Lehman bombshell #1: Almost 18 months after Lehman Brothers collapsed, sending the world into a deep credit crunch and nasty slump, a 2200 page report, released in New York earlier today, has fingered a couple of its big rivals and some executives for roles in the failure. Bloomberg reported that the report claims banks JPMorgan and Citigroup helped cause the Lehman collapse by demanding more collateral on loans and changing guarantee agreements. “The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity pool,” said Anton Valukas, the US Trustee-appointed examiner, in his report filed in Manhattan federal court. “Lehman’s available liquidity is central to the question of why Lehman failed,” he was quoted as writing in the report. “The Examiner has determined that there are a limited number of colorable claims for avoidance actions against JPMorgan and Citibank,” Valukas said in the report. Bloomberg said Valukas defined a colorable claim in the report as “sufficient credible evidence to persuade a jury to award damages at trial”. He talked to more than 100 people, including US Treasury secretary Tim Geithner, Federal Reserve chairman Ben Bernanke, former Securities and Exchange Commission chairman Christopher Cox, and examined more than 10 million documents and 20 million pages of e-mails from Lehman.

Lehman bombshell #2: According to Bloomberg and the Financial Times,  former Lehman CEO Dick Fuld, former chief financial officer Erin Callan, former executive vice-president Ian Lowittt and former managing director Chris O’Meara were also named as having certified misleading statements. Fuld was warned months before the bankruptcy by Treasury secretary Henry Paulson that Lehman might fail if it continued to report losses without finding a buyer or putting in place a survival plan, according to the examiner’s report, confirming claims made in several books about the failure of Lehman. The examiner said Lehman’s chief was “at least grossly negligent in causing Lehman to file misleading periodic reports” while its risks were rising because of long-term assets financed with short-term debt. According to the examiner, Lehman’s executives engaged in conduct ranging from “non-culpable errors of business judgement” to “actionable balance sheet manipulation”, as they used “accounting gimmicks” to move assets off the balance sheet without disclosing that to the government, rating agencies, investors or Lehman’s board. And according to the FT report, the examiner found that there was enough evidence to claim that Ernst & Young, Lehman’s auditors, failed to “question and challenge improper or inadequate disclosures” in the firm’s results. Denials have started flowing.

Bad news from America: Yes we have no tomatoes: The big cold on the eastern coast of the US and in Florida has made life tough for America’s burger and fast-food chains: 60%-70% of Florida’s tomato crop has been damaged by the cold winter, meaning prices are soaring and some chains are rationing or dropping the fruit from their salads, burgers and other products. Florida produces not only 75% of America’s tomatoes, but starts the annual crop earlier than other regions. Some markets have seen a 300%-plus rise in the cost of the standard US box of just over 10 kilograms to about $US30, up from about $US7. Now the chains (such as Wendy’s, Burger King and McDonald’s) are looking in Mexico and California for early crops. Burger King is reported to have stopped offering tomatoes in many outlets. There goes the low-fat diets!

Good news from America #1: The net worth of American households increased slightly during the final three months of 2009, according to Federal Reserve figures, and the surge in home foreclosure activity has eased, slightly. The Fed’s figures showed the the net worth of America’s 80 million-plus households (that’s the difference between assets and liabilities), rose to $US54.2 trillion in the fourth quarter of 2009, up from $53.5 trillion in the third quarter. It was the fourth consecutive quarterly increase, but the figure remains well below the highs in the second quarter of 2007, when net worth peaked at $US65.3 trillion. For all of 2009, household net worth rose $US2.8 trillion, after the $US11.8 trillion fall in 2008. For that thank the rising value of shares and other financial assets, but not housing, which continued to fall in value.

Good news from America #2: US foreclosure filings rose 6% in February from the same month in 2009, but fell 2% from January as loan modification programs and snowstorms seem to have impacted activity. RealtyTrac, the foreclosure group tracker, said the filings (such as default notices, scheduled auctions and actual repossessions) affected more than 308,500 properties last month. The 6% rise from February 2009 was the smallest year-on-year increase since January 2006. Nevada, Arizona and Florida remain the states with the top foreclosure rates, California was fourth. But the pace of foreclosure activity is easing. However, watch the situation from April. The Fed is due to end its purchases of mortgage-backed securities from the Government controlled mortgage groups, Fannie Mae and Freddie Mac. That has underwritten all US home purchases over the past year or more as it bought $US1.2 trillion of mortgage securities. No one knows what will happen when the Fed stops buying, or when it starts selling its securities.

Boom, boom 1: China’s inflation now running at 2.7%, house prices are booming, listen to the western analysts wail “bust, bust, bust”. It was the fourth successive monthly increase in inflation, but followed eight months of falling consumer prices. But the Chinese government is very worried about property price inflation: yesterday it tightened the rules significantly to cut speculation. Home buyers will have to put up a 50% deposit when buying land; the government banned the sale of land for villas and people buying land at auction will now have to put up a 20% deposit. This is after the government reintroduced a sort of capital gains tax in January, which is levied if a house is sold within five years of purchase. And developers who miss development deadlines for starting and finishing projects could be barred from land auctions for a year. The reason for this action: residential and commercial real-estate prices in 70 cities climbed 10.7% in the year to February, up from the 9.5% rate in January.

Boom, boom 2: China’s industrial production is still solid; up 20.7% for the first two months of 2010 over same period of 2009. That looks better than it actually is, January and February 2009 were depressed by the impact of the global crunch and recession. Wholesale prices jumped an annual 5.4% in February against 4.3% in January. Cars sales and production rose sharply, but the most watched indicator is crude steel output, which feeds into demand for iron ore, especially from Australia. Crude steel production jumped 22.5% in January and February to 102.89 million tonnes, with February’s figure up 22% at 50.36 million tonnes (meaning January’s figure was a much higher than expected 52.53 million tonnes). Iron ore imports rose 5.6% to 49.38 million tonnes. Over the first two months of the year ore imports rose 21% to more than 96 million tonnes. No wonder iron ore prices are around record levels, and no wonder the Brazilian exporter, Vale, is asking for a 90% price rise.

As forecast: Japan’s fourth-quarter annual economic growth rate has been cut to an annual 3.8% from 4.6% (or 0.9%, not the 1.1% first reported for quarter-on-quarter growth). The fall was tipped after business investment fell 18.5% in the quarter. The government’s first estimate had a much more optimistic forecast pencilled in. Inventories actually detracted from growth, instead of helping it. Exports were solid and a small bit of good news, the GDP deflator, the broadest measure of prices in the economy, fell 2.8%, instead of the record 3% initially reported.