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The commission is focusing on all sorts of repurchase agreements, not just those Lehman used.
In a report, Anton R. Valukas, an examiner appointed by the United States Trustee to determine if there was fraud at Lehman before it collapsed, disclosed the bank's use of repurchase agreements to hide its debt.
Analysts also see the ailing bank making further possible writedowns on a 400 billion franc portfolio of repurchase agreements as it rushes to cut its exposure to the capital markets in general and to risky assets in particular.
Yesterday, the Federal Reserve indirectly added reserves to the banking system for the fifth day this week by effecting $1 billion of repurchase agreements on behalf of client institutions.
Its transactions include substantial outright purchases or sales of government securities, relatively small purchases and run-offs of bankers' acceptances, and a considerable volume of loans made for a few days at a time to dealers in government securities or acceptances in the form of repurchase agreements.
The short-term loans came in the form of repurchase agreements for mortgage-backed securities, and all three operations were undertaken at interest rates near the Federal Reserve's target of 5.25% for federal funds, the overnight interbank loans that banks usually use to meet their short-term financing requirements.
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Safe harbor protection for certain repos should be withdrawn by either reverting to the pre-2005 BankruptCodeodefinitionsofs of "repurchase agreement" and "securities contract" or excluding from safe harbor protection repos that are the equivalent of committed financing arrangements for mortgage loan portfolios.
It was based on "repurchase" agreements between participating central banks, which agreed to provide each other with cash against the security of, for example, Treasury bonds.
The size of the market for repurchase agreements, or repos, where financial institutions borrow overnight to finance their operations, has shrunk from a peak of $4.57 trillion in March 2008, the month Bear nearly collapsed, to $2.6 trillion in July 2011.
The complaint centers on Lehman's questionable use of so-called Repo 105 transactions, short for repurchase agreements.
The repo transactions, short for repurchase agreements, helped Lehman temporarily hide billions of dollars in assets off its balance sheet.
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