SEC To Examine The Accounting Measure Of LehmanApril 21st, 2010 - 9:42 pm ICT by Pen Men At Work
April 21, 2010 (Pen Men at Work): Security and Exchange Commission (SEC) has declared that it is examining if any of America’s biggest 19 banks are utilizing an accounting measure, which is supposed to have led to the breakdown of the Lehman Brothers. The commission has transported letters to the 19 banks, seeking data about any such transactions.
Mary Schapiro, chairperson of the SEC, has divulged in her testimonial at a congressional inquiry that the SEC is inspecting Lehman’s use of the accounting move, referred to as Repo 105, which permitted it to mask its weak point before it failed.
Repo 105 is the practice of extracting high-risk debt from the balance sheet just before the conclusion of a quarter and then purchasing it back early in the next quarter
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The bankruptcy of Lehman Brothers is the biggest bankruptcy filing in American history with Lehman holding over $600 billion in assets.
Richard Fuld, the previous CEO of Lehman Brothers, swore that he has absolutely no memory whatsoever of the company utilizing its accounting to cover the fact that it was carrying too much debt.
In keeping with reports, Lehman vended high-risk debt at the end of each quarter so that it didn’t have to demonstrate that on its balance sheet thereby avoiding the inspection of regulators and shareholders. It then repurchased them at the commencement of the next quarter.
Anton Valukas, the examiner appointed by the bankruptcy court, divulged that the watchdogs missed chances to modify Lehman’s behavior before its situation had reached the point of no return.
Tags: american history, balance sheet, bankruptcy court, bankruptcy filing, chairperson, chapter 11 bankruptcy, chapter 11 bankruptcy protection, commencement, congressional inquiry, lehman brothers, mary schapiro, men at work, pen men, point of no return, regulators, repo, testimonial, watchdogs, weak point, work security