THE FORMER chief executive of Lehman Brothers blamed the Federal Reserve for the collapse of the notorious Wall Street bank last night, arguing that the Fed withheld vital funds in the run-up to its downfall.
Dick Fuld said the Fed helped other institutions such as AIG access liquidity but forced Lehman to instead file for bankruptcy in September 2008.
Speaking in front of the US Financial Crisis Inquiry Commission (FCIC) yesterday, Fuld said Lehman’s demise was caused by “uncontrollable market forces” and “the incorrect perception and accompanying rumours that Lehman did not have sufficient capital”.
He pointed out the bank had $26.7bn (£17.3bn) of equity capital in its final days.
Thomas Baxter, general counsel for the Federal Reserve Bank of New York, argued a credit line to the bank was not realistic.
He said: “We thought it was a bridge to nowhere.
Lehman was not our only problem during that month,” he said, in a nod to the collapse of mortgage giants Freddie Mac and Fannie Mae.
Baxter said the US government tried to put “foam on the runway” to ease the comedown from the collapse of Lehman, but insisted that the Fed did not have the legal authority to for a bailout.
Fed chairman Ben Bernanke will speak to the FCIC today as part of a two-day hearing on whether some banks were too big to fail.