Gee, what a shocker:

“Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.”

Not quite Repo 105, but close . . .

click for interactive graphic

courtesy of WSJ


Big Banks Mask Risk Levels
Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review
WSJ, April 8, 2010

Category: Credit, Legal, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Surprise! Big Banks Hide Risk Levels”

  1. rktbrkr says:

    Riaky Business II

    By providing near zero cost money BB is aiding and abetting this behavior – and he wants to be the capo di tutti capo of financial regulators.

    We’re come a long way baby in straightening out our financial system.

    This is the TBTF banks, of course. Being TBTF and playing with house money doesn’t encourage them to take on unacceptable risks, does it.

  2. rktbrkr says:

    Picture the TBTF jugging these trading positions like a soccer ball while kicking the mortgage cans down the road…impressive but headed for a fall

  3. WFTA says:

    Honest question: Is this not a violation of general accepted accounting principles? To this layman it looks like fraud.

  4. Marcus Aurelius says:

    Fraud is a GAAP.

  5. rktbrkr says:

    Funny juxtaposition of posts at calculated risk. Five bad news following Bernanke’s modest claim about preventing The Greater Depression. Still think it’s too early to make that call!
    * at 8:49 AM Bank Failures and Puerto Rico
    * at 8:35 AM Weekly Initial Unemployment Claims increase 18,000
    * at 11:32 AM Hotel Occupancy declines compared to same week in 2009
    * at 2:33 PM Report: Distressed Home Sales Increasing
    * at 5:20 PM Euro Bonds Spreads: Greece at Record
    * at 8:46 PM Bernanke: Economic Policy: Lessons from History

  6. rktbrkr says:

    “Is it SAFE”?

    Mortgage rates at 8-month high
    April 8th, 2010, 12:29 pm
    Mortgage giant Freddie Mac’s weekly rate survey shows the 30-year fixed-rate mortgage averaged 5.21 percent up from last week’s 5.08 percent — and the highest since the week ending Aug. 13 when it averaged 5.29 percent.

  7. The Curmudgeon says:

    Indeed, all is well again. A financial system built on lies. It’s hard to believe the WSJ even reported this. More evidence for why this ain’t over.

    My only question is what will be the next bubble? Perhaps junk bonds? Things are getting frothy for the junk and near-junk bonds again, much like 2007. “Payment-in-kind” clauses, i.e., the Option ARM equivalent of the bond world, have made a come-back.

    Or, is everything we now see already a bubble?

  8. benesposito says:

    Did they use this to pass their so-called stress tests? Can anybody here check that out?

  9. dad29 says:


    I was doing that (managing our repo position) back in 1974. Ran repos like crazy until 12/31; converted them to demand deposits for the annual report, and back to repos on 1/2.

  10. The Pale Scot says:

    Pardon the thread Hijack:

    I’m trying to find information about military expenditures and tax cuts during the Reagan era, and their proportions as related to the debt/deficit, a graph would be great.

    I’m in an argument about voodoo economics, and I don’t have Lexus-nexus. I use to have this info but the chafe is obscuring search results.

    Thank you

  11. jjay says:

    When I was a kid, I was always so proud to be an American.
    Now, all I see is a land of doped up, degenerate, drunk celebrities, grifters and war criminals!
    Gone with the wind!

  12. Marcus Aurelius says:

    Here’s one chart of the Reagan build-up and expenditures:

    Our current budget problems can be traced back to Saint Ronnie’s propensity to borrow and spend (as he is deified by the right, they have since worshiped at his alter, as evident by Dick “Dick” Cheney’s infamous “deficits don’t matter” comment). Tax cuts don’t much matter either when you run record deficits to “expand” the economy. Eventually, the Piper comes back to town looking for his money.

  13. Mannwich says:

    @WFTA: One man’s “fraud” is another man’s “business”. Does it really matter anymore at this point? Anything goes.

  14. WFTA says:

    I guess I expected Lazarus to be a little bit chastened; at least for a little while.

    BTW, great coverage at

  15. Sunny129 says:

    Banks are defying all the rules by tweaking them modified Enron style which is condoned by SEC and FASB in their PRETEND and EXTEND program which is the ‘new’ normal!