Posts Tagged ‘Lehman Bankruptcy’

The Six Hundred Forty One Million Dollar Carcass

Joshua M BrownThe Reformed Broker, happy to spread the wealth around… 

The Six Hundred Forty One Million Dollar Carcass

Buried in a story about how what’s left of Lehman Brothers is looking to emerge from Chapter 11, there was an astounding statistic that I’ll ask you to savor like the last suckle of a Werther’s Original…

From Reuters:

Lehman has paid $641.9 million in U.S. professional fees since it filed for bankruptcy, according to a January 2010 report.

Hilarious.  Lehman Brothers was the biggest bankruptcy filing in history – so why shouldn’t the "clean up effort" be the biggest legal and advisory bonanza in history as well?

Everyone got involved – restructuring firms, bankruptcy trustees, law firms of every stripe, sushi chefs, PR firms, jugglers and stilt-walkers and fire eaters, consultants, advisors, tax experts, witch doctors, real estate appraisers, hairdressers, financial engineers, secretaries, bassoonists etc.

What a Norman Rockwell moment for America – just picture this hideous tableaux – bespoke-suited and bespectacled millionaires sifting through the carrion offal of disgraced-but-still-filthy-rich billionaires while the rest of American Business looks on without a line of credit or a paying customer in sight.

Just like Walt Disney imagineered it for Main Street USA.

$641 million in fees generated during Chapter 11?  Hell, that’s a stimulus plan in and of itself!  Who can we bring to its knees next quarter?  Can we incinerate another hundred billion dollar company so that the bourgeoisie can snort those ashes off a conference table, too?

Someone’s gotta do it, so I’m not mad at the restructo-vulture complex.  In fact, to the contrary, I’m glad to see that we haven’t found a way to offshore the jobs of corporate undertakers just yet. 

Still got one booming industry left, then.  Cool. 


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Excessive Use of Repo 105 is White Collar Crime

Excessive Use of Repo 105 is White Collar Crime

Woman looking at mannequins in store window

Courtesy of Joshua M Brown, The Reformed Broker 

I won’t bore anyone with a two page dissembling of Lehman‘s use of Repo 105 which we learned about from the report on its demise this week.  Rather, this post will simply be a sledgehammer that slams the obvious into the side of the blogosphere.

For the uninitiated, the scam that was being perpetrated by Lehman Bros senior execs and their auditors isn’t a new one, it was just pulled off on a massive scale, costing investors and the economy dearly.

Repo 105 was an accounting trick that allowed Lehman to temporarily shift $50 billion in liability off of their balance sheet just in time to show investors a quarterly report demonstrating reduced leverage.  Once the quarter was closed, Lehman would then repurchase (repo) that debt back onto its balance sheet.  And they did this several times.

This window dressing allowed the company to fake solvency and sucker in investors, both in the stock market and, the company had hoped, from the sovereign wealth funds it was flirting with.

They would hide tens of billions of dollars temporarily and then trot out "Rock Star CFO" Erin Callan to lie to the world on television about how everything in Lehmanland was just fine.

Auditors Ernst & Young, the Lehman Bros Board of Directors and especially the Senior Executives who signed off on this practice have committed a crime.  This is securities fraud.  Their culpability ranges from negligence to outright thievery.  It may be Ivy League caliber securities fraud, but it is fraud nonetheless.  And if technology or industrial executives had engaged in this exact same behavior, they’d be in court defending themselves right now.

Not much more to it.

Now we’ll see if Sarbanes-Oxley has any actual teeth or if it turns out to have only been an Enron band-aid all along.

Read Also:

Lehman Report May Point Way For Criminal Charges (Reuters)

Lehman Report Points Way To Plaintiffs, Not Prison (BusinessWeek)

Accounting Fraud, Short-Sellers & The SEC (TBP) 


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How Lehman, With The Fed’s Complicity, Created Another Illegal Precedent In Abusing The Primary Dealer Credit Facility

How Lehman, With The Fed’s Complicity, Created Another Illegal Precedent In Abusing The Primary Dealer Credit Facility

Courtesy of Tyler Durden

Five months ago, Zero Hedge observed the nuances of the Federal Reserve’s Primary Dealer Credit Facility (PDCF) and concluded that this artificial liquidity boosting construct was nothing more than yet another scam to allow banks to extract ever more money from taxpayers, with the complicit blessing of the Federal Reserve Board Of New York (as the original piece also provided an in-depth discussion of the triparty repo market which is now a parallel to the buzzword of the day in the form of Lehman’s "Repo 105" off balance sheet contraption, it should serve as a useful refresher course to anyone who wishes to understand why while Repo 105 with its $50 billion in liability contingency may have been an issue, the true Repo market, with over $3 trillion of likely just as toxic assets, is where the real pain in the future will come from). The PDCF would allow assets of declining and even inexistent value to be pledged as collateral, thus making sure that taxpayer cash was funneled into sham institutions holding predominantly toxic assets, and whose viability was and is limited, yet still is backed by the Fed, which to this day continues to pour our money into them. Today, with a tip from the NYT’s Eric Dash, we demonstrate just how grossly negligent the Federal Reserve was when it came to Lehman’s abuse of the PDCF, and how the trail of slime of Lehman’s increasingly obvious manipulation of its books goes to the very top of the Federal Reserve Bank of New York, and its then governor – a very much complicit Tim Geithner.

1. The Liquidity Conundrum And the PDCF

In our original piece, we posited the following observation on the Fed’s constant involvement in liquidity provisioning, particularly in the context of the repo market:

Here is the liquidity crunch in its full flow-chart glory:

  1. If can not obtain short-term (overnight or term) funding in repo market, go to Eurodollar market
  2. If can not obtain short-term funding in Eurodollar market (LIBOR), go to asset sales
  3. If asset sales are impossible due to lack bids, illiquid markets, and collateral consists of toxic MBS and CCC-rated junk bonds, yet margin calls are streaming and repo counterparties are demanding their


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Phil's Favorites

What is the 'boogaloo' and who are the rioters who stormed the Capitol? 5 essential reads

 

What is the 'boogaloo' and who are the rioters who stormed the Capitol? 5 essential reads

Rioters mass on the U.S. Capitol steps on Jan. 6. Samuel Corum/Getty Images

Courtesy of Jeff Inglis, The Conversation

In the wake of the insurrection on Jan. 6, the U.S. is bracing for the possibility of additional violent demonstrations and potential riots at the U.S. Capitol and state capitol buildings around the nation. W...



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ValueWalk

Chinese Investments And COVID-19: What Future For Chinese Companies In The International Economy?

By Jacob Wolinsky. Originally published at ValueWalk.

Over the last 10 years, China has become a major player in foreign direct investment (FDI). According to China’s Ministry of Commerce, by the end of 2019 over 27,500 Chinese companies had invested in 188 countries around the world, and 44,000 companies had been started abroad. Asia, Europe and Latin America are the main destinations for these investments. The coronavirus pandemic has severely curtailed global trade and reduced FDI flows. Amidst this unprecedented global health crisis, what does the future hold for Chinese companies in the international economy? Ni Gao (full bio) below explains the importance of FDI for China.

...



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Zero Hedge

Global Markets, S&P Futures Flat With US Markets Closed For MLK Holiday

Courtesy of ZeroHedge View original post here.

US cash markets may be closed for Monday's MLK holiday, but US equity futures are humming and at last check they were unchanged from Friday's close at 3, 762 after earlier dropping as much as 20 points.

“Markets needed a breather or even a pull back to justify reflationary expectations,” said Ben Emons, managing director of global macro strategy at Medley Global Advisors.

Despite the dip, stocks remains just shy of...



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Chart School

Why did selling SP500 volatility trades blow up?

Courtesy of Read the Ticker

Many have made their fortunes selling volatility premium and then losing it, that is because they are running down the lit fuse and not understanding that eventually the strategy blows up.

In the chart below periods marked with A, B, C, D are periods of chasing yield which was so great the selling of option premium became vogue. Yes, this strategy worked for a while and 'this time was different' worked, until it didn't.

Selling volatility work great during period gray A until the cycle ended at red A.
Selling volatility work great during period gray B until the cycle ended at red B.
Selling volatility work great during period gray C until the cycle ended at blue C.
Selling volatility work great during period gray D un...

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Biotech/COVID-19

The simple reason West Virginia leads the nation in vaccinating nursing home residents

 

The simple reason West Virginia leads the nation in vaccinating nursing home residents

By mid-January, only about a quarter of the COVID-19 vaccines distributed for U.S. nursing homes through the federal program had reached people’s arms. Paul Bersebach/MediaNews Group/Orange County Register via Getty Images

Courtesy of Tinglong Dai, Johns Hopkins University School of Nursing

The urgency of vaccinating nursing home residents is evident in the numbers. The COVID-19 pandemic has claimed the lives of mo...



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Politics

Trump supporters seeking more violence could target state capitols during inauguration - here's how cities can prepare

 

Trump supporters seeking more violence could target state capitols during inauguration – here's how cities can prepare

The FBI says armed protests are planned at all 50 state capitols ahead of President-elect Joe Biden’s inauguration. Paul Weaver/SOPA Images/LightRocket via Getty Images

Courtesy of Jennifer Earl, University of Arizona

Americans witnessed an alarming and deadly failure in planning and policing at ...



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Kimble Charting Solutions

Treasury Bond Yields At Make-Or-Break Decision Point Says Joe Friday

Courtesy of Chris Kimble

Treasury bond yields (and interest rates) have been falling for so long now that investors have taken it for granted.

But bond yields have been rising for the past several months and perhaps investors should pay attention, especially as we grapple with questions about inflation and the broader economy (and prospects for recovery).

Today we ask Joe Friday to deliver us the facts! Below is a long-term “monthly” chart of the 30 Year US Treasury Bond Yield.

Counter-Trend Rally In Yields Facing Strong Resistance!

As you can see, treasury bond yields have spent much of the past 25 years trading in a falling channel… but the coronavirus crash sent yields...



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Mapping The Market

The Countries With The Most COVID-19 Cases

 

The Countries With The Most COVID-19 Cases

By Martin Armstrong, Statista, Jan 12, 2021

This regularly updated infographic keeps track of the countries with the most confirmed Covid-19 cases. The United States is still at the top of the list, with a total now exceeding the 22 million mark, according to Johns Hopkins University figures. The total global figure is now over 85 million, while there have been more than 1.9 million deaths.

You will find more infographics at ...



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Digital Currencies

Bitcoin: why the price has exploded - and where it goes from here

 

Bitcoin: why the price has exploded – and where it goes from here

B is for blast-off (but also bubble). 3DJustincase

Courtesy of Andrew Urquhart, University of Reading

Bitcoin achieved a remarkable rise in 2020 in spite of many things that would normally make investors wary, including US-China tensions, Brexit and, of course, an international pandemic. From a year-low on the daily charts of US$4,748 (£3,490) in the middle of March as pandemic fears took hold, bitcoin rose to ju...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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