The Financial Times details how JPMorgan recorded the infamous “Repo 105” repurchase trades as sales, just like Lehman did.What it shows is there’s a big difference in how JPM and Lehman handled the trades.
JPMorgan fully disclosed the year-end values of its repo sales and purchases in annual reports.
Lehman never did.
JPM told the FT that its strategy was an individual trading strategy, unlike Lehman’s strategy, which used repo trades marked as sales as a balance sheet management tool.
Lehman sketchily channeled their deals through the Lehman London office to take advantage of a local legal opinion, says the FT.
All of JPM’s trades were done in New York.
Lehman’s repo trades were then recorded as sales in order to shrink their balance sheets. (By the way, Lehman execs say that’s no big deal.)
JPM actually stopped recording the trades as sales in 2005, when the bank merged with Bank One (and before Jamie Dimon became CEO in 2006).
Of course Lehman continued and later declared bankruptcy.