In the early days pre-meltdown, there were a handful of skeptics pointing to problems at firms like AIG, Fannie Mae, Bear Stearns and most especially Lehman Brothers.
It was not the media or the analyst community that identified the frauds, but the short sellers. In this sad tale of criminality and corruption, the shorts were the heroes. They employed an army of traders, forensic accountants, and non-cheer-leading analysts to kick the tires of the major firms where something smelled funny.
When it came to Lehman Brothers, foremost in the crowd of shorts was David Einhorn. There were many others (me included), but it was Einhorn who most completely critiqued Lehmans balance sheet, and most vocally called out the shenanigans there. he is the hero in this tale.
At the time, the media gave LEH the benefit of the doubt. And for his troubles, Einhorn was often criticized — even trashed — by various people. The most vocal criticism came from usually astute Charlie Gasparino (then at CNBC, now at Fox Business).
But when it came to Fuld, Gasparino was off his usual sharp game. Whether he was too close to Fuld personally, or it was simply another case of access journalism is unknown. As I warned, and Charlie acknowledged on the air, Fuld was using him. (He disagreed).
But the bottom line is Charlie blew this one big time. And as the video (after the jump) makes clear, he did so in way that made the character of the parties’ to the Lehman debate an issue.
“But you put up Dick Fuld versus Mr. Einhorn? Put up Dick Fuld versus Barry Ritholtz . . . ?
Its impossible to determine who is right and wrong . . . this is so muddy. But at some point, it comes down to the people: Dick Fuld, Einhorn, Dick Fuld, Barry Ritholtz.
Who do you believe?”
Well, it turns out that we now know who was right and who was wrong. Thanks to the yeoman’s job done by Anton Valukas, the bankruptcy examiner in the Lehman Estate, we know Lehman management was a fraud, they hid losses and leverage and played their balance sheet like a fiddle.
Not only do we know who was right and wrong, we also know that relying on the sturdy character of Investment Bank CEOs — especially this one — was not the smartest way to make a bet.
And for that, you owe David Einhorn, myself and others an apology . . .