By Rachelle Younglai and Kim Dixon
WASHINGTON (Reuters) - The disgraced head of Lehman Brothers Holdings Inc told Congress on Monday that U.S. banking regulators knew exactly how Lehman was pricing its distressed assets and about its liquidity in the months before its collapse.
Throughout 2008, the U.S. Securities and Exchange Commission and the Federal Reserve "actively conducted regular, and at times daily oversight of both our business and balance sheet," said Richard Fuld, chief executive of Lehman
"(Regulators) held regular price verification reviews. They were privy to everything as it was happening," he said.
Lehman filed for Chapter 11 bankruptcy protection on September 15.
Rep. Henry Waxman, a California Democrat who chairs the panel, is holding a series of hearings to find out what went wrong and what changes are needed in financial services regulation.
"Mr. Fuld takes no responsibility for the collapse of Lehman," Waxman said at the hearing. The committee obtained thousands of pages of e-mails and other internal Lehman documents that "portray a company in which there was no accountability for failure," Waxman added.
Regulators "failed miserably" to prevent Lehman's collapse and its resulting impact on the U.S. economy which forced Congress last week to approve a $700 billion bailout for the financial industry, Waxman said.
Over the summer, Lehman discussed with the Fed the possibility of converting to a bank holding company, according to Fuld's written testimony. The two remaining big Wall Street investment banks -- Goldman Sachs Group Inc
Fuld said the Fed acted too late to broaden the types of collateral that banks could pledge to create liquidity.
"Had these changes been made sooner, they would have been extraordinarily helpful to Lehman," Fuld said.
The Fed and Treasury Secretary Henry Paulson undertook a series of emergency measures to rescue mortgage finance giants Fannie Mae and Freddie Mac. U.S. authorities also orchestrated a deal to sell Bear Stearns to JPMorgan Chase & Co
However, as Lehman's stock continued to plummet and the investment bank was unable to secure a buyer, Paulson was adamant that no government money be used to rescue Lehman.
"Had that decision been different, further dislocations in the markets might have been avoided," Fuld said.
Fuld also blamed abusive short-selling and unsubstantiated rumors to contributing to Lehman's demise. The temporary emergency rule the SEC took to halt abusive short-selling helped stabilize Lehman's stock, Fuld said.
(Reporting by Rachelle Younglai and Kim Dixon; Editing by Brian Moss and Gerald E. McCormick)
