1) Balance sheets mean nothing when you can just hide assets/liabilities that are convenient for you to hide.
2) Most major banks in the US (and likely worldwide) are basically insolvent.
A new report details how Lehman executives made business decisions that would ultimately prove suicidal, then used financial manoeuvres to mask the depths of their predicament. Finally, demands for payment by competitors helped push the firm over the cliff.
The report, produced by a U.S. court-appointed lawyer and released late Thursday, will have immediate ramifications. It provides a green light for lawsuits against Lehman's top executives, who allegedly manipulated the company's books, and its auditor, Ernst & Young, which the report says was aware of the scheme.Let's hope that the ensuing shitstorm of lawsuits doesn't stop there. Let's hope it leads to criminal investigation, not just within Lehman, but with their counterparties and within the willfully blind complicit parts of goverment "oversight" which was supposed to prevent shit like this from happening in the first place.
But the report also points to vulnerabilities that remain to be addressed. One of its major revelations is that Lehman used an accounting sleight-of-hand at several key junctures in 2008 to make its debt level appear smaller than it actually was.
Under the move, known as a “Repo 105,” Lehman shifted tens of billions of dollars of assets off its books as though they had been sold. In fact, they had been pledged as collateral in exchange for short-term loans, on terms favourable to the lender, and would return to Lehman's balance sheet within days. During that time, however, Lehman would take its quarterly snapshot of its financial health and present those figures to investors.
“It's basically window-dressing,” wrote one Lehman executive in an e-mail, according to the report. It also revealed that lawyers in the U.S. didn't endorse such accounting, so Lehman turned to a U.K. law firm and routed the transactions through Europe
Comforting that this kind of crap has been going on since 2001 isn't it? If Lehman was engaged in this sort of crap for near a decade, how many other financial institutions are playing similar games? How many would have imploded had the former Treasury Secretary thief Paulson not passed a 3 page Tarp bill extoring billions of dollars from US taxpayers.
While Lehman had employed the manoeuvres since 2001, it expanded its use of them in mid-2007, sailing through internal limits. “I am very aware,” of the impact of the transactions, one executive wrote in April 2008. “It is another drug we' r on.”
Mr. Fuld, the company's hard-charging leader, comes in for tough criticism. He was a person “who heard only what he wanted to hear,” former Treasury secretary Henry Paulson Jr. told the lawyers preparing the report.Ya, and unfortunately for Mr. Fuld he didn't have the benefit of having plenty of insiders controlling the purse of the Treasury either. I'm sure that didn't really hurt Goldmans Sach's did it?
Time to take the gloves off and start prosecuting these cocksuckers. Instead of wasting a fucking year in office and doing literally nothing about the root cause of the problem, and instead devising new and even more retarded ways of "stimulating" the economy by racking up monstrous amounts of debt. Hope and change my ass. Obama is possibly even more ensnared by the banking interests than Bush ever was. At least Bush could use the excuse of being complacent because no-one had noticed the problem yet. Obama, on the other hand, has been frantically attempting to look anywhere but where the problem actually lies. He has the full will and anger of the US populace to start taking these corporate lobbyist pieces of shit down...and yet he does nothing because he's completely and utterly dominated by them.
This shit will continue until politicians begin serving the interests of their consituents, rather than that of their corporate masters...when that will occur is beyond me.