After having just stating in an interview earlier this week that although many banks are probably guilty of what Lehman was caught doing with Repo 105's pursuing those actions based upon semantics may be fruitless (it may be called depo 106?), Reuters comes out with this interesting story: Major US banks masked risk levels: report

(Reuters) - Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York.

The paper said on Friday 18 banks, including Goldman Sachs Group , Morgan Stanley , J.P. Morgan Chase Bank of America and Citigroup , understated the debt levels used to fund securities trades by lowering them an average of 42 percent at the end of each period.

The banks had increased their debt in the middle of successive quarters, it said.

Citi, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley were not immediately available for comment when contacted by Reuters outside regular U.S. business hours.

Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.

Due to the credit crisis, banks have become more sensitive about showing high levels of debt and risk, worried their stocks and credit ratings could be punished, the Journal said.

Federal Reserve Bank of New York could not be immediately reached for comment by Reuters.

 

The Wall Street Journal (see their interactive model) and ZeroHedge broke a similar storty with some meat behind it to justify the allegations. Ahhh!!! The return of real reporting, and not just from blogs!

After having just stating in an interview earlier this week that although many banks are probably guilty of what Lehman was caught doing with Repo 105's pursuing those actions based upon semantics may be fruitless (it may be called depo 106?), Reuters comes out with this interesting story: Major US banks masked risk levels: report

(Reuters) - Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York.

The paper said on Friday 18 banks, including Goldman Sachs Group , Morgan Stanley , J.P. Morgan Chase Bank of America and Citigroup , understated the debt levels used to fund securities trades by lowering them an average of 42 percent at the end of each period.

The banks had increased their debt in the middle of successive quarters, it said.

Citi, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley were not immediately available for comment when contacted by Reuters outside regular U.S. business hours.

Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.

Due to the credit crisis, banks have become more sensitive about showing high levels of debt and risk, worried their stocks and credit ratings could be punished, the Journal said.

Federal Reserve Bank of New York could not be immediately reached for comment by Reuters.

 

The Wall Street Journal (see their interactive model) and ZeroHedge broke a similar storty with some meat behind it to justify the allegations. Ahhh!!! The return of real reporting, and not just from blogs!

Monday, 18 January 2010 18:00

Nobody Sees This as a Bubble?

 From Bloomberg: Mortgage-Bond Leverage Reaches 10-to-1, Markets Heal

Jan. 19 (Bloomberg) -- Wall Street firms are loosening terms of their lending to mortgage-bond investors as markets heal, an RBS Securities Inc. executive said.

Repurchase agreement, or repo, lending against the debt has expanded so much since freezing in late 2008 that some banks now offer as much as 10-to-1 leverage and terms as long as one year on certain securities backed by prime jumbo-home loans, said Scott Eichel, the Royal Bank of Scotland unit’s global co-head of asset- and mortgage-backed securities.

Monday, 18 January 2010 18:00

Nobody Sees This as a Bubble?

 From Bloomberg: Mortgage-Bond Leverage Reaches 10-to-1, Markets Heal

Jan. 19 (Bloomberg) -- Wall Street firms are loosening terms of their lending to mortgage-bond investors as markets heal, an RBS Securities Inc. executive said.

Repurchase agreement, or repo, lending against the debt has expanded so much since freezing in late 2008 that some banks now offer as much as 10-to-1 leverage and terms as long as one year on certain securities backed by prime jumbo-home loans, said Scott Eichel, the Royal Bank of Scotland unit’s global co-head of asset- and mortgage-backed securities.

The title just about says it all. The only thing missing is that it doesn't tell you that the banks that are too big to ensure financial stability are still getting bigger, and riskier. Before we go on, let's get a few things established for those who have not followed me regularly. Note to avoid redundancies: If you have not read me regularly, I suggest you peruse the "Credibility" side bar below. If you have not followed my recent banking articles over the last few weeks, then continue below. If you have been hanging off of my every word, then skip down to the "Break'em up, and break'em up now!" section, otherwise please read on. I strongly believe that the content of this article can change many a perception of the big banks in this country, and hopefully alert many to the risks that have been concentrated therein, even after the meltdowns that we have had to suffer at the collapse of