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.
Excessive borrowing by banks was one of the major causes of the financial crisis, leading to catastrophic bank runs in 2008 at firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have become more sensitive about showing high levels of debt and risk, worried that their stocks and credit ratings could be punished.
So when are we going to experience the next crash?
And btw- if the Democrats do not act to rein in the abuses and enact a regulatory regime to stop this sort of stuff, they will OWN the next crash.
r€nato
Perhaps so, but by then many of the current class of Dems in Congress will have moved on to lucrative lobbyist jobs… kick the can down the road, it’s a time-honored tradition in politics.
The Grand Panjandrum
Real shocker, eh? The banksters gaming the system because Congress hasn’t done anything to rein them in yet. I didn’t see that coming.
debit
Psst, Cole. It’s “rein in” as in pulling on the reins.
John Cole
@debit: It is early.
r€nato
‘rein’ and ‘reign’ are regularly (and easily) confused. My inner spelling nazi can forgive that one. But mix up ‘lose’ and ‘loose’ and I’m going to
looselose my shit.cleek
i kinda like that one, actually. it’s much more active than just losing your shit: “oh noes, i’ve lost me shit. anyone seen me shit?”
but “loosing” your shit has all kinds of slick visuals…
Alex S.
@cleek:
Loosing your shit sounds almost as dirty as toxic assets.
PeakVT
So when are we going to experience the next crash?
Stop worrying. Bailout Ben will save all the people who matter from their own stupidity.
For the rest of us, well… maybe pot will be legal by then.
Montysano
Obviously you’re not listening to Hannity or you’d know that they own this one.
jon
It’s almost as if we can’t trust our accountants to not do accounting tricks! What is this world coming to?
Mike Kay
BREAKING
Bart Stupak retires.
I hope Rachel doesn’t give up her investigation into his C-Street kickback.
debit
@r€nato: My particular favorite is “Bare with me.”
fucen tarmal
@PeakVT:
you know, pot could be the way we get young people to vote in non-presidential elections…
work it like the right worked the evangelicals to start running for, and controlling the school boards the average person thinks is too trivial to bother voting for.
you get pot smokers to pass around, so to speak, the idea of voting for this guy or that one, in local elections for sherrif, or mayor, up to house and senate….
all you need is to start funding decriminalization candidates and doing some…grass roots….
look i get the puns are lame, but inevitable. be that as it may, dems suffer from the age issue in elections, the dopers have a cause, voting is free, and they can get stoned after, before if we can assure them there won’t be any butterfly ballots to confuse.
we really do need something to motivate the youth to pay attention to local elections. pot smokers are as good a group as any.
El Cid
I thought it was only us bitter, overly pessimistic types worrying about stuff like this.
Comrade Darkness
Glass Steagall, bitches, Glass Steagall.
If we can’t find the political will to rein in these mofos we might as well move the U.S. to Central America and reelect strongman Cheney to rouse us from our houses at night and kick the shit out of us just because, cuz, man we’ll deserve nothing less.
WereBear
I love the way Rachel is hammering on the C Street story.
It’s just amazing no one else is.
El Cid
Stupak’s a complete dumbass. This ain’t ‘the hippies’ fault — it’s the fault of a moron who went public trying to kill health care reform over fundamentalist anti-abortionism, couldn’t get the votes, and had apparently not thunk of what would happen from all his awesome anti-abortion zealot friends & backers if he happened to vote yes to the bill. How could he possibly have painted himself into a nastier corner?
geg6
@Mike Kay:
Whoa. This had been rumored, but I’m really quite surprised. I mean, good riddance. LOL! He fucked over every possible constituency, even if one of them is delusional about being fucked over (the forced birthers, that is). Well, all the more reason to support Connie Saltonstall.
El Cid
@Comrade Darkness: Well, one could point out that for all its real problems, Venezuela didn’t have a bank collapse.
mai naem
I just cannot believe that anybody and I mean anybody thinks that banks should have everything little thing about them regulated including how many times the freaking bank cashier goes to the bathroom. Richard Shelby and Bob Corker really think these people are being overregulated? What are they smoking?
JackieBinAZ
@fucen tarmal: There are an estimated 14 million pot smokers in the U.S. versus the 3 million or so who watch Fox News so that may not be as far-fetched as it sounds.
Comrade Dread
It’s the beauty of the free market in action.
You see, it’s not that the company is actually well-run and that management is focused on the long term concerns of the company, it’s that the company appears to be well-run and concerned with the long term health of the organization long enough for the important people to reap huge bonuses and escape to Cancun before the check comes and the little people are left with the tab.
Yes, I’ve written my senators and representative. I would strongly suggest everyone else do the same and encourage them to get regulation with teeth in place before these monsters fuck us all over again.
arguingwithsignposts
Completely OT, but I note that there is no entry for Skull fuck a kitten in the Urban Dictionary.
What kind of world do we live in? This injustice must not stand!
Mike Kay
I hope the Nuns are laughing their asses off at brainless-Bart.
Comrade javafascist
These banksters suck at Going Galt.
JohnR
And there you have the American Way in a nutshell.
Anyone up for a stimulating rubber of 3-card monte? Ante up!
Ash Can
This is the kind of book-cooking that would send the stock analysts where I worked screaming and swearing down the hall. Literally. Once in a blue moon, some jerkoffs on someone’s coverage list would try to pull a fast one and put out a balance sheet that was basically infested with termites, and the fireworks would go off. Earnings estimates would be slashed, coverage would be ditched, and the stock would tank. And since none of these companies were anywhere near the “too big to fail” size, they often did as a result. It was harsh and fitting punishment indeed for their short-sightedness and disingenuousness.
As we’ve seen with the banking behemoths, unfortunately, this kind of punishment doesn’t work. And if failure doesn’t work as an incentive for them, that means the free market doesn’t work for them. Regulation is in order, and that’s an understatement.
Tom65
I hate to break it to you, but even if they manage to enact some kind of regulatory package, they’ll still be blamed for the slightest hiccup on Wall Street; hell, especially if they pass some regulations.
Kirk Spencer
The silver lining buried in that black cloud is that while the banks have fudged that number sharply down each quarter, the “real” trend is going down as well. They’re now “really” as low as they spiked down to in 1st quarter 2009.
The fact they’re playing games is still a problem and is indicative of a need to, well, to fix it.
Too big to fail is too big.
[ed – moderated? Why?]
Paul in KY
If Pres. Obama doesn’t put the kibosh on the practices outlined in Mr. Taibbi’s latest Rolling Stone article about how the city of Birmingham, AL got fleeced, our country & his presidency may go down the tubes.
If you haven’t read the article, please do. It’s not a happy read, sort of like ‘1984’, only bleaker.
TJ
Looks like our big banks’ business model is now juggling bottles of nitro. And expecting Obama to catch any drops. They both better hope absolutely nothing bad happens in the next 2 1/2 years, because once we get a drop, it’s going to be a pretty big explosion.
The Moar You Know
They already own this one. It wasn’t a Republican who signed the repeal of Glass-Steagall.
Fergus Wooster
@r€nato: I can handle reign vs. rein, even occasionally lose vs. loose.
However, breath vs. breathe, they’re-their-there, your-you’re make me lose my shit every time.
Oh, and “definately” too. The classic red flag for someone trying to sound smarter than they are, and failing epically.
ExtremismInTheDefenseOfLiberty
That’s right, if this stuff keeps on going on, we’ll have to hand control back to the Republicans. We know that they will keep a tight rein on the financial community.
Heh. Or, we might decide to go with the Mugwumps. Hell, it’s worth a try.
srv
The next and final crash will be before 2013.
BenA
The chamber of commerce is already on the air with ads around here trying to demonize the Consumer Protection Agency piece of Dodd’s legislation. It’s also the piece that Corker and Grassley wanted out during their 15 minutes of contrition over not being bipartisian… before DeMint got a hold of both of them.
I think that pretty much means that it’s got some teeth. I mean basically if the Chamber of Commerce is against something it’s probably a boon to the greater good… and probably good for business in the long run…
Comrade Dread
@ExtremismInTheDefenseOfLiberty:
We could vote for the Whigs.
scarshapedstar
It’s not deception, it’s innovation. You’re just jealous because you aren’t innovative, you worthless parasite.
But fine! The supermen will withhold their productivity by ceasing their bullshit accounting and we’ll see how you like it, nay, we’ll see how you SURVIVE when when a man is FINALLY entitled to the sweat of his brow.
taylormattd
I can’t believe anyone actually thinks any meaningful financial reform is going to happen.
I mean really, after watching what the republicans and a handful of conservadems in the Senate did to health care reform, are we really going to pretend that a bill sticking it to financial institutions won’t be filibustered?
Hal (GT)
I think that this just the tip of the iceberg. Complicity can be found in DC.
Sentient Puddle
@taylormattd: If Republicans filibuster and block passage of a bill, the public will lay the blame on them. Democrats still aren’t quite seen as the one party that’s beholden to Wall Street, as much as they’ve done to try and capture that title recently.
But yes, I’m afraid Republicans will attempt to weaken the shit out of the bill and succeed. I think the key barometer to look at here is whether or not there’s a leverage requirement of at least 18-to-1 in whatever gets through. If that’s in there, then what we got is probably at least reasonably good, much in the sense that the health care bill we got was reasonably good. If the leverage requirement is weak or nonexistent, then the bill is probably just a band aid.
(For those keeping score, the House bill that passed has 15-to-1, while Dodd’s proposal has nothing)
DougL (frmrly: Conservatively Liberal)
The only difference between armed bank robbers and these ‘bankers’ is that the armed robbers have the guts to do it in broad daylight where we have a better chance of catching them.
These ‘bankers’ made their theft into an 8 to 5 job, got paid for it and were able to walk away with the ‘profits’.