The "Repo 105" Scam: How Lehman Fooled Everyone

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

http://www.zerohedge.com/print/91879

 

repo 105 starts on page 15

http://lehmanreport.jenner.com/VOLUME 3.pdf

 

Interesting comment I read elsewhere.

Ackadamius | Mar 12, 2010 12:26 PM ET

Auditors can only report on the numbers that they are given by the corporation. Nor can they force a company to use those numbers in their statements. So basically the corporation can use whatever numbers they wish, the auditor is there just to sign off that they are abiding by GAAP and other standards.

Also, the timing differences are odd to me. The last audit was for the year ending in 2007 and these Repo 105's were used primarily in Q1 and Q2 of 2008, which is a period that was not audited. So that's a little suspect to me.

Plus if these Repo 105's were so bad why didn't anyone care until now? They've been used since 2001 by many firms and the IRS and SEC has approved them.

In my Investment Banking class during my MBA we were actually taught to use these because they help your balance sheet. It's perfectly legal and can drastically help your stock price. These exec's were just doing what they and every other MBA grad is taught to do.

To me this is a story 18 months late about things we already knew.

 

More fodder for the sheeple.

 

" Lehman accounted for Repo 105 transactions as “sales” as opposed to financing transactions based upon the overcollateralization or higher than normal haircut in a Repo 105 transaction. By recharacterizing the Repo 105 transaction as a “sale,” Lehman removed the inventory from its balance sheet."

Apparently it wasn't the use of 105's but the misuse.

 

they should've called them Enron 2.0 transactions

 

If Feds knew about it than perhaps that is why they were allowed to go under.

 

Lehman passed the stress test after Bear Sterns failure, there goes the theory of what the Feds knew or know.