Spitzer & Ratigan on Lehman accounting fraud

How did the NY Fed not know about this? The signs were there.

the repo trades are blatant fraud..i think we'll see some criminal proceedings coming against old Lehman management team soon. you cant repo assets right before balance sheet dates to make your leverage ratios better. thats straight up manipulation.

Lots of places were doing this from what I understand.

Again, this was out there. The Fed had to know. Lehman failed two stress tests and then the Fed agrees to use Lehman's own stress test. Tim Geithner has to go..

http://nymag.com/news/businessfinance/47844/

A few days before this year’s conference in May, Einhorn and his analysts at Greenlight had a private call with Erin Callan, the then–chief financial officer of Lehman Brothers. In two previous speeches at other investing conferences, Einhorn had raised doubts about Lehman; in April, he had explicitly stated that his firm was shorting Lehman, meaning that it had borrowed stock and sold it, with the idea that the firm would replace it at a later date when the stock declined in value (in essence, a bet that the stock would go down, not up). Very few people publicize their shorts, and when Einhorn did, it got Lehman’s attention. The conversation with Callan was to give her a chance to explain discrepancies he had uncovered between the firm’s latest financial filing and what had been discussed during its conference call about that filing.

That very week, a glowing profile of Callan had appeared in The Wall Street Journal, describing her in the headline as “Lehman’s Straight Shooter.” But she’d only been on the job six months and her background was as a tax lawyer, not in finance. She was evidently not prepared for the complexity of Einhorn’s questions and tried to bluff her way through. “The conversation was reminiscent of the ones I had with Allied,” says Einhorn. “We had our questions, we were organized, but she was evasive, dishonest. Their explanations didn’t make any sense.”

And so Einhorn, his sense of righteousness piqued, made a fateful decision: to use the conference to skewer Lehman Brothers. Given the abuse he’d received after he eviscerated Allied, he had to know that this might also have unpleasant consequences. But he was determined to out Lehman as emblematic of the greed and arrogance that had caused the credit crisis in the first place.

On the afternoon of Wednesday, May 21, he took the stage at the Rose Theater at the Time Warner Center to a rock-star reception. As an attendee told me later outside the auditorium, “He’s one of the guys who attracts the swarm.” Einhorn is something of a legend on Wall Street, not only for his investing prowess—25 percent average annual return for the twelve-year life of Greenlight—but also because of an unusual achievement: An accomplished bridge player who has played against Jimmy Cayne of Bear Stearns fame, he took up poker on a lark—and won $660,000 at the 2006 World Series of Poker. But Einhorn is entirely lacking in Vegas bravado. He’s mild-mannered to a fault. Which give his utterances all the more power.

Dressed conservatively in a dark suit and tie, Einhorn explained that he was there to speak, despite the possibility of legal and personal attacks, because “I believe it is important and the right thing to do.” The ratio of BlackBerrys to humans in the room was probably greater than one to one, and they all seemed to light up simultaneously. This was going to be good. Einhorn proceeded with a bracing analysis—including a recap of the Allied saga and a careful dissection of Lehman’s recent financial filing—that had all the moral fervor of a prosecutor’s closing argument. It was as if he were putting away a killer. His firm had a short position on Lehman Brothers, he maintained, not only because Lehman had fudged its numbers but because its recklessness had put the financial system as we know it at grave risk. He ended with a call to federal regulators to “guide Lehman toward a recapitalization and recognition of its losses—hopefully before federal taxpayer assistance is required.”

Lots of banks do repos (including most central banks.) What Lehamn did with the 105 repos was just palin fraudulent. and NOT the same as what other banks do.

"was just palin fraudulent"

What's that? Like really fraudulent, ya know, like when you pretend to resign from being the governor of the greatest state ever because you're, ya know, being all mavericky and fightin' the system from the outside, but in reality someone's just got something on you, ya betcha?

jason from what I understand there are a couple of other LARGE banks that were doing the exact same thing. kind of makes you want to sell some stocks next week right!

The entire BASEL II , regulatory framework and the actions of the Fed were to come up with creative ways to reduce regulatory capital. We focus create rules and applaud when the banks come up with ways to skirt the system. Instead of being rules based we need to be more principles based.

no no Riversider we need to be more market based. Should have let all who should have failed fail.

I actually meant to write "plain fraudulent"...typo..I guess we know how you feel about Palin though..lol

What we have now, are regulators who act more as advocates than as cops they are supposed to be. Did you catch the letter Timmy wrote to the European regulators?

Marco, Freudian slip?

Jesse Ventura called it. Sarah Palin is a quitter.

http://www.youtube.com/watch?v=2VPASAo2FUQ

Im completely indifferent to sarah palin. allthough I do think she's kinda hot in a milf way.

That's what was so weird. Yea she's very cute and has a charisma, but to vote for President based on that? McCain must have been smoking crack when he picked her for running mate.

Lehman playing hide the salami

http://www.youtube.com/watch?v=T5pA2ToZuaQ&feature=player_embedded#

cnbc called it. i thought they were always wrong

http://www.ritholtz.com/blog/2010/03/charlie-gasparino-owes-david-einhorn-and-me-an-apology/

"jason from what I understand there are a couple of other LARGE banks that were doing the exact same thing. kind of makes you want to sell some stocks next week right!"

Nope, no other banks did it. EVERY story I have read says that this was something that Lehman did, that was illegal, that no US law firm would sanction, that the counterparties were not aware they were doing, and all the other remaining i-banks have said ON RECORD that they were shocked by this and would not do it. ALL the wall street analysts who cover banks said they were shocked, even the total bears like Meridith Whitney.

Unless you show a link to a story that says others, NO other bank did 105 repos. Plain legal repos, yes. Not fraudulent 105s.

I agree , this is most likely isolated.

Is Einhorn taking new money?
http://video.nytimes.com/video/2008/06/05/business/1194817109639/betting-against-lehman.html

Do we know what bank took the other side of the Repo 105? That group would have a better understanding and better information than most others.