Larry McDonald: “Goldman Was the Appetizer and Lehman is the Main Course.”

Former Lehman Brothers Trading Vice President Larry McDonald was just interviewed by Charlie Gasparino on Fox Business Network regarding a massive behind-the-scenes investigation that is going on regarding former Lehman Brothers executives who may or may have not mislead investors. Speaking about the investigation, Mr. McDonald said, “Goldman (Sachs)

was the appetizer and Lehman is the main course. You are talking about massive investigations going on behind the scenes; the SEC, the Justice Department, the FBI is involved.” When asked if the Volcker rule will change the industry for the positive, he said, “I think slowly but surely. They are trying to get out in front. They have five to seven years to sell some of these huge positions they have. I think Goldman is doing the smart thing trying to sell these assets before everybody else has to sell them.” He added, “I think you will see some divisions spin off into public companies. Other times you will see employees that run those hedge funds leave the firm and take it private themselves.” On whether there is an active criminal component to investigation of Lehman, McDonald remarked, “Absolutely. Innocent investors lost hundreds of millions of dollars. And they might go after these people personally as well. This is a very active investigation.”