Business

CEO takes blame at Lehman

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 said in his first comments since the bank forecast last week it lost nearly $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 said during 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 $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 $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 $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 is awaiting second-quarter results from Goldman Sachs Group Inc. today and Morgan Stanley on Wednesday.

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.

And investors appear to have regained some confidence in Fuld. Shares in Lehman Brothers, which last week plunged by 30 percent before rebounding on Friday, rose $1.39, or 5.4 percent, to close at $27.20 Monday.

The company reported a loss of $2.87 billion, or $5.14 per share, compared with a profit of $1.26 billion, or $2.21 per share, a year earlier.

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.

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