SEC chief vows better bank oversight

WASHINGTON - The chairman of the Securities and Exchange Commission Tuesday pledged better oversight of the nation's largest banks after noting the agency failed to spot accounting tricks that led to the collapse of Lehman Brothers.

Chairman Mary Schapiro told a congressional panel that the agency has sent letters to 19 banks asking whether they are using accounting tricks that a bankruptcy examiner said led to Lehman's demise in 2008. Schapiro, who was not with the SEC at the time, said the agency is scrutinizing Lehman's use of the accounting move, known as Repo 105, that allowed it to mask its weakness. Repo 105 is an accounting maneuver where a short-term loan is classified as a sale.

Yesterday's hearing examining what led to Lehman's meltdown drew lawmakers into a partisan squabble over the Obama administration's push for financial regulatory reform, with Republicans noting the SEC's poor track record as proof that more regulation won't prevent future problems.

Lehman's collapse was the biggest corporate bankruptcy in U.S. history and threw global financial markets into crisis. The hearing looked at the bankruptcy examiner's report that said the firm masked $50 billion in debt.

"It's not clear any action by the SEC could have saved Lehman Brothers, but we are determined to use the lessons of that experience to be more effective," Schapiro said. "More vigorous oversight and a new approach are essential."

Richard Fuld, Lehman's former chief executive, said he has "absolutely no recollection whatsoever" of any documents related to the so-called Repo 105 accounting maneuver. After reviewing the transactions, he said, the firm complied with accounting standards. Fuld expressed regret about the company's collapse.

Two lawmakers testified at the hearing that Lehman's meltdown cost school districts, local governments and hospitals millions, forcing them to make cutbacks.

Many of the communities on their lists were in Florida, Colorado and California; none were on Long Island. - AP