Lehman Brothers examiners report

tomterm8

see http://www.scribd.com/doc/28228424/Lehman-Brothers-Examiner-s-Report-Vol-1

The executive summary is especially interesting. Basically, there are so many holes in the financial accountancy regulation that Lehman could legally manipulate the balance sheet to virtually show any leverage ratio it liked.

Count_Dante

Yes, but don't forget that it was only Lehman Bros. that engaged in these behaviours. Other investment banks never did any of these things. No. Of course not.

Kohoutek

Lehman's mistake was not having an ex-employee as Treasury Secretary!

Generali

I saw the report precis'd as being that Lehmans had tougher margin (collateral) requirements put up against it and that was what caused the collapse (source Bloomberg - can't link as it was from the terminal and I don't think it's on the Interweb).

I think tomterm8's explanation is more likely to be correct FWIW.

Butterfly_Brain

What a surprise Lehmans are fraudsters !!!!!!

Lehmanvictim

There is an UK self-help action group for ordinary savers who lost their money buying structured products that turned out to be backed by Lehman. They are fighting for compensation from the FSCS on the basis that these plans were mis-sold,. and the FSA has foced the main product providers into liquidation. To find out about the action group do a google search for missoldinvestments.co.uk

chewmylegoff

tomterm8 wrote: »

see http://www.scribd.com/doc/28228424/Lehman-Brothers-Examiner-s-Report-Vol-1

The executive summary is especially interesting. Basically, there are so many holes in the financial accountancy regulation that Lehman could legally manipulate the balance sheet to virtually show any leverage ratio it liked.

i don't agree with your reading of the examiner's conclusions. my interpretation is that whilst the examiner does not conclude that it was illegal to use repo 105, that is not really the point. the point is that the use of repo 105 was not disclosed when it should have been as there was a material impact on the accounts. this does not amount to a conclusion that the balance sheet was legitimately manipulated. quite the opposite.

will be interesting to see what happens to E&Y since they knew about repo 105 but failed to ensure that it was properly disclosed, or that its use was reported to lehmans' audit committee.

interestingly !!!!!! fuld has tried to pretend that he knew nothing of the manipulation of the balance sheet through repo 105 (and repo 108), whilst all the other senior executives say it was discussed with him on a regular basis. quelle surprise.

chewmylegoff

Generali wrote: »

I saw the report precis'd as being that Lehmans had tougher margin (collateral) requirements put up against it and that was what caused the collapse (source Bloomberg - can't link as it was from the terminal and I don't think it's on the Interweb).

I think tomterm8's explanation is more likely to be correct FWIW.

i think it basically is saying that prior to the collapse, lehmans knew that it was in danger of being downgraded in the eyes of its repo counterparties, and that if it was it would not be able to meet their collateral requirements - so they !!!!!!ed around with the balance sheet in an attempt to wrongfully avert this.

Wookster

tomterm8 wrote: »

see http://www.scribd.com/doc/28228424/Lehman-Brothers-Examiner-s-Report-Vol-1

The executive summary is especially interesting. Basically, there are so many holes in the financial accountancy regulation that Lehman could legally manipulate the balance sheet to virtually show any leverage ratio it liked.

That's the problem with rule based accounting standards. The US is very prescriptive and rule based. It is incredibly complicated and no doubt there are lots of lawyers and accountants making an enormous amount of money by helping corporates circumvent some of the rules.

UK standards were much better with a principle based regime, and one where the balance sheet was seen as the dominant financial statement. FRS5 (substance over form iirc) was particularly good at filling holes that weren't covered by other standards.

I have a nasty feeling that the IFRS project is a step away from the old UK GAAP towards US GAAP and that doesn't bode well in my view.

tomterm8

chewmylegoff wrote: »

i don't agree with your reading of the examiner's conclusions. .

Hi, Chewmylegoff, I wrote the original post within about twenty minutes of the report being available, as a heads up. I am sure a detailed analysis of the report (at a thousand pages length) will come up with a broader conclusion. My reading of the report is that the issue is not just the repo agreements hid the accounting loss; they were one of the mechanisms to blame. But they were not the only mechanism. Lehman's losses were systematically hidden from both regulators and Lehmans own board of directors, through various accounting methods that were (in my view) quasilegal.

DaddyBear

So why has nobody been prosecuted. Fraud on a grand scale.