Surprise! Big Banks Hide Risk Levels
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 . . .
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click for interactive graphic
courtesy of WSJ
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Source:
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
http://online.wsj.com/article/SB10001424052702304830104575172280848939898.html
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April 9th, 2010 at 9:59 am
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.
April 9th, 2010 at 10:02 am
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
April 9th, 2010 at 10:03 am
Honest question: Is this not a violation of general accepted accounting principles? To this layman it looks like fraud.
April 9th, 2010 at 10:04 am
Fraud is a GAAP.
April 9th, 2010 at 10:18 am
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
April 9th, 2010 at 10:33 am
“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.
April 9th, 2010 at 10:36 am
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?
April 9th, 2010 at 10:56 am
Did they use this to pass their so-called stress tests? Can anybody here check that out?
April 9th, 2010 at 11:01 am
Heh.
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.
April 9th, 2010 at 11:10 am
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
April 9th, 2010 at 11:35 am
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!
April 9th, 2010 at 11:49 am
Here’s one chart of the Reagan build-up and expenditures:
http://restoringsanity.org/military/military_spending.html
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.
April 9th, 2010 at 12:33 pm
@WFTA: One man’s “fraud” is another man’s “business”. Does it really matter anymore at this point? Anything goes.
April 9th, 2010 at 12:47 pm
I guess I expected Lazarus to be a little bit chastened; at least for a little while.
BTW, great coverage at masters.com.
April 9th, 2010 at 1:51 pm
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!