I'll admit that I supported the bailout program. All the experts were saying that we needed to do this to avoid a huge and catastrophic global economic collapse. Now these experts' opinions are becoming suspect in light of what they knew at the time.
Here’s how Repo 105 worked in simple terms: At the end of each quarter, to reduce its all-important leverage levels, Lehman would “sell” assets (typically highly liquid government securities) to another firm in exchange for cash, which it would use to pay down its debt. The assets were typically worth 105 percent of the cash Lehman received. Several days later, after reporting its earnings, it would buy the assets back. Normally, this would be considered a loan, or repurchase agreement, but instead it was booked as a sale.
Huge piles of cash were moving in and out. According to the examiner’s report, “Lehman reduced its net balance sheet at quarter-end through its Repo 105 practice by approximately $38.6 billion in fourth quarter 2007, $49.1 billion in first quarter 2008, and $50.38 billion in second quarter 2008.”Before this, Harry Markolos was waving large red flags about Bernie Madoff's creative accounting for over 8 years, but no one would listen - explained in his recent book titled, ironically enough: NO ONE WOULD LISTEN.
Our SEC and Federal regulators are not doing their jobs. Your money is not protected, and if you are not one of the big fat cats stealing citizens' money, then you are probably one of the poor citizens suffering from the fallout of this fiasco. It's really difficult for me to put into words how disgusted I am with this whole scene. If our capitalist system is to work, there is no such thing as a company that is too big to fail. And certainly there should be no one above the law.