Thursday, October 9, 2008

The Road To Failure

Of all the recent failures and near failures in the current banking crisis, the story of the Lehman Brothers investment banking firm is probably the most disappointing. The man above, Richard S. Fuld, Jr. was the final Chief Executive Officer of the company that many credit with financing the birth and growth of the American Railroad Industry in the mid 1800's. Lehman Brothers also played major roles in the financial growth of household names like Sears and Roebuck, RCA, and B.F. Goodrich. The company had a storied history and became a major player in the American economy since it's birth in 1850. So where did it all go wrong? One has to look no further than those classic sunday school teachings about the seven deadly sins and number three on that list.......greed.

Much discussion has taken place over the "toxic" sub prime mortgage mess which figured heavily into the Lehman failure. This, however, was only part of Fuld's problems where Lehman Brothers was concerned. While painting a rosey picture to the shareholders and the public, behind the scenes, the picture was bleak. In an effort to save the company from his failed practices and deals, Fuld tried to broker yet more deals with other groups (including A.I.G) who had problems of their own. He sent people to both the Middle East and Asia to try and find fresh money with no success. As hard as he tried, he just couldn't find an acceptable deal that would save his crumbling empire. But again, how did he get to this point?

Greed. It wasn't enough that his company was, albeit small and independent, a heritage company in the investment banking business with a rather healthy portfolio. It wasn't enough that he had, by all reports, a fiercely loyal staff that would have walked through the fires of hell and back if he asked them to. It wasn't enough that he had over 800 million in company stock, an art collection said to be worth millions, and several luxury homes in his name. There had to be more and he was going to get it.

I can't imagine what it would be like to be that wealthy. Quite frankly, I'm not sure I want to know. But today Richard S. Fuld, Jr. still finds himself "working" for the company even though all of his once loyal employees have been dismissed and have lost their severance packages and health benefits. His current net worth? According to sources, Fuld is worth about 100 million dollars.

During a recent appearance before a House Committee on Government Reform, Fuld wanted to blame the media, the short sellers, the government and anyone else that came to mind. While he took responsibilty for the end result, he refused to acknowledge that Lehman's failure came about as a result of his poor choices and extremely risky deal making. Read the full transcript here.

It is often said that the road to hell is often paved with good intentions. In this case I would say it was greed, deceit, and extreme arrogance on the part of Richard S. Fuld, Jr. and his senior Lehman executives that paved The Road to Failure for one America's oldest investment banks.
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