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Friday, March 12, 2010

Lehman Brothers Cooked The Books

Items of Interest:

Barry Ritholtz / The Big Picture:
Accounting Fraud, Short Sellers & the SEC -- The bankruptcy report on Lehman is both revealing and damning. Once again, the investing public learns — after the fact — the basic truisms of modern markets:

-Major accounting firms are worthless to investors. They were either unable or unwilling to detect fraud amounting to 50 billion dollars. The incompetents at Ernst & Young deserve the same fiery death as Arthur Anderson; Whether they are hired guns or paid whores, they — like the rating agencies — are worthless to investors.

-Corporate management engages in fraud all too regularly: Am I reading this correctly — that Dick Fuld’s defense will be “I didn’t know that Lehman was a giant Ponzi scheme, and I was unaware we were hiding billions in bad debt and leverage off balance sheet?”

Based on the release of the bankruptcy court report, LEH was technically insolvent perhaps years before it collapsed;

-The Shortsellers turn out to be the good guys. Consider the absurdity fraud of “protecting” the bankster frauds — fromt he truth, as revelaed by Einhorn et. al.

-The SEC is utterly incapable of comprehending how markets function. They believe the criminals who commit the fraud, and ignore the whistleblowers who uncover it;

-The ban on short selling is an indictment of the inability of the SEC to understand WTF is going on, and a reward tot he criminal corporate management teams;

-The Media did a terrible job uncovering the fraud as well. Some media folk were used by CEOs. Some of the TV press who relied on access to their subjects, actually rallied to the defense of these CEOs, including Fuld, and trashed the short sellers. Most notably Charlie Gasparino from his CNBC days, but their were others as well.

-The Analyst community, for the most part, failed as well. The few who publicly acknowledged the debacle were notable for being so far outside of the herd. 95% of them were wrong.


The Big Picture: Charlie Gasparino Owes David Einhorn (and me) an Apology
The Big Picture: Did JPM and Citi Cause Lehman’s Collapse?
The Big Picture: Coroner’s Post Mortem on Lehman
New York Times:
Report Details How Lehman Hid Its Woes as It Collapsed — It is the Wall Street equivalent of a coroner's report — a 2,200-page document that lays out, in new and startling detail, how Lehman Brothers used accounting sleight of hand to conceal the bad investments that led to its undoing. …
Yves Smith / naked capitalism:
There's no way like the American Way

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia