LIZ: THIS SATURDAY MARKS THE
TEN-YEAR ANNIVERSARY OF THE
MASSIVE EARTHQUAKE THAT WAS THE
FINANCIAL CRISIS.
SEPTEMBER 15th, 2008, LEHMAN
BROTHERS FILED FOR BANKRUPTCY.
THERE WAS NOWHERE FOR THAT BANK
TO TURN.
SMASHING THE THEOREM TOO BIG TO
FAIL.
TEN YEARS LATER, THE U.S.
HITTING RECORD AFTER RECORD.
WHAT COULD GO WRONG?
CAN GO WRONG.
IN A FOX BUSINESS EXCLUSIVE, WE
HAVE THE MAN WHO PORED OVER THE
BOOKS AND DETAILS OF THE LEHMAN
BROTHERS BANKRUPTCY AND AUTHORED
THE VERY REPORT THAT HELPED SET
IN MOTION THE FINANCIAL
REGULATIONS WE HAVE TODAY.
ANTON, THANK YOU FOR JOINING US,
SIR.
>> THANK YOU FOR HAVING ME.
LIZ: YOU WERE BROUGHT IN AS AN
ATTORNEY WHO REPRESENTED
COMPANIES AND DONE A WHOLE BUNCH
OF FORENSIC ACCOUNTING IN THE
PAST, AND YOU STARTED PORING
OVER WHAT HAPPENED.
TEN YEARS LATER, AS YOU LOOK AT
IT FROM 30,000 FEET, GIVE US IN
THE LANGUAGE THAT EVERYBODY CAN
UNDERSTAND, WHAT THE HECK
HAPPENED TO LEHMAN BROTHERS?
>> IT ACTUALLY IS RELATIVELY
MILLIONS OF DOCUMENTS, HUNDREDS
OF INTERVIEWS OF TOP EXECUTIVES
AROUND THE WORLD, TOP EXECUTIVES
WITHIN THE GOVERNMENT, THE
SECRETARY OF TREASURY, ET
CETERA, AND WHAT IT BOILS DOWN
TO, THERE WERE A SERIES OF
DECISIONS MADE BY LEHMAN
EXECUTIVES BACK IN 2006 AND 2007
WHICH THEY BELIEVE WOULD BRING
INCREDIBLE PROFITS TO THE
COMPANY.
THEY WERE NOT INDULGING IN
SUBPRIME MORTGAGES.
IN FACT, THEY WERE EXITING THAT
AREA.
THEY WERE MOVING INTO COMMERCIAL
REAL ESTATE WITH THE BELIEF THAT
THE 11th AMENDMENT WOULD HOLD,
WHICH IS THAT THE VALUE OF GOOD
REAL ESTATE WOULD NEVER DECLINE.
BELIEVED MR. BERNANKE ALSO HELD
IN MANY OF HIS SPEECHES.
WHAT HAPPENED WAS THEY STAYED
WITH THAT POINT OF VIEW,
NOTWITHSTANDING THE FACT THE
MARKET TURNED COMPLETELY AGAINST
THEM AND THE MOST AMAZING PART
KNEW EVERYTHING THAT LEHMAN WAS
DOING, ITS RISK EXCEEDANCES, THE
FACT THEY DID NOT HAVE A
LIQUIDITY POOL WHICH COULD
SUPPORT THE TYPE OF WORK THAT
THEY WERE DOING, AND THEY SAT BY
AND DID NOTHING.
AGO ALMOST TO THE DAY, TOMORROW
WILL BE THE DAY, THEY HAD SIX
HOURS TO PLAN FOR A BANKRUPTCY
AND INTO BANKRUPTCY THEY WENT.
THAT'S WHAT IT WAS.
LIZ: WHEN I HEAR THIS, AND WE
COVERED IT, WE WERE LIVING AND
BREATHING IT HERE AT FOX
BUSINESS, I FEEL LIKE YOU ARE
BEING REALLY GENEROUS TO LEHMAN,
OVERLY GENEROUS.
I SAY THAT BECAUSE IN JANUARY OF
2008, THEY CAME OUT AND SAID
WE'VE GOT RECORD REVENUES OF $60
BILLION, WE HAVE RECORD EARNINGS
OF $4 BILLION, WE'VE GOT A
MARKET CAP OF $30 BILLION.
EVERYTHING'S AWESOME.
THEN AS THE MONTHS WENT BY, THEY
STARTED, FORGET MAKING
DECISIONS, THEY ACTUALLY, I
DON'T KNOW, THEY MADE ACTUAL
BALANCE SHEET MANIPULATION MOVES
LIKE THIS REPO 105, A PRETTY
TRICKY MOVE WHICH WAS NEVER
DISCLOSED.
TO ME, THAT BEGINS TO LOOK LIKE
REAL NEFARIOUS BEHAVIOR.
>> I'M NOT GOING TO DISAGREE
WITH YOU.
IN FACT, I DO AGREE WITH YOU.
SIMPLY A DRUG THEY WERE ON, A
CHARADE.
THE LANGUAGE USED BY THE
PRESIDENT WAS SIMPLY THIS IS
SOME WAY THAT WE CAN COVER THE
BALANCE SHEET SO THEY MADE
THEMSELVES LOOK INFINITELY
BETTER THAN THEY ACTUALLY WERE.
THAT'S NOT THE REASON THEY
FAILED.
THAT'S WHAT THEY DID TO TRY AND
BUY TIME HOPING THAT THE MARKET
LIQUIDITY POOL, TOO.
LIQUIDITY TO ME MEANS CASH THAT
EMERGENCY.
THEY SAID THEY HAD THIS MASSIVE
POOL OF BILLIONS WHEN IN
ESSENCE, IT WAS TINY BECAUSE
THEY COULDN'T CONVERT IT IN THE
FORM THAT IT WAS IN.
THERE WAS A LOT OF LYING GOING
ON AND TO THIS DAY, PEOPLE
WONDER WHAT WAS THE MOST
JAW-DROPPING DISCOVERY THAT YOU
FOUND BECAUSE WE JUST
ARTICULATED A COUPLE OF THEM.
>> WELL, THE MOST AMAZING THING
TO ME WAS THE FACT THAT AS THEY
GOVERNMENT.
YOU ASKED THE QUESTION WHY WERE
THERE NO PROSECUTIONS, WHY WERE
THERE NO CIVIL SUITS BROUGHT BY
THE GOVERNMENT.
LIZ: RIGHT.
>> THE ANSWER MIGHT BE IN PART
BY VIRTUE OF THE FACT THE
GOVERNMENT KNEW ABOUT MOST OF
THESE THINGS.
THE GOVERNMENT HAD ACCESS TO ALL
OF THEIR DOCUMENTS, THEY WERE ON
PREMISES, THEY KNEW ABOUT RISK
EXCEEDANCES, THEY KNEW ABOUT THE
ISSUES WITH THE LIQUIDITY POOL,
AND THEY DID NOTHING ABOUT THAT.
SO WHEN YOU SAY WHO ARE THE
VICTIMS AND LEHMAN CAN SAY THE
GOVERNMENT KNEW THESE THINGS, WE
TRUTH.
THE GOVERNMENT DID KNOW AND THE
GOVERNMENT DID NOTHING.
LIZ: LEHMAN TRIED TO STAY IN
GOOD STANDING WITH THE RATINGS
AGENCIES AND PART OF THAT
PROBABLY PROPELLED THE LYING, ET
CETERA.
BUT AS YOU LOOK AT WHAT HAPPENED
IN THE PAST, WHAT NOW, IS
DODD-FRANK IN THE ORIGINAL FORM
AND WHAT IT LOOKS LIKE NOW,
ENOUGH TO PROTECT US FROM THE
NEXT CRISIS, WHICH MAY BE
SPARKED BY NOTHING SIMILAR TO
LEHMAN BROTHERS?
>> THE BIG QUESTION HERE IS
DODD-FRANK WAS A FRAMEWORK BUT
THERE WERE SIGNIFICANT
REGULATIONS THAT WERE PASSED
LEHMAN WAS.
LEHMAN HAD SIX HOURS OF
BANKRUPTCY PLANNING.
THAT'S ALMOST UNHEARD OF.
THE REAL ISSUE NOW IS, SAME
ISSUE THAT EXISTED THEN, IS THAT
THE GOVERNMENT DID NOT
UNDERSTAND WHAT IT WAS
REGULATING TO SOME SUBSTANTIAL
EXTENT, AND THE QUESTION IS, IN
THIS GLOBAL INTERRELATED,
COMPLEX DERIVATIVE-DRIVEN
ECONOMY, DOES THE GOVERNMENT
UNDERSTAND WHERE THE AREAS OF
VULNERABILITY ARE.
THAT'S THE QUESTION.
AND THE ANSWER WILL TELL YOU
WHAT THE FORMER CHAIRMAN OF --
CHAIRPERSON OF THE S.E.C. TOLD
US, WHICH WAS SIMPLY THAT HER
LAWYERS WHO WERE LOOKING AT THE
SAME MATERIALS THAT LEHMAN WAS
LOOKING AT, SIMPLY DID NOT
UNDERSTAND WHAT THEY WERE
SEEING.
JUST DIDN'T UNDERSTAND WHAT THEY
GOVERNMENT UNDERSTAND WHAT'S
GOING ON NOW.
THAT'S THE QUESTION.
LIZ: LET'S HOPE THEY DO.
BUT I DON'T THINK THERE'S AN
ANSWER RIGHT NOW.
ANTON, THANK YOU.
