Bleeding Green: The Fall of Fuld

Lehman: The Bankruptcy and the Blowback

After the March collapse of Bear Stearns, Wall Streeters began buzzing that Lehman would be the next to go.

Fuld, meanwhile, put on an optimistic face. He told The Economist magazine in April that, with nearly $200 billion of liquidity and collateral, he was "thrilled" with Lehman's response to the mortgage crisis.

"Smart risk management is never putting yourself in a position where you can't live to fight another day," he told the magazine.

Nevertheless, in early June, Lehman posted a second-quarter loss of $2.8 billion, its first since going public in 1994.

The poor showing led to the ouster of two key Lehman executives. But the bad news kept coming: On Sept. 10, Lehman reported another loss -- this time of $3.9 billion.

Five days later, the firm filed for bankruptcy protection.

Egan said Fuld erred by relying so heavily on debt to finance the firm's investments.

"It was lunacy to believe that he could run an operation with $650 billion worth of assets with only 3 percent shareholders' equity," he said.

Fuld was also criticized for blaming short-sellers -– traders who make bets that a company's share price is going to fall -- for some of Lehman's troubles and for reportedly spurning earlier offers by other companies to buy Lehman.

Fuld's supporters, meanwhile, differ in the ways they choose to defend the embattled CEO.

Foerster said that he agreed with Fuld's concerns about short-selling and also said that it was too early to tell how much blame his one-time colleague should shoulder for Lehman's downfall.

"Something was going on in the marketplace that was far larger and more powerful than anyone ever expected," he said. "It's bigger than one person."

Ball, the chairman of the financial firm Sanders Morris Harris Group in Houston, suggested that Fuld's fault, ironically enough, may have been rooted in his dedication to Lehman.

"To some extent, any leader who has built a company, built a business, hired the people, engineered the lines of business ... if he or she is a decent human being, he is going to have some reluctance to tear down that business, to fire the people, to dismember it," Ball said.

"That," he said, "would make anyone a bit slow to react."