After a year-long investigation, court-appointed bank examiner Anton
Valukas has produced a deadly 2,200 page report which details the
activities that led to the Lehman Brothers bankruptcy. The report is
a keg of dynamite. The question now is whether anyone in government
has the nerve to light the fuse. Valukas provides powerful evidence
that Lehman executives were involved in "balance sheet manipulation"
by implementing an arcane accounting procedure called "Repo 105"
which masked the bank's true financial condition from investors and regulators.
According to Valukas, Lehman was "Unable to find a United States law
firm that would provide it with an opinion letter permitting the true
sale accounting treatment" using Repo 105. So, Lehman executives went
outside of the country in an effort to enlist the support of a London
law firm that would approve the procedure.
It is impossible to overstate the significance of Valugas's findings.
The report exposes the opaque but central role of the repo market
which provides essential short-term loans for financial institutions.
(Lehman used repos to conceal the full extent of its collapse, by
dint of the amount of leverage it was using, meaning the pitiful
asset anchor tethered to a vast zeppelin of debt) More importantly,
it shows the cozy and, very probably criminal relationship between
the country's main regulatory bodies and the Wall Street behemoths.
The activities of the New York Fed (NYFRB), which at the time was
headed by Timothy Geithner, is particularly suspect in this regard.
The report should trigger an immediate Congressional investigation,
probing the whole affair and most importantly the role of the Fed.
<http://www.counterpunch.org/whitney03152010.html>Link
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Posted By johannes to
<http://www.monochrom.at/english/2010/03/lehman-brothers-scandal-rocks-fed.htm>monochrom
at 3/16/2010 09:06:00 AM
