We’ve been arguing that the revelations from the Lehman bankruptcy examiner’s report deal a serious blow to the ideology of regulation. Today Andrew Ross Sorkin provides really damning evidence against the idea that greater financial regulation leads to a safer financial system.
Almost two years ago to the day, a team of officials from the Securities and Exchange Commission and the Federal Reserve Bank of New York quietly moved into the headquarters of Lehman Brothers. They were provided desks, phones, computers — and access to all of Lehman’s books and records. At any given moment, there were as many as a dozen government officials buzzing around Lehman’s offices.
These officials, whose work was kept under wraps at the time, were assigned by Timothy Geithner, then president of the New York Fed, and Christopher Cox, then the S.E.C. chairman, to monitor Lehman in light of the near collapse of Bear Stearns.
Sorkin goes on to explain how the regulators were given full access to the firm’s books — not just the cleaned up version of the balance sheet shown to investors. They were aware of the Repo 105 transactions and could easily have seen the volume of them occurring around the quarterly reporting dates. Yet they failed to raise any red flags.
“The examiner’s report comes at a time when Washington is considering more financial oversight,” Larry Ribstein writes. “By whom?”
Business Insider Emails & Alerts
Site highlights each day to your inbox.