Dick Fuld Gives the Sergeant Schultz Defense

Dick Fuld of Lehman Brothers is appearing before the House Financial Services Committee today, and his prepared testimony is already online. It's a riot. Fuld is giving the famous "Sergeant Schultz defense."

Repo 105? What Repo 105? He saw nothing! He heard nothing! Oh, and he also throws in the "Alzheimer's defense." He doesn't remember!

Meanwhile a former Leman exec named Matthew Lee -- his prepared testimony is here -- will be sitting at the same panel as his former boss, ready to put the lie to Fuld's excuses.

According to his prepared testimony, Lee raised concerns about Repo 105 with senior management, the Audit Committee of the board of directors, and its outside auditors at Ernst & Young. Within days of raising these concerns, he was canned.

It will be interesting to see what emerges at the hearing today. Stay tuned.

UPDATE: After hours of pabulum from Timothy Geithner, Mary Schapiro and Ben Bernanke, finally Fuld slimed his way into view -- not sworn in, for some reason, which is a shame, because this guy lies like a Persian rug. Asked why Lehman failed, Fuld blithered and blathered and talked out the clock.

The star was William Black, former litigation director of the Federal Home Lome Bank Board, speaking forthrightly about what needs to be done: Lehman needs to be charged with fraud.

Then came more questioning of Fuld, again blithering and blathering and evading even the most simple questions.

"Let me try to put this in some context," he would say, before launching into a filibuster--and these morons would let him.

Watching that gekko Fuld running rings around the committee, being allowed to evade and stonewall, it's easy to understand why we're in the mess we're in.

I'm sorry I titled this "Fuld Gives the Sergeant Schultz Defense." I should have made it, "Fuld Gives Congress the Finger."

UPDATE, 5:07 p.m.: The questioning is continuing, as do the evasions, the lies, the squirming. There was something vaguely familiar about Fuld's appearance today.

I couldn't quite put my finger on it, and then I remembered what Fuld's performance resembled: Frank Costello's famously evasive appearance before the Kefauver Committee.

I mean, the man can't even tell the truth about his No. 1 critic, David Einhorn, whose name came up toward the end of the hearing. Fuld was obsessed with shorts and particularly Einhorn, and Fuld today can't even tell the truth about Einhorn, bearly acknowledging his existence--or that he was right.

What a douchebag.

Lehman bankruptcy examiner Anton Valukas testified that Fuld's pants were on fire: “A fact-finder concluded that he [Fuld] in fact did know and acted upon information he knew or should have known. There was at least one witness who testified that he discussed Repo 105 transactions with him and that there were document sent to him by e-mail and otherwise, which reflected the Repo 105 transactions.”

© 2010 Gary Weiss. All rights reserved.

'A Tsunami of Excuses'

William D. Cohan's op-ed today in the New York Times, "A Tsunami of Excuses," needs to be committed to memory by members of Congress considering an overhaul of financial regulation--and, above all, needs to be read and, if possible, understood by President Obama's bad choice for SEC chairman, Mary Schapiro.

They've been blaming the destruction of their firms on circumstances beyond their control, such as short selling. Cohan stomps out those excuses for the bullfeathers that they are.

The tsunami of excuses began shortly after the Bear Stearns collapse, continued through the Lehman Brothers debacle and has continued through today, promoted by the CEOs of both companies and exploited by conspiracy theorists, con men and hustlers like Overstock.com CEO Patrick Byrne (who is a bit of each). Cohan, who has written a well-received book on the debacle, "House of Cards," observes as follows:

It’s been a year since Bear Stearns collapsed, kicking off Wall Street’s meltdown, and it’s more than time to debunk the myths that many Wall Street executives have perpetrated about what has happened and why. These tall tales — which tend to take the form of how their firms were the “victims” of a “once-in-a-lifetime tsunami” that nothing could have prevented — not only insult our collective intelligence but also do nothing to restore the confidence in the banking system that these executives’ actions helped to destroy.

. . .In fact, although they have not chosen to admit it, many of these top bankers, as well as Stan O’Neal, the former chief executive of Merrill Lynch (who was handed $161.5 million when he “retired” in late 2007) made decision after decision, year after year, that turned their firms into houses of cards.

I've dealt with all of these themes in this blog and in two of my articles on the financial crisis: my profile of Tim Geithner last June and my recent article on John Paulson, in which I described how Bear Stearns CEO Alan Schwartz tried to get short seller Jim Chanos to appear on CNBC to vouch for his firm just before the collapse.

Cohan concludes by saying that "there can be no restoration of confidence in the banking system — and therefore no hope for an economic recovery — until Wall Street comes clean. If the executives responsible for what happened won’t step forward on their own, perhaps a subpoena-wielding panel along the lines of the 9/11 commission can be created to administer a little truth serum."

I agree but would go further, as I argued here. The difference is that I think there should be a 9/11-type commission whether the bankers come clean or not.

© 2009 Gary Weiss. All rights reserved.