Cooperation between the Federal Reserve and the SEC was generally quite good, especially considering the stress and turmoil of the period. In particular, the Federal Reserve, with the SEC’s participation, developed and conducted several stress tests of the liquidity position of Lehman and the other major primary dealers during the spring and summer of 2008.
The results of these stress tests were presented jointly by the Federal Reserve and the SEC to the managements of Lehman and the other firms. Lehman’s results showed significant deficiencies in available liquidity, which the management was strongly urged to correct. The Federal Reserve was not aware that Lehman was using so-called Repo 105 transactions to manage its balance sheet.