Posted by Ron F in Securities and Exchange Commission, Risk, Repo 105, Regulation, New York Fed, Lehman Brothers, Geithner, GAAP, financial crisis, Federal Reserve, Fed, Congress, compliance, Bernanke, Barney Frank, Banks, bank failures, bailouts, Accounting
I have to say that today's House Financial Services Committee hearing into Lehman Brothers' collapse leaves me confused in more than one respect.
Ben Bernanke told the committee that regulatory authority over Lehman rested with the Securities and Exchange Commission under a voluntary program set up in 2004.
But what about the New York Fed? Doesn't it have a close working relationship with major Wall Street banks? Remember Long-Term Capital Management in 1998? It was New York Fed chief Bill McDonough who knocked Wall Street bankers' heads together and kept that hedge fund from bringing down the system.
And guess what? The fellow who was president of the New York Fed when Lehman failed was sitting right next to Bernanke when he said that. And that guy, Tim Geithner, just happens to be the Treasury secretary now. Where was Geithner when Lehman was imploding?
Then there was Bernanke's statement that dodgy accounting had nothing to do with Lehman's failure. That doesn't quite square with bankruptcy examiner Anton Valukas's testimony that hiding as much as $50 billion in assets each quarter as it ran into trouble did little to inspire investor confidence in the bank. Former Lehman CEO Dick Fuld didn't help by pronouncing the bank solvent one day, and insolvent the next.
All of these folks can't be right. Time to bring in Lehman's counterparties and ask exactly why and when those guys refused to deal with Lehman.