The Lehman Accounting Fraud Scandal Widens

Because it now appears that J. P. Morgan Chase booked repurchase trades as sales as well:

JPMorgan Chase recorded some repurchase trades as sales, the same accounting gimmick that spawned Lehman Brothers’ now-infamous “Repo 105s”, suggesting that the failed bank was not alone in its interpretation of a new accounting rule.

Unlike Lehman, which never disclosed the effects of its repo deals on the firm’s balance sheet, JPMorgan detailed the year-end values of its repo sales and purchases in annual reports beginning in 2001, after a new accounting rule was introduced.

The practice ended in 2005 when the company merged with Bank One. “The transactions were done in very small amounts and were fully disclosed,” a spokesman said.

Yeah, we believe you.

More seriously, it should be made illegal to engage in activities that have the effect of removing liabilities from the balance sheet a part of their purpose.

Lehman background, I recommend the Stewart video.