If you read the financial press, it’s hard not to notice that virtually all the CEOs of major financial firms are delusional. If you take their words at face value, as opposed to posturing, they believe their misrule had nothing to do with the financial crisis, that the fact that their firms survived was due to their inspired leadership and the plucky actions of their staff, as opposed to massive rescue operations by the Fed and Treasury, and that regulation is a denial of their God-given right to make a buck any way they see fit. Despite the fact that many of their remarks range from cringe-making to preposterous doesn’t stop them. Indeed, the ones who have the self-awareness to recognize that this line of patter is pure PR no doubt also know that Big Lies work due to dint of repetition, and not their relationship to observable reality.
However, it appears that having the financial crisis analogue to the captain of the Titanic carry on in the stereotypical super-entitled Wall Street CEO manner was too much for the tender sensibilities of CNBC. The news network seems to have realized that having former Lehman CEO Dick Fuld say that the firm’s failure was due to anything but him risked calling into question the veracity of other big financial firms CEOs blaming the tsuris they experienced on forces of nature. Get a load of what happened when Fuld made his first public appearance that was not for the purpose of providing testimony since Lehman collapsed. From Huffington Post:
Dick Fuld, part villain and part unforgivably very confused bystander to the financial crisis in the eyes of most — and a victim of the financial crisis to himself — made a bizarre comeback at a conference in New York on Thursday…..
Fuld blamed regulators, borrowers and rumors for the end of the 158-year-old, $47 billion firm he led. It was a “perfect storm” that sank Lehman, not his own leadership or decisions, Fuld said, while touting Lehman’s “success” to the audience. He also claimed that every one of the 27,000 employees who once worked for Lehman had been a risk manager, because they owned stock in the firm…
Fuld’s comments were initially carried live on the financial news network CNBC, but the feed was pulled by conference organizers part way through his remarks. Technically, Fuld was at the conference to deliver a keynote address titled, “How Emerging Growth Companies Can Succeed in Today’s Capital Markets: Perspectives from My Journey.” His comments, however, were a well-rehearsed if less-than-convincing defense of his own actions leading up to the largest bankruptcy in U.S. history.
He denied that Lehman was a failed company in September 2008 and intimated that he and the firm were victims of a conspiracy centered around former competitors in regulatory positions with a vendetta against him. Fuld, nicknamed the “Gorilla” during his career for his overly aggressive style, seemed temperamentally unchanged, telling one conference questioner, “Why don’t you bite me?”
Author Ben Walsh reminds us that Fuld thought the worst of the financial upheaval was over in 2008 and pushed employees to take more risk, marginalizing or firing any who questioned him.
But it’s even worse than that. Lehman had been in a strategically precarious position for decades: a subscale firm desperately in catch-up mode with the leaders. That’s one big reason why Bear and Lehman both were overweight real estate operations. They desperately needed to be more profitable than industry leaders like Goldman, an impossibly order, so they could increase their capital bases faster and increase their market position.
Given how tough the top firms were, the only route available was to focus on the riskiest businesses, which also offered the highest potential returns and hope for the best. Lehman almost failed in the 1997-1998 Asian crisis. And despite Fuld’s self-serving blather, Lehman was so not viable in its current configuration that Fuld was seeking suitors in 2008. But as Andrew Ross Sorkin’s Too Big to Fail recounts, Fuld was so inept and presumptuous that he drove interested parties away. Lehman still had one serious deep-pockets possible rescuer, the Korean Development Bank, but they were up for only an investment in a “good bank”; the rancid real estate operations would need to be hived off and liquidated. The head of investment banking was in advanced negotiations in Korea when Fuld, uninvited, walked into the meeting and scuppered the good bank/bad bank deal. And the interest was real: the head of the Korean Development Bank, after Lehman failed, said he really wanted to consummate the transaction. And there are plenty of other proofs of what a goner Lehman was, the most obvious being its use of the accounting dodge of Repo 105, which it was using to move $50 billion of dodgy assets off its balance sheet at quarter end.
But Fuld’s narrative is different in degree, but not in kind, from that of Jamie Dimon, Standard Chartered’s now ex CEO Peter Sands, and “doing God’s work” Blankfein. And too many other Wall Street denizens seem to think it’s perfectly normal to not only put their uncensored id on display but to have their insatiable desires seen as legitimate. So while CNBC’s evident censorship arguably shows that the financial services industry has a smidge of self-awareness, it looks more like an exception that proves the rule.