the Fed knew Lehman was moving liabilities off its balance sheet but didn't think it was "significant"

Lehman Brothers executives weren't the only ones in the building when they were moving billions of dollars in liabilities off their books at the end of each quarter with magic accounting. So were the Feds, The New York Times's Andrew Ross Sorkin writes in his latest DealBook column.

Regulators like the Securities and Exchange Commission and the New York Fed sent emergency teams to monitor most of the big banks after the collapse of Bear Stearns. They had constant access to Lehman's books, and not just the dolled up quarterly reporting. So where was the government while all this "materially misleading" accounting was going on?

It now appears that the federal government itself either didn't appreciate the significance of what it saw (we've seen that movie before with regulators waving off tips about Bernard L. Madoff). Or perhaps they did appreciate the significance and blessed the now-suspect accounting anyway, Mr. Sorkin writes.

rest at http://dealbook.blogs.nytimes.com/2010/03/16/at-lehman-watchdogs-saw-it-all/?dlbk&emc=dlbk