Lehman Perfidy: Everybody Does It …”Lehman’s executives were involved in a scheme to hold assets off the balance sheet, at key accounting times, in order to conceal the firm’s extreme use of leverage. The Valukas report also faulted the bank’s accountant, Ernst & Young, for defective audit processes….A recent article by Louise Story and Eric Dash in The New York Times gives new details on how Lehman operated the repo subterfuge. It seems that they set up a company by the name of Hudson Castle, with which to engage in hiding assets. On the record, Lehman was a minority owner (25%) of Hudson Castle. Actually, Lehman controlled the board and staffed the company with former Lehman employees. This allowed Lehman to control the day to day actions of Hudson Castle, while maintaining the subterfuge that dealings between the two companies were at an arm’s length. Seeking Alpha 4/13/10
Fannie / Freddie: What does Treasury know? “1 in 10 PRIME LOANS are either late or in foreclosure. FHA loans are running close to 20% between delinquent and foreclosure-in-process. That’s one in FIVE. And of subprime loans, 41% are either delinquent or in foreclosure. Forty one percent…
So let’s ask a few questions here:
- What’s the bond market going to think about a literal $5 trillion guarantee (for three years anyway) on MBS? Might some people have known about this in advance, with that being the reason for the bleed in the long end of the bond curve this last week or so? One wonders – of course nobody would ever trade on inside information, right?
- Why wait until the market closed on Christmas Eve for this? Oh, that’s to stop a sell-off in bonds, right? Yeah, we’re playing “American Idol is on, and you’re too stupid to remember this for three days.” Got it. We’ll see how that works out.
Oh, and if that’s not enough to make you vomit, get a load of this:
The government announced Thursday that it had approved Wall Street-style, multimillion-dollar compensation packages for top executives at Fannie Mae and Freddie Mac, the two mortgage companies that have become little more than arms of the federal government.
The two top executives at the companies, which have received $121 billion in federal aid since they were seized last year, could be paid up to $6 million each for their services this year. In total, the top 12 executives at the two firms are in line to receive up to $42 million in 2009 alone.” Seeking Alpha 12/25/2009
The AIG Scandal “The scandal here is not the size of the losses from the global financial meltdown — those are losses which sooner or later, in one form or another, would have had to be borne by the government anyway. Rather, the scandal is that AIG could have earned billions of dollars by selling insurance against a meltdown, even as it was wholly incapable of paying out on those policies.” Conde Nast Portfolio 2/2/09