Lehman = Enron: New Report Details the Fraud

[bcassill]

Didn't we see this with Enron? You know, using off balance sheet entities and accounting fraud to hide debt levels? Gotta wonder who, if anyone, will ever go to prison for this.

http://www.zerohedge.com/article/rep...-other-banks-a

[bcassill]

Re: Lehman = Enron: New Report Details the Fraud

Here's more stuff on this:

http://www.zerohedge.com/article/and...st-keep-coming

[GRG55]

Re: Lehman = Enron: New Report Details the Fraud

Didn't we see this with Enron? You know, using off balance sheet entities and accounting fraud to hide debt levels? Gotta wonder who, if anyone, will ever go to prison for this.

http://www.zerohedge.com/article/rep...-other-banks-a

Nobody, including "How could I have known anything, I was just the CEO" Fuld.

And, it is inconceivable that there's only one cockroach...

[GRG55]

Re: Lehman = Enron: New Report Details the Fraud

Here's more stuff on this:

http://www.zerohedge.com/article/and...st-keep-coming

Barry Ritholtz really lays into this stinkball...

Accounting Fraud, Short Sellers & the SEC

By Barry Ritholtz - March 12th, 2010, 9:43AM


The bankruptcy report on Lehman is both revealing and damning. Once again, the investing public learns — after the fact — the basic truisms of modern markets:

-Major accounting firms are worthless to investors. They were either unable or unwilling to detect fraud amounting to 50 billion dollars. The incompetents at Ernst & Young deserve the same fiery death as Arthur Anderson; Whether they are hired guns or paid whores, they — like the rating agencies — are worthless to investors.

-Corporate management engages in fraud all too regularly: Am I reading this correctly — that Dick Fuld’s defense will be “I didn’t know that Lehman was a giant Ponzi scheme, and I was unaware we were hiding billions in bad debt and leverage off balance sheet?”
Based on the release of the bankruptcy court report, LEH was technically insolvent perhaps years before it collapsed;

-The Shortsellers turn out to be the good guys. Consider the absurdity fraud of “protecting” the bankster frauds — fromt he truth, as revelaed by Einhorn et. al.

-The SEC is utterly incapable of comprehending how markets function. They believe the criminals who commit the fraud, and ignore the whistleblowers who uncover it;

-The ban on short selling is an indictment of the inability of the SEC to understand WTF is going on, and a reward tot he criminal corporate management teams;

-The Media did a terrible job uncovering the fraud as well. Some media folk were used by CEOs. Some of the TV press who relied on access to their subjects, actually rallied to the defense of these CEOs, including Fuld, and trashed the short sellers. Most notably Charlie Gasparino from his CNBC days, but their were others as well.

-The Analyst community, for the most part, failed as well. The few who publicly acknowledged the debacle were notable for being so far outside of the herd. 95% of them were wrong.

Pathetic

All in all, the entire system failed. The situation is utterly disgusting, and if the investing public pulls its money out of the completely corrupt public markets for a generation or more, it would not surprise me...

[GRG55]

Re: Lehman = Enron: New Report Details the Fraud

Here's more stuff on this:

http://www.zerohedge.com/article/and...st-keep-coming

Hmmmm. I wonder if the Lehman Examiner's report is going to be the catalyst that finally initiates the overdue in-depth examination of the actions that led to this whole sordid mess.

More from ZH:

Ratigan And Spitzer Discuss Repo 105, Conclude "Civil Cases Will Be Brought"

Yesterday we predicted that Repo 105 would be the media buzzword for the next days and weeks. We were right. Dylan Ratigan and Eliot Spitzer digest the Lehman examiner report, and simplify it enough so that Joe Sixpack can grasp the nuances. It is, in our opinion, now beyond a reasonable doubt that Lehman's CFO should all stand in a court of law for securities fraud violations, despite Erin Callan's and Dick Fuld's protestations that all they did was in Lehman's best interest. We do not doubt that; however we are currently poring through the Q&A's of the four most recent Lehman conference call Q&As with analysts... Something tells us quite a few smoking guns will emerge. Lehman has become merely the latest example of all that is broken with today's crony capitalist system. Before that it was Goldman and swap gate; before that it was Goldman and AIG-gate; before that it was Goldman and SLP-gate, and on, and on. The evident conclusion is that the core driver of modern capitalist society is fraud at its very core, and nothing short of a massive revolutionary overhaul of the political system, which is the number one defender of the status quo courtesy of very lucrative bribes and kickbacks originating from the same rotten Wall Street that day after day is uncovered to be nothing but a sham filled with toxic assets, used to collateralize an ever growing wall of liquidity (think you Bernanke). Anyway, back to Dylan, who, in traditional fashion, is painstakingly diplomatic "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."

[vinoveri]

Re: Lehman = Enron: New Report Details the Fraud

Hmmmm. I wonder if the Lehman Examiner's report is going to be the catalyst that finally initiates the overdue in-depth examination of the actions that led to this whole sordid mess.

Hope springs eternal ....

Everytime something like this is released and then w/i a week or two is "forgotten" or blown under the rug, I go more torwards the jtabeb view, which, with all respect to my fellow ituliper, is not where I really want to go. Wishful thinking vs conspiracy paranoia, the tension is mounting, if the system is not cleansed soon, I fear many will permanently lose complete faith in the "system"; good faith and good will is what holds our culture together, and when these start going ... time to move on

That's some bunker (looks like buckingham palace)

[GRG55]

Re: Lehman = Enron: New Report Details the Fraud

Hmmmm. I wonder if the Lehman Examiner's report is going to be the catalyst that finally initiates the overdue in-depth examination of the actions that led to this whole sordid mess...

I am a bit surprised that this thread isn't getting more traffic, given this just might be the trigger for the turning point in the TBTF debate...

From Barron's:

March 12, 2010, 4:00 PM ET
Twilight of the Fuld: Those Who Told You So

By Tiernan Ray

The “I told you so’s” have started — those who criticized management of Lehman Brothers before it went bankrupt on September 15 of 2008.

Yesterday’s release of the bankruptcy examiner’s report on Lehman placed blame squarely on the management team at the time, including CEO Richard Fuld.

Barry Ritholtz writes on The Big Picture today that Fox Business’s Charlie Gasparino, at the time with CNBC, owes Ritholtz an apology for defending Fuld against Ritholtz’s accusations of malfeasance. Gasparino also owes an apology to David Einhorn of Greenlight Capital, who decried Lehman’s obfuscation even more intensely, declares Ritholtz.

Einhorn, for his part, is not speaking. “He’s decided not to make any comment on the matter at this time,” said a spokesperson for Einhorn.

And the view that this is Fuld’s twilight seems a reasonable surety among bank observers.

“Dick Fuld is going to be bankrupted and he’s going to spend the rest of his life in court fighting legal battles,” observes Dick Bove of Rochedale Securities in a phone call this afternoon. Bove, who said he’s having the nine volumes of the examiner’s report printed and bound, added, “There maybe others forced to do the same.”

[bcassill]

Re: Lehman = Enron: New Report Details the Fraud

The problem is that unlike AIG, which got lots of Congressional hearings, this one has Geithner's fingerprints all over it. I wonder how this will eventually blow up.


How Lehman, With The Fed's Complicity, Created Another Illegal Precedent In Abusing The Primary Dealer Credit Facility

"Five months ago, Zero Hedge observed the nuances of the Federal Reserve's Primary Dealer Credit Facility (PDCF) and concluded that this artificial liquidity boosting construct was nothing more than yet another scam to allow banks to extract ever more money from taxpayers, with the complicit blessing of the Federal Reserve Board Of New York (as the original piece also provided an in-depth discussion of the triparty repo market which is now a parallel to the buzzword of the day in the form of Lehman's "Repo 105" off balance sheet contraption, it should serve as a useful refresher course to anyone who wishes to understand why while Repo 105 with its $50 billion in liability contingency may have been an issue, the true Repo market, with over $3 trillion of likely just as toxic assets, is where the real pain in the future will come from). The PDCF would allow assets of declining and even inexistent value to be pledged as collateral, thus making sure that taxpayer cash was funneled into sham institutions holding predominantly toxic assets, and whose viability was and is limited, yet still is backed by the Fed, which to this day continues to pour our money into them. Today, with a tip from the NYT's Eric Dash, we demonstrate just how grossly negligent the Federal Reserve was when it came to Lehman's abuse of the PDCF, and how the trail of slime of Lehman's increasingly obvious manipulation of its books goes to the very top of the Federal Reserve Bank of New York, and its then governor - a very much complicit Tim Geithner"

[GRG55]

Re: Lehman = Enron: New Report Details the Fraud

The problem is that unlike AIG, which got lots of Congressional hearings, this one has Geithner's fingerprints all over it. I wonder how this will eventually blow up.

A "trade war" with China would be a useful distraction for the Administration right about now...:rolleyes:

[MulaMan]

Re: Lehman = Enron: New Report Details the Fraud

Well, it all starts with getting an MBA froml at Woorton, Haaavaard, ...

You spend $120,000 on an education and they promise to launch you way up the pyramid so that you do not need to work your way up.

Then they give you a copy of Ann Rand and tell you that social values do not exist so your job as a "capitalist" is to simply steal and murder while covering up your trail to ensure you do not get caught.

[marvenger]

Re: Lehman = Enron: New Report Details the Fraud

I am a bit surprised that this thread isn't getting more traffic, given this just might be the trigger for the turning point in the TBTF debate...

i think everyone must be too jaded and cynical, this is massive. the other problem is that this mess is so massive and pervasive and hasso much momentum that its probably easier to just let it all finally completely blow up and then clean up the pieces and start anew.

[Aetius Romulous]

Re: Lehman = Enron: New Report Details the Fraud

I maintain my position that this is widely systemic and chasing the people inside the system is a waste of time. Without regulating and closing off opportunities for humans to behave as humans, we accomplish nothing.

The "penalties" handed out to humans in the S&L fiasco and Enron et al have done virtually nothing to stem the insanity, and in fact, has simply driven people to redesign or sharpen their pencils in ever more complex efforts to "end around" society. The jailed hordes of this catastrophe will only push folks to find even more devious ways of operating at the edges of the law in the future.

Change the system...fundamentally. That is the solution.

[ViC78]

Re: Lehman = Enron: New Report Details the Fraud

From MacroMan -

Ladies and gentlemen, this is Repo 105.
One, two, three, four, five
Everybody on the desk so come on let's call
To the European banks and the mighty house of Morgan
Dick Fuld says we gotta get it done
But I really don't wanna
Ring 'em up like I did last week
The market ain't deep and this crap ain't cheap
We do Treasuries, Agencies, our balance sheet gets longer
And as I continue, the smell is getting stronger
So what can I do I really beg you my Lord
To get a five percent haircut, not just a four
Anything shite, it's no good let me dump it
Please send in the trumpet

A little bit of Treasuries out the door
Ring 'em up again and do some more
A little bit of repo'd GSEs
A little less mortgage-backed is what I see
A little bit of ABS is awfully fun
A hundred fifty billion though is way too long
A little bit of repo ain't a scam
A little bit more? Dick Fuld's your man

Repo 105!

Jump up and down and move it all around
Our balance sheet ain't sound
Got one knee on the ground
Sent some stuff to the left
Get some dough from the right
Sell some bonds to the front
Buy 'em back on the side
Try it on once
Then try it on twice
And if the market can't tell
Then you're doing it "right"

Repo 105!

A little bit of Treasuries out the door
Ring 'em up again and do some more
A little bit of repo'd GSEs
A little less mortgage-backed is what I see
A little bit of ABS is awfully fun
A hundred fifty billion though is way too long
A little bit of repo ain't a scam
A little bit more? Dick Fuld's your man

I do it all to
Try to keep us out of a river of poo
We can run and we can hide
But some day we're gonna take a slide

A little bit of Treasuries out the door
Ring 'em up again and do some more
A little bit of repo'd GSEs
A little less mortgage-backed is what I see
A little bit of ABS is awfully fun
A hundred fifty billion though is way too long
A little bit of repo ain't a scam
A little bit more? Dick Fuld's your man

[ViC78]

Re: Lehman = Enron: New Report Details the Fraud

On a more serious note, from Counterpunch

“Bernanke and Co. may have ‘saved the day’ ” a Lehman executive, Geoffrey Feldkamp, wrote in an e-mail message to a colleague in March 2008, according to the report. Neither Ben Bernanke, the chairman of the Federal Reserve, nor Treasury officials saved Lehman, of course. But it was that month that the Fed started a special lending program open to Wall Street banks like Lehman that could not borrow directly from it. The Fed also lowered its standards for the kinds of collateral that it would accept against such short-term loans.
“Lehman, desperate for financing, seized its chance. It packaged billions of dollars of troubled corporate loans into an investment called Freedom CLO. Then, in a series of transactions, it shifted Freedom back and forth to the New York Fed, in exchange for cash. Those moves helped make Lehman look healthier.
“Essentially, Lehman was able to temporarily warehouse illiquid investments that were worrying its investors at the New York Fed in return for cash. The Fed created this facility immediately after the near collapse of Bear Stearns. Some suspect that other banks engaged in similar maneuvers.
A spokesman for the New York Fed said the loan facility was created to help the entire financial system and prevent the problems at one bank from cascading. The collateral accepted from Lehman met the Fed’s standards, he added. A third party valued it, the Fed accepted it and then reduced prices to limit the risk." ("Fed Helped Bank Raise Cash Quickly", Eric Dash, New York Times)

Economist and author Michael Hudson summed it up like this for CounterPunch:

"Today, there’s only one market for junk: the Federal Reserve, which has lent $1.3 trillion in cash for trash, no questions asked. This amount exceeds the forecast Obama medical care plan for the next decade. No money for health insurance, but all for the junk-mortgage lenders."

Michael Hudson, the ex-Wall Street economist and author of Super Imperialism: The Economic Strategy of the American Empire put the Lehman case into perspective with observations he made to me via e mail on Sunday. I think it summarizes the big picture admirably:

“When predators have exhausted the economy, they turn on each other. The result is financial cannibalism. After all, who else is it possible to get money from in today's negative equity environment?

“If the media are missing anything, it’s that the game is over. The financial institutions are taking their money and running. They know it's over. And the only source of cashing out is the US Treasury and Fed.
“My solution:There is an easy place to start, that can take only a few weeks. That is to look at the Fed's $1.3 trillion in cash-for-trash swaps. If these prove to be junk mortgages for which the Fed has given good US Treasury bonds, at the proverbial taxpayer expense, then the Fed and Treasury administrators should have criminal charges brought against them, the accounting firms of the companies pledging these junk mortgages and other financial junk should be closed down and RICO charges brought, and the banks themselves should be wiped out. I have urged the appropriate Washington oversight committee to open an investigation along these lines."

[Rajiv]

Re: Lehman = Enron: New Report Details the Fraud

Also from Mike Whitney - The video that will put Geithner behind bars

You gotta see this! If this doesn't convince you that the Timothy Geithner knew about the securities shenanigans that were going on at Lehman, than I don't know what will.

Keep in mind, that Geithner ran Lehman through 3 "stress tests" prior to bankruptcy; all of which Lehman failed, and yet, nothing was done. Anton R. Valukas--the examiner who wrote the 2,200 page investigative-report which was released on Thursday-- has provided plenty of information detailing Lehman's “materially misleading” accounting and “actionable balance sheet manipulation.”

In other words, they cooked the books.

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