WASHINGTON— The ink was barely dry on the economic rescue bill when Congress began hauling disgraced financiers up to Capitol Hill to grill them on why and how everything went so wrong. 

First up on the dock was Richard Fuld, who presided over the rise and fall of Lehman Brothers. It was the first public appearance by Fuld since Lehman filed for bankruptcy protection on September 15.

Appearing alone before the House Committee on Oversight and Government Reform, Fuld said: "I take full responsibility for the decisions I made and the actions I took. Based on the information I had they were prudent and appropriate."

Fuld, a big man who looked tiny at the huge witness table, conceded that "with the benefit of hindsight, would I have done things differently? Yes, I would."

As Fuld sat at the witness table, two pink t-shirt clad women tried to hold up handwritten signs – one said “Shame” – before they were ushered out by Capitol police.

The Lehman C.E.O.  answered—slowly and haltingly—angry lawmakers' questions,

Some of the most dramatic moments of the hearing came when Fuld was asked why Lehman was alone in the Wall Street firms that did not get a government rescue.

“Until the day they put me into the ground, I will wonder,” he said in a strong, charged voice.

But he sidestepped questions about whether Goldman Sachs had been the beneficiary of Treasury Department’s refusal to help out, noting “I do not know why we were the only one.”

 In a glimpse of the anguish that Fuld, who spent his entire career at Lehman and headed the firm since 1994, feels, he acknowledgd that: “I wake up every night wondering what I could have done differently. This is a pain that will stay with me for the rest of my life.”

The questioning began  with Henry Waxman, chairman of the House Committee on Oversight and Government Reform, who produced a chart showing that Fuld received $484.8 million in compensation between 2000 and 2007.

"Is this fair?" Waxman, a Democrat of California, asked— more than once. Fuld squirmed, and never really answered the question. Under questioning from another lawmaker, Fuld indicated that his compensation total was closer to $350 million.

Fuld, who said he still owned 10 million Lehman shares, said that he did not recklessly spend shareholders' money. He insisted that the firm was appropriately leveraged, saying that the company reduced its leverage by some $200 billion by September 10, when it reported third-quarter results.

"Our leverage was way down," he said. He also sought to debunk rumors that the company had spent $10 billion on executive compensation, saying that sum was compensation in stocks for 30 percent of the company's 28,000 employees.

Lawmakers were highly critical, with Waxman noting that Fuld's prepared testimony indicated he "takes no responsibility for the collapse of Lehman. Instead, he cites a litany of destabilizing factors," and says "we were overwhelmed."

Waxman said that four days before Lehman filed for bankruptcy, a recommendation was sent to the board's compensation committee for three departing executives to receive more than $20 million in "special payments."

"In other words, even as Mr. Fuld was pleading with Secretary [Henry] Paulson for a federal rescue, Lehman continued to squander millions on executive compensation," Waxman said.

Other documents obtained by the committee showed that Lehman's money management subsidiary, Neuberger Berman, recommended in July that "top management should forgo bonuses this year. This would serve a dual purpose. Firstly, it would represent a significant expense reduction. Secondly…it would send a strong message to both employees and investors that management is not shirking accountability for recent performance."

In response, Waxman said Fuld mocked the Neuberger suggestion, replying: "Don't worry—they are only people who think about their own pockets."

Another dismissive reply, the committee found, came from George Walker, a cousin of President Bush, who is a member of Lehman's executive committee. In response to the suggestion of eliminating bonuses, Walker said: "Sorry team. I'm not sure what's in the water at 605 Third Avenue today…I'm embarrassed and I apologize."

Fuld sought to shift attention to the regulators. He said that the Securities and Exchange Commission and the Federal Reserve "actively conducted regular, and at times, daily oversight of both our business and balance sheet."

He said that "quarter to quarter, month to month, regulators saw how we reduced our commercial real estate holdings; how we increased our liquidity pool; how we decreased leverage and strengthened our capital levels."

In sum, he said, regulators "were privy to everything as it was happening."

His stance elicited little sympathy from either lawmakers or expert witnesses or lawmakers. Elijah Cummings, Democrat of Maryland, pointed to a May 26, 2008, email in which a high-ranking Lehman executive, David Goldfarb, proposed spending recently raised sums to "aggressively" go into the market and spend it to "buy back lots of stock" and "hurting Einhorn bad," presumably referring to Lehman critic David Einhorn.

"When people in Baltimore perform poorly, they get fired," said Cummings. "They certainly don't get a bonus."

Earlier at the hearing, Nell Minow, head of the Corporate Library, an executive compensation research group, accused Fuld of surrounding himself with "a bunch of retirees who barely knew what a derivative is." She said "the risk committee met only twice in two years—that tells you everything you need to know."
 
The hearing was minutes old before political lines were drawn up—with Republicans repeatedly insisting it's not Republicans or deregulation that are at fault.

The five committee hearings, which include a look Tuesday at rescued insurance giant A.I.G., are intended, said Representative John Mica, Republican of Florida, "to deflect attention" away from regulatory failures and flawed performance by Fannie Mae and Freddie Mac.

He said he wanted a special counsel, and insisted that any hearings are a "sham" if they don't call former Fannie Mae head, Franklin Raines, to testify—echoing Republican presidential ads trying to link Raines and Democratic presidential candidate Barack Obama.

Mica did have an appreciation for the theater of the hearing.  "If you haven't figured it out yet, your role here today is to be the villain," he told Fuld.

As the hearing closed, some spectators felt that way. They started shouting questions about why Congress hadn’t held hearings before voting on the bailout package. Fuld, and his entourage of a half-dozen, ducked into the back of the committee room and came out about 10 minutes later. That didn’t save him from having a group of Code Pink protestors – who have regularly protested against the Iraq war – from yelling that he was a “criminal” and chasing him down the hallway with Capitol Hill police doing their best to keep all parties separated  as an irritated-looking Fuld and his party scrambled toward black SUVs parked nearby..