The "Repo 105" Scam: How Lehman Fooled Everyone (Including Allegedly Dick Fuld) And How Other Banks Are Likely Doing This Right Now

Tyler Durden's picture

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Strom's picture

The full report available here:

 

http://lehmanreport.jenner.com/

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i.knoknot's picture

so... on these fridays, when the FDIC 'receives' a bank and states:

  assets     = $100M

  liabilities = $100M

  cost to FDIC to cover = $50M ...

Is this where that $50M has been hiding?, or is it still in the FASB mark-to-myth, or both or ?

jessiejune's picture

these Friday is really an wonderfull time and we should have many fun here and there just like Maize Mill.

John Self's picture

Note to all:  More Lehman fun coming by Monday, when they will need to file a plan of reorganization, or else cede control to any Tom, Dick or disgruntled shareholder out there.  Look for them to file a pro forma version for now and do their best to maintain control for the next few months until a more credible version can be hammered out.  But in any case, we might just see who's in the estate's crosshairs and whether there's any real hope of reorganization for any of the units (you'd think not, but there have been some statements to the contrary).

i.knoknot's picture

is that why this news is suddenly available now?

are we just being 'worked' here?

"there are no accidents"

    - ally - st elmos fire - a long time ago...

niccy4513's picture

Pass it on. This is a feckless piece of legislation and how can you tell bc Dodd and White House support it. Bernie, what was your price, a new log cabin museum in Stratton Mountain. We had the momentum and the people were behind you and you SOLD OUT. Adidas Adizero Adios

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Ned Zeppelin's picture

Hilarious hijinx.  Repo 105. Like hearing about credit default swaps for the very first time.

Fuld = liar.  Geithner = liar. 

Puh-leze, guys, you insult us with your denials.

Careless Whisper's picture

Ken Fuld has a bad memory plus Ernst & Andersen said the 10-K's were AAA-okay.

Howard_Beale's picture

Ken Fuld- I hardly knew you.

--Dick Lewis

bugs_'s picture

+1 Ernst & ANDERSON!!!!! LOL

hedgeless_horseman's picture

Please do not use the term "auditors" to describe Ernst & Young.  There must be a better word.  How about co-conspirators?  I don't know, call Rupert Murdoch. He is brilliant at this sort of thing.

Anonymous's picture

co-conspirators works as does boiler room
operators...

Cognitive Dissonance's picture

You make an important point. Why would anyone believe any party to the Ponzi is honest or truthful? Because they're supposed to be? Then explain to me the FDIC, FINRA, SEC, the FED and so on. If the Ponzi requires all parts to function as expected in order for the Ponzi to succeed and the Ponzi is clearly succeeding (at least for now) then all parties of the Ponzi are dishonest.

Auditors are no different from anyone else. They have the need to find and retain clients, be profitable and not make too many waves if they wish to stay in business. They know which side of their bread is buttered. Since no one has gone to jail or even suffered much beyond public disclosure and a little humiliation, what makes anyone think the auditors are not corrupt when the auditors were signing off on this shit years before the roof collapsed?

trav7777's picture

FRNbugs may not want to hear it, but it's as I've said:  we are facing an existential crisis in paper where there's a discontinuity moment coming in which confidence undergoes a phase change.

People are waking up to realize that it's all bullshit...all of it. 

Cognitive Dissonance's picture

"People are waking up to realize that it's all bullshit...all of it." 

Agreed. And this is precisely why nearly everyone is frozen in place. Sort of like that half dream, half reality moment when you're beginning to awaken from a long and deep sleep. You're not sure what is real and what is dream. Consciousness (more accurately the ego) is beginning to take over but the dream world is very seductive and alluring.

In the dream world, the nation can endlessly spend and still lower taxes, where house prices always go up and credit card limits increase, where you can replace you car every 2-3 years and it would be nice to have that fourth flat screen TV. The rabbit hole is endlessly deep but only if the public chooses to ignore reality.

cougar_w's picture

Reality is what you make of it.

We started down this rabbit hole in 1913. Manufacturing reality is old hat these days.

Anonymous's picture

and it needs to stop now! So are those of us still in the hole with our 401K's going to be made whole or is misleading
investors OKy Doky these days?
TechBob

Anonymous's picture

and it needs to stop now! So are those of us still in the hole with our 401K's going to be made whole or is misleading
investors OKy Doky these days?
TechBob

niccy4513's picture

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jEnron's picture

Geithner stepping down at Treasury.  Obama nominating Captain Renault to replace him.

Better yet, make Andy Fastow this generation's Joe Kennedy.

 

Anonymous's picture

and Martin Armstrong for vice chair of the Fed.

AnonymousMonetarist's picture

How the hell is this not fraudulent conveyance?

Anonymous's picture

This looks shady under rules governing misleading financials, prospectuses, etc.

However, a fraudulent conveyance requires that Lehman was disposing of assets at below fair market value to harm creditors. If anything, Lehman was "selling" trash assets at inflated prices.

If Lehman was in bankruptcy, the use of the "repo" proceeds to pay particular creditors could be challenged as a preferential payment. I think you are confusing the preferential payment rules with the fraudulent conveyance rules.

AnonymousMonetarist's picture

'a fraudulent conveyance requires that Lehman was disposing of assets at below fair market value to harm creditors'

Ah no...that's like saying an insolvent company can take the money to Vegas and their guilt is a function of whether they
take a haircut or not...

If the bank was not solvent, for example, creditors can examine two years worth of bonus pay in determining whether executives will have to return the payouts to the bankrupt company's trustee.

Preference-payment rules allow creditors to look back one year if the executive or officer receiving the bonus is considered an "insider" under bankruptcy rules. Otherwise, preference claims extend back only about three months.

Preference claims are meant to prevent an insolvent company from favoring one creditor at the expense of another.

The repo transactions as well as the other nuggets unveiled by ZH lay out that Lehman was double secret insolvent..

The catch is that creditors in the Lehman case will need to prove that, considering the bonus payouts for example, the bonuses were not paid out in the ordinary course of business. Creditors will have to prove that paying out bonuses to managers who ran the company into bankruptcy was considered business as usual.

That of course is challenging since fraudulent conveyance has been institutionalized by GAAP, the SEC, the rating agencies and their Nancy Capitalist enablers.

Rick64's picture

 All this time and this is the excuse. Come on you guys are market wizards and geniuses you can do better than this.

Crummy's picture

As long as no one at the SEC fears sitting on their nuts while taking a shit, then no one in on this scam has anything to fear either.

They need to start putting a bounty on uncovering fraud, then we can start a sort of privateer force of regulators.

Our motto: Never send a lawyer to do a pirate's job.

Jesse's picture

 @Crummy

 

Respect.

Anonymous's picture

yeah fucking awesome idea - too simple.

cougar_w's picture

You just summed up ZH

Miles Kendig's picture

'cept many of us are, in fact, Raiders...

AnonymousMonetarist's picture

In the United States, fraudulent conveyances or transfers are governed by two sets of laws that are generally consistent. The first is the Uniform Fraudulent Transfer Act ("UFTA") that has been adopted by all but a handful of the states.] The second is found in the federal Bankruptcy Code.

There are two kinds of fraudulent transfer. The archetypal example is the intentional fraudulent transfer. This is a transfer of property made by a debtor with intent to defraud, hinder, or delay his or her creditors.

Anonymous's picture

Ho hum. Banks cheat, CEOs and regulators collude and lie. How many times can you be suddenly shocked to learn the same thing over and over again?

Either get off your ass, stop contributing your own funds to the rapist financial markets, and start marching in the streets demanding to go Swedish on the banks, or lose your own credibility along with them.

i.knoknot's picture

don't be so quick to discount the effectiveness of the small laps of a rising tide.

one item is a conspiracy, two is ..., three is ...

i believe most folks are 'on the ready' to act appropriately when the time comes.

this entire process is a comfortable removal of doubt.

Anonymous's picture

the fix is in and we are up against connected parasites, but i agree, every ray of sunshine is welcome, sure it may not make a difference immediately and we have been depleted by these blood sucker for a long time, but you never know when it will do good, its all we can do, keep exposing things, maybe one day we will flush the parasites...

Pat Shuff's picture

Acting appropriately/careful what is wished for dept.

 

 

"How a revolution erupts from a commonplace event--tidal wave from a ripple--is cause for endless astonishment...

First a piece of news about something said or done travels quickly, more so than usual, because it is uniquely apt; it fits a half-conscious mood or caps a situation... The fact and the challenger's name generate rumor, exaggeration, misunderstanding, falsehood. People ask each other what is true and what it means. The atmosphere becomes electric, the sense of time changes, grows rapid, a vague future seems nearer...

As further news spreads, various types of people become aroused for or against the thing now upsetting everybody's daily life. But what is that thing? Concretely: ardent youths full of hope as they catch the drift of the idea, rowdies looking for fun, and characters with a grudge. Cranks and tolerated lunatics come out of houses, criminals out of hideouts, and all assert themselves...

Such is, roughly, how revolutions "feel." The gains and the deeds of blood vary in detail from one time to the next, but the motives are the usual mix: hope, ambition, greed, fear, lust, envy, hatred of order and of art, fanatic fervor, heroic devotion, and love of destruction."

--Jacques Barzun, From Dawn to Decadence: 500 Years of Western Cultural Life 1500 to the Present

YourAverageDebtSlave's picture

The powers that be let this information come out knowing full well that it would not be received well.  It reminds me of last week’s Nightline’s piece on 9/11 being a conspiracy that possibly is more than meets the eye.  It reminds me of PBS airing freedom to fascism.  Since when the hell did mainstream media start becoming so anti-government?

 

These pieces of news are nothing new, but the fact that the powers that be are now responding to these claims via mainstream media makes me suspicious.  Why release the information now?  They know that the general feel from “Joe Sixpack” is that the government is corrupt and something radical needs to be done.  Reports like this from mainstream media are just gasoline on the fire, almost as if they want there to be backlash.  It’s as if they are thumbing their nose at taxpayers saying look how corrupt we are, we know it angers you, now do something about it.  I see evidence of this when I read an online Wall Street journal article and in the comment section, 90% of the comments are saying something about how messed up our government is.

 

So then the question becomes why would the want aggravate us?  Back in 2008 for the first time (that I know of) the nation enacted an army brigade to be on alert here in the states (http://www.armytimes.com/news/2008/09/army_homeland_090708w/).   Dennis Blair a few weeks ago stated that the intelligence community will if needed assassinate Americans they believe to be a threat to other Americans (my read is that this means the government as I’m sure the CIA will not be taking out the Bloods and Crips in South Central) (http://www.democracynow.org/2010/2/9/obama_administration_us_forces_can_assassinate).  I could go on with what’s out there that makes me think this is a controlled demolition of America as we knew it.

 

My guess is that whoever’s in power is waiting for STHF so that they can make a tremendous power grab in the name of democracy.  They will wait for anarchy to break loose, watch a couple of angry entitled generations of Americans riot, loot, and terrorize their next store neighbors and wait for the people to come crying to the government to restore order.  Once that happens, the government will come in with its cape and “save the people” by implementing a more tyrannical style of government than we currently have in place via the military.

 

What was once fringe thinking and conspiracy is starting to be mainstream, and I believe it is all a ruse to get the public fired up and ready to explode.  Once that happens the government will have a legitimate excuse for coming in and exerting control over the masses.  With our current debt levels, trade cap, shitty currency, we will all be happy to take jobs working in factories for enough wages to get our slice of bread for the day while we pay back the Chinese, Japanese, and the rest of the world while the same big wigs who orchestrated Lehman’s collapse travel to the Caribbean.  Aside from writing snarky comments on Zero Hedge and other forum boards, I’ll just wait back with gun in hand and wait for the fireworks to begin.

 

cougar_w's picture

Why now: By the time anyone starts digging into this stuff the EuroZone will be imploding, bansk will be folding, and bigger shyte will have hit a bigger fan.

You throw your worst garbage on a bigger fire and run away.

Cursive's picture

These people should be fed to the harden criminals in a state prison.  We'll look the other way.  The inmates are free to do as they wish.  I really hope this is what happens.

Waterfallsparkles's picture

I think the Banks are doing this right now.  Going to the Discount Window and pledging Securities for a Loan right before Earnings.  That way they do not have to show them on their Balance Sheets.  After Earnings they pay back the Fed Loan and get their Securities back.

RockyRacoon's picture

Which transactions, of course, we can never know about.  It might stigmatize the banks, you know.  What a crock.  Audit the fed!

Anonymous's picture

If Lehman had only been doing this a quarter - maybe a "clever" dressing of the balance sheet. But for years? There is no way other financial institutions haven't been doing plenty of this too. Doesn't absolve Lehman or the regulators from their despicable conduct, (perhaps it explains the 2 year lag in disclosure cuz it's gonna get even more ugly as we look under the kimonos of the other institutions) but one more time with feeling - the financial system is still in horrid shape. The real causes and problems all still lurk. Nothing has changed except power and risk is even more consolidated. Fasten your seat belts and keep some cash and gold at home.

Anonymous's picture

Meanwhile, the market finished higher based on volume 3.