Lehman lost $3.9 billion in its fiscal third quarter as the value of mortgage-related assets fell sharply. The investment bank’s collapse precipitated Wall Street tremors that resulted in Congress approving and President Bush signing a $700 billion bailout bill on Friday, October 3.

Fuld, sitting alone at the witness table during a hearing of the House Oversight and Government Reform Committee, endured two hours of withering criticism from the panel during a hearing that lasted nearly five hours.

Panel Republicans criticized Democrats for focusing only on a Wall Street firm and accused them of refusing to examine missteps by Fannie Mae and Freddie Mac. The two government-sponsored mortgage enterprises, which recently had to be rescued, are often seen as politically favored by Democrats.

Committee Chairman Henry Waxman, D-California, produced a chart that showed that Fuld took home $484.8 million in salary, cash bonuses and stock options from 2000 to 2007.

“That’s difficult to comprehend for a lot of people,” Waxman said. “Is this fair?”

Fuld, who expressed remorse about Lehman’s demise, didn’t respond directly, but he disputed the income calculation later in the hearing, indicating that $350 million was a more accurate number.

He defended himself by saying that he did not receive a severance or a golden parachute and never worked on a contract.

Fuld also said he took the biggest loss of any Lehman stockholder when the company went bankrupt.

“I never sold my shares because I believe in this company,” he said.

Citing documents obtained by the committee staff, a couple members said that Fuld drew down Lehman’s reserves by more than $10 billion this year in part to pay year-end bonuses despite warnings about the company’s liquidity.

Fuld defended the move. He said that most of the $10 billion was allocated to employee compensation. Lehman professionals owned about 30 percent of the firm, which motivated them to “think, act and behave like shareholders,” Fuld said.

“From where you sit, it looks like we spent an extra $10 billion,” he said to Rep. Elijah Cummings, D-Maryland. “That is not, sir, what we did.”

Waxman and his Democratic colleagues repeatedly expressed their ire over Wall Street CEOs receiving huge paydays while taxpayers are now on the hook for hundreds of billions to save financial institutions.

“We can’t have a system where Wall Street executives privatize all the gains and socialize all the losses,” Waxman said.

CEO pay incentives have led to Wall Street’s near collapse, according to Nell Minow, editor of the Corporate Library, a governance think tank.

Wall Street leaders have been compensated based on the volume rather than the quality of the business they generate, she said. That has led to the creation of opaque, highly leveraged securities tied to home mortgages that are sliced and resold many times.

“CEO compensation is not just a symptom [of the problem]. It is a cause,” Minow said. “It throws fuel on the fire.”

She was especially critical of the Lehman board, which the Corporate Library graded as a “D” in June 2004 for poor oversight. It is not an isolated case, Minow noted.

“It’s replicated over and over and over again,” she said.

The House committee will delve further into Wall Street travails this fall over the course of five hearings.