Lehman Scandal Continues to Unfold as New Jersey Politicians and Editorial Boards Claim Public Servants are the Greedy Ones
As we learn more and more about the "Repo 105" scandal being uncovered in the midst of the Lehman Bros. bankruptcy, politicians in New Jersey continue to call public workers the greedy ones.
The Lehman collapse, you'll recall, shook Wall Street to the point that George W. Bush advocated for a government takeover of private financial firms. And it turns out Lehman used some fancy financial trickery to mask how bad things were, secretly moving billions of dollars off the bank's books to conceal its holdings and its debts. And while you don't hear a first whisper about that in editorial rooms or halls of the New Jersey State Legislature, a giant, collective finger is being pointed at those who go to work every day to make New Jersey a better place.
First, let's take a look at Lehman. Basically, when people started looking at Lehman, the giant bank moved $50 billion off of its books to conceal troubled assets using an accounting gimmick. Oh, and they did it "Unbeknownst to the investing public, rating agencies, government regulators, and Lehman’s board of directors," and in a "materially misleading" way, according to a new report on the bankrputcy.
It was so rampant in Lehman that it acquired a name, the "Repo 105" scheme, where the bank made all the money it was borrowing show up on the sheets as if it were buying bonds. The problem, according to Jacob Goldstein:
Everybody knows the bank isn't really selling the bond to the big company -- it's really borrowing money. So under accounting rules, the assets a bank uses in repo deals stay on the bank's balance sheet.
And to make it worse, the term "Repo 105" was invented because the bonds were worth at least 105% of what Lehman was getting for them.
It was chicanery like this--and across Wall Street--that set off the crash of 2008, leaving a several trillion dollar hole in the economy, and tipping the economy into the Great Recession.
You'd never know it if you looked at the newspapers just across the Hudson here in New Jersey. Listening to the editorials and politicians, it is the public servants who are the greedy ones. According to the Newark Star-Ledger, it's time to "go nuclear" on public employee wages and retirement security. According to the Asbury Park Press, public workers are the source of the state "bleeding money." And politicians in New Jersey, not wanting a headline to go by without them, are jumping on, saying public workers are a burden to taxpayers, and blaming public workers for the budget gap.
It's a curious world we live in, where a group of people look at banks systematically cooking the books to the point they cause the entire ecnomy to collapse, and then look at people who protect abused and neglected children and keep our parks and beaches clean, and decide the second group is full of greed.
