JPMorgan, Citigroup Helped Cause Lehman’s Collapse

[Joanne98]

Source: Bloomberg

March 11 (Bloomberg) -- JPMorgan Chase & Co. and Citigroup Inc. helped cause the illiquidity that led to the collapse of Lehman Brothers Holding Inc., the bankrupt bank’s examiner said today in a report filed in Manhattan federal court.

Lehman tumbled into its $639 billion bankruptcy, the biggest in U.S. history, because it didn’t have enough liquidity and lost the confidence of its counterparties, according to a 2,200-page report from Anton Valukas, the U.S. Trustee-appointed examiner.

By changing guarantee agreements and making new demands for collateral, JPMorgan and Citigroup helped to precipitate the liquidity crisis that doomed Lehman, Valukas said.

“The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity pool,” he said. “Lehman’s available liquidity is central to the question of why Lehman failed.”


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=aeMnMvXnUYHc&pos=1

[AllentownJake]

1. Yeah well

Citigroup is now an arm of the Federal Government and JPMorgan's CEO is a smart businessman.

[slipslidingaway]

2. knr nt

[Lucky Luciano]

3. Demanding collateral from an entity you have a claim on

And whose creditworthiness is going to he'll is not malicious - it us proper risk management. Can't blame Citi or JPM for wanting LEH to post collateral during the death spiral.

[UpInArms]

6. I have a can of gas, may I insure your house?

:hi:

[bluedigger]

4. There is no honor among thieves.

[liberation]

5. ... or sociopaths.

[kpete]

7. Report Details How Lehman Hid Its Woes ($50 Billion Off Its Books In Months Before Collapse)

Source: New York Times

According to the report, http://lehmanreport.jenner.com/VOLUME%204.pdfLehman used what amounted to financial engineering to temporarily shuffle $50 billion off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money. Senior Lehman executives, as well as the bank’s accountants at Ernst & Young, were aware of the moves, according to Mr. Valukas, a partner at the law firm Jenner & Block, who filed the report in connection with Lehman’s bankruptcy case.

Richard S. Fuld Jr., Lehman’s former chief executive, certified the misleading accounts, the report said.

"Unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s board of directors, Lehman reverse engineered the firm’s net leverage ratio for public consumption," Mr. Valukas wrote.

Mr. Fuld was "at least grossly negligent," the report states. Henry M. Paulson Jr., who was then the Treasury secretary, warned Mr. Fuld that Lehman might fail unless it stabilized its finances or found a buyer.

Lehman executives engaged in what the report characterized as "actionable balance sheet manipulation," in addition to "nonculpable errors of business judgment."

Read more: http://www.nytimes.com/2010/03/12/business/12lehman.html?hp=&adxnnl=1&adxnnlx=1268367226-wdbCZyG33xJH5il7oWNTOw

[subterranean]

8. Sounds like the kind of stuff Enron did.

Someday a book will be written about this.

[buzzard]

14. Should be a crime but instead a book or movie deal sounds about right.n/t

[Sancho]

9. jail! why not jail!

It makes no sense to me....

:mad:

[pattmarty]

10. Who is going to jail over this? There have been NO, NADA, NOT............

...............ONE new law or regulation passed since the "collapse" to reign in or do anything to stop these fucking thieves. "Change we can believe in"????????????

[No Elephants]

11. Personal civil and criminal liability, incl fines, of officers who knew or should have known is the

ONLY way to deter this kind of thing. And not just officers, but ordinary employees and directors--anyone who knew or should have known.

[aquart]

12. And do we plan to prosecute these criminals?

My guess is no.

[buzzard]

13. Grossly negligent my ass, semantics make the difference between a crime and a big FU to the public.

I also wonder how the counter parties valued the Repo 105's on their balance sheets seems it should matter to someone, but I guess no one cares about bank regulation they just continue to play their little games with no accounting to anyone, giant Ponzi schemes for those who can afford to play.

[AllentownJake]

15. What they did is now legal

Extend and Pretend accounting endorsed by the FDIC and US Treasury.

Once you have liquidity problems, the taxpayers eat the loss if you are not too big for them to cover your losses, if you are too big, here is some free money to keep you afloat.