Shell Games

While awaiting FL-19's special election results, I thought I'd take a look at the WaMu testimony, and got distracted by this. The court-appointed examiner of the Lehman Brothers failure has reported back to the court that the investment house's directors did not breech their fiduciary responsibilities. Of greater interest however was this little gem:

'A 2,200-page report by a court-appointed examiner says executives of Lehman Brothers manipulated the now-defunct company's balance sheet, using a "materially misleading" accounting trick to temporarily remove $50 billion of troubled assets, The New York Times and The Washington Post report.

The examiner's report says that then-Lehman CEO Richard S. Fuld Jr. was "at least grossly negligent" and that the accounting firm Ernst & Young could be accused of professional malpractice.'

It turns out that Lehman used a shell to hide it's toxic assets, trading them for cash out of a small company it owned on the side. This maneuver allowed Lehman to improve the appearance of its books. WaMu's whining to Congress notwithstanding, it seems less and less certain that any of these firms deserved the rescues they received in 2008 & 2009.