How It All Began (Sinclair Stewart, Paul Waldie)

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Avalanche

Black Monday, Sept. 15., will be remembered by a generation as the day the great recession that is now strangling the global economy became inevitable. On that day, the U.S. government made the fateful decision to allow Lehman Bros. to fail. But the catastrophe unleashed by Lehman's collapse has far-reaching roots

December 19, 2008

NEW YORK/TORONTO - Richard Fuld sat still in his chair and stared straight ahead, facing his interrogators with a clenched jaw and the occasional flash of defiance. {xtypo_quote_right} Why were investment banks allowed to borrow massive amounts of money to make risky bets? How could a shadow banking system, one ten times bigger than the Canadian economy, be allowed to flourish so quickly without any oversight from government regulators? Why were credit rating agencies stamping dubious products with their approval? And how could homeowners with poor credit histories or zero documentation, let alone jobs, qualify for mortgages? {/xtypo_quote_right}

He had been summoned to Washington on this chilly October morning to answer for the demise of Lehman Bros., a storied Wall Street firm that under his 15-year watch had staged a remarkable revival – and suffered an equally breathtaking collapse.

At least that was the ostensible reason. But now, as one congressman after another took turns grilling him over his lavish pay, and juxtaposing this with the financial plight of ordinary homeowners, it became clear that he had been brought here to answer for something much larger: the role of Wall Street in sparking the biggest economic meltdown in more than 80 years, a crisis that threatened not only long-lasting hardship, but a loss of faith in the very free-market system that had fashioned the country into a superpower.

“If you haven't discovered your role, you are the villain today,” chided John Mica, the Republican representative from Florida. “So you have got to act like the villain here.”