Except for the blog Financial Crookery in Scrabbling Around in a Repo 105 Haze?

Here's your handy extract from the Lehman Accounting Policy Manual in Anton Valukas' monolithic Lehman Examiners Report filing:

Repo 105 and Repo 108 transactions refer to repos with a counterparty in which we sell securities valued at a minimum of 105% (for fixed income securities) or 108% (for equity securities) of the cash received. That is, we sell fixed income securities with a fair value of at least $105 in exchange for $100 of cash for Repo 105, and equity securities with a fair value of at least $108 in exchange for $100 of cash for Repo 108. (Note that we allow Repo 108 to be done at $107 of fair value but we still refer to these transactions as Repo 108.)  Repo 105 and Repo 108 contracts typically are executed by Lehman Brothers International (Europe) ("LBIE") because true sale opinions can be obtained under English law. We generally cannot obtain a true sale opinion under U.S. law.

Financial Crookery translation: "I want to lend you some stuff for a short time and also want you to give me cash collateral.  But I only want $95.24 (per $100 of stuff) cash collateral as this gives me some ancillary benefits.  Don't worry about that though."

That is, Lehman used debt instruments as collateral for Repo 105, and equity instruments for Repo 108.

I am not sure what true sale opinions can be obtained under English law. We generally cannot obtain a true sale opinion under U.S. law means. Is it that US law doesn't allow it or does the more ominous interpretation of Valukas' words "unable to obtain a true sale opinion from a U.S. lawyer", that is, "no lawyer would sign off on the practise" apply?

Financial Crookery also has the language from the accounting standards:

For a repo to be re‐characterized from a secured financing transaction to a sale of inventory, all the following SFAS criteria must be met:

● The transaction is a true sale at law (SFAS 140.9a).
● The transferee has the ability to pledge or exchange the transferred assets
(SFAS 140.9b). and
● The transferor is considered to relinquish control of the securities transferred
(SFAS 140.9c).

FC Translation: "Rightio, here are three hurdles to jump over.  Erm I mean slide under. How do we satisfy all of these conditions to whip a bunch of stuff off our balace sheet temporarily, without actually using a market clearing price for it.

The brainless should not be in banking -- Willem Buiter