The Washington Post reports on the former CEO of Lehman Brothers, Dick Fuld’s, testimony in Washington.
Fuld is saying that he was totally unaware of the Repo 105 transactions. Readers of me remember that I had worked in Lehman through a “professional services firm” in 2007, helping the fixed income operations unit figure out what the heck it was that people were showing up for work there did everyday. (That’s no hyperbole.)
I heard of “Repo 105”, so it’s really hard to see how Fuld would not have. And anyone who had to calculate a minimum net capital position would have been aware of these transactions, since recording them on subsidiary books (which they were) meant that the company was stretching minimum net capital very thin.
Hopefully Congressional staffers are up-to-speed on the accounting issues surrounding what Lehman was doing. The basics of it are not heavy accounting, and I even diagrammed it here.