Um, I don't think Repo 105 represents a 'hole' in the balance sheet in the usual sense. I mean it doesn't negatively impact on the solvency of the firm given it is a short-term swap of cash for good quality assets.

Granted, there is a 5% mismatch between the value of the cash and the collateral, which means the $50bn in Repo 105 resulted in an effective loss of $2.5bn - which 1) is recouped when the repo matures and you underpay by 5% when you repurchase the collateral; 2) is just 1% of the "hole" and, I suppose, 3) is a fair price to pay to reduce your leverage ratio.

If the amount of assets in the Repo 105 program had stayed constant (by rolling all the repos) rather than increasing at the time of closing the quarterly books the claim of intentional fraud would be much less plausible, and Lehman would just be taking a $2.5bn loss to permanently (as long as counterparties rolled the repos) shrink its leverage ratio.

The brainless should not be in banking -- Willem Buiter