, so that losses would be averaged out.
Treasury Secretary Henry Paulson elected not to provide government aid to Lehman in its hour of need, though other Wall Street firms like AIG received billions in bailouts from the Treasury. Congressional members asked why.
"Until the day they put me in the ground, I will wonder," said Fuld, his deep-set eyes furrowed with the tension under them.
Mica suggested that Lehman hadn't spent enough on lobbying in Washington, compared to Fannie Mae and Freddie Mac, who poured money into such efforts. Rep. Christopher Shays (R-Conn.) argued that Congress is shifting blame and simply won't own its role in the crisis.
The Federal Bureau of Investigation is looking into whether the executives of Lehman Brothers committed fraud by misrepresenting the company's financial condition to its investors, according to a report Monday in The Wall Street Journal. The company would have to have intentionally misconstrued its financial statements to investors to be convicted of fraud.
Fuld said the firm did not misrepresent its financial situation. The bankruptcy, he said, was partly the fault of poor regulation structures and a market "tsunami" that moved out of Lehman's control.
"I take full responsibility for the decisions that I made and for the actions that I took, based on the information that we had at the time," said Fuld. Later he added, "What could I have done? I have searched myself every single night. I can look right at you and say this is a pain that will stay with me the rest of my life."
But the chair wasn't feeling any sympathy.
"You don't seem to acknowledge that you did anything wrong," said Waxman.
While Congress is in recess, the committee will hold several more hearings investigating the factors of the financial crisis.