Where Did It Go Wrong?

From Risk is gone on Wall Street by David Weidner:

Dick Fuld, the soon-to-be former chairman and chief executive of Lehman, and Jimmy Cayne, the former CEO of Bear Stearns, tried to outdo each other with compensation.

The "hard-charging" Fuld took home about $45 million last year. But that was OK because he was a lifer at the firm who had helped rebuild it a couple of times when it neared collapse. No one ever thought that maybe the executive people liked to call the gorilla was one of the reasons the firm kept running into trouble.

Cayne's net worth soared to $1 billion at the end of 2006, but we're supposed to feel sorry for him because he lost a fortune in the collapse and has to live in a $26 million apartment in the Plaza Hotel.

The employees of these firms aren't much better. They can't figure out why the market has lost confidence in their eggshell companies built on mountains of combustible derivatives. They scowl at journalists, pay coffee vendors not to serve reporters who make a fraction of what brokers do. They blame the media for their woes, not their banking counterparts who have cold feet.

Wall Street tells investors to buy and hold and then goes on a bank run against two of its own.

Read more here.