Congress opens hearings on financial meltdown
Posted: Monday, October 6, 2008 10:25 pm
By JULIE H. DAVIS
Associated Press Writer
WASHINGTON (AP) — Con-gress heard today that Lehman Brothers, days away from becoming the largest bankruptcy in U.S. history, was pleading for a federal rescue on one hand while steering millions in dollars to departing executives on the other.
The first hearing into what caused the nation’s financial markets to collapse last month, precipitating a $700 billion bailout, opened with finger-pointing and glimpses into internal company documents from Lehman’s chaotic last hours.
Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, said the giant investment bank was “a company in which there was no accountability for failure.” Lehman’s collapse set off a panic that within days had President Bush and Treasury Secretary Henry Paulson asking Congress to pass the rescue plan for the financial sector.
Richard S. Fuld Jr., chief financial officer of Lehman Brothers, was among witnesses called to testify.
Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept. 11 request to Lehman’s compensation board that three executives leaving the company be given $20 million in “special payments.”
“In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation,” Waxman said.
The government let Lehman go under Sept. 15, only to bail out insurance giant American International Group the next day, in a cascading series of financial shock and failure that put Washington on track for the multibillion-dollar rescue starting the end of that week.
Waxman described that plan as a life-support measure. “It may keep our economy from collapsing but it won’t make it healthy again,” he said.