Bank Balance Sheets: Yet Another Example

It is really sad that there is no real democracy in this country. Real democracy is the ancient Greek city state style voting directly on issues rather than what is the current form called "representative democracy". The aware ones know that representative democracy is crap. Currently we have the ruling class rich families in an oligarchic style and corporations that are all too powerful and above law since they have politicians who are supposed to be our representatives in their pockets. Of course if -as an American- you ever took any classes on political systems or history of the ancient world, you would have a better idea of what is really going on in this country and realize that you are nothing but a peasant and most likely your employer is your slave-owner holding you by the balls in one way or another. If you took any class like that in this country, you are very likely to have been told that direct democracy is not plausible in the current world due to much bigger populations and representative democracy (what an oxymoron) is the way to go. They want you to believe that so that you can yield power to a group of families and people that have monopolized the political system in this country. Does it not strike you as odd that fathers and sons, and grandfathers and grandsons and whatever else have been elected the presidents, governors, and what not several times??? That to me sounds like a sultanate. Was George W so much better than any other option that he became the president, twice??? Or Obama, Mr. Change for that matter. You know how the easiest way I know there is no democracy in this country besides the fact that there is no real justice when it comes to the banks and corporations? It is how the American people voted the republicans out of office because Bush's men Paulson, Bernanke, and Geithner went above their powers, gifted trillions to the banks at the taxpayer voters expense and yet Obama who came to power promising change kept the same men in power. Who really is in power Bernanke, Geithner and similar a few other people or Obama? Obama must have agreed to keeping these men before being chosen by some powerhouses of the political system in this country that does not let or make it easy for anyone else to get anywhere near power. So was Obama really democratically elected or was he shoved down our throats by a bunch of these powerful people who want to think we are living in a democracy whereas they choose all the candidates the way they want and just like Manchurian candidates these candidates are all the same give or take a little.

Going back to our topic of direct democracy, don't you think with the advent of internet and cellphones direct democracy should be a lot easier to implement? I think it would be very cheaply and easily implemented, but it won't because some people and those people are rich and powerful, do not want this to happen. We are living in the times of kings and lords people, don't fool yourselves. There is no justice or democracy.

Below is an example:

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Bank Of America Says Its Lehman-Style Bogus Balance Sheet Manipulation Is A-Okay

Posted Mar 24, 2010 09:57am EDT by Henry Blodget 

As John Hempton pointed out last week, Lehman wasn't the only bank that engaged in bogus end-of-quarter balance sheet manipulation to trick investors into thinking it was less leveraged than it was.

Turns out, Bank of America (BAC) did it, too.

Hempton compared Bank of America's "average quarterly assets" and "end of quarter assets" and found that, in each quarter, billions of dollars of assets conveniently disappeared briefly at the end of the quarter, only to return again at the start of the next one.

Thus, Bank of America interrupted its wild gambling for a few days at the end of the quarter, presented a sober snapshot to its investors, and then went right back to gambling again.

Was this illegal?

Probably not.  Like Lehman, Bank of America probably found some legal loophole in some country somewhere that allowed them to momentarily hide tens of billions of dollars of assets somewhere where Wall Street wouldn't see them.

But it's certainly not transparent and forthright, either.

Anyway, ProPublica caught up with Bank of America and asked them to comment on this behavior.  Naturally, Bank of America thinks it's perfectly acceptable:

"Efforts to manage the size of our balance sheet are routine and appropriate, and we believe our actions are consistent with all applicable accounting and legal requirements."

Mm hmm.  As ProPublica notes, this is almost exactly what Ernst & Young said about its Lehman accounting:

"Our opinion indicated that Lehman’s financial statements for that year were fairly presented in accordance with Generally Accepted Accounting Principles, and we remain of that view."

See Also: Here's Why Lehman's Accounting Was Totally Bogus--And Why The Rest Of Wall Street's Still Is

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Housing Market Woes

The housing market continues to do poorly. The supply of homes for February rose 9.8% to 8.6 months’ of supply from 7.8 months’ of supply in January. It is amazing that the markets took this as a good sign or at the least some commentators tried to paint this as good news. Economy is doing terrible and only very few people are getting any help from the bubble in the stockmarkets considering 57% of the stockmarket is owned by the top 1% of Americans and 86% of it by the top 20%. Neither of these two groups make up too much of the 70% of the US GDP, which is consumer spending. Most of the people who make up that 70% are either unemployed or cutting back huge. The current levels in the markets are unsustainable. The one market that glitters and offers hope for the future is the physical gold market.

CLF: The Ultimate Momentum Stock

For those people who follow the most common advice in the Market Wizards books, CLF could be a dream come true. It is the definition of a momentum stock. It is also the ultimate bubble stock. It is showing technical strength and pushing new 52-week highs everyday. Valuation and fundamentals are thrown out of the window and a castle is built in the air. You can surely choose to play with fire in the later stages of this stock market bubble and the poster child of it, CLF, and possibly make some money, but eventually if you overstay your welcome, you will lose your shirt. I've seen it happen to people with this stock. My choice for the last couple months has been buying a small amount of puts and am I glad to have played this bubble that way. I think that is actually the best way of shorting - especially bubbles. Otherwise imaging being short a stock that went from yesterday's low of $61.91 to $67.50 today on no news and despite bad news in the economy. This stock is "acting" "great" if you are a momentum guy - one of those people who do well for a while and then lose their shirts, the people profiled in Nassim Taleb books such as Fooled by Randomness. Either way, I think this stock is going to be a great short at some point, but I might be early, which is why I have been shorting it using puts that I will systematically roll further and possibly higher if this frenzy continues. If you think it will be taken over, I have to tell you you are a fool. Funny how history repeats. I said the same things to other people who did not believe me a couple years ago and this stock cost them a lot. It will do the same again. No board that has half a brain will agree to taking this company over at this valuation. If they do, I'll be shorting them. Enjoy the bubble while it lasts because like all other bubbles, this will end very ugly.

Morgan Stanley's Past Reminds One Of GLD's Future

This is old news I know - from 2007, but it is very telling for what has been going on, is going on, and will be going on in the precious metals markets for the individual investors. GLD comes to mind when one reads this article. It is highly unlikely that GLD actually owns the physical gold as people believe they do. People believe they do because they make them believe GLD holds physical. That cannot be further from the truth.

Here is the Reuters article:

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UPDATE 1-Morgan Stanley to settle class-action lawsuit

Tue Jun 12, 2007 7:22pm 

(Recasts, adds response from Morgan Stanley)

NEW YORK, June 12 (Reuters) - Morgan Stanley (MS.N) will pay $4.4 million to settle a class-action lawsuit with brokerage clients who bought precious metals and paid storage fees, according to a court filing.

The proposed settlement, which must be approved by the federal court in Manhattan, includes a cash component of $1.5 million and economic and remedial benefits valued at about $2.9 million, according to a court filing on Monday.

The suit, filed in August 2005, alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store.

But Morgan Stanley either made no investment specifically on behalf of those clients, or it made entirely different investments of lesser value and security, according to the complaint.

"While we deny the allegations, we settled the case to avoid the cost and distraction of continued litigation," Morgan Stanley said in a statement.

According to the filing, Morgan Stanley argued there were no violations of law and no default or failure to perform or deliver precious metals.

The suit was filed by Selwyn Silberblatt, on behalf of himself and others who bought precious metals -- gold, silver, platinum and palladium in bullion bar or coins -- from Morgan Stanley DW Inc. and its predecessors and paid fees for their storage, according to the filing. The suit covered investors who did so between Feb. 19, 1986, and Jan. 10, 2007.

Silberblatt, a resident of Maine when the suit was filed, bought silver bars from Morgan Stanley during that period. (Additional reporting by Joe Giannone)

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Great Site With A Lot Of Interesting Data And Opinion Pieces

The data on stock market ownership and silver markets is especially interesting (highlighted in yellow). Here is one from Bullion Bulls Canada:

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Precious Metals and Rigged Markets

Written by Jeff NielsonFriday, 19 March 2010 11:47

The manipulation of the global, gold and silver markets is fact, not merely “suspicion” or the delusions of “conspiracy nuts”. Confirmation of this reality comes in many forms. There is theobvious sham of the world's two, largest “bullion-ETF's”: GLD and SLV. It is most apparent in the silver market, where “official” inventories have tripled, but with 100% of this supposed, “new inventory” being the privately-owned bullion held by SLV. In other words, the more silver which is boughtby SLV-holders, the larger that the “official” inventories get (i.e. the amount of silver for sale).

How exactly does that work? I know that when I buy my own, “Silver Maples” that no one can sell that silver out from under me – to the first person who is willing to ante-up the current “spot” price.

Then there are the massive, “short” positions of the bullion banks – the largest such concentrations in the history of commodities trading. Not only does the size of these positions preclude there being any rational justification for them (other than to deliberately depress precious metals prices), but the trading of these positions doesn't even follow basic, profit-maximizing behavior. In other words, at times where gold and/or silver have already been pushed well into “over-sold” territory (and into strong “support” areas), the shorts typically try to continue to push bullion prices lower (and into this strength) through increasing the size of their positions – rather than taking profits (the expected behavior of shorts sitting on big profits), or waiting for other shorts to stick their necks out to push prices through resistance.

The only explanation which covers both the size of these positions and the trading-patterns is that these traders – a handful of “bullion banks”, led by JP Morgan and Barclay's – are engaging in this activity purely to suppress the price of gold and silver.

This is reinforced by the words of Alan Greenspan – both in his younger days and during his tenure as Chairman of the Federal Reserve (see “Young Greenspan and Gold”). Young Greenspan eloquently proclaimed that gold was the only “protection” against the “confiscation of wealth” by the bankers, through the permanent “inflation” which was an inherent part of the bankers' paper/debt empires. He warned that the bankers' “tirades against gold” were specifically because without gold “there is no way to protect savings from confiscation through inflation”.

It should be no surprise that the older Greenspan – who served as the bankers' tool as Fed Chairman – seemed to 'forget' everything he knew about gold. Instead, all the older Greenspan was interested in talking about was how the Fed could manipulate the price of gold, in order to maintain “confidence” in the bogus, banker-paper which they erroneously call “money”. Either through senility (or all the zero's he added to his “net worth”), older Greenspan no longer saw any need for people to “protect” themselves from bankers.

Accepting (purely for the sake of argument) that the precious metals market is heavily-manipulated, gold-skeptics will reply “why risk investing in a rigged market?”

The obvious answer to that question is to simply point out two facts. It is a basic aspect of economics (and arithmetic) that any “good” which is under-priced will be over-consumed. This is the same thing as simply saying that when something is “cheap” that people will buy more of it. The effect of this basic principle is that all “price-fixing” must fail – since greater and greater imbalances are created as buyers want to purchase more and more but sellers want to sell less and less.

How has this translated in the gold market? During the first two decades of gold and silver price-fixing, prices were kept flat or falling. However, during the last decade of precious metals manipulation, gold and silver prices have quadrupled. Clearly, the anti-gold cabal has lost their “choke-hold” on this market.

An equally effective way of illustrating how price-fixing leads to greater imbalances in the market is to look at the behavior of central banks – who for nearly thirty years have been the principal suppliers of the gold which has been dumped onto the market to suppress the price. Despite the fact that the price of gold has quadruped, last year, for the first year since 1988, central banks went from being (huge) net-sellers of gold to huge net-buyers.

The same banks which only ten years earlier were lining-up top dump gold at less than $300/ounce are now lining-up to buy it at $1100/oz. In just one year, central banks went from dumping around 200 tons of gold (on a net basis) to adding over 400 tons (more than the total amount of gold being sold by the IMF). The amount of gold purchased by central banks in 2009 was the most since 1964 – nearly 50 years.

For those who subscribe to the absurd propaganda of a “gold bubble”, think again. To begin with, no one is in a better position to know how badly our purchasing-power is being ravaged by inflation (or about to beravaged) then these central bankers – whose reckless monetary policies create all this inflation. To suggest that the world's central banks are (as a group) all going on a gold-buying binge on merely a whim is absurd. They are buying gold today because they know the correction in the price of gold back to its fair market value has just begun.

Many have heard that in inflation-adjusted dollars that gold would have to rise to over $2,000/oz, just to equal the previous high in 1980 (when the global economy was relatively healthy). However, that comparison relies upon the phony, inflation statistics produced by the U.S. government.

Regular readers will be familiar with my preference for the numbers of John Williams (Shadowstats.com): who calculates U.S. statistics the same way they were calculated in 1980 – before an infinite number of statistical gimmicks were added to 'doctor' the numbers. Using Williams' inflation numbers for the last thirty years, the price of gold would have to rise to $7,494/oz, just to equal the 1980 high.

The “case” for silver is much, much more bullish. Because vast amounts of silver are literally “consumed” in its myriad, industrial applications, roughly 90% of global, silver stockpiles have disappeared over the last 50 years. And, unless you fall for the ETF-sham, silver inventories (the amount of silver supposedly available for purchase today) have plummeted by 90% in less than 20 years. Thus, thirty years of price-fixing have set-up the silver market for the “Mother of All Supply-Squeezes”.

That is one reason why you should not be afraid of the “rigged” markets for gold and silver. However, thanks to the miscreants of Wall Street, there is now a second, equally-good reason for North American investors to prefer the rigged, precious metals markets: because our other markets are “rigged” even more.

This is especially apparent in the U.S. To begin with, the wealthiest 1% of the U.S. population – the ultra-rich – own 56% of all U.S. stock. The top-20% own 87% of all stock...and a handful of Wall Street banks directly (or indirectly) control the vast majority of that money. It no longer even matters how much isdirectly controlled – thanks to the abomination known as “trading algorithms”.

As the ones who created these trading-algorithms, Wall Street's market-manipulators now only need to get the U.S. propaganda-machine to spin the appropriate message each day in order to know in advanceprecisely how the army of traders (who allow these programs to think for them) will deploy their money.

Wall Street's “Pied Pipers” lead around these traders by the nose because they are now essentially brain-dead, allowing their money (and their clients' money) to be used by Wall Street to pump-up markets – and allowing the banksters to make their billions in “trading profits”. Given how completely Wall Street now controls trading in American markets, the Plunge Protection Team no longer even needs to spend much time manipulating U.S. markets. Instead, they can devote their time/efforts to sabotaging other markets – in order to make the U.S. appear to be the least-worst option for investors.

This brings us to the key dynamic which separates the precious metals market from the other rigged-markets in which we are forced to trade (or simply not “invest”, at all). In the precious metals market, prices have been held down – and suppressed for so many years that a powerful correction upward is now underway.

Conversely, in U.S. equity markets, we have stocks which have been pumped-up to outrageous levels – in what has literally been the largest/fastest “rally” in U.S. history. Just as manipulating prices lower must, ultimately fail, so too will the upward manipulation of U.S. equities also give way. Indeed, afterexperiencing the largest rally in history, one would have to be a complete idiot not to expect a brutal correction in those over-valued markets.

This presents investors with a very, clear choice. They can invest in pumped-up U.S. markets which mustgo down or they can invest in precious metals markets which must go up. When I say this, do not mistake this for a “short-term prediction”. Even before our markets became the corrupt 'casinos' which they are today, there were words of warning for investors: “the market can remain irrational longer than you can remain solvent.”

In other words: never use “margin”. Invest for the long term (or at least the “medium term”). Engaging in short-term trading in rigged-markets is pure gambling. The “technical analysis” which these short-term gamblers rely upon is based upon a long list of assumptions, all of which must be true, or the “T/A” is completely invalid. Sadly , virtually none of the people who use “T/A” every day have enough of a mathematical background to even know what those assumptions are (let alone whether any of them are true). At the top of the list of these assumptions is “free and open markets”.

For those who don't want to “gamble” with their money, precious metals are (as Alan Greenspan professed) the “only protection” in existence which can shield investors from the multitude of malevolent economic forces which threaten their wealth. The fact that this market has been manipulated for so long is the only reason why investors can still purchase gold and silver at near-giveaway prices. The fact that this manipulation is clearly failing also dictates that we will not be able to buy gold and silver at current, cheap prices much longer.


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Yet Another Wrongdoing By The NY Fed: Shocking??!!!

This is the biggest reason the Fed needs to be audited which will undoubtedly will end up in the Fed being abolished. It is better for the people of this country and the future of our children as our freedom is at risk at the hand of a bunch of bad-intention people. Similarly, how Turbo-Tax-Timmy still is in office is beyond me... The below is from the Huffington Post:

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Ryan Grim

ryan@huffingtonpost.com | HuffPost Reporting

Become a FanGet Email Alerts from this Reporter

New York Fed Warehousing Junk Loans On Its Books: Examiner's Report

First Posted: 03-22-10 01:12 PM   |   Updated: 03-22-10 04:34 PM

As Lehman Brothers careened toward bankruptcy in 2008, the New York Federal Reserve Bank came to its rescue, sopping up junk loans that the investment bank couldn't sell in the market, according to a report from court-appointed examiner Anton R. Valukas.

The New York Fed, under the direction of now-Treasury Secretary Tim Geithner, knowingly allowed itself to be used as a "warehouse" for junk loans, the report says, even though Fed guidelines say it can only accept investment grade bonds.

Meanwhile, the Fed and Geithner both strongly oppose a congressional measure to authorize an independent audit of the central bank and its lending facilities. The provision passed the House but is under attack in the Senate, where Banking Committee Chairman Chris Dodd (D-Conn.) says he hopes to stop it.

Without an audit, the Fed is able to conceal the specifics of what it holds on its balance sheet. If the Lehman deal is any indication, the Fed is hiding billions of dollars in toxic loans on its books.

"The Fed legally is forbidden from taking such assets. There's a legal requirement that the Fed's assets be investment grade," Rep. Alan Grayson (D-Fla.) told HuffPost. Grayson, who is the cosponsor of the Grayson-Paul Audit the Fed measure that passed the House, said the Lehman scandal shows precisely why such an audit is needed.

"The net result of this is we know the Fed knowingly bought assets for more than they were worth -- substantially more than they were worth -- and actually created a market for garbage that Lehman was more than happy to push on the Fed because they regarded the public as the suckers of last resort," said Grayson.

A Fed spokesman told the New York Times that a "third party" valued the assets and found they met the standards. Yet the Fed, after accepting the assets, "reduced prices to limit the risk" -- an immediate concession that they were, in fact, over-priced. Otherwise, why reduce their price?

For once, Grayson and Fed Chairman Ben Bernanke are in agreement, to a point. A New York Fed spokesman directed HuffPost to congressional testimony Bernanke delivered last month. "While the emergency credit and liquidity facilities were important tools for implementing monetary policy during the crisis, we understand that the unusual nature of those facilities creates a special obligation to assure the Congress and the public of the integrity of their operation," Bernanke said. "Accordingly, we would welcome a review by the GAO of the Federal Reserve's management of all facilities created under emergency authorities."

Just how far that review would go is the subject of debate in the Senate.

The Valukas report found clear evidence that the New York Fed knew that Lehman was sending it garbage that it had no intention to market. In other words, the baskets of assets were created for the specific purpose of selling to the Fed for far more than they were worth.

Lehman knew it too: "No intention to market" was scrawled on one of the internal presentations about the assets. A separate bank, Citigroup, later characterized the assets as "bottom of the barrel" and "junk" when Lehman tried to push them their way, according to the report.

If Lehman hadn't gone bankrupt anyway, the public would have no knowledge of this backdoor bailout. "It's just fortuitous that we found out about this through a bankruptcy proceeding and a trustee that was willing to allow and pay for some digging," said Grayson. "Do we really just have to hope for the best, that whenever the Fed does something wrong, we might someday find out about it?"

Geithner himself was aware that there was a gap between what Lehman claimed the assets were worth and what they were really worth. "The challenge for the Government, and for troubled firms like Lehman, was to reduce risk exposure, and the act of reducing risk by selling assets could result in 'collateral damage' by demonstrating weakness and exposing air' in the marks," Geithner said, according to the report.

The assets, called "Freedom CLOs", were sold to the Fed's "Primary Dealer Credit Facility," according to the report.

Lehman immediately recognized the value of what the Fed had set up. A day after the PDCF was announced, an internal Lehman analysis suggested that "the new 'Primary Dealer Credit Facility' is a LOT bigger deal than it is being played to be." The facility could be a used as "as a warehouse for all types of collateral, we should have plenty of flexibility to structure and rethink CLO/CDO structures."

It was a get-out-of-debt scheme and could "serve as a 'warehouse' for short term securities [b]acked by corporate loans [and] "MAY BE THE 'EXIT STRATEGY' FUNDING SOURCE WE NEED TO GET NEW COMPETITION IN THE CORPORATE LOAN MARKET," according to the Lehman analysis.

But not one that Lehman felt like discussing with the public. "Given that the press has not focused (yet) on the Fed window in relation to the [Freedom] CLO, I'd suggest deleting the reference in the summary below," CEO Dick Fuld wrote in an April 4, 2008 email uncovered by the report. "Press will be in attendance at the shareholder meeting and my concern is that volunteering this information would result in a story."

Fuld has declared himself vindicated by the report.

The Fed won't say how much more toxic "garbage" is in the Fed's "warehouse" and that also concerns Grayson.

"The Fed's balance sheet is a cartoon version of what's actually inside," said Grayson. 
"We only get to basically do autopsies on the carcasses of the Fed's failures, but what we don't find out is when they show favoritism to companies that do not end up in bankruptcy."

The Treasury didn't immediately respond to a request for comment. Below is the relevant section of the report:

(c) In Addition to a Liquidity Backstop, Lehman Viewed the PDCF as an Outlet for Its Illiquid Positions

The PDCF not only provided Lehman with a ready response to those who speculated it would go the way of Bear Stearns, but also a potential vehicle to finance its illiquid corporate and real estate loans. A day after the PDCF became operational, Lehman personnel commented: "I think the new 'Primary Dealer Credit Facility' is a LOT bigger deal than it is being played to be . . . ." They mused that if Lehman could use the PDCF "as a warehouse for all types of collateral, we should have plenty of flexibility to structure and rethink CLO/CDO structures . . . ." Additionally, by viewing the PDCF as "available to serve as a 'warehouse' for short term securities [b]acked by corporate loans," the facility "MAY BE THE 'EXIT STRATEGY' FUNDING SOURCE WE NEED TO GET NEW COMPETITION IN THE CORPORATE LOAN MARKET."

Lehman did indeed create securitizations for the PDCF with a view toward treating the new facility as a "warehouse" for its illiquid leveraged loans. In March 2008, Lehman packaged 66 corporate loans to create the "Freedom CLO." The transaction consisted of two tranches: a $2.26 billion senior note, priced at par, rated single A, and designed to be PDCF eligible, and an unrated $570 million equity tranche. The loans that Freedom "repackaged" included high‐yield leveraged loans, which Lehman had difficulty moving off its books, and included unsecured loans to Countrywide Financial Corp.

Lehman did not intend to market its Freedom CLO, or other similar securitizations, to investors. Rather, Lehman created the CLOs exclusively to pledge to the PDCF. An internal presentation documenting the securitization process for Freedom and similar CLOs named "Spruce" and "Thalia," noted that the "[r]epackage[d] portfolio of HY [high yield leveraged loans]" constituting the securitizations, "are not meant to be marketed."

Handwriting from an unknown source underlines this sentence and notes at the margin: "No intention to market."

Lehman may have also managed its disclosures to ensure that the public did not become aware that the CLOs were not created to be sold on the open market, but rather were intended solely to be pledged to the PDCF. An April 4, 2008 email containing edits to talking points concerning the Freedom CLO to be delivered by Fuld stated:

"Given that the press has not focused (yet) on the Fed window in relation to the [Freedom] CLO, I'd suggest deleting the reference in the summary below. Press will be in attendance at the shareholder meeting and my concern is that volunteering this information would result in a story."

It is unclear, based solely on the e‐mail, why a reference linking the FRBNY's liquidity facility to the Freedom CLO was deleted. One explanation could be that Lehman did not want the public to learn that it had securitized illiquid loans exclusively to be pledged to the PDCF. Another reason may have been to hide the fact that Lehman needed to access the PDCF in the first place, given that accessing the securities dealers' lender of last resort could have negative signaling implications.

The FRBNY was aware that Lehman viewed the PDCF not only as a liquidity backstop for financing quality assets, but also as a means to finance its illiquid assets. Describing a March 20, 2008 meeting between the FRBNY and Lehman's senior management, FRBNY examiner Jan Voigts wrote that Lehman "intended to use the PDCF as both a backstop, and business opportunity." With respect to the Freedom securitization in particular, Voigts wrote that Lehman saw the PDCF

as an opportunity to move illiquid assets into a securitization that would be PDCF eligible. They [Lehman] also noted they intended to create 2 or 3 additional PDCF eligible securitizations. We avoided comment on the securitization but noted the firm's intention to use the PDCF as an opportunity to finance assets they could not finance elsewhere.

Thus, the FRBNY was aware that Lehman viewed the PDCF as an opportunity to finance its repackaged illiquid corporate loans. The Examiner's investigation has not determined whether the FRBNY also understood that these Freedom-style securitizations were never intended for sale on the broader market.

In response to a question from FRBNY analyst Patricia Mosser on whether Voigts knew "if they [Lehman] intend to pledge to triparty or PDCF,"5359 Voigts replied that the Freedom CLO was "created with the PDCF in mind."

According to internal Lehman documents, Lehman did in fact pledge the Freedom CLO to the PDCF. On three dates, March 24, 25 and 26, 2008, Lehman pledged the Freedom CLO to the FRBNY on an overnight basis, and received $2.13 billion for each transfer.5361 FRBNY discussions concerning the CLO's underlying assets, however, took place on or around April 9, 20085362 -- more than a week after the FRBNY began accepting the CLO.

UPDATE: Tyler Durden at Zero Hedge has been all over this scandal.

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