Former Lehman Brothers CEO Richard Fuld lifted his bowed head, looked squarely at U.S. lawmakers on Tuesday and acknowledged that people were hurt in the collapse of the former Wall Street giant.

I have to live with that, he said, slumped in a chair at a Capitol Hill inquiry into the biggest-ever U.S. bankruptcy, which helped trigger a global financial crisis and set off the worst U.S. recession since the 1930s.

As senators moved closer to a historic overhaul of financial regulation, Fuld -- known as The Gorilla for his aggressive style at Lehman in its heyday -- was alternately contrite and combative before the House of Representatives Financial Services Committee. For full story on financial reform battle, see

Lawmakers focused on a controversial Lehman accounting practice that clouded the bank's true financial state. Fuld said he was unaware of the practice while running the bank.

Asked if he thought other CEOs and firms would be able to learn from his mistakes, he said, Yes sir, I would.

Challenged about whether Lehman's actions sometimes looked more like gambling than banking, Fuld said to one lawmaker: I hesitate to say this because you will ... well, whatever. But we were risk adverse.

When the lawmaker looked incredulous, Fuld said, I know, I walked right into that one.

The 2008 Lehman debacle paralyzed global capital markets and unleashed calls for financial reform. The post-mortem on Lehman's demise is now raising more specific concerns.

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.

I have absolutely no recollection whatsoever of hearing anything about 'Repo 105 transactions' while I was CEO of Lehman, Fuld told the committee at a public hearing.

Repo 105 is a legal technique, but critics say it was improperly used by Lehman to mask its level of risk-taking. No charges have been brought against Lehman over the practice.

Former U.S. Securities and Exchange Commission Chairman Christopher Cox told the committee the Lehman examiner's report may provide the basis for an SEC enforcement action.

In an emotional moment, a former Lehman executive, Matthew Lee, told the committee that he was suddenly fired in 2008 after raising concerns about the firm's Repo 105 dealings.

On multiple occasions, I attempted to bring these issues to the attention of Lehman Brothers' executive management ... Within days of first raising issues, I was terminated, said Lee, choking up at one point and pausing to drink some water.

Based on what I observed during my employment, I believe that there were serious, material accounting control and corporate governance issues at Lehman, he said.


Fuld had last gone before a congressional panel in October 2008, weeks after Lehman imploded. At the time he was greeted by protesters with signs reading Shame and Cap Greed.

No such display of public anger developed on Tuesday in a hearing room much less boisterous and crowded than the scene more than a year and a half ago.

Lawmakers at the hearing decried the 2007-09 financial crisis and urged a sweeping regulatory overhaul.

Across Capitol Hill, the Senate continued to move toward a pivotal vote on the most substantive overhaul of financial regulations since the Great Depression. The Senate was expected to take up the bill next week.

The House approved a reform bill in December that embraced many of the reforms proposed by Obama in mid-2009.

Major bank stocks ended higher on the New York Stock Exchange on Tuesday, except for Goldman Sachs, whose shares fell 2 percent even though it reported its first-quarter profits nearly doubled..

On Friday the government filed fraud charges against Goldman Sachs linked to its structuring and marketing of a subprime mortgage investment.

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

She 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.

Schapiro was joined at the hearing by Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke.

Failure is inevitable in financial systems, Geithner said. The challenge for governments is to devise a system where failures of private firms cannot cause catastrophic damage to the economy.

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