“Given that the press has not focused (yet) on the Fed window in relation to the [Freedom] CLO, I’d suggest deleting the reference in the summary below. Press will be in attendance at the shareholder meeting and my concern is that volunteering this information would result in a story.”

To be clear, I’m not saying the media have not done good work so far on this story. Bloomberg had a tough story this weekend looking at the implications of the report for Dick Fuld (emphasis mine):

“I am the one who ultimately signs off and I’m comfortable with our valuations at the end of our second quarter,” then- Chief Executive Officer Fuld said on the conference call. “We have always had a rigorous internal process.”

The rigor was based on a shaky foundation, according to a 2,200-page report about the firm’s demise by Anton Valukas, the examiner for the bankrupt firm. Lehman Brothers “reverse- engineered” a key measure of stability, masking the firm’s true financial condition, Valukas said. Some asset valuations were also “unreasonable,” he said.

Keen to show that it had reduced leverage, a gauge of a company’s ability to withstand losses, Chief Financial Officer Ian Lowitt said on the June 16 call that the firm had shrunk its net leverage ratio to 12 times from 15.4 in the second quarter.

It accomplished the feat by reducing net assets by $70 billion, said Lowitt, who had just replaced Erin Callan in his post. “We’re going to operate conservatively,” he said.

Unbeknownst to shareholders, the firm was hiding $50 billion in assets through off-balance-sheet transactions known as Repo 105s that temporarily removed holdings until days after the quarter closed, according to Valukas. In the first quarter, the firm had used the same strategy to hide $49 billion in assets, he said in the report.

And contained in the Bloomberg story is this story idea from investment pro and blogger Janet Tavakoli, last seen here at The Audit standing up to the know-nothings on CNBC:

“Repos were just one of many ways to hide losses,” said Janet Tavakoli, president of Chicago-based financial consulting firm Tavakoli Structured Finance Inc. “All of the former investment banks used those techniques. All of them borrowed too much money and were overleveraged.”

Also, The Wall Street Journal’s Peter Eavis had a smart, as usual, take on what the Lehman report means for transparency and accountability, and the Journal also was good to look at the repo market on Saturday.

But the non-MSM blogs have led on this story.

It’s early yet, but that’s the rub with the stuffed stories today. If Lehman is slipping off the radar screen already, it seems unlikely we’ll see the full follow-through we need.

UPDATE: For more on coverage of Lehman, see my post on Clusterstock’s John Carney falling all over himself arguing that Lehman execs shouldn’t be prosecuted.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.