The Crux Of Dick Fuld's Testimony: Everyone Else Was Given Special Treatment, Except Us

Richard Fuld

Dick Fuld is testifying today in a session of the FCIC’s hearing on the financial crisis called, “Too Big To Fail.”

From Reuters:

The FCIC is using the collapse of Lehman Brothers and the government-brokered sale of Wachovia to Wells Fargo as case studies [of the concept that some firms are so important to the financial system that they enjoy implicit government backing.]

Fuld’s full testimony isn’t online yet, is now online and embedded below. We’ve just started reading the full version, but for now, from what we can tell from this Reuters article, the crux of his argument will be:

The Fed offered everyone else special treatment, except us. Or, in his words:

Lehman proposed to government regulators a menu of options that could have given the investment bank relief and possibly averted its September 2008 collapse.

Regulators rejected these options — including allowing Lehman to become a bank holding company — but weeks later extended the measures for other Wall Street firms.

Fuld has been making this argument for a while now, using it to blame the failure of Lehman on the bullying of other Wall Street banks and the regulators. But it’s interesting that he’s bringing it up now, in a hearing on whether or not TBTF banks should exist.

The question is – will his testimony argue in favour of implicit government backing? Or will his example prove that banks that are “too big to fail” shouldn’t exist.

He seems to be mainly arguing that the government should either bail out all banks, or none, because he thinks it was unfair to single out Lehman Brothers.

Only Lehman was denied that expanded access. I submit, that had Lehman been granted that same access as its competitors, even as late as that Sunday evening, Lehman would have had time for at least an orderly wind down or for an acquisition which would have alleviated the crisis that ensued.

But we’ll see which way he leans when he testifies later today.

UPDATE: We have our answer.


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