The Five Dumbest Things on Wall Street This Week

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Five Dumbest Things on Wall Street: Sept. 19

Gregg Greenberg

Lamenting Lehman

"It's a tragedy ... Bobbie (Lehman) is spinning in his grave."

That's what long-time Lehman Brothers partner Herman Kahn said following the firm's sale to Shearson/Amex in 1984, according to Greed and Glory on Wall Street: The Fall of the House of Lehman by Ken Auletta.

If he was rolling over then, one can only imagine what Bobbie's doing now. He should be haunting former CEO Dick Fuld for driving the 158-year-old firm into the ground.

With so much stupidity still swirling around Lehman's sudden demise, the Five Dumbest Lab selected a few items too good to pass up before saying our final goodbyes:

Leaving on Top: Institutional Investor awarded Lehman Brothers the top spot this week in its annual All-America Fixed Income Research Team rankings, defending its title for the ninth straight year.

Bove's Bungle: "I still believe that this is one of the best companies on Wall Street and that it has value well beyond its current stock price. Therefore, the stock remains a buy," said Ladenburg Thalmann analyst Dick Bove on Sept. 11 with the stock's price at $7.25 and sinking.

Asleep at the Board: What's especially revealing about Lehman's demise is the average age of its 10-member board: 74.3 years. Their backgrounds are even more revealing. Counted among the board are such business bastions as a theater producer and a Navy admiral. Anyone still wondering why things fell apart? We won't even ask if anyone believes they earned the $360,000 in average compensation they received.

Waxman Pathetic: "Our hearings will examine what went wrong and who should be held to account," Henry Waxman, the Democratic congressman from Los Angeles, said Wednesday when he announced hearings that will include Dick Fuld and former AIG(AIG Quote) CEOs Robert Willumstad and Maurice "Hank" Greenberg. That's the kind of decisive response we've come to expect from Congress.

Fuld's Farewell: "The past several months have been extraordinarily challenging. For some of you, the firm has been your home for decades. For others, less than a year. For all of us, it has been far more than a place of employment. It has been a source of pride." Email from Richard Fuld, CEO of Lehman Brothers, 1994-2008. Yes, Dick, you've got plenty to be proud of.

Dumb-o-meter score: A perfect 100 -- Webster's Dictionary should use a lithograph of Fuld's face to illustrate its definition for "Dumb."

Grand Theft at Take-Two?

It seems that Take-Two (TTWO Quote) Chairman Strauss Zelnick has been taking his company's "Grand Theft" video games a little too literally.

Not that Zelnick has been stealing cars, mind you. But investors may feel like he stole their cash after he rejected a $2 billion offer from Electronic Arts(ERTS Quote) to acquire Take-Two.

Take-Two lost a quarter of its market value Monday, falling to $16.57 a share after rival EA withdrew its offer for the company. EA, home to hit titles like Madden 09, announced an unsolicited $25.74-a-share bid for Take-Two seven months ago. Zelnick and his management team rebuffed the offer as too low in light of the strong performance of the fourth "Grand Theft Auto" installment, which has sold more than 10 million copies since being introduced in April.

Zelnick shrugged off Monday's stock market drubbing, saying the company remains in "terrific shape" and saying he's got "numerous" options, including having Take-Two going at it alone.

Unfortunately for Take-Two's shareholders, more turmoil appears to be coming. Grand Theft Auto has been a mega-seller, but Take-Two's three-year contract with the game's two creators -- Sam and Dan Houser at Rockstar Games -- expires in February. Analysts question whether Take-Two can retain them.

With the EA deal off the table, it could be "game over" for Zelnick if he can't patch things up with the Houser brothers.

Dumb-o-meter score: 85 -- The new game for Take-Two shareholders could be called Grand Theft Zelnick.

Nice Try, Hank

Maurice "Hank" Greenberg's last-ditch effort to save AIG almost seemed noble.

Then again, the former CEO of AIG AIG(AIG Quote) owned 12.9 million shares of the company as of May and is CEO of Starr International, which owned about 243 million AIG shares as of July, according to SEC filings. Last year, those holdings were worth $15.8 billion. Now they're valued below $500 million.

So it's no shocker that Greenberg, who was forced to leave the company in 2005 amid an accounting scandal, was desperately trying to get back into the AIG headquarters before the government rushed in to stitch the financial Frankenstein together with an $85 billion loan.

In a letter sent Tuesday to his successor at AIG, Robert Willumstad, Greenberg complained that his "repeated requests" to offer suggestions and help had been "ignored."

"Since you became Chairman of AIG, you and the Board have presided over the virtual destruction of shareholder value built up over 35 years," wrote the once imperial Greenberg, who kindly added that it was not his intention to "try to point fingers or be critical."

No. No finger-pointing there.

To add insult to injury, while Greenberg's net worth has been decimated by the collapse of his life's work, Willumstad could waltz out with as much as $7 million after just three months on the job.

So it's hard to begrudge Greenberg's scorching sarcasm in such a combustible environment.

Then again, Hank, weren't you the primary architect of this towering inferno?

Dumb-o-meter score: 80 -- When you point a finger at someone, there are three fingers pointing back at you.

Don't Quit Your Day Job, Mel

For a radio guy, Sirius XM Radio(SIRI Quote) CEO Mel Karmazin hasn't got a clue how to work an audience.

He bombed so badly at an investor conference last week in California that Sirius stock crashed below a buck. That's what he gets for joking about the company's debt dilemma amid a shortage of cash to repay $300 million in convertible senior notes due next February.

Asked about those difficulties, Karmazin quipped, "Am I going to lend the company the money? I hope not. I hope we don't get to that," according to The Wall Street Journal.

And that crazy Karmazin didn't stop there. After projecting savings from the purchase of satellite radio operator XM will increase to $425 million in 2009 from $400 million, he tossed out this one-liner:

"That's not good, when your expenses are higher than your revenue, right?"

Hilarious. He should give himself a comedy channel right next to Howard Stern's.

It's all the funnier considering that Sirius' shares are facing delisting a month from now if they do not lift themselves out of penny-stock land.

Karmazin later reconsidered his smart-aleck asides saying, "I wish I didn't say it. I tend to be candid. I said something off-handed."

Don't quit your day job, Mel. Then again?

Dumb-o-meter score: 75 -- On your way out, will the last shareholder of Sirius XM please turn off the radio?

Johnny's Cash

John Thain had a very good year. Well, not quite a year.

After 10 months as CEO of Merrill Lynch(MER Quote), Thain could pocket up to $11 million from this week's sale of Merrill to Bank of America(BAC Quote), according to Laurence Wagman of compensation consulting firm James F. Reda. That's on top of the $15 million bonus Merrill threw at him last December to woo him away from NYSE Euronext (NYX Quote).

So Thain's probably not too concerned about walking away from his $750,000 annual salary after handing over the reins to the firm's so-called "Thundering Herd" of brokers to BofA chief Ken Lewis.

Amid all the praise being heaped on Thain for saving Merrill by brokering the $50 billion takeover, we at the Five Dumbest lab would like to remind everyone that Merrill's stock dropped from $56 a share when Thain took the mantle to $17.06 last Friday before the deal was announced.

Funny that no one's talking about a role for Thain at Charlotte, N.C.-based BofA. Relocating to North Carolina? Yeah, right! After job-hopping from Goldman Sachs(GS Quote) to the NYSE to Merrill Lynch, he has yet to leave downtown New York.

For his part, Thain is already waxing nostalgic about the good old days as Mother Merrill's big Daddy.

"It's fair to say that this isn't necessarily the outcome I would have expected when I took this job," says Thain. "But we have been consistently cleaning up the balance sheet, repairing the damage that had been done over the course of the last few years, and frankly this opportunity is, I think, a very good opportunity both for our shareholders and our employees."

Not to mention good for Thain's wallet.

Dumb-o-meter score: 70 -- It's not Stan O'Neal's $140 million send-off, but it's still good work if you can get it.