Friday, March 12, 2010
Lehman Brothers: “Another Drug We R On”
Editor’s Note: We will, as promised, soon conclude “What We Learned Writing A Book About Warren Buffett” in these virtual pages. This morning’s headline in our online Wall Street Journal, however, is too timely and important to go without a comment right here, right now.
This just in: short-sellers had nothing to do with the collapse of Lehman Brothers.
You’re reading that correctly. Summarizing the 2,200 page report of the bankruptcy-court examiner who investigated Lehman Brothers, the Journal’s headline says, “Lehman Torpedoed Lehman.”
Not—despite the misinformed yammering of hysterical Congresspersons driven near-mad during the financial crisis by the thought that, lacking any other employable skills as they do, their fat government pensions and healthcare benefits would be at risk if their country collapsed; and fueled by the highly misleading commentary of at least one self-appointed crusading CEO whose chief aim seemed to be to shift the spotlight away from his own shortcomings—short-sellers.
In fact, short-selling is not mentioned in today’s Wall Street Journal—just a lot of really bad management by people desperate to keep a sinking ship afloat any way they could, including “accounting maneuvers,” one of which was referred to by an insider in an email as “another drug we r on.”
But don’t listen to us—after all, in addition to investing in many fine American companies for the long run, we also sell certain not-so-fine companies short.
Listen to the Wall Street Journal:
A scathing report by a U.S. bankruptcy-court examiner investigating the collapse of Lehman Brothers Holdings Inc. blames senior executives and auditor Ernst & Young for serious lapses that led to the largest bankruptcy in U.S. history and the worst financial crisis since the Great Depression.
In the works for more than a year, and costing more than $30 million, the report by court-appointed examiner Anton Valukas paints the most complete picture yet of the free-wheeling culture inside the 158 year-old firm, whose chief executive Richard S. Fuld Jr. prided himself on his ability to manage market risk.
The document runs thousands of pages and contains fresh allegations. In particular, it alleges that Lehman executives manipulated its balance sheet, withheld information from the board, and inflated the value of toxic real estate assets.
Lehman chose to "disregard or overrule the firm's risk controls on a regular basis,'' even as the credit and real-estate markets were showing signs of strain, the report said.
In one instance from May 2008, a Lehman senior vice president alerted management to potential accounting irregularities, a warning the report says was ignored by Lehman auditors Ernst & Young and never raised with the firm's board….
—The Wall Street Journal
There is more—much more.
2,200 pages more, in fact, with 300 pages alone devoted to “balance-sheet manipulation” according to the Journal.
Read it yourself:
And say goodbye to the made-up, non-existent, never-happened, figment of their imagination “naked short-selling scandal” that brought down America.
I Am Not Making This Up
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The content contained in this blog represents only the opinions of Mr. Matthews, who also acts as an advisor: clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 8:00 AM