Congress Grills Regulators, Executives at Lehman Brothers Hearing
Federal regulators and former executives from Lehman Brothers faced renewed criticism from lawmakers in the House on Tuesday during a hearing examining the policy implications of the investment bank’s collapse in September 2008.
Some of the toughest criticism during the often contentious hearing was directed at the Securities and Exchange Commission.
“At best, regulators failed to catch the accounting manipulation that permitted Lehman to give a misleading picture of its financial health,” said Rep. Spencer Bachus of Alabama, the top Republican on the committee.
“I saw nothing in my investigation to suggest that the SEC asked even the most fundamental questions that might have uncovered this practice early on, before Lehman escalated it to a $50 billion issue,” Valukas said in prepared remarks.
“What is clear,” he added, “is that had the government acted sooner on what it did or should have known, there would have been more opportunities for a soft landing. The markets might have been spared the turmoil of Lehman’s abrupt failure.”
Richard Fuld, Lehman’s former chairman and CEO, told the committee that while he had “absolutely no recollection whatsoever of hearing anything about Repo 105 transactions,” he said that officials from both the SEC and the Fed “were privy to everything as it was happening.”
SEC Chairwoman Mary Schapiro, who took over the agency after Lehman’s collapse, acknowledged lapses in the agency’s oversight.
“I don’t think any of us would claim the oversight of Lehman was a success,” Schapiro said.
We’ll have lots more on today’s hearing and the push for financial reform on Tuesday night’s NewsHour broadcast. Stay tuned.