Ms. Erin Callan had a reputation for downplaying the problems of Lehman Brothers. Callan 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. However, once the company needed to raise capital and take an unexpectedly large loss, essentially admitting that it had been playing around with prices the credibility of Erin Callan was toast.

We can understand why Mr. Dick 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. Dick Fuld doing while Ms. Erin Callan and Mr. Joseph 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.

Source: Reported by Mock The Market http://mockthemarket.blogspot.com/

AP records on the ousting of Erin Callan and Joseph Gregory.

The lack of confidence in Lehman's leadership has been hanging over the company for weeks, and it was unclear if the management upheaval will be enough to satisfy critics. The company has been under intense pressure of late, particularly from short seller David Einhorn of Greenlight Capital, who has been an outspoken critic of the firm's financial health and its public disclosures.

Callan and Gregory join a long list of executives who have lost their job since global banks and brokerages began writing down nearly $300 billion of bad investments stemming from bad bets on mortgage-backed securities.

Others who have lost their jobs include Merrill Lynch & Co. CEO Stanley O'Neal, Citigroup Inc. CEO Charles Prince, and Morgan Stanley co-President Zoe Cruz.

Callan will remain with Lehman in its investment banking division, where she previously ran a group that catered to hedge funds before taking the CFO spot last September. Gregory, who has been with Lehman for more than two decades, will also remain with the firm in an undetermined position.