Lehman and SEC

The SEC is watching the big banks right now, to make sure there are no new shenanigans that match what Lehman did before the recent financial crisis, that brought them to ruin.

Lehman was using a certain accounting trick, that the SEC is worried banks may continue trying, thus putting the recovery at risk. THe accounting technique is known as Repo 105, which allowed them to mask the major problems they were having with their business, up until the time it failed.

According to financial experts, Lehman "was significantly and persistently in excess of its own risk limits, was aware of these excesses and simply acquiesced....the SEC is determined to become a more effective regulator," she told lawmakers. "We are determined to use the lessons of that experience to be more effective."

Lehman and SEC
cbsnews.com

The Securities and Exchange Commission is examining whether any of the 19 largest U.S. banks are using an accounting trick that a bankruptcy examiner has said led to the collapse of Lehman Brothers, SEC Chairman Mary Schapiro said Tuesday. Schapiro testified at a congressional hearing that the SEC is scrutinizing Lehman's use of the accounting move, known as Repo 105, that allowed it to mask its weakness before it failed. She said the agency has sent letters to the 19 banks, seeking information about any such transactions... Federal Reserve Chairman Ben Bernanke testified at the hearing that the central bank wasn't aware that Lehman used the accounting move. And even if the Fed did know, it wouldn't have changed the Fed's view that the company was in bad financial shape, he said.

Lehman and SEC