Fuld on the Offensive via Getty Images
The Financial Crisis Inquiry Commission on Wednesday took on the question of what led to Lehman’s failure and I’m not sure we came away with any answers. Although we did get a much better window into the lingering bad blood between Fuld and the Federal Reserve.
The FCIC is looking into the question of so-called “Too Big To Fail.” The idea is that one of the causes of the financial crisis is that banks were allowed to get too big. In fact, they got so big that the federal government had no choice but to bail them out even after they did such dump things as buy up worthless real estate properties or lend money to people who couldn’t afford to pay them back, or hold onto billions of dollars of securities that were derived from those silly and ultimately doomed loans. You would expect that a government knowing it would have to bail out big banks if they made even the slightest mistake would have had a very watchful eye. But it didn’t. It not only allowed these banks to finance bad loans, but with the used of derivatives they were allowed to finance each bad loan multiple times.
Lots of juicy stuff to dive into for the FCIC. Of course, as has been the case with the FCIC all along, the commission completely misses the pool. Instead of focusing on these issues, the commission spent a good portion of its time in the Lehman hearing on one issue: Was the Fed in the very last minutes of Lehman’s life willing to save the ultimately doomed institution. Fuld says there were a number of things that the Fed could have done to save Lehman. The Fed officials testifying on Monday say the investment bank was toast no matter what the Fed did.
I’m not sure if this is the issue we really need to get to the bottom of. But, OK, if that’s where the FCIC wants to go, I will play along. It’s Fuld vs. Fed. Here’s how the Curious Capitalist would call the fight:
