Lehman Brothers - If you are experiencing Déjà vu, that's because it is GroundHog Day!

The shit has hit the fan and Lehman Brothers was busy cooking the books before they imploded. Where have we seen this before? Let's see, we had Enron, Worldcom, Citigroup, accounting scandals, AIG scandals and here we are.

Maybe we got a bail out because it is within bankruptcy court these discoveries are made. With a Lehman Rescue would we ever have known this latest rip off and scam?

Below is a Dylan Ratigan show clip, where he explains what Lehman Brothers did, in a nice visual and analogy so you can grasp the magnitude.

 

Next, you need to read the Bankruptcy Court appointed examiner, Anton R. Valukas's report, provided here by Jenner & Block and 2200 pages long.

Deal Book explains what a repo 105 is:

Repos, short for “repurchase agreements,” it involved what amounts to a short-term loan, exchanging collateral for cash up front, and then unwinding the trade as soon as overnight.

and illustrates how it works with this graphic:

 

repo 105

 

Reuters put up a graphic, below, giving a visual on how repo 105 at Lehman Brothers worked.

 

repo 105

 

Naked Capitalism points out Tim Geithner, running the New York Fed at the time is implicated in the Lehman Accounting Fraud from this report. Oh yeah there he is again (recall AIG 100% payouts).

The unraveling isn’t merely implicating Fuld and his recent succession of CFOs, or its accounting firm, Ernst & Young, as might be expected. It also emerges that the NY Fed, and thus Timothy Geithner, were at a minimum massively derelict in the performance of their duties, and may well be culpable in aiding and abetting Lehman in accounting fraud and Sarbox violations.

We need to demand an immediate release of the e-mails, phone records, and meeting notes from the NY Fed and key Lehman principals regarding the NY Fed’s review of Lehman’s solvency. If, as things appear now, Lehman was allowed by the Fed’s inaction to remain in business, when the Fed should have insisted on a wind-down (and the failed Barclay’s said this was not infeasible: even an orderly bankruptcy would have been preferrable, as Harvey Miller, who handled the Lehman BK filing has made clear; a good bank/bad bank structure, with a Fed backstop of the bad bank, would have been an option if the Fed’s justification for inaction was systemic risk), the NY Fed at a minimum helped perpetuate a fraud on investors and counterparties.

Seeking Alpha goes through the accounting fraud, shows how it's illegal through Sarbanes-Oxley, which was supposed to prevent the next Enron and then shows how the Federal Reserve, the SEC did nothing and were complicit.

Zero Hedge asks when will former Lehman Brothers CEO, Richard Fuld, leave the country and go into hiding to avoid criminal charges. The report judiciously calls him grossly negligent.

From Bloomberg, JP Morgan Chase and Citigroup helped pushed Lehman into bankruptcy and now banks are issuing denials that they too, used 501 repos.

Banks then finally squeezed Lehman, wanting their cash for fictional trash back:

JPMorgan Chase & Co. and Citigroup Inc. helped cause the failure of Lehman Brothers Holdings Inc. by demanding more collateral and changing guarantee agreements, according to a report on the biggest bankruptcy in U.S. history.

Wow. See what a bankruptcy can do? Why expose all sorts of stuff that is in the public interest. No wonder so many financial institutions were deemed too big to fail. Makes me wonder if the phrase should be re-calibrated to too big to expose.

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Comments

Participate? Oy!

There is now disclosed a veritible litany of outrageous misdeeds by the investment banking community. And the shock value of each one dissipates as the number grows greater over time. Does anyone here truly believe that the pattern we've been witnessing will ever respond to the exercise of the franchise? If so, why? Why would it be that a Congress and President owned lock, stock and barrel by the interests have even the slightest concern for the public will? Do they now? Have they recently? The American people wish to see an even hand extended by the United States in its dealing with the Middle East peace question yet Vice President Bo-Jangles not unexpectedly gets his nose rubbed in it with this week's settlement insult and that because even foreign nationals know that so much a creature of lobbies are our politicians that nothing will come of these slights. Who is it that really wishes to engage this charade any longer by participating? Not me, thank you. I'm gone and have been so since 1992. Wake me for the general strike, kindly.

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Calling all rebels.

There are no constraints left to halt America's slide into a totalitarian capitalism. Electoral politics are a sham. The media have been debased and defanged by corporate owners. The working class has been impoverished and is now being plunged into profound despair. The legal system has been corrupted to serve corporate interests. Popular institutions, from labor unions to political parties, have been destroyed or emasculated by corporate power. And any form of protest, no matter how tepid, is blocked by an internal security apparatus that is starting to rival that of the East German secret police. The mounting anger and hatred, coursing through the bloodstream of the body politic, make violence and counter-violence inevitable. Brace yourself. The American empire is over. And the descent is going to be horrifying

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Read the entire article here. It is Chris Hedges at his thought provoking best.

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Strange Happenings

Now if I loan someone money will the Fed pay me back later?

It is beyond strange that the Fed needed someone to act for them here.

My tinfoil hat tells me this was a ruse to disguise a cash payment to JPMorgan and maybe others that went through Lehman Brothers somewhat similar to the AIG back door payments imo.

JPMorgan Chase & Co. gave $138 billion this week in Federal Reserve-backed advances to the broker dealer unit of Lehman Brothers Holdings Inc. to settle Lehman trades and keep financial markets stable amid the biggest bankruptcy in history, according to a court filing.

One advance of $87 billion was made on Sept. 15 after the pre-dawn bankruptcy filing, and another of $51 billion was made today, Lehman said in court documents. Both advances were made to settle securities transactions with customers of Lehman and its clearance parties, according to the filing.

The advances were necessary ``to avoid a disruption of the financial markets,'' Lehman said in the filing.

The first advance was repaid by the Federal Reserve Bank of New York on the night of Sept. 15, Lehman said. JPMorgan said in a statement that the $51 billion advance was also repaid and the process will zero out the advances at the end of each day.

Bloomberg Story Here

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that is a butt load of money

This is from Sept. 2008 for anyone else reading it and that is strange to give such sums when a business is in bankruptcy. It says it was an advance and was repaid to "settle transactions" but without knowing the specifics ...
your guess is as good as mine.

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Geithner Was Behind the Wheel on This Also

This was handled by the New York Fed also. I saw this that Monday or Tuesday the week Lehman dumped and did a double take.

I'm betting this was arranged over the weekend at the September 13-14 Whitehouse meetings and the money went right back to JPMorgan and then was 'repaid' by the Fed giving Morgan $138 billion to shore them up.

Can't happen? How did Citigroup hide the early 90's government bailout from investors? Their books are cooked. No other way they can hide their real financial health and huge influxes of money in the form of a bailout.

Certainly all conjecture but has anyone ever heard of this type of Fed transaction?

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JPMorgan Bails Out Lehman After They Brought it Down?

Its interesting that JP Morgan would bail out a business they helped crush the Friday before isn't it?

There were some fancy sleight of hand moves made that weekend and the first few days also.

I imagine the Fed was not authorized to extend any credit to Lehman never mind any none bank especially one that already declared bankruptcy but its also highly likely there was no such instrument as a Federal Reserve backed advance to a bank aiding a bankrupt company either.

One cannot believe that the powers that be decided to let Lehman go under without providing for themselves to get everything they were owed out from the burning house before the fire department and arson investigators arrived.

October 5, 2008

JP MORGAN has been accused by its Wall Street rivals of dealing the final hammer blow that forced Lehman Brothers into collapse in a sensational claim that threatens to spark a colossal legal battle.

The giant American bank is alleged to have frozen $17 billion (£9.6 billion) of cash and securities belonging to Lehman on the Friday night before its failure.

According to Lehman’s biggest creditors, this was what precipitated the liquidity crisis that embroiled the firm, forcing it into Chapter 11 bankruptcy protection on the morning of Monday, September 15.

TimesOnline October 2008 Article Here

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I'm On It

I found a forum that appears to discuss nothing but the Lehman bankruptcy. I'm trying to join so I can ask about this transaction.

The New York Fed that weekend torpedoed a Barclay Bank bailout apparently. A good short discussion of that below

WSJ Blog Discussing the Botched bailout/buyout the weekend before the collapse

Thats what is perplexing. No we won't guarantee them till you buy them but we'll pay out $138 billion a day or two later for no apparent reason other than because we are support someone who threw their money away?

My Senator is on the Senate Banking Committee and he has responded to me in the past with personal responses so I am going to run this by him also.

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