Heightening Scrutiny Of Repurchase Agreements

Law360, New York (August 24, 2010, 11:10 AM EDT) -- Earlier this year, a bankruptcy examiner concluded that Lehman’s financial accounting, in connection with its use of repurchase agreements (“repos”), created a “materially misleading picture of the firm’s financial condition.”

Generally, repos are loan agreements that allow financial institutions to borrow money for a short term, offering securities held by the firms as collateral while simultaneously agreeing to repay the cash and take back the collateral at a specific point in time. Lehman (according to the examiner) accounted for its repo transactions as sales, thereby reducing...
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