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In conjunction with the anniversary of the largest bankruptcy in American history, the former vice president of Lehman Brothers gave a standing-room only crowd of students, faculty, and Bowling Green community members the dramatic insight into the collapse of the financial giant, Lehman Brothers. Mr. Lawrence McDonald began talking about how the bankruptcy of Lehman was bigger than the bankruptcies of Enron, WorldCom, and Adelphia, combined.

Lehman Brothers had been able to survive more than 150 years of events such as the Great Depression, both world wars, the Civil War, and September 11, but it couldn’t escape from the horrible mismanagement of the top few who allowed the company to become an “out-of-control monarchy,” resulting in an $800B domino effect in the global economy. McDonald compared what happened to Lehman to smashing head on into the subprime iceberg of disaster.

McDonald said that Richard Fuld Jr. should never have been allowed to be both CEO and Chairman of the Board at Lehman. He added that Fuld surrounded himself with “yes men” who were hand-selected and “in his back pocket.” McDonald stated that these board members were not knowledgeable enough to understand the risk the company was taking with the subprime mortgages. The company was lending millions of dollars to people who couldn’t even afford their first house payment. McDonald characterized them as “NINJA” mortgages: “No income, no job assets.”

McDonald told the audience that Fuld and his top executives made sure those managers who spoke up and begged the company to change course, including him, were “silenced.”

According to McDonald, two primary ways to prevent another colossal collapse are to provide term limits of CEOs and board members and “incentivize” the uncovering of fraud by hiring the brightest on Wall Street with a portion of the TARPS funds.

The former vice president of Lehman Brothers wanted to make something positive come out of this horrible disaster, so he wrote a book called “A Colossal Failure of Common Sense: the Inside Story of the Collapse of Lehman Brothers” which ranks as number seven on the New York Times Best Seller list. As a result, he has been interviewed by some of the largest news organizations in the world.

McDonald’s visit was part of the Edward and Linda Reiter Lectureship: Ethics and Values in the Workplace, hosted by the BG eXperience Program in collaboration with the College of Business Administration.

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