Via: Zero Hedge
Submitted by Tyler Durden on 03/03/2013
It is conventional wisdom that in the days leading to Lehman’s bankruptcy filing on the night of September 15, 2008, sheer panic and utter confusion ruled ever back- and middle-office, over concerns that a counterparty, any counterparty, but especially Lehman, would end up being “not money good“, and the result was that trigger-happy margin clerks had the potential to make or break a company, by demanding just enough variation margin that would send the notice recipient promptly into bankruptcy. It is also conventional wisdom, that it was precisely several such margin calls mostly out of JPMorgan that precipitated the Chapter 7 filing by Lehman brothers, as the firm was finally unable to mask the fact that it was terminally overlevered, and even more terminally illiquid. It is certainly conventional wisdom, that Lehman was certainly massively overlevered, holding billions of overmarked CMBS on its balance sheet, and was doing everything in its power to hold on to precious liquidity, taking every opportunity to window dress its balance sheet as far better than it truly was (Repo 105 at the end of every quarter promptly comes to mind), over fears of avoiding precisely such a margin call onslaught, where the first margin call would cascade into many, likely lethal, margin calls.
Which is why, over four years after the filing of Lehman’s bankruptcy and the fight for who was responsible for what in the Lehman Chapter 7 saga still waging, most actively between the Lehman creditor estate and tri-party repo stalwart JP Morgan, we were not surprised to learn that the Lehman estate had attempted to force yet another sworn testimony from a (former) employee of JP Morgan, in hopes of catching the firm as engaging in a malicious act of defrauding Lehman of precious liquidity in its final hours, or said in layman’s terms, forcing it to liquidate.
What did catch our attention was that Lehman named the infamous JPM Chief Investment Office, and specifically its very infamous trader Bruno Iksil, accountable along with others for the London Whale fiasco, as the person responsible for an initial margin call to the tune of $273.3 million, made the same day “that JPMorgan made its first of two demands that week each for $5 billion of extra cash collateral that it had no right to obtain and that drained Lehman of $8.6 billion” (as per the Lehman filing). One could make the argument that this initial margin call was the straw that broke the camel’s back, as in the avalanche of money requests, every dollar flowing out of Lehman may have been the one that pushed it under.
If, of course, the Lehman estate claim was credible.
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