Richard Fuld, former CEO of Lehman Brothers, was summoned to Capitol Hill on Tuesday to answer for the collapse of the fallen Wall Street giant, amid signs a vote on historic financial reforms may be delayed.

Known as The Gorilla inside Lehman in its heyday, Fuld was slated to headline a hearing before the House Financial Services Committee chaired by Representative Barney Frank, the Democrats' gruff architect of financial reform in Congress.

Fuld's October 2008 appearance before lawmakers was marked by protesters with signs reading Shame, and Cap Greed, just weeks after Lehman imploded, paralyzing capital markets and unleashing a worldwide push for tighter financial rules.

The highly anticipated clash of Fuld and Frank was still to come as the hearing got under way, with lawmakers decrying the 2007-09 financial crisis and urging a regulatory overhaul amid fallout from U.S. fraud charges against Goldman Sachs.

Failure is inevitable in financial systems, U.S. Treasury Secretary Timothy Geithner told the panel, tapping his feet on the floor under the table as he testified.

A frequent congressional witness, Geithner appealed to lawmakers to complete its work on reforms.

The challenge for governments is to devise a system where failures of private firms cannot cause catastrophic damage to the economy, he said.

As the House panel examined the 2008 Lehman bankruptcy -- the largest bankruptcy filing in U.S. history -- the Senate was moving toward a pivotal vote on the most substantive overhaul of U.S. financial regulations since the Great Depression.

President Barack Obama, who has made financial reform a top priority since winning a major victory on healthcare reform, supports a bill approved by a Senate committee last month.

It is now headed toward the Senate floor for debate and a decision, but faces solid opposition from Republicans as well as banking industry lobbyists, who have fought against it for months.

Democrats, in control of 59 votes in the 100-member Senate, need the support of just one Republican to overcome procedural hurdles likely to be thrown in front of the bill. One Democratic official said the Senate now looked unlikely to take up the bill before next week, later than previously hoped.


The U.S. Securities and Exchange Commission on Friday brought fraud charges against Goldman Sachs linked to its structuring and marketing of a subprime mortgage investment. Goldman has emerged from the crisis as Wall Street's top firm.

Major bank stocks were higher in afternoon trading on the New York Stock Exchange, except for Goldman, which was down 1.8 percent at $160.40.

With Democrats betting that the Goldman case would boost deep and persistent public anger against the financial industry and improve chances of their bill's passage, Goldman on Tuesday reported that its first-quarter profits nearly doubled.

SEC Chairman Mary Schapiro told reporters that the case against Goldman was absolutely not politically motivated.

The House approved a reform bill in December that embraced many of the reforms proposed by Obama in mid-2009. But the Senate has yet to act, with the result that regulation has changed little since Lehman fell apart in late 2008.

Fuld was expected to tell the House committee that he only learned of Lehman's use of a controversial accounting technique a year after the investment bank filed for bankruptcy.

A court-appointed examiner reported in March that Lehman used a technique known as Repo 105 to temporarily remove some assets from its books, obscuring its full financial picture. Critics say the technique can be abused for window dressing financial results at the end of a quarter.

I have absolutely no recollection whatsoever of hearing anything about Repo 105 transactions while I was CEO of Lehman, Fuld said in the prepared remarks to be delivered.

Fuld left Lehman at the end of 2008.

Geithner was joined at the House committee hearing by Federal Reserve Chairman Ben Bernanke and the SEC's Schapiro, also veterans of such proceedings.

Schapiro said the investor protection agency was considering whether new rules are needed to prevent the masking of a company's debt at the end of the quarter.

Former SEC Chairman Christopher Cox told the committee, in prepared remarks, that the Lehman examiner's report may provide the basis for an SEC enforcement action.

(Additional reporting by Andy Sullivan, Karey Wutkowski, Rachelle Younglai, Kim Dixon and Clare Baldwin, with Steve Eder in New York; Editing by Gary Crosse))