Lehman Repo 105 chronology -Financial Crisis of 2008

September 10, 2008, rating agency Moody's threatened to downgrade Lehman Brothers credit rating after several potential buyers walked away from a deal with Lehman after Lehman projected $3.9 billion loss for the quarter.

September 15, 2008, Lehman filed for bankruptcy with $639 billion in assets, making it the largest bankruptcy in history. Repo 105 enabled Lehman to accept a 5% haircut on fixed income assets it pledged as collateral in a repo agreement. The repo agreement extended across the end of the quarter and then buy back those same assets once the new quarter began. Lehman was able to account for the transaction as a true sale instead of financing because of high and expensive haircut. Reporting of this transaction created reduced balance sheet size by as much as $50 billion and net leverage was reduced from 13.9 to 12.1 for the second quarter of 2008. Lehman did not disclose the use of Repo 105 to regulators, rating agencies, investors or even to its own board of directors. SEC conducted inquiry of 24 public financial institutions and concluded that Lehman's window dressing was an isolated case. The conclusion was over the half the value of primary dealers' net positions, and over three times the window dressing done by Lehman.