I am currently in the middle of the book Too Big to Fail, while the book has some structural problems (too many little teeny details about who went to Harvard, what car they drove and who grew up poor, it is almost as if the author showing off that he’s done this research), the content is solid. This book tells this tale from yet another angle. I continue to be amazed at how many of the Wall Street CEOs had no idea of the enormity of their problem. At the same time, there’s almost no acknowledgment that they caused the problem. The other thing that seems to shine through in all of these financial meltdown books is the sense of privilege that piece Wall Street executives seem to have.
This leads me to William Cohan’s article in the New York Times. It seems that privilege is continuing:
Notwithstanding the fact that Judge Peck is now overseeing litigation in his courtroom about whether Barclays conned Lehman in the original sale and should have paid billions more for the business, he will have the opportunity, at a hearing on Aug. 18, to make another gutsy call: He can — and should — take a heroic stand against continuing to use the dwindling assets of the Lehman estate to pay the ongoing legal bills of Lehman’s former officers and directors, the very people who helped drive the firm off the cliff in the first place. Their culpability was made abundantly clear by the comprehensive 2,200-page post-mortem released in March by the special examiner, Anton Valukas.
Why should Lehman’s creditors, who stand to get pennies on the dollar when the bankruptcy case winds up years from now, foot the rapidly mounting legal bills for people like the former chief executive Dick Fuld and two of his top officers, Erin Callan and Ian Lowitt? More important, what kind of message does it send to existing and future corporate leaders if there is no limit to how far they can go to avoid taking responsibility — be it ethical, moral or financial — for their actions?
Judge Peck has the opportunity to say “no más” to Fuld & Co., who are plenty wealthy (Fuld is estimated to have been rewarded with nearly $500 million by Lehman between 2000 and 2008), and require them to start footing the bills for their own legal defense instead of continuing to suck millions in legal fees for their attorneys out of the estate. All payments have to be approved by Judge Peck s because of something known as the “automatic stay,” which — as its name suggests — puts an immediate and ongoing block on all payments to creditors of every stripe during a bankruptcy proceeding. To pay the legal bills of the former Lehman officers and directors, Judge Peck has to approve them, and that is the purpose of the Aug. 18 hearing. (more…)