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Michael Hiltzik: The truth about Lehman Bros. ...

March 16, 2010 |  3:40 pm

... turns out to be even worse than anyone could have expected.

As the bankruptcy examiner's report cited by my Wednesday column alleges, Lehman drifted into wholesale fraud as its financial condition deteriorated in the year before it filed for bankruptcy in September 2008.

The intensity of the market chaos that followed its fall led to widespread questions about whether then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke blundered in not saving the firm as they had rescued Bear Stearns, Fannie Mae and Freddie Mac and AIG.

The report by Anton Valukas, a former federal prosecutor, suggests that Lehman was an enterprise that could not and should not have been saved by an injection of taxpayers' cash. When the reckoning came, there were barely any real assets in the till, no collateral to back a government loan, and no buyer.

Ever since the failure, conspiracy theories have abounded about why Lehman fell and why the government let it happen. Many seem to have originated from the fertile mind of its ex-chairman, Dick Fuld. Unsurprisingly, they all have the same theme: It's not Dick Fuld's fault. Well, Mr. Valukas begs to differ, and he has the evidence to prove it.

The column starts below:

The bankruptcy of Lehman Bros. in September 2008 is widely seen as the event that kicked the financial meltdown into high gear.

So it makes sense that the report released last week by Lehman's bankruptcy examiner should stand as the one indispensable analysis of how Wall Street almost brought the U.S. economy crashing down.

The uncompromising report should put to rest the self-serving claims by Lehman's ex- Chairman Richard S. Fuld that the firm was destroyed by rumors, short selling, stock manipulation and an unwarranted loss of confidence by clients and trading partners. In 2,200 pages the examiner, Anton R. Valukas, lays out the truth in all its ugly glory: Lehman's fall was 100% its own fault.

Read the whole column.

-- Michael Hiltzik

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