Bonuses back As Big Banks make Billions

how did Lehman’s published financial statements, as recently as its final 10-Q published in July of 2008, show a positive net worth of $26 billion, when the bankruptcy liquidators are saying that they are looking at a negative net worth of $130 billion?

Put another way, “Why is it that Lehman’s $660 billion balance sheet, heavily weighted in real estate and residential mortgages, experienced no writedowns whatsoever before February 2008, and writdowns of less than 1% of total assets thereafter, in the midst of the largest collapse in value of such assets in recorded history?” And why did Lehman management assert, repeatedly, through the crisis that it had no problem with liquidity or solvency, when clearly it had problems with both? How is it that the sale of preferred equity securities by the firm in April of 2008 was accomplished without revealing that the firm’s assets would soon be revealed to be worth over $100 billion less than its liabilities? Doesn’t any or all this constitute securities fraud? And shouldn’t there be criminal liability for the executives who signed the firm’s 10-K and 10-Q’s, who under Sarbanes-Oxley are responsible for material misstatements made in those documents?

All of these questions may or may not be answered in the fullness of time, once the bankruptcy is concluded. And it will be satisfying, in some sense, if those who knowingly committed securities fraud, if that is what occurred, are brought to justice.