Now, if the leakers intended that people trade on the info in the memo, there’s a potential securities fraud claim under Rule 10b-5; anyone who did trade on the memo before it was publicly reported would also arguably have violated Rule 10b-5.

So, it’s not clear that there were any violations of the securities laws here – and certainly there’s no Reg. FD violation. Just wanted to clear that up for people.

Although it wasn’t in this segment, reader Dwight, who pointed us to this item, indicated that Gasparino said more at other points during the news day:

I just heard live on CNBC via Gasparino that Lehman is circulating an internal memo claiming they have deleveraged to 12:1 and have better liquidity than Goldman or MS.

Then tonight this steaming pile from Bloomberg:

“Lehman May Raise as Much as $5 Billion of Capital, Person Says “

http://www.bloomberg.com/apps/news?pid=20601087&sid=aa.y9r0zYgIk&refer=home

If their capital ratios are so good and their liquidity is better than Goldman’s, why do they need to raise $5 billion???? Once again the big lie propagated by Bubblevision continues.

Just like it did during the first two weeks of March 2008.

I’m not an SEC expert, but I think the problem here is that disclosure of financial information is strictly regulated by the SEC and by accounting standards. That is, that certain financial information *must* be formulated based on accepted accounting standards, and disclosed publicly.

The reason for these laws is not to tamp down idle speculation. After all, anyone on the street can speculate all they want about any company. But it’s to prevent those with inside information (i.e. management, employees, etc.) from using that inside information to unfair advantage.

Ostensibly, shorts like Einhorn don’t have inside information about the company. That’s why there are no laws regulating what they can and can’t say about Lehman’s financials. But Lehman’s management *does* have inside information. Thus, they’re strictly regulated.

Furthermore, I think Yves’ point is that if Lehman’s data (like their deleveraging, and their asset sale) were truly legitimate and based on accepted accounting standards, then they’d be announcing the results from the top of every building in Manhattan. The only reason to not do so is if you know the numbers are bogus and want to prevent the SEC and shareholders from slapping you with a bigtime lawsuit by maintaining plausible deniability. Thus the “unofficial” leaks and whispers.

When ever I read, “it’s hard to understand these complicated financial transactions”, I check to make sure I still have my wallet.

When you do not have a “real” underlying asset in a transaction it is a Ponzi scheme. This scheme may be dressed up in a toxic but it still fraud.

George K

This is another potential run on the bank situation, and the shorts get to say whatever they want with very little accountability. The issues are generally too technical for anyone to understand, but everyone understands the appearance of panic.

I just saw Einhorn on cnbc and the elevator version of his argument boiled down to the fact that Lehman hasn’t taken the same percentage hits as peers. Einhorn got a huge forum and even used the word ‘fraud’ in a question to Sen Dodd regarding financial reporting. Losing money or being stupid isn’t a crime.

We will know the truth soon enough and I don’t see any advantage of a meltdown vs. a slower unwind of Lehman. The economics of the business are going to prove one side right.

In my opinion, leaks just level the playing field a bit. There really isn’t any way for an SEC company to respond effectively to multiple attacks by shorts. I would consider a ‘leaked’ power point slide from Lehman just about as credible as a hedge fund power point.

There is a lot not to like here. “Leaks” are way down my list.

Me think they need to pass special legislation to deal with the financial industry shenanigans. Form a top-gun team of well-paid investigators that would be shielded from “external influences” except in extraordinary circumstances.

In short, something that would strike the fear of God into anyone thinking of playing fast and loose with finance laws.

Naked arrogance I would say.

And hiding behind “anonymous” to boot. Please keep this in the permanent archives. A snake revealed.

TomD