Lehman Demotes CFO and Removes COO, Fuld Will Do Everything

In a desperate move to regain credibility from investors, Lehman has demoted Erin Callan from the CFO position and removed Joseph Gregory from the COO post.  Dick Fuld will remain as CEO.  Herbert McDade will succeed Mr. Gregory and Ian Lowitt will take over for Ms. Callan.

Ms. Callan had a reputation for downplaying Lehman's problems. She denied issues with Lehman's balance sheet and dismissed assertions from Lehman's detractors that the company was not marking its inventory of mortgages realistically.  Taking a firm stance only works if you are right.  Once the company needed to raise capital and take an unexpectedly large loss, essentially admitting that it had been playing around with prices, her credibility was toast.  I understand why Mr. Fuld is now taking desperate measures to restore faith in his company.  But blaming it all on the CFO and COO may not work.  Investors have to ask themselves: What was Mr. Fuld doing while Ms. Callan and Mr. Gregory were supposedly busy wrecking the firm?  Mr. Fuld is well reputed for pulling a rabbit out of a hat during the last credit crisis of 1998.  My hunch is, the story this time around will not have a happy ending.