What Led to Lehman Brothers Failing?
BALDWIN: Lehman Brothers, the poster boy for the financial meltdown, and its bankruptcy filing, by the way, was the biggest Chapter 11 filing in financial history. So, now we're finally getting some answers here, some clues, if you will, about what it actually was that actually triggered that collapse. A new report actually blames Lehman executives and the company, their auditor, that was supposed to be keeping an eye on them. Let's bring in our business correspondent, Christine Romans, of course host of "YOUR $$$$$." Christine, OK, so we have this 2,220-page report.</s>CHRISTINE ROMANS, CNN ANCHOR: Right.</s>BALDWIN: And in it, it's saying, "Hey, executives of Lehman Brothers, you kind of screwed up, because you didn't really paint the whole picture as honestly as you could have." And, No. 2, Ernst & Young is sharing in the blame.</s>ROMANS: Yes. Basically, it says Lehman did it to itself. That Lehman imploded because of a lot of mistakes that were made all up and down the line. This is-- a bankruptcy examiner for a year has been studying what happened at Lehman, and basically, Brooke, found out it was bad executives, professional misconduct -- I'm sorry, malpractice is the actual quote from the accountant, and asleep regulators. And the entire country, of course, paid the consequences. These are laundry lists: accounting gimmicks, withholding information, auditor failure, in particular looking at $50 billion last year of debt that was moved off into what's called the repo market so that it didn't look like Lehman was as leveraged as it really was. Also this report, Brooke, I found was very interesting. It basically blames to -- the investment banking model in this country, the way that things have just evolved, that these companies were allowed to take so much risk and have so much leverage; and also the fact that the regulators, quite frankly, didn't -- didn't even get it. This is what they finally conclude. The conduct ranged from serious but non-culpable errors of business judgment...</s>BALDWIN: Non-culpable?</s>ROMAN: Ouch! To actionable -- non-culpable, to actionable balance sheet manipulation. So, this story doesn't end here. That's for sure.</s>BALDWIN: Now, what about, let's say, the former CEO of Lehman? Is he saying mea culpa or no?</s>ROMANS: No. Look, a lot of people are named here, including some former finance -- finance officials of this company, as well.</s>BALDWIN: Yes.</s>ROMANS: The auditor, Ernst & Young, is saying, "Look, we gave them a clean bill of health in 2007. That was the last time we audited them. They fell apart in 2008 because of adverse conditions in the financial markets." You look at Dick Fuld, the CEO of this company. Through his attorney or through his spokesman, he has released a statement saying that he didn't know about these particular transactions that were moving the $50 billion off the balance sheets. He didn't write them. He didn't know what they were. He didn't design them and he didn't know what they were. And others are either not commenting or saying "no comment," quite frankly. A couple of banks named here, as well, who were accused of calling in their collateral to help Lehman go over the edge, maybe to help their own position. They're not commenting either.</s>BALDWIN: Wow. Christine Romans. And, by the way, I want to remind, as always, our viewers, Miss Christine Romans, the star of "YOUR $$$$$." We will see you this weekend, as we do every single weekend, 1 p.m. Eastern. Christine, thank you. I'm sure she'll have much more on that juicy report from Lehman.</s>ROMANS: Yes.</s>BALDWIN: Thank you very much.</s>ROMANS: Yes.</s>BALDWIN: All right, moving on. Let's do some top stories for you. Ground Zero workers who say they were sickened by dust and debris have finally reached a deal on their health claims. A settlement would be worth up to $657.5 million, but it must first be approved by the workers and a judge who scheduled his first hearing this afternoon. In total here, about 10,000 lawsuits have been filed by police, firefighters, construction workers over respiratory illnesses. Investigations into runaway cars, a massive recall for bad brakes, and now accusations of endangering the public. Toyota is being sued by Orange County, California. Prosecutors claim detective vehicles and deceptive business practices put people in danger. And "in God we trust" isn't budging from your money. And your kids will still be pledging allegiance to "one nation under God." Here's the deal. The San Francisco appeals court basically now has rejected arguments that the words cross the line between church and state. The panel said the God references are historical, not religious. A pregnancy crisis. Right now, in America, an alarming number of women are dying from simply having babies. So, our question, why?