Did accounting rules do for Lehman?

17 September 2008

1 minute read

Dick Fuld may be widely seen as an ogre guilty of hubris and ineptitude, but some people are coming out on his side.

The argument in favour of Fuld goes a little like this....There was no need for a company generating an operating profit of $600m a quarter to go under simply because it had a $6.4bn non-cash charge to revenues - particularly when that non-cash charge related to potentially spurious mark-to-market valuations of currently illiquid products.

According to Fuld's few remaining fans, Dick had simply bet on the housing market. That call was wrong - in the short term. Longer term, all could have come good, if only mark-to-market rules hadn't intervened.

Give Dick a break below...

AUTHOReFinancialCareers UK

Insider Comment

7 comments

Jo
John Titor
23 September 2008
It serves you right!. Somebody told me 2 years ago: "Only the best minds works in Lehman Bro".
Ask to people who got stock option and increased their lifestyle in 3-4 years as a rock star. Now they mourn. It's the end of the easy money era
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CP
CPA
22 September 2008
this ranks as one of the stupidest propositions.....this is like saying I lost at tennis because the introduced lines which the ball must fall in between. A true industry leader would have (no pun intended) accounted for the incoming rules and adjusted teh game plan accordingly. It's not like the rules came in overnight.
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ed
edvard
17 September 2008
The bet would have come good longer term - when, in 2011?
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Da
Dave
17 September 2008
FASBY 157 has been the overarching problem. Companies that are viable and have no intent to sell an asset are being forced to mark assets to liquidation vales even if there is no need for the institution to sell them. If the fundamentals have not changed an asset should not be market either up or down as long as the holder does not plan to sell anytime soon. The problem we have today is that there are forced asset sales going on and the buyers are squeezing as much as they can to get the lowest price.
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Se
Serge
17 September 2008
Relaxing mark to market accounting rules in the current environment would only be storing up big problems in the future. It is not a solution simply to default to a fundamental value that may never again exist. Asset writedowns need to be registered as they occur so that the toxicity can work through the system.
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