Lehman Cooks Books - Nobody Surprised

So now we have the auditor's post-mortem examination of the fall of Lehman Brothers. Most people agree that this marked the real beginning of the financial crisis that led us into this recession. And, while almost everyone knew there was some shenanigans going on, the report reveals more than just a little misdirection.

In the interest of disclosure, I am not an accountant or financial expert. In fact, I am like most Americans - a victim of this massive and ongoing fraud. Those are strong words, but these were serious crimes.

According to the report, Lehman CEO William "Whatever it takes to make me look good" Fuld ordered his people to clean up the books at Lehman to reduce the debt on their balance sheets. And clean they did. In fact, what they did was to cook the books. They even had a name and a procedure for this recipe - "Repo 105."

Yep. A publicly traded company entrusted with billions of investor dollars created a process by which they could move exorbitant debt off the books to fool regulators and shareholders as to the health of the company. Now, we all know that publicly traded companies are supposed to have independent auditors examine these books looking for just the type of thing Repo 105 was doing. So what happened there?

Well, according to the report, the auditors - Ernst and Young - were in on it. Right. The very folks who are supposed to monitor for fraud were helping to commit it. And the credit rating firms? Well, they were so corrupted it is barely worth this sentence.

Former CEO Fuld claims he had no idea this was going on. That make him either culpable in the fraud and cover up or criminally negligent. The law requires the CEO to sign off on these reports, and Fuld did. In fact, just days before Lehman joined the dinosaurs in ignoble extinction, Fuld told everyone and anyone that the firm was in good shape and not to worry. In private, Fuld was begging for Hank "Pirate" Paulson to save his company.

The report reveals a very troubling problem. Where were the regulators? Well, they were conspicuously ignoring things. One does not hide over $80 billion in debt and not leave a trail. Yet, the regulators, auditors and board members were happy to go on about their day and pretend that nothing was wrong.

To be fair, at least one financial reporter - Eric Bolling of Fox Business - openly challenged Fuld's rosy report. While most of the financial press was buying Fuld's nonsense hook line and sinker, Bolling announced on-air that the lawyers were in the boardroom. Keep in mind that some of these Wall Streeters are Bolling's friends, yet he reported the truth anyway.

Here is what the report really tells us. It tells us that the regulatory system is broken. That Wall Street cheats. That big bankers lie and get away with it. That the financial press is largely (except Bolling) a pile of sycophants. That the government looked the other way.

So what will it really take to restore our confidence in what is obviously a gamed system? Well, some prosecutions might help. Fuld in handcuffs would help. Ernst and Young punished if not shut down might help. But what would really help is real transparency. The transparency that Bernanke, Paulson and Geithner promised and then proceeded to avoid.

Maybe we need new regulation and new agencies, and maybe not. We cannot be sure until we examine - in the open - what went wrong and who failed. Not some confidential secret report, but a truly open process.

And given the state of the regulators and Congress, I nominate Eric Bolling and Elizabeth Warren to head it up. Sure, Bolling is a conservative. But he is also an honest investor and one that knows how the liars on Wall Street work. And Elizabeth Warren is one of the few truly plain spoken folks anywhere in the process.

The bottom line of the Lehman report should read, "Everyone involved failed to do their jobs. All of them had a hand in the fraud and all of them should pay."

After all, we the taxpayers are already paying for their crimes.