In a letter to Attorney General Eric Holder, Sen. Chris Dodd (D - Conn.), the chairman of the Senate Banking Committee, called for an investigation into the accounting activities used by Lehman Brothers during the financial crisis.

Last week, Lehman's bankruptcy examiner issued a scathing report that detailed the firm's use of "Repo 105" transactions to keep debts from being reflected on their balance sheet. The deals were essentially loans that were improperly classified as revenue on Lehman's books. The effect was to remove $50 billion from Lehman's balance sheet -- an act that then CEO Richard Fuld, was "at least grossly negligent" in allowing, the examiner said.

So which theory is it: stunning bureaucratic incompetence, wishful thinking and denial, or a cover up? Or a combination of the above?

No matter which theory or theories you subscribe to, the continuing revelations of how the SEC -- and perhaps more importantly, the New York Fed -- conducted themselves in the months before Lehman's collapse, paint an increasingly damning picture.

The Valukas report shows both regulators were monitoring Lehman on a day-to-day basis shortly after Bear's failure. They recognized that it had a massive hole in its balance sheet, yet took an inertial course of action.

GREENWICH, Conn.-Extended Stay Hotels Inc. has decided to take an investment offer worth up to $905 million from a group led by Starwood Capital Group in order to exit bankruptcy, abandoning an earlier proposal from Centerbridge Partners and Paulson & Co.

The hotel chain said Thursday that the proposal from Starwood, TPG Capital and Five Mile Capital Partners would value it at about $3.9 billion after the deal closes. It also said the deal would strengthen its balance sheet, lower its debt to $2.8 billion from $7.4 billion and provide cash reserves that would be poured into its properties and operations.

The Federal Reserve funds itself, making money on the buying and selling and holding of U.S. government and mortgage-backed securities, among other things. After paying its expenses, any profits go to the U.S. Treasury. It prizes this independence from the congressional appropriations process.

It seems the Senate Banking Committee has discovered the advantages of what one might call off-balance-sheet financing. In the latest version of the financial-regulatory bill unveiled by Chairman Chris Dodd on Monday.

teri buhl of greenwich time got larry mcdonald's response to the repo 105 allegations. let's just say he wasn't shocked by the possibility of fraud at lehman. [w]e reached out to one of the experts in all things lehman: larry mcdonald, former lehman

March 15 (Bloomberg) -- Japan's five-year notes advanced, ending a three-day drop, on speculation the Bank of Japan will announce additional steps to ease monetary policy.

Five-year yields fell from the highest in three weeks before the meeting on March 16 and 17, where the BOJ may seek to counter a contraction of its balance sheet caused by the month-end expiration of an emergency-credit program, according to economists surveyed by Bloomberg News.

Lehman Brothers used inconsistent and highly subjective methods to value the increasingly problematic assets on its books, according to the Valukas report released last week detailing the events that led to the company's demise.

While the most damning parts of the report recount how the bank took $50bn of assets off the balance sheet at quarter's end in an exercise in window dressing, the report also highlights valuation processes that are troubling as well.

Inside Lehman Brothers Holdings Inc., some executives quietly fretted about the firm's accounting as the company headed to the brink in September 2008.

Matthew Lee did something about it.

In May 2008, the former Lehman senior vice president wrote a letter to senior management warning that the company may have been masking the true risks on its balance sheet.

Now, the little-known Lehman executive once in charge of "global balance sheet and legal entity accounting" is at the center of allegations that Lehman manipulated its numbers and misled investors.

March 12 (Bloomberg) -- A 2,200-page bankruptcy report a year in the making may point the way for plaintiffs looking to sue former Lehman Brothers Holdings Inc. officials, lawyers said, rather than grand juries probing possible crimes.

The report, filed by bankruptcy examiner Anton Valukas yesterday in Manhattan federal court, describes off-balance- sheet transactions Lehman used to hide debt in late 2007 and 2008, deceiving shareholders about its ability to withstand losses. The firm, which collapsed in September 2008, filed the biggest bankruptcy in U.S. history and helped trigger the financial crisis and resulting $700 billion government bailout.

NEW YORK (Dow Jones)--A bankruptcy-court examiner's scathing report on the collapse of Lehman Brothers Holdings Inc. (LEHMQ) names seven banks that participated in transactions Lehman used to conceal its balance-sheet weakness.

The report by examiner Anton Valukas also suggests that some or all of the banks, all based outside the U.S., may have known at the time that Lehman was executing what are known as "Repo 105" repurchase transactions in order to keep assets off its balance sheet, and as a result might "try to squeeze Lehman." The report doesn't allege that any of the banks engaged in any wrongdoing.

Thursday, a U.S. bankruptcy-court examiner investigating the collapse of Lehman Brothers Holdings Inc. released a scathing 2,200-page report. Here are some highlights.

The examiner criticized Lehman for the "materially misleading" approach it took to represent its financial condition. He focused on the so-called "repo" market, in which firms sell assets in exchange for cash to fund operations, often just overnight or for a few days.

Linklaters, one of London's premier law firms, is battling to defend its reputation after a US report into the failure of Lehman Brothers showed it approved controversial deals that shifted billions of dollars of debt off the balance sheet in the years before the bank collapsed.

The hard-hitting report found that the crucial deals, which were also sanctioned by Lehman's auditors, Ernst & Young, were described as "window dressing" by bank staff and masked the precarious state of its finances while it was under scrutiny from regulators and investors.

Lehman Brothers bosses have been accused of using an "accounting gimmick" to hide billions in losses which helped bring about its collapse and unleashed the global financial crisis.

A Lehman employee in London after the firm's collapse

The so-called gimmick, called "Repo 105", was used to temporarily remove $50bn (£33bn) of assets from the US investment bank's balance sheet in 2008, according to a one-year investigation.

Those are some of the words that court examiner Anton Valukas used to describe an alleged practice at Lehman Brothers Holdings in the first and second quarters of 2008 to make it appear that the securities firm had fewer risky assets on its books.

That conclusion could have legal implications for the Lehman estate, according to the report. Within Lehman, the practice was known as "Repo 105." "Although Repo 105 transactions may not have been inherently improper, there is a colorable claim that their sole function as employed by Lehman was balance sheet manipulation."

AUGUSTA, Ga.-Morris Publishing Group said Tuesday that it has emerged from under bankruptcy protection.

A judge last month approved a prepackaged debt restructuring for the Georgia-based publisher of 13 daily newspapers, including The Augusta Chronicle and Savannah Morning News.

The company has spent the past year formulating a plan to shed $288.5 million in debt -- or about 70 percent of its total of $415 million. The plan allows Morris' owners to keep control of the privately held company.

Paying back government loans and attempting to sell off businesses weighed on American International Group's results in the fourth quarter, pushing the insurer deep in the red after two profitable quarters.

AIG ( AIG - news - people ) reported a loss of $65.51 per share, far lower than the $458.99 per share it lost last year, but still worse than the $3.94 per share expected by the few analysts who still cover the stock. The insurer recorded a loss of

Blockbuster Inc.'s (BBI) fourth-quarter loss widened as the video-rental chain continued to suffer from sales erosion and big write-downs.

Battling to remain relevant as the traditional video-rental business fades, Blockbuster has brought in advisers to help it look at ways to remake itself and to shore up its balance sheet.

The company, which warned in January that its holiday performance was disappointing, is looking at buying assets from bankrupt rival Movie ...

Federal Reserve Chairman Ben Bernanke is slated to be in the spotlight this week, amid a steady hum of economic data.

The Standard & Poor's/Case-Schiller Home Price Index is projected to show that home price increases flattened out in December, consistent with other data suggesting the uptick in housing prices from the fall has not continued this winter. Analysts expect the composite index of home prices in 20 major cities to be up 0.05 percent, compared with a 0.24 percent rise in November.

NEW YORK-Standard & Poor's raised its outlook for Louisiana-Pacific Corp. to "Stable" from "Negative" on Friday, saying the building-products maker strengthened its balance sheet in 2009 despite the housing slump. S&P also reaffirmed Louisiana-Pacific's "BB" corporate credit rating.

The ratings agency said its economists expect housing starts to rise 35 percent this year and 50 percent next year, helping to gradually strengthen LP's earnings.

(Adds share price in fifth paragraph.)

Feb. 18 (Bloomberg) -- ABB Ltd., the world’s biggest builder of power grids, said it aims to cut costs by $3 billion by the end of this year, 50 percent more than previously planned to meet profit targets as customers remain hesitant to invest.

Chief Executive Officer Joe Hogan maintained his “cautious outlook for the year,” according to a statement today. ABB still aims for an operating margin of 11 percent to 16 percent. Last year, that measure of profitability was 13 percent.