A Republican lawmaker requested a congressional hearing on a bankruptcy examiner's report on Lehman Brothers Holdings Inc
Representative Spencer Bachus, the top Republican on the House of Representatives Financial Services Committee, said the report highlighted regulators' failure to act on evidence of accounting gimmicks used to hide Lehman's insolvency.
Either the SEC and the New York Federal Reserve failed to discover the ongoing accounting fraud at Lehman, or they turned a blind eye to the ongoing fraud, Bachus said in a letter to the committee's chairman, Barney Frank, requesting a hearing.
He said the hearing would be especially important given legislative proposals to expand the Fed's regulatory powers.
Under legislative packages in the House and Senate that represent the most extensive rewriting of financial market rules since the 1930s, the Fed would gain greater ability to supervise the largest and most complex financial firms.
Later on Wednesday, the House Financial Services Committee was to hold a hearing to examine the link between the Fed's banking supervision responsibilities and its monetary policy function.
The 2,200-page Lehman report, from a court-appointed examiner, found that the investment banking firm used a gimmick, known as Repo 105, for the sole purpose of manipulating its books, contributing to its demise.
The report also found that Lehman had been insolvent for weeks before it filed for bankruptcy in September 2008.
Bachus, who does not have authority to convene a hearing himself, said lawmakers should examine the adequacy of the monitoring of Lehman by the New York Fed and the U.S. Securities and Exchange Commission after the collapse of Bear Stearns in March 2008.
He said the hearing should include testimony from Treasury Secretary Timothy Geithner, former SEC Chairman Christopher Cox, and former Lehman Chief Executive Dick Fuld.
(Reporting by Karey Wutkowski; editing by John Wallace)