Drawing the Correct Lessons from Lehman Bros

“It wasn’t a mistake to let Lehman fail, it was a mistake to let it live so long.”

-Ann Rutledge, a principal with New York-based R&R Consulting and the co-author of two books on structured finance.


I am continually astounded by the many missed opportunities you Humans have to learn valuable life lessons. Perplexingly, you manage to not only miss the causes of major events, but to draw the wrong lesson from your experiences. It is curious to me how such an oft clever species can frequently be so dense.

The most recent example of this is the latest revelation from the rotting carcass of Lehman Brothers.

No, the collapse of Lehman Brothers is not what “plunged the economy into the worst financial crisis since the 1930s” any more than the first trailer destroyed by a tornado caused the rest of the trailer park to be demolished.

Bloomberg News, one of the most astute gatherers of business intel, could write something so ignorant is simply mind boggling to me. It reveals how easy it is to push a false narrative, and how valuable a commodity the Truth itself is.

To anyone who wants to understand how Lehman Brothers committed suicide, there are plenty of books on the subject. But today’s revelation shows exactly how corrupt the organization was. Starting with Dick Fuld, who majored in arrogance at Pompous U, to the criminal enterprise that was their CFO/accounting division.

Repo 105s — moving billions of dollars off balance sheet each quarter to hide their true financial state from investors, creditors, and the SEC — were bad enough. Now we learn that the criminality at Lehman Brothers went so far as to make “$3 billion in loans to itself in transactions that even today would elude the Dodd-Frank law designed to prevent such financial alchemy.”

This revelation teaches us that any firm that is hellbent on committing suicide, that flouts ordinary accounting rules, that goes to extremes to misrepresent their financial conditions, can accomplish that.

Laws against murder won’t stop a serial killer, but they should allow the criminal justice system to bring them to justice. The purpose of regulations cannot stop someone like Lehman’s Dick Fuld or AIG’s Joseph J. Cassano. They exist to provide guidelines of acceptable behavior to the rest of us, and to bring cretins to justice when they are caught on their murderous sprees.

I am still waiting for some Justice from the serial killers’ ball of 2007-09 . . .


Dick Fuld’s Fantastic Revisionism ! (September 2010)

Lehman Failed Lending to Itself in Alchemy Eluding Dodd-Frank

Christine Richard and Bob Ivry
Bloomberg, March 11 2011

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