In the early days pre-meltdown, there were a handful of skeptics pointing to problems at firms like AIG, Fannie Mae, Bear Stearns and most especially Lehman Brothers.

It was not the media or the analyst community that identified the frauds, but the short sellers. In this sad tale of criminality and corruption, the shorts were the heroes. They employed an army of traders, forensic accountants, and non-cheer-leading analysts to kick the tires of the major firms where something smelled funny.

When it came to Lehman Brothers, foremost in the crowd of shorts was David Einhorn. There were many others (me included), but it was Einhorn who most completely critiqued Lehmans balance sheet, and most vocally called out the shenanigans there. he is the hero in this tale.

At the time, the media gave LEH the benefit of the doubt. And for his troubles, Einhorn was often criticized — even trashed — by various people. The most vocal criticism came from usually astute Charlie Gasparino (then at CNBC, now at Fox Business).

But when it came to Fuld, Gasparino was off his usual sharp game. Whether he was too close to Fuld personally, or it was simply another case of access journalism is unknown. As I warned, and Charlie acknowledged on the air, Fuld was using him. (He disagreed).

But the bottom line is Charlie blew this one big time. And as the video (after the jump) makes clear, he did so in way that made the character of the parties’ to the Lehman debate an issue.


“But you put up Dick Fuld versus Mr. Einhorn? Put up Dick Fuld versus Barry Ritholtz . . . ?

Its impossible to determine who is right and wrong . . . this is so muddy. But at some point, it comes down to the people: Dick Fuld, Einhorn, Dick Fuld, Barry Ritholtz.

Who do you believe?”


Well, it turns out that we now know who was right and who was wrong. Thanks to the yeoman’s job done by Anton Valukas, the bankruptcy examiner in the Lehman Estate, we know Lehman management was a fraud, they hid losses and leverage and played their balance sheet like a fiddle.

Not only do we know who was right and wrong, we also know that relying on the sturdy character of Investment Bank CEOs — especially this one  — was not the smartest way to make a bet.

And for that, you owe David Einhorn, myself and others an apology . . .



Category: Bailouts, Financial Press, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

44 Responses to “Charlie Gasparino Owes David Einhorn (and me) an Apology”

  1. Dennis says:

    You are being too kind . . .

    He shit the bed -

  2. maynardGkeynes says:

    “usually astute Charlie Gasparino”

    You meant: “usually insane”


    BR: Back in the Blood on the Street days, he was terrific.

    Its all been down hill from there . . .

  3. Scott F says:

    Dont forget Dennis Kneale — he is quite the tool here also

  4. Joseph Pulitzer says:

    Charlie Gas-bag-arino did you favor . . .

  5. destor23 says:

    I Believe In Dave And Barry

    Come on, it’d make a funny t-shirt!

  6. Darkness says:

    You are tenacious pit bull, Mr Ritholtz. And if ever we needed one to repeatedly dig up all these bones and gnaw on them again and again, it would be now.

    More power to you.

  7. Invictus says:

    I would not hold my breath waiting for an apology from the gas bag.

  8. Chief Tomahawk says:

    Charlie Gasparino: Latest example of “failing upwards”?

  9. leftback says:

    The Gas Bag couldn’t fix the tampon in his a**hole, so don’t hold your breath.

  10. Cynic_FA says:

    Barry says “we also know that relying on the sturdy character of Investment Bank CEOs — especially this one — was not the smartest way to make a bet.”

    Just talking with my partner today. The guys running the big banks and investment banks are a bunch of goniffs. The Lehman report says they were adding leverage to the books in 2008. Maybe the system too oftten reinforced the profitability of taking big risks, or maybe Fuld is a very sick man who suffers from MANIA

    Of course this does not apply to Blankfein who we all know is “doing God’s work” or the CEO who might be in my district office next week.

  11. Based on emails I was copied on, he seems to have buried the ax with Einhorn

  12. mcHAPPY says:


    With regards to accounting, could you explain what is different between what Lehman Brothers did in 2008 to what is being done with banks now and since early 2009?

    Seems to me it is the same game. The only difference is Congress through the FASB have changed the rules to make this sort of behaviour acceptable, condoned, and now rewarded.

    Think about those who proceeded using these types of accounting off-balance sheet gimmicks and tricks: Enron and Lehman comes to my mind.

    Does everyone remember how they ended?

  13. HCSKnight says:


    Nice piece. Hopefully Charlie shows some character….

    IMO, the public’s knowledge of what is short selling and naked short selling, and their understanding the critical role played in equity markets by short sellers, are the two most important subjects that must be corrected; for the good of the nation. If the public at large really understood these things, then I think the eye would begin to rightly turn back to be cast on the true source of market ills.


  14. With all the billions and billions of dollars that pass through the Social Security system, I don’t ever recall hearing a big scandal or anything less – it’s always been handled very responsibly. Yet, in the private sector, many of those in charge are complete shysters and frauds. What was the argument again that we had to give these people control over our money?

  15. fatelephant says:

    Apology? He needs to do a lot more than that. . But then, it’s this attitude that got him on to the show in the first place…

  16. CIGA Monitor says:

    I just had to comment about the video remarks on how Lehman management is totally engaged.

    Now that today’s post from Yves Smith [ NY Fed Under Geithner Implicated in Lehman Accounting Fraud Allegation ] shows just how they were engaged, which includes a link to court documents, I would hope that someone somewhere in Washington can summon up the courage to actually enforce existing laws and prosecute these criminal scoundrels.

    This just shows the importance of prior news/propaganda in understanding the reality of what is discussed today. We Americans must be the biggest fools in history for consistently and adamantly ignoring history. We will become legendary in that regard when future historian tally up the damage.

  17. Alex says:

    It is amazing to me, how most people see what they want to see, even when refusal to understand damages their own interests.

    Yet, there are exceptions (like yourself Barry), and they are gems worth holding onto.

    I used to think, how can I beat out the majority of hard working and often very well educated people who populate Wall Street?

    I have found the answer is often simple really. Watch the facts, never be distracted from acting according to what people DO, and always go with what works…even if these things kill my ego to do so.

    Doing these things is more than enough winning edge against most of my competition, as their egos work 24 / 7 to be my greatest ally.

  18. Thanks for the kind words, Alex . . .

  19. farmera1 says:

    If I remember correctly Fuld testified before Congress that he had pocketed $600,000,000 in the six years before Lehman fell. That is pretty strong incentive to edge over into creative accounting. (Maybe the emphasis is on the creative part and less on the accounting.)

    Does anyone else remember Fuld’s comments????

  20. cheparro says:

    Are we talking about the same prescient David Einhorn who, in 2005, became a major stockholder and director of the bankrupt New Century Financial, one of the largest producer of sub prime mortgages?


    BR: I don’t know — but what’s your point? That he doesn’t bat 1000% ? He also bought Target, that didn’t do well.

    How does that apply to the issue in the current discussion? We are looking at a corrupt accounting, venal corporate executive suite, complacent media — And you want to point out the guy who figured this out had other bad trades? WTF does that matter?

    This is the single most foolish comment I gave read this year

  21. dedalus says:

    Here’s a partial transcript of the video:

    Bill Griffeth: Charlie we talked about this yesterday: Lehman Brothers is no Bear Stearns.

    Gasparino: Yeah, I mean, you know, what’s kind of interesting about Einhorn—and I actually called him up yesterday; I had an interesting conversation with him [chuckles to himself] about some of the stuff Lehman has been saying about him—is that he’s not really saying anything different than we’ve been saying now for weeks: that Lehman is deleveraging, that it’s trying to get its capital ratios . . . its risks down . . . ahh, it may raise capital (Who knows what form it is). But long-term, Lehman has a problem. Um, the short-term is really where it gets really murky, and it’s really difficult to tell who’s right and who’s wrong.

    I will tell you this: The reason why I know that the shorts—many of them—are full of it, in some respects in this whole case, is that we did a report yesterday which had some . . . which was an internal Lehman document, which talked about, you know, some of the issues affecting the firm: how they brought down . . . exactly how they brought down leverage. Ah, did they really do a stock buyout the other day that a lot of the . . . a lot of the shorts were touting as causing the stock to go up, which they didn’t really buy back that much, as we showed.

    Ahh, and then so we did this report—and its all these shorts—Barry Ritholtz, a good friend of mine, he’s writing in these blogs that somehow I’m being used by Lehman—and it just shows you at that point it becomes desperation fact, that maybe, you know, Dick Fuld is right and David Einhorn is wrong.

    And I will say this—Dick Fuld is CEO at Lehman—at some point it’s hard to figure out fact and fiction here because I’ll be the first to tell you Wall Street firms B.S. everybody. But [if] you put up Dick Fuld versus Mister Einhorn, put up Dick Fuld versus Barry Ritholtz—and what do you get? What is the comparison? I will tell you Dick Fuld has a reason, basically, maybe to massage the numbers ’cause he’s fighting for his life. But this is a guy who’s been there in the past and at some point it’s hard….

    [Gasparino is then interrupted.]

  22. carleric says:

    Gasparino is simply a clown. I remember during the heighth of the panic, CNBC used to trot out good ol’ Charlie with his rumor of the day…..all of w hich were designed to help the market. Hopefully noone here wasted any money on Charlie’s self-serving book.

  23. KentWillard says:

    Give each man what he deserves and none of us scape whipping.

    What about the huge amount of money corporations spent on SOX compliance so that executives would be held accountable and accounting statements would be accurate? It wasn’t regulation, it was very expensive bureaucracy. And how are Fuld, Callan and the others being held accountable?

  24. Lehman Brothers: Caught cheating, again

    But it’s not that complicated. Lots of people knew that Lehman was playing games with its numbers, even if they didn’t know exactly how. What they didn’t know was the chain reaction that Lehman’s catastrophic failure would cause. And Dick Fuld, who was signing off on bogus quarterly statements, has no right to be aggrieved, not after pocketing hundreds of millions even as his company imploded — much of which, we hope, will be squandered in an unsuccessful legal defense.

    Barry Ritholtz was one of the Wall Street watchers calling bullshit on Lehman at exactly the time when the bank was cooking the books, and he was ridiculed by name for it on CNBC. Ritholtz seized upon the release of the new report as an opportunity to settle some old scores. The video is instructive if only to remind us how complicit the financial press was in the whole charade.

  25. TakBak04 says:


    From Yves at Naked Capitalism to a Lefty Blog…this from a poster that you might find interesting.

    Yves from “Naked Captalism” has post up on this Blog.

    It’s interesting that after Geithner’s “Puff Pieces” in all the Mainstream Mags…that this comes out about
    “Lefty Bloggers” invited to sit down at the table with Geithner.

    rosalind March 12th, 2010 at 1:01 pm

    gosh, what a coinky dink that Secretary Geithner had a bunch of bloggers over for a little “no direct attribution!!” coffee klatch this past Monday. almost as if he knew this report was dropping and needed to get some spinning in ahead of time.

    and why yes, the author of the Huffpo post Yves cites was at the invitation-only confab, Shahien Nasiripour, per Americablog.

    it will be interesting to track how the other bloggers at this meeting cover the story. again, per Americablog, they include:

    Faiz & Amanda at ThinkProgress
    John Amato, Crooks & Liars
    Duncan Black, Escahton
    Sam Stein, Huffpo
    Ryan Grim, Huffpo
    David Kurt, TPM
    Felix Salmon, Reuters
    Megan McArdle, The Atlantic
    Matt Yglesias, Think Progress
    Patrick Garafalo, American Prospect
    James Kwak
    Joe Sudbay, Americablog
    John Aravosis, Americablog

    It would be interesting, indeed to see how these folks invited to Geithner’s Table report on the Latest Revelation about Lehman Brothers.

    BTW: CNBC’s “FAST MONEY” did mention it tonight. In a “segment” …..for a few minutes..

  26. Not exactly all lefties:

    James Kwak co-wrote 13 Bankers with Simon Johnson. He is also co-founder with Johnson of The Baseline Scenario. I don’t think of him as Left compared with the rest of that list.

    And Megan McArdle of The Atlantic is hardly a lefty blog — she appears to my eyes as a classic rightwards leaning efficient market type of a fool

    Recall some of the astoundingly silly WTF statements McArdle made — long after the causes of the collapse were evident to those who objectively looked at the data:

    “But financial meltdowns don’t offer villains, for the simple reason that no one person or even one group is powerful enough to take down a whole system.” (Jul 10 2009)

    “Don’t underestimate how contingent history is — Had Al Gore been elected in 2000, the Republicans would be arguing that this was problem of too much regulation, not too little. Who ever happened to be in charge gets blamed. ” (October 14th, 2008)

    These are just aggressively ignorant statements . . .

  27. Mr.E. says:

    On the Lehman issue Gasparino proved he was one of the herd, another sheep, being mislead by some glitzy fat cats. One this, Barry, he owes you an on-air apology that is at least as damning to himself as he was towards you in his aired commentary on CNBC.

    As others have noted over many posts, please keep doing what you have steadfastly been doing here. If we had a few more like you crises like what was seen through 2008 would be far less likely.

  28. cheparro says:

    You’re right, Barry. My comment was a non sequitor in the context of this thread. But I think the perspective on Einhorn is a little different. To me he is no “hero”

    You came to your position about the impending meltdown through logic and research (along with, I suppose, the John Poulsons etc)…I look at Einhorn differently. I think he was very much a part of the problem contributing heavily to the madness. I guess one could say he had his epiphany and went short…and good for him! He was right and Gasparino was wrong on Lehmann.

    Look at it this way…By 2005 Einhorn was a director and a major shareholder of New Century Financial, possibly the largest producer of garbage mortgage loans in the business. Lehmann undoubtedly bought a substantial number of those loans from New Century, packaged them into MBSs and sold them off to whomever and, most likely, subsequently sold swaps insuring against defaults in the same paper they were selling (and undoubtedly sold naked swaps as well and probably retained a large portfolio of mezzanine tranches thus exponentially increasing their exposure.)

    Einhorn must have learned something from his 2 years experience on the New Century board (New Century filed for bankruptcy in April of 2007 and criminal proceedings were initiated in December of ’09 against the management). I realize that management often keeps its outside board members in the dark but Einhorn is a brilliant businessman. He couldn’t have been entirely clueless. He most likely understood at some point that New Century (and its fellow mortgage producers Countrywide, etc) were selling time bombs to the Lehmann’s of this world, it wouldn’t be a stretch to think that his New Century experience made a bet against the packager of those loans look like a sure thing. I don’t know how much analysis of Lehmann’s balance sheet was needed by Einhorn..he knew those asset valuations were fiction.

    Finally, I am in complete agreement on the value of short selling. None of the investment banks who were heading over the falls had any legitimate gripe with the shorts. Their purpose was to distract attention (although there is a case to be made that the Fuld’s of this world may not have known how deep a hole their bond traders had dug for them. If so, it could be understandable for them to look to outside causes for their misery).

  29. TakBak04 says:

    Sorry, here’s the Link:

    NY Fed Under Geithner Implicated in Lehman Accounting Fraud Allegation

  30. philipat says:

    Interesting also that Fuld, through his lawyer, said that he was unaware of the specifics of the Repo accounts. Perhaps someone might explain to Fuld, through his lawyer of course, is that the very reason a CEO is required to sign-off on Company accounts is to accept responsibility. So he had better, in his own best interests, understand the specifics. It’s not enough, in legal terms, to claim ignorance of the details.

  31. V says:

    I wonder if we will get any perp walks after the report into Lehman?

  32. Equityval says:

    Let me preface this by saying that I didn’t follow Gasparino’s work all that closely (though I’m sure I read some of it) a decade ago when you claim he was on his game. However, it is hard to believe the guy had ANY game after watching him over the last 3 years. I don’t think it is a stretch to say that Gasparino did very little reporting and largely made a market in rumor mongering during most of the financial crisis. The quote from the video clip that is cited in the post amply demonstrates that he pretty much stopped thinking or using any analytical powers when it came to Lehman. As he parsed the situation, it was essentially a comparison of personalities rather than an evaluation of facts.

    Despite what Charlie thinks or claims in the video, the Lehman situation was not so hard to figure out. They had roughly $5B of capital tied up in two CRE deals that were worthless: the bridge equity of the Archstone deal, done at the very tippy top of the CRE cycle and a large investment in SunCal which owned a patch of undeveloped desert in the inland empire. A quick conversation with anyone in the apartment business or a glance at the CMBS spreads in Q2 of 2008 would have told you that the Archstone bridge equity was a donut. Likewise, given the dynamics of the housing market in the Inland Empire in 2008 the present value of SunCal’s land (which was levered) was approximately zero. In addition to these things, Lehman owned levered equity in assorted smaller real estate developments in Florida and California as well as honking portfolios of mortgage debt that were dropping in value by the week [I have not had the time to read the examiner's report on the valuations, but I suspect they will corroborate this view]. It was clear, even at a significant distance from Dick Fuld’s office, that their capital was significantly overstated (due to the fantasy marks on the CRE positions) and that the firm was hopelessly overlevered. This is what Einhorn (and quite a few other people like me that were shorting the stock) saw and why he was so vocal about Lehman’s problems.

    Had Gasparino used even a modicum of independent thought and considered the facts that the shorts had marshalled, he would have seen that Lehman’s capital was seriously impaired. Instead, his view was that the shorts and the “blogs”, as he derisively intoned, were just out to stir up as much bad press about Lehman as possible and he apparently couldn’t be bothered with facts, it was coming down to personality and reputation.

    The other aspect of Gasparino that is staggering is his continued belittlement, to this day, of the blogosphere long after Lehman had gone under the waves and AIG , BAC and Citi were rescued. The ONLY people that saw any of this coming were bloggers. Barry, Calculated Risk, Yves Smith, Carl Denninger and a handful of others were out in front of this and called it – I know because I was reading all of them. The continued willful ignorance of these writers by Gasparino and others like him in the mainstream press, shows you how little original thought and IQ points are left in the branded media outlets. [For more evidence of the brain drain, see Gretchen's lead column in the NYT Sunday business section in which she conflates credit default swaps and currency swaps TWO WEEKS IN A ROW! Hello - is there anyone left in the newsroom who can fog a mirror - we don't know the difference between these two instruments three years after the subprime bubble burst in Feb 07?????] I was under the impression that journalism was about uncovering facts wherever they lay, but it is very clear if you have dealt with the press in any fashion, that the only people they pay attention to are people in “official” positions (government or corporate) or people that have already been vetted by someone in the mainstream media. The rest of the data and inferences out there are invisible because none of these people, like Charlie, apparently have the ability to parse reality, or independent analyses of it, on their own.

    Charlie does owe you a big apology, and he could show some real contrition by giving some credibility to the non-mainstream media and taking seriously the high quality stuff that bloggers write. His own credibility would benefit.

    The other group who should be engaged in some major introspection as a result of the Lehman report is the SEC. First, it exposes how ill-equipped they were to discharge their oversight of disclosure requirements when it came to the big banks. Second, they should be ASSHAMED that they became the handmaidens of the Dick Fulds of the world and not only ignored the Einhorns of the world but turned their investigatory apparatus on the very people brave enough to speak the truth. Talk about losing your bearings! I realize Mary Shapiro was not in the chair when all of this went down, but I sincerely hope that she uses the report as a point of departure for a complete remake of the culture of the SEC. In short, the people there need to get a clue as to what is really going on the world and how it works. The Madoff and Lehman episodes have exposed the SEC as a bunch of process driven lawyers worried about whether their subjects are filling out the right forms, rather than a group of people who understand the businesses of the people they are supposed to be regulating and figuring out whether the spirit of the law is being complied with. There is little evidence so far that any culture change is taking place. Shapiro should put a copy of the report on everyone’s desk this weekend and assign it as required reading – it would be a good start.

  33. alfred e says:

    @BR: Cool. Keep it up.

    People like to dish BS until they get called on it.

    We may not fix it, but at least we can say we tried.

    And for that I thank you.

  34. Bess says:

    Does Charlie Gasparino Owe David Einhorn (And Barry Ritholtz) An Apology?

    I don’t think I have to tell you people it takes a big man to admit when he’s wrong, and an even bigger one to follow that admission up with an apology. Charlie Gasparino is fully aware of this truism, though in his 40 some-odd years, he’s had nothing to say sorry for, and certainly never gotten anything wrong. Sure, other people have seen it differently– the guy Chaz cut off on the BQE the other day, the San Pietro busboy he screamed obscenities at for getting his order wrong (twelve martinis, roast chicken with ketchup on the side), etc– but that’s their problem. Today you can add Barry Ritholtz to the list of people that Chaz doesn’t owe nothing. Yes, BR’s argument has its quasi-valid points– Ritholtz reminds us today that Chaz defended Lehman Brothers by saying Dick Fuld obviously knew more about the firm’s balance sheet than David Einhorn and Barry– but those are just facts. Charlie does have one thing to say to Ritz, though, which is simply this: ba fungul. No further questions.

  35. farmera1 says:

    Here’s a blast from the Past (June of 2008): Dirty Tricks at Lehman

    “The bank had a better day than yesterday, with the stock up a tad more in large part due to supportive words by highly respected investment bank analyst Guy Moszkowski who said that the notion that Lehman would come to the same end as Bear Stearns was “unfounded”.

    “Charles Gaspardino of CNBC, the favorite outlet of those who aspire to paint the tape (there have been instances of favorable-to-embattled-company tidbits coming from him shortly before the close of trading) commented on a Lehman internal memo that came into his possession.”

    “But leaking an internal memo with non-public, material financial information to Gasparino is an SEC violation, although I am highly confident it was done in such a way the the firm has plausible deniability if questioned. Don’t tell me this may have been an unauthorized employee leak; if this memo was circulated broadly to employees, it was done with the full intent that word would get outside the firm. That happens predictably with mass employee communications. And if it was limited distribution, the recipients, as anyone who has passed a Series 7 exam ought to know, are fully aware that selective disclosure of material information is a big no no under SEC Rule FD.”

    “This stinks to high heaven. I spent a few years in the industry a long time ago, and the SEC requirements were taken pretty seriously. Now skirting around the edges, particularly the ruse of using plants with the likes of Gasparino in lieu of proper disclosure has become common. And it’s a favored device with embattled companies. To me, this fact pattern alone is enough reason to be short the stock. Management is acting as if all is not well in Denmark.”

  36. soloduff says:

    Addressing Charles Gasparino, Barry Ritholtz says, “Not only do we know who was right and wrong, we also know that relying on the sturdy character of Investment Bank CEOs — especially this one — was not the smartest way to make a bet . . . . And for that, you owe David Einhorn, myself and others an apology . . . .”

    Ritholtz’s indignation is shared by virtually all of the posters. Unfortunately, neither Ritholtz nor the posters mention Gasparino’s latest book, “Sellout,” in which Fuld is criticized and Einhorn is praised. Gasparino has already, and publicly, reversed the position that gives Ritholtz and friends such umbrage.

    So who owes whom an apology?


    BR: Charlie impugned the characters of those who dared question the great Dick Fuld on air. He mentioned me by name on the air, as someone not worth believing versus Fuld.

    If he apologized to me in the book for that, than I will apologize to him for this post.

  37. farmera1 says:

    One of the techniques Lehman used was called Repo 105s. They were using financial legerdemain (aka creative accounting) to make their balance sheets look better (they had less leverage/debt) at the end of the quarter. This link explains the process.

    Repo 105: Lehman’s ‘Accounting Gimmick’ Explained

  38. Equityval says:

    A little more detail from the Examiner’s Report on the SEC’s handling of short sellers who focused on Lehman.

    Note how the regulators are doing Lehman’s bidding by calling out short sellers as manipulators. This is pretty clear evidence of how politicized the SEC has become. They too, like Gasparino, had ceased to worry about facts and apparently were more concerned with who was on the other end of the phone and who they worked for. Thomsen and Sirri of the SEC resigned in early 2009 in the wake of the Madoff revelations.

    “p. 713: After Bear Stearns nearly collapsed, short sellers began to focus on Lehman and other banks. On March 20, 2008, Russo [LEH's general counsel] contacted Linda Thomsen, the SEC’s Head of Enforcement, regarding rumors of hedge funds “taking another run at Lehman.” On April 1, 2008, at Lehman’s prompting, Erik R. Sirri, head of the SEC’s CSE program, made a statement at an annual conference regarding the SEC’s view of the seriousness of rumors and stock manipulation in the context of short sales. At the April 15, 2008 Board meeting, Lehman’s management discussed Lehman’s concerns regarding short selling. On May 21, 2008, at the Ira Sohn Conference, one day after the comment period for the SEC’s proposed rule concluded, Einhorn gave a presentation on Lehman, analyzing Lehman’s Form 10‐Q, filed April 9, 2008.2767 Einhorn announced that he was shorting Lehman’s stock based on his belief that the stock was over‐valued. Before that presentation, Einhorn had corresponded with Callan in mid‐May 2008, as part of what he described as fact‐checking in advance of his presentation at the Ira Sohn Conference. Einhorn focused on four major issues in his correspondence with Callan and in his May 21, 2008 speech: (1) Lehman’s disclosures regarding CDO exposure and related write‐downs; (2) the difference between the amount of Level III assets disclosed in the Form 10‐Q filed in February 2008 and during Lehman’s first quarter 2008 earnings call; (3) Lehman’s disclosure and valuation of its stake in KSK Energy; and (4) Lehman’s write downs of its CMBS assets. On the day of Einhorn’s speech, Lehman’s stock closed down $2.44, with its highest volume of the entire month of May 2008. Einhorn’s criticism of Lehman and Callan is commonly cited as the reason for Callan’s replacement less than three weeks later.”

    Highlighting the pervasiveness of the rot in the regulatory system, this excerpt from the Report indicates that the general counsel of the NY Fed concluded, after reading Einhorn’s book on Allied Capital, that maybe these shorts knew what they were doing. However, the institution was unable to make the leap from that insight to actually mustering up some inquiry into Lehman’s solvency. So who might have quashed Baxter’s initiative? Most likely his boss and your current Treasury secretary, TurboTax Timmy

    “Following the near collapse of Bear Stearns, Einhorn published a book, Fooling Some of the People All of the Time, which focused on Allied Capital. Thomas C. Baxter, Jr., General Counsel to the FRBNY, said that reading Einhorn’s book made him think that the FRBNY should pay more attention to short sellers’ concerns. However, Baxter did not reach that conclusion for the reason that Lehman would have wanted, namely to persuade the Government to regulate short sellers, but rather because it appeared to Baxter that Einhorn may have been shorting Lehman for good cause. Baxter was unable to say, however, whether anyone at the Federal Reserve followed up on Einhorn’s criticism of Lehman in his speech.”

  39. Aramis says:

    Why do you bother with him?

    Dealbreaker has detailed his loutish behavior. He is not a serious journalist, and no one cares what he says or does anymore — and no one sees him on Fox Business.

    Put a fork in Gasparino, he’s done.

  40. StatArb says:

    Stopped clock right twice a day ………

  41. StatArb says:

    Dennis Kneale – - – clueless in Seattle

  42. redwood509 says:

    Bravo! It is time to point out who were the real champs!
    Sadly, the shorts were right. Gasparino is a hard worker
    but this expose makes me wonder what he is up to?

  43. ToNYC says:

    Gasparino is on the take: he works for free dinners at all the IB’s joints and seeing his mug on the tube somehow conflates his ego with acceptance. A mug shot indeed. He is simply bankrupt disparaging the greatest medium for truth on the planet while he proves that advertising a bad product only more rapidly decreases sales. The Blogospere which he disparages as if he was borm to the branded media manor, is simply information that is free of corporate sponsorship that lives or dies by its freedom from lies.