Monday, March 15, 2010

Lehman's Problems, Continued

I'm still mining the Examiner's Report that I discussed yesterday, looking for the good nuggets.

I found this: On page 480 of the second pdf in the series, the Examiner is discussing Lehman's efforts to sell itself to Warren Buffett. Fuld and Buffett spoke on Friday, March 28, 2008.

"They discussed Buffett investing at least $2 billion in Lehman. Two items immediately concerned Buffett during his conversation with Fuld. First, Buffett wanted Lehman executives to buy under the same terms as Buffett. Fuld explained to the Examiner that he was reluctant to require a significant buy-in from Lehman executives, because they already received much of their compensation in stock. However, Buffett took it as a negative that Lehman executives were not willing to participate in a significant way. Second, Buffett did not like that Fuld complained about short sellers. Buffett thought that blaming short sellers was indicative of a failure to admit one's own problems."

Buffett was of course wise in this. And the short sellers were right to believe that Lehman was over-valued as Einhorn explained in May 2008.

The vulture doesn't kill. The vulture feeds on the flesh of the dead. And, in so doing, said vulture performs a service. Though he is led to perform that service by his regard for his own self-interest, it is a genuine service. Bring out your old Adam Smith neckties!

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