LONDON (MarketWatch) -- Former Merrill Lynch officials warned the Securities and Exchange Commission and Federal Reserve that Lehman Brothers was incorrectly calculating its liquidity position months before its collapse, according to a published media report.
Former staffers at Merrill, which was later acquired by Bank of America /quotes/comstock/13*!bac/quotes/nls/bac (BAC 16.78, -0.04, -0.24%) , contacted U.S. authorities after Lehman released an estimate of its liquidity in the first quarter of 2008, the Financial Times said Friday.
Lehman touted the numbers to counterparties and investors as evidence it was in a stronger position than some rivals, but former Merrill officials said they believed Lehman included so-called regulatory capital in its calculation of excess liquidity -- something other banks didn't do -- the newspaper added.
"We started getting calls from our counterparties and investors in our debt. Since we didn't believe the Lehman numbers and thought their calculations were aggressive, we called the regulators," the newspaper quoted one former Merrill banker as saying.
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