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.

Former
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
Fed.

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)?