Clinical Proof Of Banker Psychopathology: Repo 105's "Pimply" Importance To A Few Managing Directors' Lehman Equity Stakes

What is $50 billion between a couple of psychopaths? It's basically “a drop in the ocean” according to Max Abelson's account of how the Repo 105 fiasco is seen by the other side. Several ex-Lehman bankers speak off the record in "The repo men's new Lehman shrug" and confirm that not only is Wall Street terminally deluded in its own self-importance, but that basically everyone in finance is a megalomaniac, with no sense of relative worth, or any worth, for that matter, unless it goes straight into their back pocket. “I’m like, whatever" says London managing director #1, when asked what his reaction to the Repo 105 disclosure is. So when is it not "whatever?" $500 billion? $500 trillion? In its pursuit of finding ever more complex ways of defrauding the middle class silly (without the latter even being aware its share of net global wealth is about to decline from 1% to half that), Wall Street's bankers have passed the clinical psychopathology barrier, and will stop at nothing to destroy the wealth of everyone else not only with impunity, but with a smirk and a smile. Now that's net worth change you can believe in.

Steep yield curves, unfathomable derivatives, off balance sheet gimicks, repo XYZ: all these serve simply to push off ever more private risk into the public domain (via the TBTF or otherwise moniker) while Wall Street collects its 3-5% from each transaction, and has an infinite pool of zero interest money courtesy of its biggest lackey - the Fed. People ask - so who is the idiot on the other side of every offer ever higher into this 65% rally? Why you dear taxpayer, that's who. And you are paying for it with either certain eventual hyperinflation which will leave you broke, or certain eventual hyperdeflation which will destroy the entire system as one firm after another go under, until the very US is bankrupt. Heads you lose, tails you lose. And all the time the deranged egomaniacs quoted in Abelson's piece are laughing to the bank.

And to guarantee that sooner or later an ever more indignant and furious public, finally takes to the pitchforks and sawed-offs, lines like these are sure to seal the deal:

The only people who would worry about using an old trick to reduce leverage from 13.9 to 12.1, the second executive said, are “yappers who don’t know anything.” Both executives think of Repo 105 as a minor detail that was played up by a lawyer who needed to justify a report whose cost had run to $38.4 million. “When you spend what you did on this report, and you go through a firm for a year, and this is all you find? That’s amazing,” the first said.

Of course, the irony is that these presumed BSDs ridicule the system, yet end up losing their entire equity stakes in the only financial firm so far to liquidate. And the next bank to go tits up and want America's compassion? The public will be, like, whatever. Just before the ultraviolence begins that is.

It is also notable that their arrogance is only matched by their resentment of fellow firm Goldman Sachs (which last time we checked was not trading at about $0.00 on the pink sheets). Just a little squid envy boys?

“If Valukas went into Goldman Sachs, what do you think the report would look like?” the first asked, referring to the court-appointed examiner, Chicago attorney Anton Valukas. “This would be a fairy tale compared to that.”

We'll leave this sordid tale of jealousy and psychopathology alone, suffice it to say that even though Goldman noted that it has never engaged in Repo 105s (duh, of course not - these were a Lehman specific off balance sheet construct), what the right question to ask is whether the firm ever engaged in transactions that were "Substantially Similar." Yes, that is a legal term, and yes, Goldman will have a much tougher time going on the record refuting that particular question. And with ZH going restricted on the last tangent quite soon, we hope that others will continue the good fight of pursuing just how high (Tim Geithner, wink, wink) the stench of criminality goes. Yes, no matter how you frame it, you don't have to be a (securities) lawyer to know that 10(b)-5 breach is a criminal in every world. Even Wall Steet's.

p.s. With regards to the post's title, we wish Mr. Abelson had asked the Lehman bankers how much of their collective net worth the firm's persistent fraud ultimately ended up flushing down the drain.