It appears that Lehman wasn't the only bank that reduced borrowing at quarter-end, to show investors a prettier leverage picture. The simplest way I know to define the practice is "like a college student paying his neighbor to hide his bong during room inspections."
(For a fuller discussion of the repo market, see here)
The Wall Street Journal reports today that ALL the big banks were engaging in heavy "debt-reduction" activities at quarter-end over the last year and a half:
A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.
Copyright 2010 AlphaNinja