Lehman Chief Accepts Blame For Credit-Market Losses

NEW YORK, June 16 -- Lehman Brothers chief executive Richard Fuld took the blame Monday for the company's staggering second-quarter loss and said the investment bank was too slow in reacting to the credit crisis.

"This is my responsibility," Fuld declared in his first comments since the bank forecast last week it lost nearly $3 billion from bad bets in mortgage-backed securities and other risky investments. The longest-serving chief executive left on Wall Street now has as his mission to restore confidence to the firm's tarnished image.

"We made active decisions to deploy our capital, some of which in hindsight were poor choices because we really didn't act quickly enough to the eroding environment," Fuld said in a conference call with analysts.

He said that the investment house has acted quickly since recording its first loss since going public in 1994. Lehman raised $6 billion of fresh capital last week and demoted its chief financial and chief operating officers.

Lehman also reduced the size of its balance sheet by $147 billion, more than Fuld had targeted for the quarter. Meanwhile, it slashed mortgage holdings by 20 percent -- higher than the original forecast of 15 percent.

Many of the reductions came from unstable mortgage-backed securities and leveraged loans that caused financial companies globally to write down nearly $300 billion since last year. The crisis has caused the ouster of Fuld's peers from Merrill Lynch and Citigroup and nearly caused the collapse of Bear Stearns before it was sold to J.P. Morgan Chase.

Wall Street is awaiting second-quarter results from Goldman Sachs Group on Tuesday and Morgan Stanley on Wednesday.

Fuld, while not able to rule out the possibility of further problems, said he's "gotten the message" and is comfortable with the investment bank's current positions.

And investors appear to have regained some confidence in Fuld. Shares of the company, which last week plunged by 30 percent before rebounding Friday, rose $1.39, or 5.4 percent, to close at $27.20 Monday.

"Lehman's survival as an independent entity should not be at stake," said Chermaine Lee, an analyst with Boston-based financial consulting firm Celent. "Yes, their exposure to subprime was very heavy and yes, they are comparatively smaller as an investment bank, but they have taken credible measures thus far in reducing their leveraged positions, getting rid of subprime and mortgage-related assets from their balance sheet."

The company reported a loss of $2.87 billion, or $5.14 per share, compared with a profit of $1.26 billion, or $2.21 per share, a year earlier. Markdowns on risky assets caused revenue to hit negative $668 million from last year's $5.51 billion.

The losses caused the ouster of Chief Financial Officer Erin Callan and Chief Operating Officer Joseph Gregory. Callan, who took the job in December, was one of the highest-ranking women on Wall Street. Gregory had been with Lehman for three decades and was considered to be a close confidant to Fuld.