Merrill Lynch (Merrill Lynch news) executives smelled something fishy back in 2008, when Lehman Brothers (Lehman Brothers news) was bragging to counterparties that it had the strongest liquidity position on the Street. A former Merrill Lynch official tells the Financial Times: "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."

That of course raises the question: What did the SEC and Federal Reserve Bank of New York do with this tip? The SEC told the paper that the senior people overseeing Lehman Brothers had left the agency. We may not find out anytime soon how seriously these calls were taken, but this certainly adds to the fallout from Anton Valukas's posthumous report on Lehman Brothers.

And let's not forget the Lehman executive who warned about misleading shareholders, and was fired for it. There is a chance that regulators may be feeling their hand forced on this. Increasingly, it's looking less palatable to sit back and say the episode is over. 

For more:
- here's the Financial Times article

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