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Former Lehman CEO Fuld: 'The Belly of America Has Been Ripped Out'

Friday, 29 May 2015 07:19 AM

Richard “Dick” Fuld, who led Lehman Brothers Holdings Inc. into the bankruptcy that set off the near-collapse of the world’s financial system, says he’s now working for the small companies that America needs for a real economic recovery.

“Why has the belly of America been ripped out?” Fuld said Thursday in what was billed as his first public address since the credit crisis that led to the implosion of the 158-year-old investment bank. “The small companies can’t get financing.”

He began by removing his coat and delivered his speech in a white shirt and solid blue tie to a packed ballroom at the Marcum MicroCap Conference, a yearly gathering for people in what’s known as the penny-stock business, now Fuld’s business. Once one of the most powerful men on Wall Street, he runs a consulting firm for small companies and is working on a plan for a stock exchange to make it easier for them to go public.

“The guts of what we do is merchant banking,” said Fuld, 69, who didn’t accept payment for the keynote remarks; Marcum LLP made a $25,000 donation to the Harlem Children’s Zone in lieu of his fee. “We don’t put up capital because I lost a fair amount of that stuff.”

Polite Applause

When he ran Lehman Brothers — he was chief executive officer from 1994 until it made the largest corporate filing for bankruptcy protection in U.S. history in 2008 — Fuld mingled with central bankers, prime ministers and some of the highest fliers in finance. He sat with JPMorgan Chase & Co.’s Jamie Dimon and Jeffrey Immelt of General Electric Co. on the board of the Federal Reserve Bank of New York and was a member of the International Business Council of the World Economic Forum, the outfit that hosts the annual assembly of global power brokers in Davos, Switzerland.

It was a different ecosystem at the Grand Hyatt Hotel in midtown Manhattan. The Marcum MicroCap Conference attracted promoters and hustlers looking to drum up investments in tiny, speculative companies. One of Fuld’s fellow speakers was Josh Sason, a 28-year-old who made a fortune lending money in arrangements known to some as death-spiral financing. Other presenters included representatives from a marijuana-centric social network and a nano-medicine company that claims it’s on to cures for HIV and Ebola.

Mother’s Love

The man who was known as the Gorilla of Wall Street was greeted at the Grand Hyatt with polite applause. He recounted his career at Lehman, saying the firm succeeded for years by focusing on clients and giving employees a stake in its future. He blamed a perfect storm fueled by easy access to credit for the crisis. People close to Lehman also have said top risk managers were ousted or demoted amid infighting and arguments over hedges as the collapse neared.

“Regardless of what you heard about Lehman Brothers’ risk management, I had 27,000 risk managers because they all owned a piece of the firm,” Fuld said Thursday. He later noted that his 96-year-old mother “still loves me.”

Fuld pretty much stayed out of the spotlight after a 2008 hearing on Capitol Hill where he was grilled by members of Congress — Republican John Mica of Florida said the banker was being cast as the “villain” — and then heckled as he returned to his limousine.

But while he sold his 6,200-square-foot-apartment on Park Avenue, he kept estates in Connecticut, Idaho and Florida. And though the bankruptcy examiner concluded Lehman misled investors with “accounting gimmicks,” regulators and prosecutors wrapped up years of investigations without filing charges against him.

Short Sellers

He’d made Lehman into a bond-trading powerhouse and borrowed billions to invest in U.S. real estate, including the subprime mortgages that ended up burying the investment bank as the housing market tanked and Lehman’s stock spiraled. But he has faulted the government for not bailing out Lehman. (He has also blamed short sellers for encouraging its demise. “I want to reach in, rip out their heart and eat it before they die,” he said during a 2007 internal meeting, shown in a BBC documentary.)

In 2009, he formed his consulting firm, Matrix Advisors LLC, and last year was part of a group that took over a defunct trading venue called National Stock Exchange Inc. They’re trying to turn it into an easier place for small companies to list their shares, said David Karlin, a Matrix managing director.

“Companies such as those at the Marcum conference would be likely customers,” Karlin said. “We’re targeting having it up and running by late summer.”

Who’s Fuld?

Asked after the speech why he’s working with penny stocks, Fuld denied that he was. “They’re not penny stocks,” he said and walked away.

The 125 companies that made presentations at last year’s Marcum conference haven’t turned out to be very good investments. They’ve dropped an average of 24 percent since, and less than a quarter of them have gone up, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index climbed 10.6 percent over the same period.

Asked about Fuld, several attendees said they didn’t know who he is. Vincent Genovese, CEO of NAC Global Technologies Inc., said the name didn’t ring a bell, then pulled out one of his company’s “harmonic gears” to demonstrate the technology.

“Don’t use these names, but we’re already selling to the U.S. Army,” said Genovese, whose company’s shares last traded for 21 cents. Asked for clarification, he said he was actually selling to a “prime” military contractor.

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Richard "Dick" Fuld, who led Lehman Brothers Holdings Inc. into the bankruptcy that set off the near-collapse of the world's financial system, says he's now working for the small companies that America needs for a real economic recovery.
lehman, fuld, belly, america
Friday, 29 May 2015 07:19 AM
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