LEHMAN MANAGEMENT MAY OFF THE HOOK BUT DOUBT PERSISTS AS TO WHETHER VALUE EXISTS IN MORTGAGES OR MORTGAGE BONDS

Bloomberg News scoops that the fearsome SEC is going to let top executives from Lehman Brothers off the hook without so much as a wrist slap. Instead, it will give them a “public rebuke.” Well, that ought to disincent a future generation of corporate criminals.

Bloomberg gets some good quotes from Duke professor James Cox, who rebuts the idea that Repo 105 was technically legal:

In April, the Financial Accounting Standards Board changed its rule for how firms have to account for the short-term transactions that let Lehman temporarily remove about $50 billion in assets from its balance sheet by treating them as sales. FASB’s move may bolster the defense that the rule, not Lehman’s application of it, was faulty.

Since Lehman is defunct, any enforcement action would likely target individuals, such as Fuld and Callan, said Cox.

“The executives had to sign off that the financial statements fairly presented the firm’s financial position,” Cox said. “Even though the Repo 105s were perhaps in technical compliance with GAAP, they were distorting the true economic image of the firm.”

— The Wall Street Journal had a nice piece on the foreclosure scandal earlier this week, reporting that borrowers are having success fighting banks by arguing they can’t prove that they own their houses.

During the fall, banks temporarily suspended foreclosures to address so-called robo-signing problems, where employees were approving legal documents without properly reviewing them. They said that in weeks they could fix what they considered to be simple clerical errors. But borrowers are uncovering new types of document problems, further delaying banks’ efforts to get foreclosures back on track.

In some cases, borrowers are showing courts that banks failed to properly assign ownership of mortgages after they were pooled into mortgage-backed securities. In other cases, borrowers say that lenders backdated or fabricated documents to fix those errors.

And it gets this fun quote from the industry:

Laurence E. Platt, a banking-industry lawyer at K&L Gates in Washington, concedes that banks may have been sloppy. But he says “the real assault on the legal system” are efforts by judges and local officials to strip lenders of their rightful ownership and make foreclosures impossible.

Read Adam Levitin on why that’s nuts.

— Bloomberg’s new Bloomberg View editorial page offers a good example of why you can almost always skip a publication’s house editorials. Today it writes on the Groupon IPO:

There are lots of reasons to feel on edge about the future — but don’t try to impose any of them on Andrew Mason, the 30-year-old founder and chief executive officer of Groupon Inc. Yesterday, his online-coupon business filed to go public, with Mason blasting out a message that is worth remarking on for its youthful exuberance.

And that’s the lede.

This is even more insipid:

What comes next? Mason admits he doesn’t know, but his entrepreneurial zeal (and honesty) is welcome. “As with any business in a 30-month-old industry,” he writes, “the path to success will have twists and turns, moments of brilliance and other moments of sheer stupidity. Knowing that this will at times be a bumpy ride, we thank you for considering joining us.”

Groupon’s chances of success are impossible to predict —as up in the air as the Republican presidential field or the Mets’ future. The “risk factors” in Groupon’s prospectus include more than 40 ways the company could come unstuck. Even so, hats off for trying. And if it doesn’t work out, investors can’t say that young Mr. Mason didn’t warn them.

Zzzzzz.