Repo 105: “Like, whatever”

By Felix Salmon
March 17, 2010
Max Abelson has talked to three former Lehman executives about the Valukas report, and you can see why they requested anonymity. Here are some of the gems from Senior Executive #2:

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Max Abelson has talked to three former Lehman executives about the Valukas report, and you can see why they requested anonymity. Here are some of the gems from Senior Executive #2:

“It’s just not that big of an event… They just want to be mad and don’t know what they’re talking about and want to be outraged.”

“These firms clearly shop jurisdictions all the time for the most favorable rule set, and there’s nothing wrong with that.”

The only people who would worry about using an old trick to reduce leverage from 13.9 to 12.1, the second executive said, are “yappers who don’t know anything.”

There was lots of talk in the early months of the Obama administration about whether Wall Street bankers really Got It or not — whether they had any comprehension of the amount of justifiable anger in the country and the world that was arrayed against them. Clearly, they don’t. These executives aren’t Erin Callan, retreating to a quiet life in the Hamptons to lick her wounds and ponder her possible criminal prosecution. My guess is that they’re all currently employed, at Barclays or elsewhere, making enormous amounts of money, and persuading themselves that everybody must therefore be rubes, ripe for ridicule. Here’s Senior Executive #3:

The idea, a year and a half after the biggest bankruptcy in American history began, is that criticism of the firm is the domain of unsophisticates. “When I read this, I giggle a little bit. Because $50 billion is a shitload of money, but in the grand scheme of things,” said a third source, a former managing director in England—where the accounting gimmick, named Repo 105, was given a legal endorsement that it couldn’t get here, “$50 billion is a drop in the ocean.”…

The former managing director in London said that Repo 105 was an open secret there, if it was a secret at all. “Yeah, yeah, yeah. In Europe, people just generically talk about it. It’s funny, for nonprofessionals, you can try to make it a smoking gun,” the source said, “I’m like, whatever.”

I’m looking forward to Chris Lehmann’s take on these guys: they deserve all of his opprobrium and more. But it’s important not to lose sight of the fact that what we’re seeing here is a corporate failing to an even greater degree than it is an individual one, and that it infects investment banks generally, not just Lehman Brothers. These shops deliberately go out to hire psychopaths, and then they fire the ones who go soft, while promoting the most aggressive assholes, keeping a few smooth-talking client-relationship types on hand to preserve some semblance of a respectable public face. (Fuld was never particularly good at that part of the job.)

This is something that regulatory reform can’t even come close to addressing, unless it deals head-on with the question of compensation. If you think what street criminals will do for a few thousand or hundred thousand dollars, it becomes less shocking what bankers will do for a few million. Or that they will allow their worldview to be skewed to the point at which they can genuinely say that $50 billion is “a drop in the ocean”. It’s, like, whatever.


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check out Fuld’s reaction – he says the examiner’s report VINDICATES him! the link is on my blog and on Dealbreaker – a NY POst story

Posted by KidDynamite | Report as abusive

The market(s), despite what the quants think, are the collective psyche of its participants. Americans (abused) seem to be suffering from a form of co-dependency to their abusers (financial leaders/markets). No matter to what extent financial institutions steal American citizens property (money), Americans have convinced themselves that they cannot confront their abuser (capital markets) for fear of losing them, despite Americans physical and mental suffering and loss of self respect.

As American markets continue to be manipulated by financial institutions, these markets are no place for anyone with self respecting values concerning their own wealth and investments.

Domestic violence is on the horizon and as any policeman knows, this is the most unpredictable situation.

Posted by csodak | Report as abusive

This is organized crime. No other word for it.

I just don’t get why there is no journalistic organization in the US that doesn’t see the ratings/circulation/page view advantages of going after these guys to the death.

Posted by Dollared | Report as abusive

The principal difference between the phycopaths at banks and the ones at financial media oulets is unfortunately the level of financial literacy. This is the key problem for regulators as well. But there is no point in looking at a dead horse for too long unless you plan to go completely mad. Keep your eyes on BarCap and their balance sheet

Posted by Tseko | Report as abusive

The bankers built something even they can’t control. They have this mentality that no rules, plus no personal rules, is a good thing. The banking industry will continue until it dies and it cannot be resurected, by anyone. When you have this, you have something like the drug running in the US. No rules, totally out of control, and no hope of getting better. Our government is unable and unwilling to stop sucking on the lobby teat and this will eventually doom the banking industry..

Posted by fred5407 | Report as abusive

I do believe that when stating that Investment Banks look for Psicopaths to hire you should at least cite some evidence. Comentaries from 3 former Lehman exec´s dont really constitute any form of evidence that a court would admit.
Furthermore, does the “justifiable anger” come from articles like this that solely blame bankers for the crisis or from a consesuous “mea culpa” that also includes all U.S. citizens that were overly exposed to debt and were key catalists for the crisis.

Posted by OMS | Report as abusive

How times have changed. Now we have investment bankers whining about barbarians at the gate.

Posted by wpw | Report as abusive

Blah, blah, unfair, blah, blah, criminal, blah, blah… All of you people are chumps. The American public is just as much to blame for what happened. You people don’t read your credit card statements. You spend like there’s no tomorrow, then when the world collapses around you, you cry foul, and run to the politicians like a child running to momma because the kid around the corner stole your toy! There will be no revolution in this country until we stop crying, turn off the television, start paying attention and start acting on the knowledge we gain for OURSELVES. Do you actually trust what you are reading here? Get the facts and then boycott! That is the true power behind capitalism. Every week I sit and listen to people saying, “the rich keep getting richer, and the poor keep getting poorer.” Then I ask these same people, “Well, just how much richer did you make Budweiser, Macy’s, and the NFL this weekend?” If you don’t like it, stop buying! Chumps. All of us…CHUMPS. Pay attention and stop asking the government to do it for you. Do you actually want government run crap?! Have you ever had to hold on the phone for hours to get an appointment for some government run program, then the girl at the other end hangs up the phone because (hey, there’s no profit here, why should she care?) Do it YOURSELF America! Boycott, Boycott, BOYCOTT!

Posted by Texicano | Report as abusive

Pretty soon more and more people like me will stop buying houses, stocks, investing in trust funds, 401ks, using credit cards, etc.

Anything without tangible value will be abandoned because the perception is that it is becoming dangerous.

I am 27, most of my peers have no serious hope of ever owning a home.We don’t want to work thirty years to pay off a house. Especially when so many are paying mortgages that cost more than their home is worth.

these “quants” have destroyed any faith in the stability of the various markets. Enough people are smart enough to know that they control our financial system, and NOTHING will change.

They have triggered a chain reaction that amounts to starving the credit beast…to death.

Unfortunately that means the end of the American financial system as we know it.

Congratulations, you destroyed the world.

I wonder if they did it on purpose?

Posted by WildTurkey | Report as abusive

The quotes and the punctuation marks make no sense in the extracts that are supposed to represent actually conversations. Where were they taken from? I am assuming they are actually email? How does a speaker quote himself? There is something very odd about the way the extracts of conversations are presented.

Articles like this piece are show trials with incompetent judges for jurors who are idiots. This is the kind of garbage that circulated before the French revolution.

Posted by paintcan | Report as abusive

The only thing that gives me a bit of hope when I read articles like this one, is that the American people will once and for all start realizing that not all of us in the developing world who call these thieves of finance by their names are conspiracy theorists or “dangerous left-wing revolutionaries.” Our countries just have more experience in dealing with these modern-day barbarians.

Posted by AlanFurth | Report as abusive


Well there might have been lots of garbage circulating before the French revolution. But perhaps we’re now also going through the inevitable symptoms of a new Enlightenment of sorts.

Posted by AlanFurth | Report as abusive

BTW, I think you will find that the attitude exhibited in these quotes typifies City Bangstas who have a warped sense of class entitlement and experience a delusion of mental superiority.

At least in downtown Manhattan, Bankstas of the NY species know damn well what hooligan toolery is.

Posted by williambanazi7 | Report as abusive

Thank god the pursuit for real culprits of the financial crisis still continues and our agony is felt.In another era and another place there could have been a revolution but here we will continue as if nothing happened or is bound to happen in the name of any meaningful change of our system.instead we will sail these tranquil waters to the bigger sunami and on to the biggest and final one who so ever will be lucky to survive the next one.What is 50 Billion ..a drop in the ocean,lets arrive at the sum that will be enough to put us in the depths we cannot surface out of.It makes a good spin and is hyped up consistantly that they were not alone in creating that mess but all of us with our recklessness and the failure of our politicians and bureaucrats.Who stood to benefit the most,it was those that with easy money (borrowings at low rates and unsuspecting investors’money and transacting in debt as currency)unregulated and leveraged to extents no one understood its underlying risks.They not only gambled away their companies but our livelihood as well.Either they were too smug or too naive but certainly most foolish and fool hardy.It is surprising that their actions and decsions have come under the breach of law and they have managed to keep their reputations entact with the hope of more big rewards to follow.

Posted by schadha100 | Report as abusive

OMS wrote:
“when stating that Investment Banks look for Psicopaths to hire you should at least cite some evidence.”

Just admit you didn’t bother to follow the links, and move on.

Posted by moebadderman | Report as abusive

What’s your point, Paintcan? That the article is factually wrong? Or that the French Revolution was unjustified?

Can you explain your comment just a bit further for us un-Enlightened folks?

Posted by Dollared | Report as abusive

I’ll be blunt: the reason no senior banker has issued a “mea culpa” is the same as for no Jew ever freely admitting to sacrificing Christian children in religious rituals. There is nothing to admit. Both groups are ordinary people that were made scapegoats for events masses do not understand.

As for the financial crisis, how about this explanation: the home prices declined producing huge losses, some of which were borne by homeowners, some by the government, and the rest – by financial firms (surprise). Everything else is incidental or pure fog.

Posted by JamieNYC | Report as abusive

@dollared: gee you got me! Whether these bankers are the evil people they are being claimed to be, none of the so-called evidence seems to merit an appearance in court. With one or two notorious exceptions. Does anybody honestly believe that Kerveil was solely responsible at SocGen?

They are complaints without any real attempt at fixing the problem and even the definition of the problem, can only be offered by people who are experts.

If you don’t like the French revolution analogy – how about looking at Mao’s Gang of Four instead? An entire generation of Chinese youth, just the people with more hormones than sense, were programmed to sack the government establishment and the cultural past of an ancient country, found devils in every closet, revisionists, counter-revolutionaries and anything associated with the countries past practices, because Mao may have been having a senior moment and worried that he was loosing his grip on power. He’d made a lot of disastrous decisions and the population needed scapegoats. He printed his little red theology and sent his red guard murderers and vandals throughout the country all preaching with the fervor of the bore again, – like the stupid sheep they were – preaching like it was the second coming and beating anything not of the true faith into submission or to their grave. Some of the comments in these pages are so close to them it is frightening. The Tea Partiers are closest to them but most of them appear to be geriatric or just ready to kill anything that talks back. But I can’t figure out what they really expect to do.

When the Red Guirads finally run out of available fuel – and the saner powers – any that were still alive, were able to reign them in – or the poor dears were all just exhausted, what goes put up for trial? None of them, of course. They would have attacked that court too. His wife and her four aids. And most certainly not Mao himself. Not one of the true believers was willing to blame themselves and they just as blindly gang together as the herd they always were and let out one loud bleat of “baaaad leaders”.

These pages can be sickening because, like the French Revolution, rhetoric rules and even if a solution is in sight it can be killed by the rival and very entrenched powers that don’t want to be unseated or those who don’t want to be pinched. That’s where we are and there doesn’t seem to be a way out.

I may as well enjoy myself with the rhetorical fun, because sure as hell you fools won’t fix the leaking tub. It doesn’t have a solution. The times has changed and the center of gravity has shifted off shore don’t you know? Time to get your boats and swim to the big time on the other side of the world. If they will let you in? But you’re all too damned expensive and they can do it all for so much less than you jerks pay for a latte. So many of them would work all day for a happy meal The overhead costs of this rattle trap are just too high and that are a lot more very hungry and very eager hands and mouths to feed then ours.

Even if you could unseat or fire every banker – and a lot of them are unemployed already – what coherent plan is available to replace them all? I sure as hell don’t have one. But it’s fun reading about it. I just love watching all the ideas sprinkle down like snowflakes to watch them melt when the hit the hard ground. And because the Supreme Court recently handed the government to the major corporations, there’s hardly a reason to vote anymore. But they are the people who tend to be herded like better dressed red guards.

I’ll never see another paying job in my life and now I probably shouldn’t even bother reading the papers. But it gives me something to do while I collect food stamps. And what really bothers me is, I had the good fortune and some small family financing to live on under $15,000/year for the last 20 years with a very small scale and rather productive small business and a decent quality of life. And I had to work harder than at any job of my life including school.

As for your question about factual accuracy. Did you read through the boxes of emails to know whether Mr.Salmon is just giving you his own peculiar snippets of what he wants to hear and what is very popular to say now?

I just love it when people single out my comments. It tells me the commenter didn’t get much more out of the article than I did.

Posted by paintcan | Report as abusive

Why on earth would anybody question the epidemic psychopathy among investment bankers? Here’s a partial checklist:

Factor 1
Aggressive narcissism

1. Glibness/superficial charm
2. Grandiose sense of self-worth
3. Pathological lying
4. Cunning/manipulative
5. Lack of remorse or guilt
6. Emotionally shallow
7. Callous/lack of empathy
8. Failure to accept responsibility for own actions

Factor 2
Socially deviant lifestyle

1. Need for stimulation/proneness to boredom
2. Parasitic lifestyle
3. Poor behavioral control
4. Promiscuous sexual behavior
5. Lack of realistic, long-term goals
6. Impulsiveness
7. Irresponsibility
8. Juvenile delinquency
9. Early behavioral problems
10. Revocation of conditional release

Traits not correlated with either factor

1. Many short-term marital relationships
2. Criminal versatility

Yep. That about sums them up. One of the problems with psychopathy is, there’s no cure. The only way to get rid of this problem boils down to the same way you get rid of zombies. Rule #2: Double Tap –”Zombieland”

They’ll never admit guilt. It’s simply not in their genetic makeup. Think of it as their survival mechanism.

When a psychopath tells you $50 Billion’s just a drop in the ocean, that’s their sadistic side talking. They just want to watch you waste time going red in the face trying to explain arithmetic of scale to them. To which they are impervious.

When the fun in that wears off, they’ll lead you further down the garden path and strangle you with numbers, anything but accept blame. When it emerges that it wasn’t 50 but more like 750 Lehman wangled, then suddenly it’s your fault for accusing them of fraud for the wrong amount. See how that works?

Plus, then they’d be right. $50 Billion IS a drop in the bucket of what has been swindled of late, market-wide, with command-level complicity.

Think Trillions.

Posted by HBC | Report as abusive

I met Dick Fuld once. He is a cold, cold man

Posted by Story_Burn | Report as abusive

To HBC, What you say could be applied to the corporate world, most of the government, the military (both Officers and troops), the world of celebrities, the world of the arts, many in my neighborhood and many of my friends and many of the people that were clients and people I worked for.
Who does that leave that will be someone you could enjoy a drink with , maybe smoke a joint and have a little fun with? Are you a good friend of Lord Buddha?

Do you think you are not included in the laundry list of human failings?

And you leave out how much should anyone who might just pass muster and not fail one of those character tests, actually be entitled to by way of compensation? She we pay them their weight in gold?

It really doesn’t matter how perfect the people are, it matters a great deal more – how well they can build a system of laws and regulations that will allow the perfect and imperfect to exists without destroying each other or imprisoning each other.

Your real name doesn’t happen to be Robespierre does it? The pea green incorruptible himself?

Posted by paintcan | Report as abusive

Good job, Felix. Good job. Thanks

Posted by gramps | Report as abusive

Repo 105 – in and of itself – was not the big deal. It was SYMPTOMATIC of all of the other bullsh*t the Lehman f*cksticks were up to. Repo 105 didn’t take down the firm. It was the tens of billions of bad investments and the other ADDITIONAL several percentage points of leverage that did them in. Again, not that Repo 105 isn’t an issue – it is. But in the whole scheme of things, it’s a bit of a red herring. There had to be MUCH more criminal stuff going on to end up so famously bankrupt.

Posted by HuFlungPu | Report as abusive

I with HuFlungPu. The point of the Repo 105 problem is dual – that it shielded a mountain of bad decisions, and that with the right combination of corrupt actors, it can be used by any corporation to shield any mountain of bad – or corrupt – decisions. This is a catastrophic model when financial companies are involved – they are so hard to analyze, so these things are easy to do. And the scale of the leverage means the damage can be much, much bigger. GM is a drop in the bucket compared to this.

This is exactly what happened with Enron – run an increasingly risky ponzi scheme, use off balance sheet vehicles to hide the losses, and build it bigger every quarter.

The result MUST be the same. People must go to prison – and we must find a way for them and their families to die poor. You can’t leave this mess behind and be sure you can pay for your kid’s Harvard education.

Posted by Dollared | Report as abusive

So we need to have a plan that will work before action for change is initiated? That’s a gut buster. Our social/political/economic system is morphing and the catalyst is industrialists seeking markets and through government control telling 95% of the population to undergo hardship as severe as losing their homes, savings and lives while the remaining 5% raise an eyebrow from an itch developing on their arse.

The catalyst of the French Revolution the lack of want for the potato. Freedom of Europe was gained through the arrogance of entitlement within the ruling minority. There principles behind the legitimacy for change today is not different than any revolution that results in a more equitable society.

Posted by csodak | Report as abusive

The entire government is run on accounting tricks from reinvestment of the social security trust fund in treasury bonds to other kinds of borrowing from it to pay for pet congressional ear marks.

Even the process of writing bills and passing them into law requires payoffs in the form of extraneous earmarks for the support of constituencies.

The “more equitable society” that the French Revolution is supposed to have created was more of a rocking horse than a stable regime. The French went from hapless King, to bungling directorate, back to King, then to emperor, and back to King and back to emperor etc until the first WW. And the former aristocracy was always present trying to get back what they lost during the terror. That started another revolution. Napoleon only made new aristocrats and handout out estates as prizes for services rendered.

The aristocracy probably started the revolution – but not the very big people at Versailles who were actually willing to abandon their prerogatives at the start. Read Simon Schama and even de Tocqueville.

The biggest problem now is the corporations will run the congress and will get the rules they want to live by. Period, End of story and end of the so called American empire. We will get “Great American Story Time” and payoffs to keep the great majority of us feeling like we matter at all.

What ever asses get into the White House or Congress will be well lubricated with corporate finding and will never dare bite the hands that feed them. they know that this is not the world of the colonial Congress and that the constitution will be for those who can’t take the time to read the long form. The long form is 200 years of Supreme Court decisions and subsequent legislation. And hardly mentioned at all, no discussion in this or any other paper – are the very long strings treaties, this and most other countries have with the UN. In The beginning of the read and the end of the documents makes a world of difference.

WE are thinking about accounting tricks while the entire structure of the government is drifting into something that merely resembles what people might think it is.

I’m surprised the little ditz and her boy friend haven’t spammed this thread with “Who cares , I got an older man LOL’. he might be citizeness of the future.

The only way for a revolution to occur is for it to have very wealthy supporters and some real strategists. Otherwise you just have a mob insurrection. Forget revolution, it isn’t going to happen. You don’t get a more equitable society, only a lot of people with dead relatives who have other things to worry about than the rights of man. And revolution today would mean killing off the population until it fits the available funding.

Posted by paintcan | Report as abusive

I would agree that you need more than a disorganized and underfunded rabble but I would argue that not every wealthy individual in this world supports corporate governance of the private sector.
There is enough innovation in disruptive technologies that have and will make a difference in social order and this technology does not require killing off populations.
While the revolution via Napoleon was not the answer, it did provided opportunity. The universe is full of entropy.

Posted by csodak | Report as abusive