The information still coming to light about the regular deception of investors by American banks, in some ways is reassuring. See WSJ below. In the typical American way, a mighty mess has been created, but then they now are setting about it and sorting it out. The first thing an addict or sinner needs to do, is to admit their sin or addiction. From there, they will start to improve, but not until.
What worries everyone is the eerie silence on banking and other deception in Europe. It seems unlikely that practices that had become the norm on Wall Street, in investor deception, were not known over the pond. There is the small matter also that not only banks, but European governments were known to be involved in financial deception, as was the Greek government, organising the hiding of debt with the help of Goldman Sachs. It is unlikely to be an isolated case.
If fear in America is lessening, it is because the bad news is beginning to come out. The problem in Europe is that it isn’t. Until it does, trust will be in short supply. That is why European debts will be so hard to finance, not because of the underlying economies, but because of an endemic culture of corruption and deception, which is still in denial. It is lack of trust that will kill the Euro.
Bank of America Corp. admitted to making six transactions that incorrectly hid from view billions of dollars of debt, following a bid to cut the size of a unit’s balance sheet and meet internal financial targets.
The disclosure, made in a letter to the Securities and Exchange Commission, comes as the agency prepares to unveil the results of an inquiry into banks’ accounting for borrowing deals known as repurchase agreements, or “repos.”
BofA’s letter was sent in April in response to the inquiry, but this is the first time the details of the six trades in question have been disclosed. The bank had acknowledged in its last quarterly report that its accounting for the transactions, made at the ends of quarters from 2007 to 2009, was incorrect.
The bank’s disclosure also suggests the trades may be an example of end-of-quarter “window dressing” on Wall Street, in which banks temporarily shed debt just before reporting their finances to the public. The practice, which The Wall Street Journal has uncovered in a series of articles, suggests the banks are carrying more risk most of the time than their investors or customers can easily see, and then juggling it during quarter-end reporting of financials.
Window dressing isn’t illegal in itself. But intentionally masking debt to deceive investors violates regulatory guidelines. BofA said its incorrect accounting wasn’t intentional.
Apart from requiring more disclosure about the bank’s repo accounting, the SEC hasn’t taken any action against BofA over the matter. The fact that the letter was released suggests the SEC has concluded its review.
Though much smaller in scope, Bank of America’s accounting of the six trades is similar to what a bankruptcy-court examiner said Lehman Brothers Holdings Inc. did to make its balance sheet look better before it filed for bankruptcy in 2008. Lehman used a strategy dubbed “Repo 105” that helped the Wall Street firm move $50 billion in assets off its balance sheet, the examiner said in March.
OK, Europe, it’s your turn. What scams have your banks and governments been involved with? Nothing, huh? Sorry. No one believes you.