Lehman Brothers chief executive Richard Fuld on Monday took the blame for the company's staggering second-quarter loss, and said the investment bank was too slow in reacting to the credit crisis.
“This is my responsibility,” Fuld declared in his first comments since the bank forecast last week it lost nearly US$3 billion from bad bets in mortgage-backed securities and other risky investments.
As the longest serving CEO left on Wall Street, his mission now is clearly to restore confidence to the firm’s tarnished image.
“We made active decisions to deploy our capital, some of which in hindsight were poor choices because we really didn’t act quickly enough to the eroding environment,” Fuld, sounding agitated on a conference call with analysts.
He pointed out that the investment house has acted quickly since recording its first loss since going public in 1994. Lehman last week raised US$6 billion of fresh capital and demoted its chief financial officer and chief operating officer.
Lehman also reduced the size of its balance sheet by US$147 billion, more than Fuld had targeted for the quarter. Meanwhile, it slashed mortgage holdings by 20 percent — higher than the original forecast of 15 percent.
Many of the reductions came from unstable mortgage-backed securities and leveraged loans that caused financial companies globally to write down nearly US$300 billion since last year.
The crisis has caused the ouster of Fuld’s peers from Merrill Lynch Co and Citigroup Inc, and nearly caused the collapse of Bear Stearns before it was sold to JPMorgan Chase & Co Wall Street was awaiting second-quarter results from Goldman Sachs Group Inc yesterday and Morgan Stanley today.
Fuld, while not able to rule out the possibility of further problems, said he’s “gotten the message” and is comfortable with the investment bank’s current positions.
The company reported a loss of US$2.87 billion, or US$5.14 per share, compared with a profit of US$1.26 billion, or US$2.21 per share, a year earlier.
Markdowns on risky assets caused revenue to hit negative US$668 million from last year’s US$5.51 billion.
The losses caused the ouster of chief financial officer Erin Callan and chief operating officer Joseph Gregory. Callan, who took the job in December, was one of the highest ranking women on Wall Street. Gregory had been with Lehman for three decades, and considered to be a close confidant to Fuld.
Ian Lewitt, Lehman’s newly installed chief financial officer, said he realizes that management has a tough job ahead of them.
“What do you do to rebuild confidence? You provide information. You’re transparent, and you clearly answer the questions asked. And most importantly, you show through your performance,” he said in an interview.
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