Tag: Lehman

Chris Dodd Asks Department Of Justice To Probe Lehman’s Repo 105 And Other Firms’ Shady Accounting Practices   Zero Hedge

March 19, 2010

The Honorable Eric H. Holder, Jr.

Attorney General of the United States

United States Department of Justice

950 Pennsylvania Avenue, NW

Washington, D.C.  20530

Dear Attorney General Holder:

I am deeply concerned about the facts that have come to light regarding the demise of Lehman Brothers and the accounting manipulation that contributed to it. I respectfully ask you to commission a task force to investigate the Lehman situation as well as other companies that may have engaged in similar accounting manipulation with a view to prosecution of employees or agents who contributed to any violations of the law.    

According to the Report of the U.S. Trustee-appointed Examiner Anton R. Valukas, Lehman presented a misleading picture of its financial condition to the public by using extensive repurchase agreements known as Repo 105 transactions. The Examiner found that “Lehman did not disclose its use — or the significant magnitude of its use — of Repo 105 to the Government, to the rating agencies, to its investors, or to its own Board of Directors.” The result was to conceal its holdings of bad assets and to temporarily remove approximately $50 billion of assets from its balance sheet at the end of the first and second quarters of 2008. The Examiner found that Lehman used Repo 105 transactions for no other articulated purpose than to shrink its balance sheet at the quarter-end, in a manner that deceived investors and creditors about its true financial state and misleading others.    

We must work tirelessly to reduce the incidence of financial fraud in order to restore trust and confidence in the financial markets. A task force investigation and taking appropriate Federal actions in these matters will contribute to these goals.

Sincerely Christopher J. Dodd Chairman

Timmy-Gate: Did Geithner Help Hide Lehman’s Fraud?   By L. Randall Wray

Timmy-Gate Takes a Turn For The Worse: Did Geithner Help Lehman Hide Accounting Tricks?

Just when you thought that nothing could stink more than Timothy Geithner’s handling of the AIG bailout, a new report details how Geithner’s New York Fed allowed Lehman Brothers to use an accounting gimmick to hide debt. The report, which runs to 2200 pages, was released by Anton Valukas, the court-appointed examiner. It actually makes the AIG bailout look tame by comparison. It is now crystal clear why Geithner’s Treasury as well as Bernanke’s Fed refuse to allow any light to shine on the massive cover-up underway.

Recall that the New York Fed arranged for AIG to pay one hundred cents on the dollar on bad debts to its counterparties-benefiting Goldman Sachs and a handful of other favored Wall Street firms. (see here) The purported reason is that Geithner so feared any negative repercussions resulting from debt write-downs that he wanted Uncle Sam to make sure that Wall Street banks could not lose on bad bets. Now we find that Geithner’s NYFed supported Lehman’s efforts to conceal the extent of its problems. (see here) Not only did the NYFed fail to blow the whistle on flagrant accounting tricks, it also helped to hide Lehman’s illiquid assets on the Fed’s balance sheet to make its position look better. Note that the NY Fed had increased its supervision to the point that it was going over Lehman’s books daily; further, it continued to take trash off the books of Lehman right up to the bitter end, helping to perpetuate the fraud that was designed to maintain the pretense that Lehman was not massively insolvent.

Dylan Ratigan & Eliot Spitzer plainly explain the fraud that occurred at Lehman.  Ratigan hands Spitzer collateral (a trash can), and Spitzer hands Ratigan cash.  Lehman “pawned” its garbage in exchange for short-term loans to spruce up the quarterly books with “more cash, less trash.”  This is the “repo 105” fraud everyone is talking about since the release of the bankruptcy examiner’s report.  Please watch:

CEO Dick Fuld alone made half a billion bucks off this fraud.  He remains a free man today.  As Spitzer said, the accounting firm Ernst & Young, the Fed, and the Treasury were also involved in this fraud.

Ratigan: “This report comes just short of suggesting this is by no means an accident but instead one of the greatest crimes ever perpetrated by a group of people, and enabled by the US government.”

And Spitzer concludes: “there is no doubt civil cases will be brought. We had a failure of CEO, the CFO, the accountants, and indeed the regulators, the Fed and the Treasury, that were inside these banks, and the question has to be asked: where were they?”