Friday, April 9, 2010

Big Banks Masking Risks

Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review

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....

That practice, while legal, can give investors a skewed impression of the level of risk that financial firms are taking the vast majority of the time.

"You want your leverage to look better at quarter-end than it actually was during the quarter, to suggest that you're taking less risk," says William Tanona, a former Goldman analyst who now heads U.S. financials research at Collins Stewart, a U.K. investment bank.

Though some banks privately confirm that they temporarily reduce their borrowings at quarter's end, representatives at Goldman, Morgan Stanley, J.P. Morgan and Citigroup declined to comment specifically on the New York Fed data. Some noted that their firm's financial filings include language saying borrowing levels can fluctuate during the quarter.
Less than one month ago, Goldman Sachs was telling us this:

Goldman Sachs Group Inc. (GS) said Friday that it has never used a transaction known as Repo 105. The examiner investigating the collapse of Lehman Brothers Holdings Inc. (LEHMQ) said Repo 105 used a clause in accounting rules to classify repos as sales, even though Lehman was still obliged to repurchase the assets at a later date. That meant the assets disappeared from the balance sheet, and Lehman could use the cash it received to temporarily pay down other liabilities. This made Lehman look less leveraged than it actually was. "Goldman Sachs has never used this transaction," a spokesman for the investment bank said in an email to MarketWatch.

I guess they just call it something else.


Anonymous said...

It's nice to see some MSM finally catch on. Now do we think they'll expose the fact that many of the States and Our Federal gov are complicit?

Unknown said...

13christian louboutin shoes
reebok shoes
ralph lauren polo shirts
air jordan 11
nike air max 90
hermes birkin
nike outlet store
michael kors discount handbags
polo shirts women
toms outlet
ugg boots sale
louboutin shoes
gucci handbags
polo shirts
nike heels
michael kors handbags
fendi bags
michael kors bags sale
hollister outlet store
cheap jordan 11
cheap chanel bags
michael kors handbags
michael kors handbags
polo outlet
cheap jordan shoes
polo shirt
dior handbags
nike outlet
air jordan 13 retro
north face jackets
north face outlet 70% off
under armour clearance
michael kors sale
ugg boots on sale 70% off
polo ralph lauren factory store
fitflop shoes
nike clearance
burberry scarf
prada shoes
coach outlet store online
christian louboutin outlet
nike outlet store online
coach factory online

5689 said...

true religion
ralph lauren polo
coach outlet
air max 90
moncler outlet
coach factory outlet
moncler outlet
adidas superstar
nike outlet
jordan uk

Unknown said...

off white clothing
vans shoes
lacoste outlet
coach outlet online
off white
supreme clothing
fila shoes
kobe basketball shoes
balenciaga shoes

zzyytt said...

yeezy boost
mbt shoes online
lacoste polo
yeezy boost 350 v2
adidas ultra boost 3.0
michael kors outlet
adidas tubular
kobe basketball shoes

Coqicoqi said...

Pandora Jewelry
Jordan 9
Pandora Jewelry
Jordan 4
Jordan 11
Air Jordan 9
Air Max 270
Red Bottom Shoes
Pandora Jewelry

zzyytt said...

adidas shoes
cheap jordans
nhl jerseys
adidas tubular
ferragamo belt
supreme hoodie
air jordans
adidas yeezy
adidas superstar