The Valukas Report argues that the use of Repo 105 “materially misrepresented Lehman’s true financial condition” (p. 747). Yet Repo 105 is not important for the issues examined in this paper. The assets removed from the balance sheet were safe and liquid: 91% were Treasury and agency securities, and over 99% were investment grade (Valukas Appendix 17 pp. 12-14) . If we put those assets back on the balance sheet, along with the corresponding liabilities to repocounterparties, this adjustment does not significantly affect my analysis of Lehman’s solvency, its
liquidity needs, or whether it had adequate collateral for a Fed loan.