Here's Why Lehman's Accounting Was Completely Bogus -- And Why The Rest Of Wall Street's Still Is

[girl gone mad]

Here's Why Lehman's Accounting Was Completely Bogus -- And Why The Rest Of Wall Street's Still Is
http://www.businessinsider.com/heres-why-lehmans-accounting-was-just-completely-bogus-and-why-the-rest-of-wall-streets-still-is-2010-3">The Business Insider

I agree with Felix Salmon that the former Lehman staffers who defend Repo 105 are psychopaths – certifiably insane. They state (as if this justifies it) that …

The only people who would worry about using an old trick to reduce leverage from 13.9 to 12.1, are “yappers who don’t know anything.”

For those that don’t know Repo 105 was a sale and repurchase agreement by which Lehman parked about 50 billion in assets (presumably assets they did not want to discuss) overnight via a repo transaction so they would not appear on the balance sheet.

By now anyone who does not realize that sort of accounting legerdemain is unacceptable is (a) entirely out of touch with reality and (b) self aggrandizing on a magnificent scale. Both are signs of mental illness.

But unfortunately the Lehman executives do have one point. Repo 105 type balance sheet faking was “an old trick” and well known to anyone who cared to read balance sheets (very) carefully.*

http://www.businessinsider.com/heres-why-lehmans-accounting-was-just-completely-bogus-and-why-the-rest-of-wall-streets-still-is-2010-3">more...

[unblock]

1. that makes it sound like the 13.9 number was "correct" and the 12.1 number was "fraud"

but the reason why the repo 105 thing is silly is because BOTH numbers were fraudulent, as were/are most legerage ratios, as are most numbers corporate america produces for end of quarter reporting.

there's a considerable amount of gimmickry that's been deemed acceptable by law and by standard accounting practices.

if we understand repo 105s correctly, they went over the line with that particular gimmick. but the point is that all these numbers were rather gimmicked up to begin with.

if wall street is criticizing those complaining about repo 105 as "yappers who don't know anything" it's probably not because they're claiming that repo 105 is legit -- it's because they're claiming it's no more illegitimate than a whole host of other things that look equally fraudulent.