SEC boss reveals probe

The head of the Securities and Exchange Commission confirmed on Wednesday that the agency is investigating several companies' actions in the run-up to the financial crisis of 2008.

SEC Chairman Mary Schapiro said "it would be safe to assume" that the agency is looking closely at the conduct of a number of firms during that time. She did not name the companies.

Schapiro spoke in testimony to a House Appropriations subcommittee weighing the agency's request for about $1.3 billion for the budget year starting Oct. 1, a 12 percent increase from the current year.

Lawmakers want to know whether the sort of accounting gimmick recently uncovered that was used by the collapsed investment firm Lehman Bros. to mask billions in debt was widely used on Wall Street.

The implosion of Lehman Bros. Holdings Inc. into the biggest bankruptcy in U.S. history in September 2008 precipitated the financial meltdown that plunged the economy into the most severe recession since the 1930s.

After saddling itself with tens of billions in troubled assets that couldn't be sold easily, Lehman masked $50 billion in debt and its perilous financial condition by using the so-called Repo 105 accounting gimmick, an examiner appointed by the bankruptcy court found in an extensive report issued last week.

Questions are being raised about the supervision of Lehman by the SEC and the Federal Reserve in the months before its collapse.

The autopsy of Lehman issued last week by bankruptcy examiner Anton Valukas could serve as a valuable road map for the two agencies in their investigations, experts say.

Schapiro also renewed her call for Congress to bring credit default swaps and other derivatives under new regulation, saying "it's absolutely imperative" to bring transparency to the multitrillion-dollar global market for the risky instruments.