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Thursday, March 28, 2024

We Demand The Fed Be The Financial Uber-Regulator… The Australia Fed That Is

Courtesy of Tyler Durden

We already know that the Federal Reserve System was blind, mute, dumb, and frankly, retarded when it came to Lehman’s Repo 105, and pretty much every other aspect of the Lehman collapse. As the Examiner discloses: “Secretary Geithner “did not recall being aware of” Lehman’s Repo 105 program”, “Jan Voigts, who was an Examining Officer in FRBNY’s Bank Supervision Department, had no knowledge of Lehman removing assets from its balance sheet at or near quarter?end via a repo trade”, “Arthur Angulo, who was a Senior Vice President in FRBNY’s Bank Supervision department, likewise was unaware that Lehman engaged in repo transactions at quarter?end” although the latter did point out that “the described repo transactions appeared to go “beyond other types of [permissible] balance sheet management.” And lastly, “Thomas Baxter, FRBNY General Counsel, had no knowledge of Repo 105 transactions, either by name or design.” Yet it is these clowns that want to become America’s uber-regulator. Now that is funny, considering that at the apex of the greatest cataclysm for the financial industry, the Fed was blissfully unaware of one of the most egregious book cooking scams ever conducted by a Wall Street firm. Yet with all the Fed’s bells and whistles, with all its Bloomberg terminals, all its fancy daytraders, all its Flash trading enabled momentum chasing algos, one central bank, half way around the world, knew all too well what was going on at Lehman – the Reserve Bank of Australia. Which is why we nominate the RBA’s chair, Glenn Stevens, to be direct supervisor of the entire ungodly and corrupt mess that is Wall Street (and to make Ben Bernanke his butler). We also strongly endorse the nomination of Amanda Drury to supersede that of Janet Yellen, as the Fed’s new chair of vice. At least she will bring some inflationary pressures to the Marriner Eccles building.

From the Examiner’s report:

Jawad reported that the Reserve Bank of Australia asked Lehman why Lehman wanted to engage in Repo 105 transactions.

The associated text is more or less irrelevant but shows once again just what a scam 105’s were

Jawad then stated, “I spoke to Mark Cosaitis about this and he obviously would like us to give a vague reason about getting better net down treatment, which isn’t a lie. However, if they want a deeper explanation then we may have to get down to the nitty gritty of the truth. Do you want us to go down this line or want us to just give it a miss . . . . [T]he more people that know the truth, the more dodgy it can be.” The statement by Jawad about “better net down treatment” refers to Lehman’s terminology for the reduction of net assets by means of Repo 105.

Yada, yada, more criminality, we get it. What is funny is the massive game of pass the buck that is occurring on on US soil, even as the Aussies knew too well the shitshow that was about to unravel in the soon to be Socialist States of Amerika. Cause, you see, Tim Geithner, was not, is not, and never will be a regulator. In fact, if TurboTax can’t hack it, you won’t find timmay within 50 feet of it. Once again from the report:

In the words of one of the FRBNY’s on?site monitors: “how Lehman reports its liquidity is between Lehman, the SEC, and the world.” In the same vein, FRBNY witnesses repeatedly stated that they were mindful that the FRBNY was not Lehman’s “primary regulator” under the CSE program, and that the FRBNY was not monitoring Lehman with an eye toward compliance or enforcement. – Examiner’s Interview of Treasury Secretary Timothy F. Geithner, Nov. 24, 2009, at p. 4 (repeatedly emphasizing that the SEC, not the FRBNY, was Lehman’s primary “supervisor”).

Ok, fine. So it is the SEC’s obligation. So what do we find is the SEC’s excuse for gross oversight:

[SEC Assistant Director for Trading and Markets Matthew] Eichner stated, the SEC applied a “much different standard” to holding company liquidity pools than the companies themselves did. Eichner characterized the SEC’s standard as “narrower” than the standard to which the holding companies held themselves in public disclosures. Additionally, he said that the SEC was “very comfortable living with a world where  numbers in the public were the ones the firms worked out with their accountants,” as opposed to the narrower numbers worked out by the SEC.

Ah, ok, so the SEC is now passing the buck to Lehman’s auditors, the soon to be defunct Ernst & Young (setting aside that fact that there is some serious Times Square real estate that will soon need to be filled: recall that 5 Times Square, E&Y’s New York Headquarters, is at a DSCR of 0.98, with E&Y occupying 97% of the building. Something tells us the lease will be forcefully terminated before its 2022 maturity). 

So what is E&Y’s take on things:

Asked whether Ernst & Young was aware of or had concerns with Lehman’s inclusion of certain assets, such as the Citibank deposit or JPMorgan’s intraday collateral, in its liquidity pool, Schlich stated that the composition of the liquidity pool was a “regulatory issue.”

Yup, folks, you heard that right: E&Y throws the ball back at the regulators, which for all intents and purposes is the FRBNY and the SEC, which have both washed their hands of the whole affair. And so we are back to square one, with nobody caring to take any responsibility, while thousands of people lost the entirety of their Lehman investments because of the corrupt trio of the FRBNY-SEC-E&Y. Just swell.

Please can Australia annex the US already?

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