To monitor the ability of borrowing firms to repay, the Federal Reserve, in its role as creditor, required all participants in these programs, including Lehman, to provide financial information about their companies on an ongoing basis. Two Federal Reserve employees were placed onsite at Lehman to monitor the firm’s liquidity position and its financial condition generally.
Beyond gathering information, however, these employees had no authority to regulate Lehman’s disclosures, capital, risk management, or other business activities. During this period, Federal Reserve employees were in regular contact with their counterparts at the SEC, and in July 2008, then-Chairman Cox and I negotiated an agreement that formalized procedures for information-sharing between our two agencies.