Lehman questions linger

The questions about Lehman Brothers (LEH) won’t go away. The investment bank’s shares rose Monday after Lehman chief Richard Fuld took responsibility for its $2.8 billion second-quarter loss. He stood behind Lehman’s balance sheet marks and reaffirmed that the bank’s so-called deleveraging effort, in which it sold assets to reduce the size of its balance sheet by some $147 billion, was largely complete. But not everyone is persuaded. The Wall Street Journal reports Tuesday that a change in accounting rules could potentially reverse some of Lehman’s recent balance-sheet reductions. The shift centers on changing rules for how a firm determines whether pools of bonds it sells as securities remain under its control. And at Naked Capitalism, Yves Smith wonders how Lehman was able to sell so many assets so quickly in a market that wasn’t always terribly upbeat. She concludes this “seems to be too good to be true” - a notion that, if shared by investors, could point to more declines ahead for Lehman shares.

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