In response to ex-Lehman Brothers CEO Dick Fuld’s fulminating testimony before the Financial Crisis Inquiry Commission, Federal Reserve lawyer Scott Alvarez scoffs that the Fed couldn’t have done much to stay the investment bank’s execution at the hands of the credit markets.
Alvarez took Fuld’s assertions out to the woodshed, saying that Lehman Brothers had never applied to be a bank holding company. This contradicts Fuld’s prepared remarks, which suggest that Lehman was denied bank-holding-company status. In any case, Alvarez maintains that converting Lehman into a holding company wouldn’t have prevented the bankruptcy, and that other measures would have proven similarly ineffective. Lehman didn’t have the collateral to get additional loans and stay afloat, Alvarez said. Again, this contradicts Fuld’s testimony.
Colin Barr of Fortune reports:
“If the Fed had lent to Lehman without adequate collateral, this hearing would have only been about how we wasted the taxpayer’s money,” Alvarez said in response to a question about the Fed’s differing responses to funding problems at Lehman and Bear Stearns, which was sold in a federally financed fire sale six months before Lehman collapsed.
Looks like ex-Lehmanites will have to hunt harder if they are to definitively blame others for the company’s implosion. Fortunately for amused onlookers, its lawyers are already on the trail.