When the Lehmans ‘Repo 105’ story broke last week, CU noted the similarities with Enron. There are indeed some similarities – the bullying of external accountants to get dodgy treatments waived through; the reliance on convenient legal opinions - but there’s an even more compelling parallel. It’s WorldCom and the halfwit Bernie Ebbers, now languishing in gaol.
WorldCom, you may recall, resorted to the laughable expedient of capitalising $ 6 billion of expense - the simplest profit-doctoring scam imaginable. And the Lehmans Repo trick isn't at all complicated either.
Enron’s schemes, by contrast, were mind-boggling. Starting with ultra-complex (but legitimate) securitisations, Ken Lay’s boys moved on by degrees to transactions the structure of which even some investment banks found it hard to fathom. (“Actually unfathomable”, according to one academic.)
Everything about Lehman’s, from Dick “the worst US chief executive of all time” Fuld down, reeks of rank amateurism! Move up Bernie, you may have a new cell-mate.