After a year-long investigation, court-appointed bank examiner Anton Valukas has produced a deadly 2,200 page report which details the activities that led to the Lehman Brothers bankruptcy. The report is a keg of dynamite. The question now is whether anyone in government has the nerve to light the fuse. Valukas provides powerful evidence that Lehman executives were involved in "balance sheet manipulation" by implementing an arcane accounting procedure called "Repo 105" which masked the bank's true financial condition from investors and regulators.

According to Valukas, Lehman was "Unable to find a United States law firm that would provide it with an opinion letter permitting the true sale accounting treatment" using Repo 105. So, Lehman executives went outside of the country in an effort to enlist the support of a London law firm that would approve the procedure.

It is impossible to overstate the significance of Valugas's findings. The report exposes the opaque but central role of the repo market which provides essential short-term loans for financial institutions. (Lehman used repos to conceal the full extent of its collapse, by dint of the amount of leverage it was using, meaning the pitiful asset anchor tethered to a vast zeppelin of debt) More importantly, it shows the cozy and, very probably criminal relationship between the country's main regulatory bodies and the Wall Street behemoths. The activities of the New York Fed (NYFRB), which at the time was headed by Timothy Geithner, is particularly suspect in this regard. The report should trigger an immediate Congressional investigation, probing the whole affair and most importantly the role of the Fed.