New Merrill Lynch Disclosure Shines A Perjurious Light On Ben Bernanke's Sworn Testimony; JP "Fed Lite" Morgan Also Dabbled In Repo 105-type Scams

Tyler Durden's picture

It seems it was just yesterday that Bernanke was on the edge of committing perjury and lying that the Federal Reserve of New York knew nothing about Lehman's "more peculiar" off balance sheet transactions. Oh wait, it was: as a reminder in his cross by Scott Garrett, the New Jersey representative asked the Fed Head whether the "Fed was aware of the Repo 105 and the accounting irregularities going on?"
Bernanke answers "No - they were hidden." Oops. Because a story just released by the Financial Times seems to indicate otherwise, and unless Merrill Lynch is lying out of their derriere, Mr. Bernanke should be immediately investigated for potential perjury before the American people. "Securities and Exchange Commission and Federal Reserve officials were warned by [Merrill Lynch] that Lehman Brothers was incorrectly calculating a key measure of its financial health months before its collapse in 2008...In the account given by the Merrill officials, the SEC, the lead
regulator, and the New York Federal Reserve were given warnings about
Lehman’s balance sheet calculations as far back as March 2008
."  Amusingly, the sole purpose why Merrill would rat out Lehman is to make its own disastrous situation more agreeable, as often happens when the rats realize the sinking of the ship is inevitable. Well, unlike Merrill, whose liquidity situation was equally as disastrous on the weekend of September 14th, which found a pressed suitor in the form of BofA (and its Fed/Goldman-puppet CEO Ken Lewis), Lehman was not quite so lucky (one wonders why). Yet the bigger issue is why does the Fed keep on lying to the American public without any trace of consequence? When will someone finally wake up and sue the Federal Reserve (and we don't mean FOIA), or at least slap a racketeering lawsuit on "those people?" Oh yeah, the market is up, American Idol is on TV, G-Pap has done all that was needed to (not) be bailed out, so all shall be well. This is better known as "if the other Ponzi dude was thrown in jail, you must acquit" defense.

Further troubling evidence from the FT that the FRBNY may be nothing more than a sinister cabal of Wall Street-acquired criminals:

Former Merrill Lynch
officials said they contacted regulators about the way Lehman measured
its liquidity position for competitive reasons. The Merrill officials
said they were coming under pressure from their trading partners and
investors, who feared that Merrill was less ­liquid than Lehman.

The warnings take on a special significance after last week’s report by Anton Valukas,
the Lehman bankruptcy court examiner, who found that Lehman had used
questionable financing tools to flatter its balance sheet before its
September 2008 collapse.

The findings raise questions over what
federal regulators knew about Lehman’s accounting and when they knew
it. In the account given by the Merrill officials, the SEC, the lead
regulator, and the New York Federal Reserve were given warnings about
Lehman’s balance sheet calculations as far back as March 2008.

and current Fed officials say even in the competitive world of Wall
Street, it is un­usual for rival bankers to relay such concerns to the

The Fed is currently scouring thru its emails, but unfortunately has no confirmation that any exchange like the one mentioned above has ever occurred:

The New York Fed said it were unable to verify that the conversation with Merrill Lynch bankers took place.

When in doubt deny, deny, deny. And what recourse do the American people have anyway? It's not like the Fed is, you know, transparent, or willing to open its books to anyone, to demonstrate just how deep the criminal rabbit hole actually goes.

And also from the FT we learn that none other than JP Morgan was also using Repo 105 comparable transactions. At least Jamie Dimon's firm not only was fully transparent about this gimmick, but it promptly ended the practice some time in 2005.

Unlike Lehman, which never disclosed the effects of its repo deals on
the firm’s balance sheet, JPMorgan detailed the year-end values of its
repo sales and purchases in annual reports beginning in 2001, after a
new accounting rule was introduced.The practice ended in 2005 when the company merged with Bank One. “The
transactions were done in very small amounts and were fully disclosed,”
a spokesman said.

So let's paraphrase the question for Mr. Bernanke - was the Fed at least aware of those disclosed SFAS 140 transactions? And also, for our own curiosity, can we get a roster of all the FRBNY people who are and have been supposed to oversee SFAS 140 implementations by various banks (hello Steven Manzari)?

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LeBalance's picture

As a reader, but new writer, I find this forum and its level of discourse the best I have found yet.

Yes, BB and his ilk continually lie, thieve, and the other 57 flavors as well, but as ZHers we know their stripe right?

They are the representatives of the owners of this recievership.  They are extra-debt slave colony and as a result the intra-colony rules do not apply.

Now I may be completely wrong, but if we could agree that the paid actors in DC are just that and arrive at a few more sort of obvious things that are presented here every day, then this discourse might move on to discuss the predicament (sp?) we face.

It is certainly not an issue to follow the owners' sign and track their propaganda, but not to acknowledge them as what they are stifles (in my view) the wholistic understanding of not only the owners, but ourselves.

The owners are the studious providers of the experience and experiencers themselves, the mass populace are the junkees, who just want more sugar.  Well, Uncle Sugar has never turned from his charge before his charge's eyes have rolled up in the head, the tough has been bitten in two, bowels have been voided, and the experiencer is dead.  This is a sacred duty.  You are one or the other or outside watching.

It is beautiful.

kdervin's picture

Didn't Anton Valukas include in his report the possibility of suing the Fed?  Let's hope he launches that missile.

buzzsaw99's picture

They've been lying for damn near an hundred years.

hedgeless_horseman's picture

They've been lying for damn near an hundred years.

They?  Over the last few years, I have spent an inordinate amount of calories thinking about, "they."  I remember my parents would often say, "They should do something," or, "They will take care of it."




What form will they take next?

buzzsaw99's picture

Headless corpses hopefully. ;)

Reflexivity's picture

They've been lying for damn near an hundred years.

The questions then becomes:  How does the average American manage their money for retirement so as to not get screwed again?

Yes governments, bankers, businessmen, and religious leaders have a propensity for corruption.  Corruption is nothing new in places where power and money is collected.

So, this being the case--and the banking scandals being a the peak of corruption--what should the average American do (or not do) to protect themselves and their investments for the next 30-40 years?

Is there a new way or alternative to trusting your cash reserves (i.e. nest egg) to the stock market?  What is the solution besides a well-diversified portfolio consisting of bonds and passively-managed index funds?

MarketTruth's picture

The wealthiest family in the entire world, estimated worth of 500 trillion, are the Rothschilds. During a very rare interview during the beginnings of this recent financial crisis Sir Evelyn Rothschild said to hold on to your gold bars. He was referring to it as a way to protect the value of your earning/money. So buy physical gold as a way to protect yourself. Central banks are right now net buyers and have been buying more physical gold than they ever have since around 1964.

Reflexivity's picture

Thanks for your comment.  I like that you quoted Rothschild, instead of just saying: Gold B****s!

So, let's make it a little less abstract.  If you had, say, a $1,000,000 cash nest egg (hypothetically speaking) and you were 40 years old, then how much (what %) would you put in gold?


(Also, from a review of Niall Ferguson's ascent of money:

"However, as the war [Waterloo Campaign] concluded, Rothschild was left with a huge hoard of gold which was virtually worthless by then so in an attempt to parlay the gold into cash, in 1815, he bought massive amounts of British bonds. In 1817, when the prices of the bonds had risen by 40%, Nathan sold, making huge profits."

source: )

The 'gold solution' seems simple on the face, but what makes it complex is the timing.  If you buy now, when do you plan on selling so that when/if gold prices collapse you don't end up losing value in your gold holdings?  Getting out is the other half of the coin (pun intended).

Harbourcity's picture

Nothing will happen to Bernanke.

Geithner was knee deep in it and he didn't even get a stern talking to.

They need Bernanke to keep this ponzi scheme running...

Oracle of Kypseli's picture

Something will happen to Bernake but not yet. "When the fit hits the shan."

There are rumors that he packs a glock 40. He may do himself in.

The FBI is sensitive to public and political moods. When the mood is right the FBI will be more effective. Trust me they watch and they know when to unleash.

BlackBeard's picture

NAWWWW he packs a .40?!  I would have thought that Shalom would pack a sissy gun like a Sig. P232 or something LOL

drwells's picture

America: "I WANT THE TRUTH!"


Sadly, he's correct.

Phazer2's picture

I sharpen the tines on my pitchfork a little more each night . . .

Get_to_the_choppa's picture

Paging Dr. Paul...this is your gotcha moment...go get 'em.

Of course, sans email evidence this will go nowhere fast.  Let's hope someone at Merrill has the same propensity as I do to keep and 'insurance' copy of their .pst files on a CD somewhere safe.

Oracle of Kypseli's picture

I bet a hostile entity will pay well for such CD.

Sale of the CD to the wrongdoers will look as a blackmail.

SRV - ES339's picture

He "dropped the ball" yesterday... very disappointing.

hbjork1's picture

OK, OK, Paul for President, Kaufman for Vice President.  We have over 2 years to work on it.

casino capitalism's picture

That's exactly what I keep asking myself - Where are the indictments?  I'm trying to figure out when the system got so broken that obvious fraud now goes unpunished (and really unnoticed by the crooks in charge).  Less than 10 years ago, people were charged (and even convicted - hello bernie ebbers).  No more.  The crooks are firmly in charge.

Cookie's picture

And there I was under the impression that here in Thailand the levels of corruption were the worst in the world; wrong again, take a bow oh so sanctimonious USA

Rusty_Shackleford's picture

Complete and utter lawlessness.


Lasciate ogne speranza, voi ch’entrate

Cookie's picture

If you thought this type of cancer was unique to the USA......


OCTOPVS's picture

Ladies and Gentleman of the jury excerpt of "On The Brink" by Henry M. Paulson Jr.


"Investment banks understood that if any questions arose about there ability to pay, creditors would flee at wildfire speed. This is why a bank's liquidity was so critical. At Goldman we had absolutely obsessed over our liquidity position. We didn't define it just in the traditional sense as the amount of cash on hand plus unencumbered assets that could be sold quickly. We asked how much money, under the most adverse conditions, could disappear on any given day: if everyone who could legally request there money back did so, how short would we be and could we meet our obligations? To be on the safe side, we kept a lockbox at the BANK OF NEW YORK filled with bonds that we never invested or lent out. When i was CEO at Goldman, we had amassed $60 billion in these cash reserves alone. Knowing we had that cushion helped me fall asleep at night"


Do you still have the lockbox?

Whats in the lockbox?

Who else knows about the lockbox?

What are the rules of the lockbox?

Who else has a lockbox?

Is the lockbox like Fort Knox and only rocks are in the box?



kdh_2010's picture

I would call the NYFRB an instance of regulatory capture, but it's more like a duck-hunter's decoy, innit? "Look, it's safe! We're protecting your money! See that duck over there, bobbing around without a care in the world?"

Cookie's picture

"A former top North Korean official has reportedly been executed over his handling of last year's botched attempt at currency reform that triggered widespread unrest."

We can only dream of similar justice in the USA, Euroland & UK


the grateful unemployed's picture

during bush the iraq war was funded OFF budget, which you know might raise the attention of any normal Fed chief. far as i know Obama isn't running his war off budget? (hey brian williams, is the war run off budget? oh, weathers bad, sure I understand)  who cares the numbers are so big. the fed is in up to their neck from nixon right on down the line. how did the obama people acquire fed duplicity? i mean 20m from goldman hardly seems like a drop in the bucket? of course maintaining the status quo was a pretty sweet deal. most voters thought there would be a whole lot of shakeups after bush was gone. so far nothing, what's obama get for all this? a trillion dollar healthcare bill financed with worthless bonds? paid for by China and Japan, while the japanese gangsters come here for liver transplants. (but no death panels no sir)

obama is the biggest gangster of all, but hey, its an american genre.

chindit13's picture

Look, the Repo 105's are, in their largest sense, about accounting.  And accounting is so, well, pre-Recovery.  All of you ZHers can be glass half empty types and worry about dinosaurs, but get it through your thick heads:  dinosaurs are extinct.  Same with accounting.  Same with debts.  And definitely same with bears.  Oh, and the unenlightened Middle Class.  EXTINCT.

America today is all about forgiving the past and looking with optimism toward the future.

Many former Middle Classes consumers have embraced this spirit of forgiveness and optimism with the same fervor evidenced by the banks, REITs, retailers, and Specialty Coffee companies.  They know that obligations have changed.  Nobody is really obligated anymore to honor his debts, especially if the debts are real estate related.  Obligation today centers around going back to the real traditional American values of overconsuming things one neither needs nor can afford, and using that freed up capital formerly wasted on mortgage payments to make it all happen. 

THAT is what made America great and what will make it great again, at least in its own mind, which is all that really matters anyway.  See, America is lucky enough to be bordered by two vast oceans, as well as two countries that don't really matter, a piece of Almighty handiwork which renders the American mind forever sheltered and ignorant, god blessit.  America is the Greatest Country on the Face of the Earth and the Envy of the World (c) because...well, most Americans don't have a clue how the rest of the world lives anyway.  Americans just know that every man, woman and child on the planet would, if we were less vigilant, sneak into this Great Country (c) and pick fruit or be a maid for a political nominee or go to a hospital in Los Angeles for a taxpayer paid nose job and tummy tuck.

But let me not digress into talk of the sins of the foreigners, for this is all about optimism and tomorrow and Our Children (c).

In Lake Wobegon, everyone was above average.  In America, everything is Better than Expected (c).  (Disclosure, Chindit13 is currently in a legal battle with CNBC, a subsidiary of Comcast and formerly a bastard stepchild of taxpayer-assisted-suicide recipient GE, for rights to that phrase.  My lawyer has said I am not able to further discuss it at this time, but let me just say this:  Bob Pisani, I'll own your ass!)

The sun has never shown as bright in America as today.  Reagan told us it was morning in America.  Today, under the wise and patronizing leadership of President Oreobama and his crack team of former(?) Goldman Sachs' partners, it is high noon on Fourth of July weekend on a Hampton's beach, and our glasses are filled with bubbly.

Just like the patriotic consumer who has tossed off the Yoke of Oppression Formerly Known as a Mortgage from HELOC (c), American business has also tranformed itself and helped re-invigorate the country.  Led by the smartest guys in the room, otherwise known as Investment Bankers, our latter day David Faradays and Nicola Teslas, have taken the art of shuffling paper and altering reality to a new level.  This quantum leap in financial sophistication has obviated the need for accounting, as accurate accounting has now been proven to be a lagging indicator just like labor.  Regarding that labor, our Boys From Broad (Street) have shown us that like accounting, labor is also a thing of the past.  They have proven that an unemployed individual is really just a Home Hedge Fund Manager waiting to happen.  With ever generous UE comp checks coming courtesy of Oreobama and his Rumpilstiltskin duo of Ben Bernanke and Tim Geithner, our new cadre of Home Hedge Fund players can build real wealth piling those checks into the likes of BIDU and WFC and GMCR and M and just about any REIT as one is better than the other, and get richer than former workers used to be before American Business shipped everyone's job to China and Bangalore.  Big rich.  52" HDTV LED rich.

And all of this new wealth is easily paid for by the wondrous and mysterious---and for all of our own good opaque---machinations taking place deep in the bowels of the Marriner S. Eccles Building, a subsidiary of Parker Brothers, and majority owned by the messiahs at Goldman Sachs.  The old gods turned water into wine;  our new and improved Gods turn Faraday and Maxwell's electricity into MONEY.  Money for everybody.  The Perpetual Money Machine.  Unlimited lucre.

One only wonders why we didn't think of this sooner, and why we suffered needlessly all those years enduring the horrors of business cycles and commuting to work and pay as you go and all of those things we now know are unnecessary and keep us from all of our true callings as stock market geniuses and super consumers.  Now we know.  Just Print It!

The only time better than today will be tomorrow. Gap up!

merehuman's picture

written like a song. Cheers to ye

chindit13's picture

Damn!  I tried to edit out the gaffs after ten minutes, and "Access Denied".  Rather capricious program this Drupal is.



Tethys's picture

I believe it won't let you edit if someone has replied to your post... just fyi

hbjork1's picture

Well done gaffs and all. 

Tethys's picture

+100   I laughed.  I cried.  It changed me.

velobabe's picture

And definitely same with bears. EXTINCT.

oh you mean financial bears¿

cause the real one's are just waking up and already doing damage on my property.

i am printing you out, too‡

there are some seriously smart people that post here

OCTOPVS's picture

how do you know dinosaurs are extinct?

Hansel's picture

I just saw Nanci Pelosi on TV.  That's proof they aren't extinct, innit.

sweet ebony diamond's picture

I am pissed.  Here I am posting to the Insider when all the fun is here.  Damn!

This is my one post before the big party.

I can't believe Ben Bernanke is so stupid.

How is this possible?

Anyway, see you guys on the other side.


Popo's picture

There isn't much question in my mind that Bernanke will eventually hang himself.   The level of deception, fraud and insider dealing is so mind bogglingly high, that there is almost no chance that Bernanke will not stumble during testimony.   He failed to learn the lessons of Greenspeak.  He says far too much, far too clearly.

Furthermore, the longer he is in office, the more information he has to hang the rest of the cabal.  The cabal knows this and this is precisely why he will hang sooner than later.

Then he will be replaced with an equally inept, academic puppet -- likely one who understands the importance of crypitc communications.  And the game will begin anew.



SRV - ES339's picture

Maybe Ben should take the time to check out the Huffington Post once in a while... Max Keizer on Lehman (and others) Repo's... circa July 2008, before TSHTF!

Mr Lennon Hendrix's picture

More order out of chaos BS.

Monday1929's picture

Note the Fed's denial of a "conversation". If they never replied to the e-mails, there was no conversation.

Like if Dick Fuld never owned a computer, just a blackberry, he could not read the attachments which laid out the specific criminal activity.


Lee S.

AnonymousMonetarist's picture

Thought the same thing when I read the FT this AM. Parsing.

Analogies to the mob keep coming to mind.

With all their transgressions the bullet that gets 'em is the one seen as superfluous and insignificant...

Repo 105 ... ha! If only you knew ....


deadhead's picture

The lies, half-truths, distortion, and corruption continue to bubble to the surface.

This bell cannot be unrung.

We won't improve until the system is flushed out.

trichotil's picture

"20. Economic crises have been produced by us for the GOYIM by no other means than the withdrawal of money from circulation. Huge capitals have stagnated, withdrawing money from States, which were constantly obliged to apply to those same stagnant capitals for loans. These loans burdened the finances of the State with the payment of interest and made them the bond slaves of these capitals .... The concentration of industry in the hands of capitalists out of the hands of small masters has drained away all the juices of the peoples and with them also the States .... (Now we know the purpose of the Federal Reserve Bank Corporation!!)"

Ivar Kreuger's picture

Holy Shit folks:

Federal Reserve Must Disclose Bank Bailout Records


March 19 (Bloomberg) -- The Federal Reserve must disclose documents identifying financial firms that might have collapsed without the largest ever U.S. government bailout, a federal appeals court said.


BlackBeard's picture

Yet another example of a two tiered legal system in this country.  Don't steal a pizza folks, you'll get printed.  Steal a gajjilion dollars white collar style? well, enjoy your new yacht buddy.

mark456's picture

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