Could Dick Fuld Have Been Legally Stopped From Destroying Lehman?

Quite a bit of ink- real and electronic- has been spilled regarding Dick Fuld's failed Lehman Holdings.

Last week, or perhaps the week prior, there was an interesting discussion on CNBC concerning the timeline and actions, or inactions, of various players surrounding the Lehman bankruptcy.

For example, there are stories of several in-person meetings between Fuld and Treasury Secretary Paulson. Some say that Paulson pointedly told Fuld to raise more capital or suffer the consequences. Others say this was not the case.

Fuld is clearly under the microscope for potentially having told his staff and executives one thing about Lehman's capital adequacy and plans to raise more, while telling investors and analysts something different. If this is proven to be true, with bad intent, Fuld could be facing jail time.

Stepping back, the larger question would seem to be this:

Can and/or should the US Federal government, either through cabinet officers or regulators, intercede with financial sector firms and either take possession of them, or direct them to take various actions, prior to a bankruptcy?

Is a concern that a firm's reckless or ill-advised courses of actions will 'cause some problem' or 'cause something bad to happen to the financial system,' of an undefined nature or magnitude, sufficient to justify the taking of personal property in the form of a publicly-held financial services firm?

Several people, including John Gutfreund, former Salomon Brothers CEO, have opined that Fuld should have known sometime late last year that he wasn't going to be able to maintain Lehman's independence for very long into 2008, as a solvent company.

Even if this were true, does that mean the Federal government should have interceded just based on fears, rather than facts?

Was Fuld's continued running of Lehman as an independent firm criminal?

These are not trivial questions.

For example, Treasury, the Fed and the FDIC have all taken actions in the third quarter of this year which would have been totally unacceptable, had they taken place one year earlier. Yet, had they taken place in 2007, the serious meltdown of fixed income and equity markets might not have occurred to the extent they have in recent months.

Was AIG necessary, or an overstepping of legal boundaries? WaMu? Fannie and Freddie?

In the case of the latter two GSE's, given that Congress and at least two Presidents encouraged these firms to securitize problematic home loans, is it fair for citizens to have lost equity value due to government's incompetence?

What is the desirable path in our mixed-economy? What are the appropriate uses of, and curbs on Federal power in maintaining the health of our financial system, while also respecting private property rights?