Lehman Bankrutpcy: "Repo 105, Bank's Accounting Gimick, Was Like A Drug," (they cooked the books)

[Amerigo Vespucci]

Lehman Bankrutpcy: 'Repo 105,' Bank's 'Accounting Gimick,' Was Like 'A Drug,' Emails Show

http://www.huffingtonpost.com/2010/03/12/lehman-bankrutpcy-repo-10_n_496463.html



Former Lehman CEO Dick Fuld

The arcane "accounting gimmick" employed by Lehman Brothers as the firm failed in 2007 and 2008, was like "a drug" propelling the bank to conceal the true nature of its financial health, according to bankruptcy documents released yesterday.

As news organizations pour through the 2,200 pages of documents released by Anton Valukas, the examiner in charge of sifting through the most expensive bankruptcy in history, new details have surfaced about possible criminal actions by Lehman executives.

An executive referred to by Lehman execs as the firm's "balance sheet" czar -- who later went on to become the firm's COO -- likely had knowledge of the firm's highly creative accounting maneuvers, notes The New York Times. Here's the NYT:

"I am very aware ... it is another drug we are on," Herbert McDade wrote in an April 2008 e-mail cited by the examiner's report. At other times, he is described as calling for a limit to the number of Repo 105 transactions.

At the center of the controversy is a technique called "Repo 105," under which Lehman was able to move $50 billion off of its balance sheet in the second quarter of 2008 alone, MarketWatch reports. Here's more from Market Watch:

Repo 105 is essentially a type of secured loan and is booked that way in the accounts -- leading to an increase in both assets and liabilities.

Lehman's trick was to use a clause in the accounting rules to classify the deal as a sale, even though it was still obliged to repurchase the assets at a later date. That meant the assets disappeared from the balance sheet, and it could use the cash it received to temporarily pay down other liabilities.... was crucial for maintaining the group's credit rating as rating agencies and investors began to focus more on leverage and demanded lower risk.

[Vinnie From Indy]

1. Still America waits for accountability on Wall Street

Lehman was a WMD for millions of Americans and it seems there will be no justice for these people. My father was one of the victims of Lehman's demise. He worked hard all his life to have a chunk of his retirement vanish into thin air.

[FarCenter]

2. Note that they couldn't get a US lawyer to approve it, so they did the repos in London

[Skidmore]

3. Is that not fraud? And why are these people still walking free?

Oh, I forgot. They are too big to fail. To important to be brought down. Geniuses.

[Double T]

4. BO needs to get a REAL prosecutor in the AG position and start doing something......

about these wall street crooks; they are in every investment banking operation. More and more of doing absolutely nothing.

[atreides1]

5. Uh Huh

But it ain't going to happen.

[closeupready]

6. No, you're correct - it won't happen.

n/t

[Double T]

8. WE can't continue to expect NOTHING and just say 'Uh Huh'.

THIS is exactly WHY WE need to fire every single person in the 'do absolutely nothing' congress and the 'go along to get along' WH; SCOTUS Too! We no longer can just sit back and let what is left of this country be sold off and sold out.

[indepat]

7. Not having been into rock, wondering if photo is of Jefferson Airplane, circa 1970

:)